Q2 2024 LENSAR Inc Earnings Call
Speaker Change: i know
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Speaker Change: please stand by your program is about to begin if you need audio assistance during today's program please press starars zero
Speaker Change: good morning and thank you for your participation at this time all participants are in a liston only mode later we will conduct a question and answers
Speaker Change: As a reminder, this conference call will be recorded. I would now like to turn the call over to Cameron Radinovic of Burns McKellan. Mr. Radinovic, please go ahead.
Cameron Radinovic: Thank you, Operator. Good morning and welcome to the Lensar second quarter 2024 financial results conference call. Earlier this morning, the company issued a press release providing an overview of its financial results for the quarter ended June 30th, 2024.
Operator: Earlier this morning, the company issued a press release providing an overview of its financial results for the quarter ended June 30, 2024. This press release is available on the Investor Relations section of the company's website at www.lensart.com. These statements are subject to known and unknown risks and uncertainties, which may cause the company's actual results, performance, or achievements to be materially different from any future results or performance expressed or implied in this presentation.
Cameron Radinovic: This press release is available on the Investor Relations section of the company's website at www.lensart.com.
Speaker Change: Joining me on the call today is Nick Curtis, Chief Executive Officer of Lenczar, who will review the company's recent business and operational progress.
Speaker Change: Following his comments, Tom Staab, 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.
Speaker Change: Today's conference call will contain forward-looking statements, including those statements regarding future results on audited and forward-looking financial information, as well as the company's future performance and or achievements.
Speaker Change: These statements are subject to known and unknown risks and uncertainties which may cause the company's actual results, performance, or achievements to be materially different from any future results or performance expressed or implied in this presentation.
Speaker Change: you should not place undue reliance on these forward-looking statements
Speaker Change: For additional information, including a detailed discussion of the company's risk factors, please refer to the company's documents filed with the Securities and Exchange Commission, which can be accessed on the website.
Speaker Change: in addition this conference call contains time sensitive information that is accurate only as of the date of this live broadcast august eighth two thousand and twenty-four
Speaker Change: Lenzar undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this live conference call.
Nick: but that it is my pleasure to turn the callover to ncurarttis nick
Nick: Thank you, Cam, and good morning to everyone. I appreciate you joining us, and I'm excited to update you on an unprecedented second quarter for Lenzar. Starting from an Ally system placement standpoint, the second quarter was a record period for Lenzar. We placed 17 new Ally systems, a remarkable 30% increase over a strong second quarter of 2023. From a historical perspective, the second and fourth quarters are typically our strongest in terms of revenue. In each of these quarters in 2023, we achieved $12 million in revenue, which we exceeded with a $12.6 million in Q2 2024, an increase of 5%. Remember, however, this is without clearance to sell Allies.
Nick: outside the U.S. With this past performance in mind and given the newly received EU and Taiwan clearances, we're excited about the system as well as procedure market share growth possibilities for the remainder of the year. In addition to the 17 placed ally systems, we converted six previously installed systems on usage agreements to sold systems, as well as ended the quarter with a backlog of an additional 17 ally systems. We expect these to be placed in the second half of 2024. The conversion of placed rental systems to sold systems demonstrates significant customer satisfaction with Ally and provides further validation of Ally's capabilities versus
Nick: competitive systems in the marketplace. Demand for Lenzar's ally systems is strong and growing, despite some weakness and uncertainty in the overall economy with interest rates remaining high. In the face of these macroeconomic headwinds Lenzar has proven resilient in our ability to meaningfully expand our footprint in refractive laser cataract surgery. In addition to our record number of placements, procedure volume also had impressive growth with a 19% increase over Q2 2023 and first half 2024 procedure volumes up 22% over the first six months of 2023. Furthermore, we saw a 16% increase in our installed base with 80 allies
Nick: in the field and three hundred thirty lens our systems installed worldwidei' really proud of this impressive progress another important performance metric is our penetration into new practices in the second quarter eighty eight percent of our ally placements will with new customers and more than eighty percent of the u s systems placed in the first half of the year would were with first time lens our users this is another clear example of surgeons growing choice to use ally over competitive systems and directly impacts the growth trajectory of our recurring revenue and procedures going forward given ally clearance in the e u and taiwan we can begin to replace older competitive device
Nick: and attract new practices to LENZAR from those regions where there is already significant interest in Ally and begin executing our OUS commercial strategy to further increase our worldwide installed base. I have a great deal of confidence that these efforts will prove successful as they have thus far in the U.S. Where the majority of our U.S. conversions thus far have been surgeons new to LENZAR, upgrading to Ally is a better option than an aging, sub-optimal, however still usable laser. We're approaching a significant industry-wide replacement cycle as competitive systems currently in use are nearing end of life. These systems are based on decade-plus-old technology and while still in use,
Nick: functional, they're clearly inefficient and lack features capable of delivering improved outcomes for patients. Given the slow pace of innovation from the largest eye care companies competing in our space, rapid servicing and system reliability are beginning to create challenges. As we have shared on previous calls, this reality is creating a perfect commercial opportunity for Lenzar. Adoption and placement of an ally system into a surgeon's practice or an AFC can result in meaningful revenue and EBITDA growth thanks to its ability to significantly increase efficiency in patient throughput as well as enhance outcomes. Because of these factors we believe it is a matter of when, not if, they adopt our technology.
Nick: We're beginning to see a substantive acceleration in the rate of Ally conversions. The current economic conditions I mentioned earlier make it more challenging for surgeons and facilities to invest in upgrading their capital equipment. However, the speed and efficiency of Ally, which is being discussed in an increasing number of peer-to-peer communications, surgeon-initiated studies, and case studies discussed during this quarter's medical meetings, demonstrate the financial benefit of adopting our system, helping to overcome the economic challenges surgeons face. Additionally, penetration into important channels, such as the private equity groups, combined with the overall age of competitive systems in the market, will continue to provide significant catalysts for the future.
Nick: for Ally Adoption. Accordingly, we expect to see new customers and overall market share growth continue quarter over quarter as this perfect storm plays out. As we continue placing new systems with new users and these surgeons become more familiar with the Ally experience and the associated advantages of working with Lenzar, we're confident that procedure volumes and recurring revenues will increase in parallel. We had an exceptional quarter as evidenced by the continued revenue and placement growth in the U.S. and receiving CE mark approval for Ally, a major strategic milestone which we announced yesterday that sets the stage for commercial expansion into the European market. This important regulatory approval
Daniel Bussard: and Daniel Bussard. I'm delighted to be here today to talk about how the EU has been a great partner in the development of the LentAr product. The first step is to develop a new prototype. LentAr's design for AI further reinforces our belief LentAr is paving the way to revolutionize advanced laser cataract surgery. The EU clearance is a critical step toward our objective of expanding ALI's reach on a global scale. There are a number of European surgeons eager to take their capabilities to the next level with ALI. We have a solid network of distributors ready to deploy and LentAr is poised to replicate its US success story in key markets elsewhere in the world. To that end, we have been training our new product, LentAr, on a new, new technology and a new product that we hope will be the next big breakthrough for the US. and clinical applications support partners, and we have already initiated shipments to Europe . And the first ALI was installed in a surgeon's facility this week. I look forward to updating you on all the progress.
Speaker Change: of the European launch next quarter. I'd also like to report we recently received TFDA approval to make Ally commercially available in Taiwan and Hong Kong. And like Europe , we've been working closely with our Southeastern Asian distributor to support an efficient launch. I'm pleased to share that we've also shipped our first systems to Taiwan with users having already performed the first Ally cases and have additional OUS regulatory approvals on the horizon. We continued to actively evangelize Ally within the medical community with a strong lens our presence at both the ACOS Europe Symposium in Prague and the DOC meeting in Nuremberg. We conducted a number of Ally demos.
Speaker Change: and interacted with european thought leaders highlighting allies key differentiators and unique ability to address the short comings of first generation systems this acttive we du tail perfectly into the e u commercial launch on the heels of our for two it regulatory cleclarance with our growing installed base encouraging utilization trends in an expanding international footprint we're well positioned to further increase our market share both in the u us and the rest of the world as we move forward proudof what the lens our team is accomplished to dateand is incredibly gratifying to share some of the details on how far we've come since receiving f d a clearance of allies just two years ago gaining over four
Tom: and others. The number of procedural market share points in the U.S. since launching Ally is an incredibly positive milestone, but it's just the start. We continue to believe that Ally is a transformative technology with the potential to positively impact the future of the laser cataract market. We're starting to see this play out, but view this as a marathon, not a sprint. Now that we can market and sell Ally outside the U.S. with additional markets potentially available to us in the coming months, I expect that the positive momentum for Lenzar will begin building at a quicker pace. Now let me turn the call over to Tom to cover our financial highlights for the quarter. Tom. Thank you, Nick. Just a few brief remarks from me.
Tom: on our strong second quarter performance. Revenue was $12.6 million in the second quarter of 2024 compared to $12 million in the second quarter of 2023, reflecting a 5% increase. This growth was generated from an increase in procedure volume. To echo Nick's earlier comments, U.S. procedure volume increased 16% over the second quarter of 2023, and on a worldwide basis, we saw an increase of 19%. Given the timing of placements in the second quarter and ramp-up time for sites and surgeons to reach an optimal utilization rate, we expect to see more robust procedure volume culminating in recurring revenue.
Speaker Change: in the third and fourth quarters of 2024 when these recently installed systems begin to achieve a typical monthly run rate. In addition, we are extremely excited to have recently received EU and Taiwan regulatory clearances that allow us to sell Ally outside the United States. We are now able to increase Ally's global footprint. Improving Ally's systems in these operating regions is extremely important and enables us to increase our market share, total and recurring revenue, as well as positively impact our cash flow. We have been anxiously awaiting these clearances as they are significant.
Speaker Change: and others. Gross margin for the quarter was $6.8 million, representing a gross margin of 54%, compared to $6.8 million and 56% gross margin realized in the second quarter of 2023. Our gross margin was strong this quarter, although we anticipate a slight decrease in our future gross margin percentage as we see a higher concentration of ally sales and anticipate a higher concentration of revenue outside the United States in future quarters. For the year, we continue to expect a gross margin percentage of approximately 50%. Total operating expenses for the second quarter of 2024
Speaker Change: However, as discussed previously included in the net loss was the one time impairment charge of $3 $7 million and a charge associated with our outstanding warrants, which occurred in both both second quarters relating to an increase in our stock price.
Speaker Change: To evaluate our results and operations more intuitively, let us look at our adjusted EBITDA results.
Speaker Change: The second quarter is generally a strong quarter for us and you see we achieve breakeven having a positive adjusted EBITDA of $30000. After narrowly missing breakeven in the second quarter of last year with a negative $188000.
Speaker Change: Looking forward, we expect to see operating breakeven quarters with some consistency starting as soon as the fourth quarter of this year.
Speaker Change: If you exclude the warrant and impairment items from our net loss for the second quarter, our loss was $1 $4 million in 2024 as compared to $2 $8 million in 2023 or one half of what it was for the second quarter a year ago.
Speaker Change: As of June 32024, we had cash and cash equivalents of $15 $4 million as compared to $24 $6 million at December 31, 2023.
Speaker Change: Cash used in the second quarter was $3 $7 million and was largely dedicated to increases in inventory and our leased fleet of U S systems.
Speaker Change: These uses of cash are a function of building inventory to supply ally systems to the EU in Taiwan for which shipments have already have begun as well as expanding our fleet of ally systems in the United States.
Speaker Change: Now I'd like to turn the call over to the operator, and we look forward to your questions Margery.
Speaker Change: Thank you Sir at this time, if you'd like to ask a question. Please press the star one on your telephone keypad, you may remove yourself from the queue at any time by pressing star to once again that is star one to ask a question and while we wait for those questions to comment we will next go to Frank Thank Ian from Lake Street Capital markets. Please go ahead.
Speaker Change: Great. Thanks, taking my questions. Congrats on all the progress I was hoping to start with one on the mix of sales versus placements in the quarter, obviously really impressive placement quarter. Nic can you maybe talk a little bit more about the mix of how much of those were actual upfront sales versus placements and then how the prospects.
Speaker Change: Look to get those into a full purchase or do they stay as placement and just develop a big recurring revenue stream.
unknown: Yeah, hi Frank. I appreciate the questions. Thank you. So of the 17 on the installs, 10 of those were sold, and 7 of those were leases, if you will. So about 59% of the systems were actually sold, and then, of course, we converted the additional 6 systems that had been placed previously.
Speaker Change: Yes.
Nic: Frank I appreciate the questions. Thank you so up to 17.
Speaker Change: On the installs.
Speaker Change: 10 of those were sold and seven of those were leases.
Speaker Change: Leases, if you will so about 59% of the systems were actually sold systems of the 17 and then of course, we converted the additional six systems that had been placed previously.
Speaker Change: Got it that makes sense and then maybe shifting over to manufacturing capacity clearly you're scaling well and I think I asked this last quarter too, but do you still feel confident youre able to produce the amount of alloy systems required to keep up with demand now that youre entering a couple of geographies.
Speaker Change: I do actually we had anticipated these approvals and so as Tom made some remark.
Tom: His in his comments here, we we had been buying inventory and building inventory. There is some lead time to our receiving some of the critical parts such as the laser aspect and certain other components.
Speaker Change: Computer wise and whatnot and chips. So we've been we've been placing orders and we had been receiving items in anticipation of this so manufacturers.
Speaker Change: Manufacturers manufacturing is actively building systems now as we speak and we feel good that we're going to be able to deal with our backlog and by the way that was U S backlog that I that I was talking about going into the quarter.
Speaker Change: We'll see.
Speaker Change: As we as we move forward in this quarter.
Speaker Change: We start to get more orders from outside the U S. But we feel comfortable that we've ordered enough parts and we're and we're actively building and people are pretty fired up around here.
Speaker Change: Thanks, and maybe just the last one and help us with back half expectations.
Speaker Change: I heard the comment Q to Q4, typically the strongest but maybe if you can help us think about how we should be thinking about our models for Q2 and Q4 and <unk>.
Operator: Please stand by. Your program is about to begin. If you need audio assistance during today's program, please press star zero.
Speaker Change: Bridging to that expectation for 20% growth this year.
Operator: Good morning and thank you for your participation at this time. All participants are in a listen only mode. Later, we will conduct a question and answer.
Speaker Change: Yes, so typically.
Speaker Change: As we said Q2 Q4 would be the best quarters I certainly expect based on the continued interest.
Operator: As a reminder, this conference call will be recorded.
Cameron Radinovic: I would now like to turn the call over to Cameron Radinovic of Burns, McKellen. Mr. Radinovic, please go ahead. Thank you, operator.
Speaker Change: Getting approvals outside U S and sort of early indication of demand for systems to be shipping O U S debt.
Nicholas Curtis: Good morning and welcome. Welcome to the Lensar's second quarter, 2024 Financial Results Conference call. Earlier this morning, the company issued a press release providing an overview of its financial results for the quarter-ended June 30, 2024. This press release is available on the Investor Relations section of the company's website at www.Lensar.com.
Speaker Change: Will will have a reasonable quarter this quarter in the third quarter, which typically.
Speaker Change: Globally cataract surgery volumes or the lowest overall cataract surgery volumes are the lowest in Q3 as compared to all the other three quarters over the course of the year because of of extensive European vacation schedules.
Cameron Radinovic: Joining me on the call today is Nick Curtis, Chief Executive Officer of Lensar, who will review the company's recent business and operational progress. Following his comments, Tom Staab, Chief Financial Officer of Lensar 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.
Speaker Change: People people.
Speaker Change: Generally traveling more doing less and then the fourth quarter typically is the strongest from a procedure number perspective overall cataract procedures. So I expect that to follow suit with lens are up but even more so for us because we've got.
Cameron Radinovic: Today's conference call will contain forward-looking statements, including those statements regarding future results, unaudited and forward-looking financial information, as well as the company's future performance and or achievements. These statements are subject to known and unknown risks and uncertainties which may cause the company's actual results, performance or achievements to be materially different from any future results or performance expressed or implied in those presentations. You should not place undue reliance on these forward-looking statements. For additional information including a detailed discussion of the company's risk factors, please refer to the company's documents filed with the Securities and Exchange Commission.
Speaker Change: A large number of systems that are installed at the end of the first quarter and certainly into second quarter with a big backlog moving into third quarter, well have a reasonable third quarter, and then and then I expect fourth quarter debt.
Speaker Change: The meetings that we've got the shipments that are going O U S. In this quarter and in fourth quarter that were really going to finish the year really strong going into the first quarter. So I would expect that bolt on to procedure level as well as on a on an overall.
Frank: Capital level in numbers of systems Youre going to see some really strong performance here as we get into the fourth quarter and Frank maybe just a little bit of color. So in my remarks, I mentioned that we expected procedure volume to increase in the third and fourth quarter. If you look at the third quarter and the 17 placements and you split the quarter.
Cameron Radinovic: In addition, this conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, August 8, 2024. Lensar undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this live conference call.
Frank: Right in the middle.
Speaker Change: The vast majority of those placements were actually installed in.
Frank: In the latter half of the quarter and so what that means is you got to ramp up the systems and they should kick in in significance in the third quarter, but really all of them will be hopefully off operating at an optimal level in the fourth quarter. The other thing to consider is with the two clearances.
Cameron Radinovic: With that, it is my pleasure to turn the call over to Nick Curtis. Nick? Thank you, Cam.
Nicholas Curtis: Good morning to everyone. I appreciate you joining us and I'm excited to update you on an unprecedented second quarter for Lensar. Starting from an ally system placement standpoint, the second quarter was a record period for Lensar. We placed 17 new ally systems, a remarkable 30% increase over a strong second quarter of 2023. From an historical perspective, the second and fourth quarters are typically our strongest in terms of revenue. In each of these quarters in 2023, we achieved 12 million in revenue, which we exceeded with a 12.6 million in Q2 2024, an increase of 5%.
Speaker Change: We just started shipping systems and obviously it's.
Speaker Change: At least one third of the quarter is done so it'll take us a while to.
Speaker Change: Get that but those procedures from an ex U S.
Speaker Change: Perspective should kick in in the fourth quarter. So we really do expect the fourth quarter. It would be very very strong for us.
Speaker Change: Just because of those catalysts.
Speaker Change: Got it that's helpful. Thanks, Congrats on all the progress.
Operator: Thank you. And next, we're going to go to Ryan Zimmerman with BTIG.
Speaker Change: Thank you and next we're going to go to Ryan Zimmerman with BTG.
Nicholas Curtis: Remember, however, this is without clearance to sell allies outside the U.S. With this past performance in mind and given the newly received EU and Taiwan clearances, we're excited about the system as well as procedure market share growth possibilities for the remainder of the year. In addition to the 17-placed Ally systems, we converted six previously installed systems on usage agreements to sold systems, as well as ended the quarter with a backlog of an additional 17 Ally systems.
Ryan Zimmerman: Hey guys, good morning and congrats on all the approvals. It's exciting to see.
Ryan Zimmerman: Hey, guys good morning.
Ryan Zimmerman: Congrats on all the approved.
Speaker Change: Approvals.
unknown: I want to ask about your OUS strategy a little bit, Nick. So just talk to us kind of how you're thinking about approaching the market. I mean, obviously, you have distributors there, but is there something beyond just attendance at clinical meetings? Are you putting any resources into these markets? Just help us understand kind of how you're thinking about approaching that.
Speaker Change: Let's see.
Ryan Zimmerman: One I wanted to ask about your <unk> strategy, a little bit Nick So I'll, just talk to us kind of how you're thinking about approaching the market I mean, obviously you have distributors there but.
Nicholas Curtis: We expect these to be placed in the second half of 2024. The conversion of placed rental systems to sold systems demonstrates significant customer satisfaction with Ally, and provides further validation of Ally's capabilities versus competitive systems in the marketplace. Demand for Lensar's Ally systems is strong and growing, despite some weakness and uncertainty in the overall economy with interest rates remaining high. In the face of these macroeconomic headwinds, Lensar is proven resilient and her ability to meaningfully expand our footprint in refractive laser cataract surgery.
Speaker Change: Is there something.
Speaker Change: Beyond just the attendance at clinical meetings are you putting any resources in these markets just help us understand kind of how you're thinking about approaching that.
Speaker Change: Yeah. Thanks, Rod appreciate I appreciate the question so.
Speaker Change: It's interesting we didn't have the luxury 12 years ago. When we when we were introducing the first gen.
Speaker Change: Being able to.
Speaker Change: Sort of control the launch if you will.
Speaker Change: Had to go go global.
Speaker Change: And introduce the product everywhere.
Speaker Change: 12 years ago, because we were sort of the last company and we are the smallest independent moving into the marketplace thinks there are a lot different right now we're the leader in the technology moving into the marketplace now with a significantly enhanced new product.
Nicholas Curtis: In addition to our record number of placements, procedure volume also had impressive growth, with a 19% increase over Q2 2023, and first half 2024 procedure volumes of 22% over the first six months of 2023. Furthermore, we saw a 16% increase in our installed base with 80 Ally's in the field, and 330 Lensar systems installed worldwide.
Speaker Change: And Europe has been pretty polarized in terms of peoples.
Speaker Change: Belief or lack thereof in the femtosecond laser market space for cataract surgery, and so it's been polarized there because when when these technologies launched there was a high expectation for.
Speaker Change: Efficiencies outcome in performance and quite frankly, the first generation systems went into the marketplace.
Nicholas Curtis: I'm really proud of this impressive progress. Another important performance metric is our penetration into new practices. In the second quarter, 88% of our Ally placements were with new customers, and more than 80% of the US systems placed in the first half of the year were with first time Lensar users. This is another clear example of surgeons growing choice to use Ally over competitive systems, and directly impacts the growth trajectory of our recurring revenue and procedures going forward.
Speaker Change: And they didn't necessarily perform like that to start and now that we've had the benefit of a ramp up in the U S. There's been a significant amount of cross pollination between.
Speaker Change: European physicians and physicians outside U S.
Speaker Change: Hearing about ally.
Speaker Change: <unk> certainly got a much better handle on al I know and understand very well how it works and we've already put very substantive.
Nicholas Curtis: Given Ally clearance in the EU and Taiwan, we can begin to replace older competitive devices and attract new practices to Lensar from those regions where there is already significant interest in Ally and begin executing our OUS commercial strategy to further increase our worldwide installed base. I have a great deal of confidence that these efforts will prove successful as they have thus far in the US. With the majority of our US conversions thus far have been surgeons new to Lensar upgrading to Ally's a better option than an aging sub-optimal, however still usable laser.
Speaker Change: Kind of continuous improvement.
Speaker Change: Grades into the system and so we expect that when we get these first systems installed theres a couple of different areas I talked about.
Speaker Change: Channels in the U S from a private equity perspective, what those same channels exist outside U S and and we've begun.
Speaker Change: In the EU at least and we'd be gone too.
Speaker Change: Penetrate into one of the larger two of the larger private equity groups actually in in with first Gen. Lasers of leads are and we will be evolving.
Nicholas Curtis: We're approaching a significant industry-wide replacement cycle as competitive systems currently in use are nearing end of life. These systems are based on decade-plus-old technology, and while still functional, they're clearly inefficient and lack features capable of delivering improved outcomes for patients. Given the slow pace of innovation from the largest I care companies competing in our space, rapid servicing and system reliability are beginning to create challenges. As we have shared on previous calls, this reality is creating a perfect commercial opportunity for Lensar.
Speaker Change: The ally lasers, there we've also reached out to.
Speaker Change: A group of Kols that heretofore we haven't.
Speaker Change: Necessarily had a relationship with and done business before and as you know peer to peer is really strong.
Speaker Change: Video for these types of technologies and products and we're really focused on how we address the shortcomings of the first gen lasers.
Speaker Change: Yes in practice in.
Nicholas Curtis: Adoption and placement of an Ally system into a surgeon's practice or an AFC can result in meaningful revenue and eva.growth thanks to its ability to significantly increase efficiency and patient throughput, as well as enhance outcomes. Holmes. Because of these factors we believe as a matter of when, not if they adopt our technology. We're beginning to see a substantive acceleration in the rate of ally conversions. Current economic conditions I mentioned earlier make it more challenging for surgeons and facilities to invest in upgrading their capital equipment.
Speaker Change: The EU and so we are putting some resources into those areas. We're doing we're going to we're going to be present, there es Crs is coming up.
Speaker Change: I'll talk more about some of the activities that we're going to be doing at the ESC Rs.
Speaker Change: Next quarter's call because they'll be able to give you an update as to actually how we did and we're also going to likely.
Speaker Change: Be sending some of our people over to Europe and into Taiwan, Hong Kong to work with the distributors, there and getting a quick quicker uptake with installs right because they don't have the numbers of employees dedicated to it sorry to take up somewhat grad, there, but that's important.
Nicholas Curtis: However, the speed and efficiency of ally which is being discussed in an increasing number of peer-to-peer communications, surgeon-initiated studies and case studies discussed during this quarter's medical meetings demonstrate the financial benefit of adopting our system, helping to overcome the economic challenges surgeon's face. Additionally, penetration into important channels such as the private equity groups combined with the overall age of competitive systems in the market will continue to provide significant catalysts for ally adoption.
Speaker Change: Our multi pronged approach.
Speaker Change: Approach here great.
Speaker Change: Great Great color and I appreciate that I wanted to ask I mean.
unknown: Last quarter, if I recall correctly, you weren't building a contribution from international revenue. I think I heard you correctly say that the backlog of 17 is all U.S. So I just want to understand, are you expecting any revenue in the back half of this year from international revenue?
Speaker Change: Hugh.
Speaker Change: Last quarter, if I recall, you weren't building in the contribution from international revenue I think.
Speaker Change: I heard you correctly say that the backlog of 17.
Speaker Change: All U S. So just want to understand are you expecting some revenue in the back half of this year.
Nicholas Curtis: Accordingly, we expect to see new customers and overall market share growth continue quarter over quarter as this perfect storm plays out. As we continue placing new systems with new users and these surgeons become more familiar with the ally experience and the associated advantages of working with Lenzar, we're confident that procedure volumes and recurring revenues will increase in parallel.
unknown: Internationally.
Speaker Change: 100% and in fact, it's interesting because Rev rack Tom.
Speaker Change: Tom touched on it in here.
Rev rack: In his remarks Rev rack in the U S takes longer than.
Speaker Change: It does.
Rev rack: Because in the U S to give Rev. Rec, we have to.
Nicholas Curtis: We had an exceptional quarter as evidence by the continued revenue in placement growth in the US and receiving CE Mark approval for ally, a major strategic milestone which we announced yesterday that sets the stage for commercial expansion into the European market. The important regulatory approval for ally further reinforces our belief Lenzar's paving the way to revolutionize advanced laser counteract surgery. The EU clearance is a critical step toward our objective of expanding ally's reach on a global scale.
Speaker Change: We have to take the order we have to site visit we have to ship, we install we have to train.
Speaker Change: And then when we have certified users on the product we get to Rev. Rec, whether its a sole system or whether it's a place system in the U S and so there's a time lag there Rev rack outside the U S.
Speaker Change: With the distributors works out when it leaves our dock it becomes the property if you will sold system to to the distributor.
Nicholas Curtis: There are a number of European surgeons eager to take their capabilities to the next level with ally. We have a solid network of distributors ready to deploy and Lenzar is poised to replicate its US success story in key markets elsewhere in the world. To that end, we have been training our EU field service and clinical applications support partners and we have already initiated shipments to Europe and the first ally was installed in a surgeon's facility this week.
Speaker Change: Rev Rec occurs.
Speaker Change: Foster outside U S than it does in U S number one however, lower margins right because distributors our R. R.
Speaker Change: In essence re selling contracting with the customer.
Speaker Change: And.
Speaker Change: The pathway to procedure revenue once it once it leaves our dock is Denver is very similar to the U S. Because they still have to install it they have to train they have to.
Nicholas Curtis: I look forward to updating you on all the progress of the European launch next quarter. I also like to report we recently received TFDA approval to make ally commercially available in Taiwan and Hong Kong and like Europe we've been working closely with our South Eastern Asian distributor to support an efficient launch. I'm pleased to share that we've also shipped our first systems to Taiwan with users having already performed the first ally cases and have additional OUS regulatory approvals on the horizon.
Speaker Change: You will get people certified before Theres revenue on procedures, which is why theres always a lag between the installs and when you when you start to see.
Speaker Change: Productive top so it gets to their normal.
Speaker Change: Normal rate, if you will of procedures.
Speaker Change: So that's sort of the process. So I'm excited because we'll actually see revenue in the third quarter. When typically we might not see as much revenue in the third quarter.
Nicholas Curtis: We continued to actively evangelize ally within the medical community with a strong lens our presence at both the ACO's Europe symposium and Prague and the DOC meeting in Nuremberg. We conducted a number of ally demos and interacted with European thought leaders highlighting allies key differentiators and unique ability to address the shortcomings of first generation systems. This actively dovetailed perfectly into the EU commercial launch on the heels of our fortuitous regulatory clearance. With our growing install base, encouraging utilization trends in an expanding international footprint, we're well-positioned to further increase our market share of both in the US and the rest of the world as we move forward.
Speaker Change: <unk> because we.
unknown: With it just getting the approvals.
Speaker Change: Regardless of vacations.
Speaker Change: We're shipping we're shipping some systems.
unknown: Which is good.
Brian: So does that make sense, Brian will be getting sales outside the United States in the third quarter, but I wouldn't expect a whole lot of Percy direct revenue until the fourth quarter, which is why when I answered <unk> question not only do you have the timing in the United States of placements in the second.
Speaker Change: Quarter that were late in the second quarter, but then you also have the contribution from Europe.
Nicholas Curtis: I'm proud of what the Lensar team has accomplished to date, and it's incredibly gratifying to share some of the details on how far we've come since receiving FDA clearance of Ally just two years ago. Gaining over four procedural market share points in the US since launching Ally is an incredibly positive milestone, but it's just the start. We continue to believe that Ally is a transformative technology with the potential to positively impact the future of the laser counteract market.
Speaker Change: Procedure volume going into the fourth quarter. So I think the fourth quarter should be a nice quarter for us.
Speaker Change: That's very helpful and then.
Speaker Change: Maybe two more questions for me and then I'll hop back up to you, but just you guys accelerated your growth 16% against the 13% comp in the U S.
Speaker Change: Really great to see whats your read Nick on the health of the procedure environment, particularly for cataracts right now both U S and globally and then the second question I'll just.
unknown: Ask upfront.
Nicholas Curtis: We're starting to see this play out, but view this as a marathon, not a sprint. Now that we can market and sell Ally outside the US, with additional markets potentially available to us in the coming months, I expect that the positive momentum for Lensar will begin building at a quicker pace.
unknown: Tom as we think about margins I appreciate the guidance this year.
Speaker Change: Conceivably with all of the consumable revenue and recurring revenue next year margins could snap up a little more materially.
Speaker Change: Just help us think about maybe the longer term margin opportunity for you guys. Thanks for taking the questions guys.
Thomas Staab: Now let me turn the call over to Tom to cover our financial highlights for the quarter. Tom? Thank you, Nick. Just a few brief remarks from me on our strong second quarter performance. Revenue was $12.6 million in the second quarter of 2024 compared to $12 million in the second quarter of 2023, reflecting a 5% increase. This growth was generated from an increase in procedure volume. To echo Nick's earlier comments, US procedure volume increased 16% over the second quarter of 2023, and on a worldwide basis, we saw an increase of 19%.
unknown: No problem.
Speaker Change: Go ahead.
unknown: No.
Speaker Change: Brian I'm sorry.
Speaker Change: Tracking gross margin can you can you.
Speaker Change: First question, Nick was just U S accelerated.
Speaker Change: 10% on it how do I look at the cataract market overall, yes, just your read on cataract procedure.
Speaker Change: Procedure the procedures.
Speaker Change: So it's interesting because.
Speaker Change: There is there is.
Speaker Change: Some pent up demand from a cataract surgery perspective.
Speaker Change: The people this is kind of still a little bit of a hangover from COVID-19 writers there's patients that.
Thomas Staab: Given the timing of placements in the second quarter and ramp up time for sites and surgeons to reach an optimal utilization rate, we expect to see more robust procedure volume culminating in recurring revenue in the third and fourth quarters of 2024 when these recently installed systems begin to achieve a typical monthly run rate. In addition, we are extremely excited to have recently received EU and Taiwan regulatory clearances that allow us to sell ally outside the United States.
Speaker Change: Didn't have surgery, then now have surgery on the other hand, there is there is some uncertainty.
Speaker Change: With interest rates.
Speaker Change: Talk about the economy and inflation and whatnot and so I think patients I think there is some pressure on physicians from from a premium surgery perspective on the other hand.
Speaker Change: You also have the generation of patients that are becoming cataract age patients that that have had made investments significant investments in their eyes.
Thomas Staab: We are now able to increase allies' global footprint. Selling ally systems in these operating regions is extremely important and enables us to increase our market share, total and recurring revenue, as well as positively impact our cash flow. We have been anxiously awaiting these clearances as they are significant catalysts for our future success. Gross margin for the quarter was $6.8 million, representing a gross margin of 54%, compared to $6.8 million and 56% gross margin realized in the second quarter of 2023.
unknown: Refractive.
unknown: Refractive procedures, leading up to this and so.
Speaker Change: A coast there was an interesting session doctors are under pressure in their offices to maintain profitability, which is very difficult to do with <unk>.
Speaker Change: Presentations in time necessary in the office on the other hand with reimbursements under pressure.
unknown: And.
Speaker Change: They certainly in incidents of astigmatism, 70% to 90%.
Speaker Change: Of patients who have visually significant astigmatism.
Speaker Change: It is imperative that doctors to begin offering alternatives to patients from.
Thomas Staab: Our gross margin was strong in this quarter, although we anticipate a slight decrease in our future gross margin percentage as we see a higher concentration of ally sales and anticipate a higher concentration of revenue outside the United States in future quarters. For the year, we continue to expect a gross margin percentage of approximately 50%. Total operating expenses for the second quarter of 2024 were $12.1 million and compared to $9.6 million in the second quarter of 2023.
Speaker Change: Surgical perspective that aligns patient need.
Speaker Change: In patient ward with <unk>.
unknown: Surgeons needs to be able to.
unknown: Be able to offer those services.
unknown: And.
Speaker Change: Make a profit so I think I feel pretty comfortable that with the astigmatism side that youll see a higher management of astigmatism as more routine to cataract surgery cataract surgery is refractive surgery.
Thomas Staab: The increase in operating expenses was primarily attributable to a one-time impairment charge on intangible assets of $3.7 million. If you exclude this impairment charge, our total operating expenses were $8.4 million, which is largely a function of decreased general and administrative expenses, somewhat offset by increased selling and marketing expenses as we focus on growing our commercial organization and market share in the United States. The $3.7 million charge relates to a strategic decision to terminate our collaboration with Earthly, associated with the integration of their FACOL-emulsification system into Ally.
Speaker Change: Doctors are.
Speaker Change: Relating to that private equity groups also had been pretty static right.
Speaker Change: I haven't been able to continue to do deals they made some pretty rich deals.
Speaker Change: In in paid premiums for these practices. So we're seeing the private equity groups, who are on the business side. They were not that interested in looking at these types of things as replacement technologies to the older technologies that are when they are hearing the efficiencies they have to improve efficiencies.
Speaker Change: They have to be able to have better patient throughput, we deliver on that so while the macroeconomic climate is difficult.
Thomas Staab: Although we remain committed to combining Ally and FACOL capabilities and will continue to maintain a robust portfolio of IP related to this integration, we have decided to discontinue activities with Earthly. The discontinuation of the collaboration eliminates any contractual and any other potential limitations on Lenzar, collaborating with other FACOL manufacturers in the future. Net loss for the quarter was $9 million, or a $0.79 loss per ship per common share, compared to an $8.8 million loss and a $0.81 loss per common share in the second quarter of 2023.
Speaker Change: This is this is not.
Speaker Change: It's a win with this.
Speaker Change: They are having to look at this and they are giving serious consideration. So I feel like our volume and just by the nature of the percentage of new customers that are coming to lens or this is going to.
Speaker Change: The macro market doctors need to do and offer these types of procedures patients want them and need them.
Speaker Change: Regardless, there is enough patients to be able to do this.
unknown: Thank you.
Robert: So Robert.
Speaker Change: In regards to gross margins, obviously, we're predicting that we're around 50% for this year and Thats.
Thomas Staab: However, as discussed previously, included in the net loss was the one-time impairment charge of $3.7 million and a charge associated with our outstanding warrants, which occurred in both second quarters relating to an increase in our stock price.
unknown: We're seeing.
Speaker Change: A few more sales than what we had originally anticipated.
unknown: And it goes to Nick's comments about.
Speaker Change: The difficult macro economic market.
Thomas Staab: To evaluate our results and operations more intuitively, let us look at our adjusted EBITDA results. The second quarter is generally a strong quarter for us and you see we achieve break even having a positive adjusted EBITDA of $30,000 after narrowly missing break even in the second quarter of last year with a negative $188,000. Looking forward, we expect to see operating break even quarters with some consistency starting as soon as the fourth quarter of this year.
unknown: Just being a little harder for capital equipment sales.
Speaker Change: We've been pleasantly surprised that it's ticked up a little more than what we had anticipated.
Speaker Change: So you take that forward and the short answer to your question is if we're at 50% right now we could easily go to 53% to 55%.
Speaker Change: And there is a number of factors that you that we are evaluating there one is.
Speaker Change: The floodgates have opened outside the United States right now we've been captive to growing in the United States and we've done really well we will continue to do that next year, but what youre going to see is now where we have the ability to.
Thomas Staab: If you exclude the warrant and impairment items from our net loss for the second quarter, our loss was $1.4 million in 2024 as compared to $2.8 million in 2023, or one half of what it was for the second quarter a year ago. As of June 30, 2024, we had cash and cash equivalence of $15.4 million as compared to $24.6 million at December 31, 2023. Cash used in the second quarter was $3.7 million and was largely dedicated to increases in inventory and our least fleet of U.S, systems. These uses of cash are a function of building inventory to supply ally systems to the EU and Taiwan for which shipments have begun as well as expanding our fleet of ally systems in the United States.
Speaker Change: Two place outside.
Speaker Change: The United States and Thats very important for two reasons one is all of those.
unknown: Placements will be sales unlike in the United States, but.
Speaker Change: Our margins generally carry an 80% or our procedures carried an 80% margin or so obviously our systems carry a much lower.
Speaker Change: Percentage and then outside the United States, even lower than the United States simply because we have to make sure that our distributors are motivated and compensated appropriately.
Speaker Change: So I think that you have benefit in margin associated with.
Cameron Radinovic: Now I'd like to turn the call over to the operator and we look forward to your questions. Marjorie? Thank you, sir.
unknown: More.
Speaker Change: More throughput of systems and utilization of overhead more sales of systems is going to pull on that margin down a little bit, but as we play systems the procedures and the recurring revenue associated with that obviously gives a much higher margin chisanbop it all out.
Operator: At this time, if you'd like to ask a question, please press the star one on your telephone keypad. You may remove yourself from the queue at any time by pressing star two. Once again, that is star one to ask a question.
Frank Takkinen: And while we wait for those questions to come in, we will next go to Frank Takkinen from Lake Street Capital Market. Please go ahead. Great, thank you. Questions, congrats on all of the progress. I was hoping to start with one on the mix of sales versus placements in the quarter. Obviously, a really impressive placement quarter. Nick, can you maybe talk a little bit more about the mix of how much of those were actual front sales versus placements and then how the prospect looks to gift those into a full purchase or do they stay as placements and just develop a big recurring revenue stream?
Speaker Change: And I would say 53% to 55.
Speaker Change: Thank you Tom.
Operator: Thank you. I'd like to turn the call back to our speakers for any closing remarks.
Speaker Change: Thank you I'd like to turn the call back to our speakers for any closing remarks.
Speaker Change: I appreciate everybody for joining the call today. Thank you and for your continued interest in <unk>, we really look forward to updating you as we make further progress and the exciting remainder of 2024 and beyond thank you.
Speaker Change: You for your attention today and questions I appreciate it.
Frank Takkinen: Yeah. Hi, Frank. I appreciate the questions. Thank you. So up to 17 on the installs, 10 of those were sold and 7 of those were leases, if you will. So about 59% of the systems were actually sold systems of the 17.
Operator: This does conclude today's program. Thank you for your participation. You may disconnect at any time.
Speaker Change: This does conclude today's program. Thank you for your participation you may disconnect at anytime.
Operator: Yes.
Operator: Oh.
Speaker Change: Uh huh.
Operator: [music].
Nicholas Curtis: And then, that makes sense. And then maybe shifting over to manufacturing capacity clearly, you're scaling well. And I think I asked about this last quarter too, but do you still feel confident you're able to produce the amount of allied systems required to keep up with demand now that you're entering a couple of new geographies? I do actually, you know, we had anticipated these approvals. And so, you know, as Tom had made some remark in his comments here, we had been buying inventory and building inventory.
Operator: Okay.
Operator:
Operator: Okay.
Operator: [music].
Nicholas Curtis: There's some lead time to receiving some of the critical parts such as the laser aspect and certain other components, you know, computer-wise and whatnot and chips. So we've been placing orders and we have been receiving items in anticipation of this. So, you know, manufacturing is actively building systems now as we speak and we feel good that we're going to be able to deal with our backlog. And by the way, that was US backlog that I was talking about going into the quarter.
Operator:
Operator: [music] Thanks for watching!
Operator: Hum.
Operator: [music].
Nicholas Curtis: And, you know, we'll see as we move forward in this quarter, as we start to get more orders from outside US. But we feel comfortable that we've ordered enough parts and we're actively building and, you know, people have pretty fired up around here.
Nicholas Curtis: Nice. And then let me just the last one. Help us with back half expectations. I heard the comment Q2, Q4 typically the strongest, but maybe if you can help us think about how we should be thinking about our models for Q2 and Q4 and bridging to the expectation for 20% growth of this year. Yeah. So typically, you know, as we said, Q2, Q4 would be the best quarters. I certainly expect based on the continued interest in getting approvals outside US and sort of early indication of demand for systems to be shipping OUS that will have a reasonable quarter, this quarter and the third quarter, which typically, you know, just globally, cataract surgery volumes are the lowest.
Nicholas Curtis: Overall, cataract surgery volumes are the lowest in Q3, as compared to all four, you know, the other three quarters over the course of the year because of extensive European vacation schedules, you know, people generally traveling more, doing less. And then the fourth quarter typically is the strongest from a procedure number perspective overall cataract procedure. So I expect that to follow suit with lens R, but even more so for us because we've got a large number of systems that installed at the end of the first quarter and certainly into second quarter with a big backlog moving into third quarter.
Operator: Hum.
Operator: [music].
Operator: Sure.
Operator: [music].
Nicholas Curtis: We'll have a reasonable third quarter and then I expect fourth quarter that between the meetings that we've got the shipments that are going OUS in this quarter and in fourth quarter that we're really going to finish the year really strong going into the first quarter. So I would expect at both on the procedure level as well as on an overall capital level and numbers of systems, you're going to see some really strong performance here as we get into the fourth quarter.
Nicholas Curtis: And Frank maybe just a little bit of color. So in my remarks I had mentioned that we expected procedure volume to increase in a third and fourth quarter. If you look at the third quarter and the 17 placements and you split the quarter right in the middle, the vast majority of those placements were actually installed in the latter half of the quarter. And so what that means is you know you've got to ramp up those systems and they should kick in in significance in the third quarter, but really all of them will be hopefully operating at an optimal level in the fourth quarter.
Nicholas Curtis: The other thing to consider is with the two clearances, we just started shipping systems and obviously it's you know at least one third of the quarter is done. So it'll take us a while to get that, but those procedures from an XUS perspective should kick in in the fourth quarter. So we really do expect the fourth quarter to be very very strong for us just because of those catalysts.
Ryan Zimmerman: Thank you and next we're going to go to Ryan Zimmerman with BTIG. Hey guys, good morning and congrats on all the approvals that I'm excited to see. I want to ask about your OUS strategy a little bit Nick. I've just talked to us kind of how you're thinking about approaching the market. Obviously you have distributors there but is there something beyond just attendance at clinical meetings? Are you putting any resources in these markets to help us understand how you're thinking about approaching that? Yeah, thanks, Ryan. I appreciate the question.
Nicholas Curtis: We didn't have the luxury 12 years ago when we were introducing the first gen of being able to sort of control the launch if you will. We kind of had to go global and introduce the product everywhere 12 years ago because we were sort of the last company and we were the smallest independent moving into the marketplace. Things are a lot different right now. We're the leader in the technology moving into the marketplace now with a significantly enhanced new product.
Nicholas Curtis: And Europe has been pretty polarized in terms of people's belief or lack thereof in the femtosecond laser market space for cataract surgery. And so it's been polarized there because when these technologies launched there was a high expectation for efficiencies outcome and performance. And quite frankly the first generation systems went into the marketplace and they didn't necessarily perform like that to start. And now that we've had the benefit of a ramp up in the U.S, there's been a significant amount across pollination between European physicians and physicians outside U.S, hearing about Ally.
Nicholas Curtis: We've certainly got a much better handle on Ally now and understand very well how it works and we've already put very substantive kind of continuous improvement in upgrades into the system. And so we expect that when we get these first systems installed, there's a couple different areas. Because I talked about channels in the U.S, from a private equity perspective. Well those same channels exist outside U.S, and we've begun in the EU at least.
Nicholas Curtis: And we've begun to penetrate into one of the larger two of the larger private equity groups actually in with first gen lasers of Lenzar and we'll be evolving into the Ally lasers there. We've also reached out to a group of KOLs that here to four, we haven't necessarily had a relationship with and done business before. And as you know, peer to peer is really strong in these types of technologies and products and we're really focused on how we address the shortcomings of the first gen lasers as in practice in the EU. And so we are putting some resources into those areas. We're going to be present there.
Ryan Zimmerman: ESCRS is coming up and I'll talk more about some of the activities that we're going to be doing at the ESCRS in next quarter's call because I'll be able to give you an update just to actually how we did. And we're also going to likely be sending some of our people over to Europe and to Taiwan Hong Kong to work with the distributors there in getting a quick, quicker uptake with installs because they don't have the numbers of employees dedicated to it. I'm sorry to take up so much time there, but it's important, you know, it's a multi-prone approach here. Great, great color and appreciate that. Now I want to ask, I mean...
Nicholas Curtis: You last quarter, if I recall, you weren't building in the contribution from international revenue. I think I heard you correctly say that the backlog of 17 is all U.S., so just one to understand, are you expecting some revenue in the back half of this year internationally? 100%. And in fact, it's interesting because Rev Rack, Tom touched on it in his remarks. Rev Rack in the U.S, takes longer than it does OUS because in the U.S, to give Rev Rack, we have to ship, we have to take the order, we have to site visit, we have to ship, we install, we have to train, and then when we have certified users on the product, we get to Rev Rack, whether it's a sold system or whether it's a place system in the U.S. And so there's a time lag there.
Nicholas Curtis: Rev Rack outside the U.S, with distributors works out when it leaves our dock, it becomes the property, if you will, sold system to the distributor. So Rev Rack occurs faster outside U.S, and it does in U.S., number one. However, lower margins, right, because distributors are in essence reselling, contracting with the customer. And the pathway to procedure revenue once it leaves our dock is then very similar to the U.S, because they still have to install it, they have to train, they have to give people certified before there's revenue on procedures, which is why there's always a lag between the installs and when you start to see productive, you know, types of gets to their normal rate, if you will, of procedures.
Nicholas Curtis: And so that's sort of the process. So I'm excited because we'll actually see revenue in the third quarter, when typically we might not see as much revenue in the third quarter, OUS, because we just, you know, with just getting the approvals, regardless of vacations, we're shipping some systems, which is good. So that makes sense? Ryan, we'll be getting sales outside the United States in the third quarter, but I wouldn't expect a whole lot of procedure revenue until the fourth quarter, which is why, you know, when I answered Frank's question, not only do you have the timing in the United States of placements in the second quarter that were in late in the second quarter, but then you also have the contribution from Europe on procedure volume going into the fourth quarter. So I think the fourth quarter should be a nice quarter for us. Very helpful.
Ryan Zimmerman: And then maybe two more questions for me and then I'll hop back to you, but just, you know, you guys accelerated your growth, 16% against a 13% comp in the U.S., really great to see what's your read, Nick, on the health of the procedure environment, particularly for cataracts right now, both U.S, and globally. And then the second question I'll just ask up front, you know, Tom, as we think about margins, I appreciate the guidance this year, conceivably with all the consumable revenue and recurring revenue next year, margins could step up a little more materially, just help us think about maybe the longer term margin opportunity for you guys. Thanks for taking the questions, Beth. I'm a prompt.
Nicholas Curtis: So, Frank, I'm sorry, because I was on track and I could grow smart and can you back up? Yeah, first question Nick was, just US accelerated, 60% on a start. Oh, how do I look at the cataract market overall? Yeah, just your read on cataract health procedures. So, it's interesting because, you know, there is still some pent up demand from a cataract surgery perspective. You know, the people, you know, this is kind of still a little bit of a hangover from COVID, right?
Nicholas Curtis: There's patients that didn't have surgery, that now have surgery. On the other hand, there's some uncertainty, you know, with interest rates and, you know, talk about the economy and inflation and whatnot. And so, I think patients, I think there's some pressure on physicians from a premium surgery perspective. On the other hand, you also have, you know, the generation of patients that are becoming cataract age patients, that have had and made investments, significant investments in their eyes in, you know, refractive procedures leading up to this.
Nicholas Curtis: And so, in ACOS, there was an interesting session. Doctors are under pressure in their offices to maintain profitability, which is very difficult to do with presentations and time necessary in the office. On the other hand, with reimbursements under pressure, and they certainly, in incidents of astigmatism, 70 to 90 percent of patients have visually significant astigmatism, it's imperative that doctors begin offering alternatives to patients from a surgical perspective that aligns patient need and patient want with really surgeon's needs to be able to offer those services and, you know, make a profit.
Nicholas Curtis: So, I think I feel pretty comfortable that with the astigmatism side, that you'll see a higher management of astigmatism as more routine to cataract surgery, cataract surgery is refractive surgery, and doctors are relating to that. Private equity groups also have been pretty static, right? They haven't been able to continue to do deals. They made some pretty rich deals in paid premiums for these practices. So, we're seeing the private equity groups where on the business side, they were not that interested in looking at these types of things as replacement technologies to the older technologies that are when they're hearing the efficiencies, you know, they have to improve efficiencies, they have to be able to have better patient throughput.
Nicholas Curtis: We deliver on that. So, while the macroeconomic climate is difficult, this is not an if, it's a when with this, you know, they're having to look at this, and they are giving serious considerations. So, I feel like our volume, and just by the nature of the percentage of new customers that are coming to Lenzar, this is going to, on the macro market, doctors need to do and offer these types of procedures, patients want them and need them. And regardless, there's enough patients to be able to do this.
Thomas Staab: Thank you.
Thomas Staab: So in regards to gross margins, obviously, we're predicting that we're around 50 percent for this year and that's, you know, we're seeing a few more sales than what we had originally anticipated and it goes to Nick's comments about, you know, the difficult macroeconomic market and just being a little harder for capital equipment sales. That, we've been pleasantly surprised that it's ticked up a little more than what we had anticipated. So you take that forward and the short answer to your question is if we're at 50 percent right now, we could easily go to 53 to 55 percent and there's a number of factors that we are evaluating there.
Thomas Staab: One is, you know, the floodgates have opened outside the United States. Right now, we've been captive to growing in the United States and we've done really well. We will continue to do that next year but what you're going to see is, now we're at, we have the ability to place outside the United States and that's very important for two reasons. One is, all those placements will be sales unlike in the United States but, you know, our margins generally carry an 80 percent or our procedures carry an 80 percent margin or so.
Thomas Staab: Obviously our systems carry a much lower percentage and then outside the United States even lower than the United States simply because we have to make sure that our distributors are motivated and compensated appropriately. And so, I think that you have benefit in margin associated with more throughput of systems and utilization of overhead, more sales of systems is going to pull on that margin down a little bit but as we play systems, the procedures and the recurring revenue associated with that obviously gets a much higher margin. Chisholm bought it all out and I would say 53 to 55. Thank you, Tom. Thank you.
Nicholas Curtis: I'd like to turn the call back to our speakers for any closing remarks. I appreciate everybody for joining the call today. Thank you and for your continued interest in Lensar. We really look forward to updating you as we make further progress in the exciting remainder of 2024 and beyond. Thank you for your attention today and questions appreciated.
Operator: This does conclude today's program. Thank you for your participation. You may disconnect it any time. Frank Takkinen, Ryan Zimmerman, Thomas Staab, Cameron Radinovic Frank Takkinen, Ryan Zimmerman, Thomas Staab, Cameron Radinovic Frank Takkinen, Ryan Zimmerman, Thomas Staab, Cameron Radinovic