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spk04: Ladies and gentlemen, this is the App Reader. Today's conference is scheduled to begin momentarily. And until that time, your lines will again be placed on music hold. Thank you for your patience. Thank you. Good morning and thank you for your participation. At this time our participants are in a listen only mode. Later we will conduct a question and answer session. As a reminder, this conference call will be recorded. I would now like to turn the call over to Cameron Radinovich of Barnes McLellan. Mr. Radinovich, please go ahead.
spk02: Thank you. Good morning and welcome to the Lenzar fourth quarter and full year 2021 financial results conference call. Earlier this morning, the company issued a press release providing an overview of its financial results for the quarter and full year ended December 31st, 2021. This press release is available on the investor relations section of the company's website at www.lenzar.com. Joining me on the call today is Nick Curtis, Chief Executive Officer of Lenzar, who will review the company's recent business and operational progress. Following his comments, Tom Staub, Chief Financial Officer of Lenzar, will provide an overview of the company's financial highlights before turning the call back over to Nick for closing remarks. 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 this presentation. 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, which can be accessed on the website. In addition, this conference call contains time-sensitive information that is accurate only as of the date of this live broadcast March 3rd, 2022. 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. It is my pleasure to turn the call over to Nick Curtis. Nick.
spk00: Thank you, Cameron, and good morning to everyone listening. Thank you for joining us on our fourth quarter and full year 2021 conference call. 2021 was a year of continued progress and execution for LENZAR. And I'm proud of all that we've accomplished since becoming a public company in the fall of 2020, despite facing the lingering challenges associated with the global COVID-19 pandemic. 2021 represented a return to our historical growth trends, as well as meeting our development milestones leading up to our 510 filing for Ally in the first quarter of 2022. Our full year revenue increased 31% and procedures sold were up 37% over 2020. It's also an important metric to note, procedures were up approximately 22% in 2021 as compared to pre-pandemic levels in 2019, signifying a return to our historical trend of delivering 20 plus percent growth on an annual basis. In addition to steady growth in procedure volumes, we saw increases in both system sales and lease placements for our current product offering Lensar Laser System with Streamline and IntelliAccess refractive capsulorexus. This is yet another indication reflecting our continued demand and confidence from the surgeon community and the value of our leading edge cataract surgery technology. Even with the difficulty of placing capital equipment in new accounts, including the more time-consuming operating procedures and controls our surgeons and sites face in the backdrop and uncertainty of the pandemic, we were successful in increasing our worldwide installed base of systems over 10% in 2021. One of the key benefits to the gradual easing of COVID-related restrictions has been our ability to engage in more direct in-person sales and marketing activities with physicians as well as industry events. Even though we were successful in adapting our operations to whatever situation the pandemic presented, face-to-face interactions and the ability to visit with existing and prospective customers is beneficial to the process of demonstrating and realizing the benefits of our more highly evolved current femtosecond laser, as well as to engage in more productive discussions regarding the substantial benefits and enhancements of the Ally system. As we entered the fourth quarter, our team scheduled several meetings and presentations around the AAO conference in New Orleans and ESCRS-sponsored Aegean Cornea. Lensar was able to leverage the growing appreciation of our current Lensar system with our core feature technologies, as well as the enhanced features and advancements in technology of our next generation Ally adaptive cataract treatment system that we are planning to bring to femtosecond laser cataract surgical procedures. Turning to Ally, we recently achieved a major milestone with the submission and FDA acceptance of our 510 application and regulatory clearance of Ally as promised. Our application is now undergoing substantive review by the agency and we're on track to launch Ally in the second half of 2022 if cleared by FDA. As we discussed in our press release announcing FDA acceptance of the 510K, this submission is the first phase of a planned two-step commercial release strategy. The Ally Adaptive Cataract Treatment System, if cleared by the FDA, will be launched as the next generation femtosecond laser. This launch will be followed by an additional 510K application seeking clearance of the faecal emulsification features contained within the integrated Ally system later this year. LensEye will begin commercialization of Ally as planned with a controlled launch. Ally will have the fequimostification device integrated as part of the system. However, the features will not be enabled for use until we receive FDA clearance on this aspect of the combined system. We believe the staged approach allows for the most efficient, expeditious, and clear pathway to commercialization for Ally, and more importantly, puts the most advanced and most contemporary femtosecond laser in the hands of surgeons in 2022. The majority of competitive femtosecond lasers currently in use are nearing the end of their useful life and are clearly vulnerable to replacement. Ophthalmic surgeons demand the most contemporary and advanced technology, not systems that lack substantive, relevant enhancements that are based on technology more than a decade old. They want access to the most efficient and best tools in their hands because it provides the opportunity to deliver best practice outcomes for their patients and their practices. Other than our current LLS, the first femtosecond lasers for cataract surgery entered the market as early as 2010, and they haven't evolved much from their initial state. These lasers lack the key features that are at the core foundation in the current generation LLS and in the Ally adaptive cataract treatment system. Lensar's laser system has been evolutionary to include a suite of six significant upgrades in the past six years, providing better technology to assist the surgeon in delivering consistently better efficiencies and outcomes, improving both the patient's and surgeon's experience in cataract surgery. Now we are moving to Ally. Ally is revolutionary, having the potential to address many of the limitations of current technology through its small footprint, significantly increase laser speeds in both the cornea and lens treatments that are part of the cataract procedure, enhanced ergonomics, superior imaging capabilities, and includes advanced stigmatism management features. We believe that Ally sets a new standard for femtosecond laser-assisted cataract surgery with the potential to improve surgeon efficiency and enable them to deliver optimal outcomes for patients. The first in-market dual-pulse laser is designed to significantly reduce the duration of treatments, cutting procedure time by up to two-thirds. We look forward to the FDA review process and updating you on all of our progress as we move closer to a potential clearance decision. While 2021 presented challenges, I believe we're on the verge of revolutionizing the cataract treatment market. We're at this juncture thanks to the commitment, teamwork, and support of the entire Lensar team in working toward our collective objectives of continuing to be the technology leader in the industry. Now let me turn the call over to Tom to cover our financial highlights for the quarter and year. Tom.
spk01: Thank you, Nick. Our fourth quarter and full year 2021 financial results are included in our press release issued earlier this morning, but I'd like to take this opportunity to expand on that information by adding some color to the remarks contained in the release. Revenue was $11.2 million in the fourth quarter of 2021 compared to $8.3 million in the fourth quarter of 2020. All individual components of revenue, product, lease, and service increased from the fourth quarter of 2020. It was a very strong quarter for us with total revenue increasing $2.9 million or 35% over the fourth quarter of 2020. The increase in 2021 total revenue was primarily driven by increased procedure volume generating approximately $1.8 million. with the remainder due to system sales and lease placements. In the fourth quarter of 2021, we sold 41,642 procedures compared to 30,503 procedures sold in the fourth quarter of 2020. Our procedure volume increased 37% over the fourth quarter of 2020 and 30% over the fourth quarter of 2019. Gross margin for the quarter was $5.6 million and represented a gross margin percentage of 50.2%. We increased gross margin $1 million in the quarter over the $4.7 million recorded in the fourth quarter of 2020. Total operating expense for the fourth quarter of 2021 were $9.5 million compared to $11.5 million in the fourth quarter of 2020. This decrease was largely due to less non-cash stock compensation expense, somewhat offset by an increase in R&D expenditures. The increase in R&D for the fourth quarter of 2021 was related to additional costs for the continued development of Ally as we neared our 510 filing, as well as materials purchased for the manufacturer of Ally, which totaled approximately $1 million in the quarter. Total stock-based compensation in the fourth quarter of 2021 and 2020 was $1.5 million and $5.1 million, respectively. Net loss for the quarter decreased significantly and was $3.9 million, or a $0.41 loss per share, compared to a $6.8 million loss, or a $0.78 loss per share in the fourth quarter of 2020. Adjusted EBITDA to the fourth quarter of 2021, which excludes stock-based compensation expense, was a $1.6 million loss compared to a $1.1 million loss in the fourth quarter of 2020. As of December 31st, 2021, we had cash and cash equivalents of $31.6 million as compared to $40.6 million at December 31st, 2020. Cash utilized in the fourth quarter was $700,000 and $9 million for the full year. With over $31 million on cash on hand at December 31st, a cash burn of less than $10 million for 2021, and our Ally 510 submission accepted for substantive review by the FDA, we have a strong balance sheet and positive momentum going into our anticipated Ally launch in the second half of this year. I would also like to touch on a few other high points for 2021. Our total revenue for 2021 increased $8.1 million, worth 31% over 2020 levels. Our recurring revenue for the year was 86%, which represents all revenue outside of system sales and provides a recurring revenue foundation of approximately $30 million going into 2022. As you look at procedures, our annual procedure volume in 2021 increased 35% over 2020 levels and 22% over 2019 levels, indicating system utilization and a primary indicator of our business growth has returned to historical trend levels. Historically, excluding 2020, when elective procedures were shut down due to the pandemic, we successfully grew our business by at least 20% every year. As we report today, we feel we have persevered through the pandemic well, and we look forward to achieving exciting and pivotal ally milestones in 2022. In summary, our annual procedure and revenue growth accompanied with our cash provide strong pillars supporting the Lensar Foundation to launch Ally in the second half of 2022. Now I'd like to turn the call back over to Nick for some closing remarks.
spk00: Thank you, Tom. I really appreciate everyone taking the time to listen this morning, and I'm going to turn the call back over to the operator, and we look forward to your questions.
spk04: At this time, if you would like to ask a question, press star 1 on your telephone keypad. Again, that is starting the number one for any questions. Your first question is from the line of Danielle Atalafi with SVB Learwings.
spk05: Hey, good morning, gentlemen. Thank you so much for taking the question. And congrats on a really strong 2021 given all the dynamics there. I'm just curious if you could talk a little bit directionally about how to think about 2022 and the cadence. I mean, obviously you had a strong Q4, even though we did have a COVID surge. Maybe talk a little bit more about what you saw towards the end of Q4 and into Q1 and how to think about procedure volume in the first quarter specifically, obviously, but then if that drives any sort of recovery in the back part of the year. And then I have a few follow-ups.
spk00: Sure. Thank you. Hi, Danielle. I appreciate the question. Um, so fourth quarter, traditionally in cataract surgery, because people are, you know, reaching their deductibles and, and, um, you know, have a healthcare funds to spend, you know, at the end of the year. So traditionally fourth quarter from a procedure perspective, cataract surgery wise would, uh, would be a strong quarter. But we're also, you know, and so historically, fourth quarter is always the best quarter of the year for the number of procedures. And then there's some drop off of procedures in the first quarter as compared to fourth quarter overall cataracts. And then they build again towards the fourth quarter of the year. So that's traditionally now with the COVID and the pandemic, it's been a little bit different. Volumes have been overall cataract surgery volumes have been less than what they were previous. But it seems that people are more willing to convert to these types of procedures now. And so we've seen strong continued use. The other thing that I mentioned in the and the call was is that we've got some additional system placements that we're putting in, and that was strong in the fourth quarter. So these systems will get installed, you know, as we move into the first quarter and get up and running. And so, you know, I would expect that we would continue to see some solid procedure growth there.
spk05: Okay, got it. So kind of Would it be fair to characterize Q1, and we can take this offline too, but sort of normal seasonality or maybe more pronounced because of Omicron is the message here. You're actually still seeing pretty strong procedure volume and COVID's not having as much of an impact as maybe in some other areas within med tech.
spk00: I don't want to jinx us. Yeah, okay. We seem to see, you know, a decent, certainly decent procedures. It's been a little spotty in areas just because of the COVID, but then it comes back strong. The doctors, if they're not doing surgery in a week or whatnot, when it appears that things slow down, then they're busy and they come back and get back at it.
spk05: Got it. And then I just had two higher-level questions. One, the utilization, your procedure volumes per system seem much higher than before. other peers like J&J and Alcon. What is driving that and how sustainable is that?
spk00: It's a really good question because it's important. It's important for Lensar. Really, our system is much more efficient than the other systems, number one. because we can transfer data from the preoperative devices and a variety of preoperative devices into the system, it eliminates the need for manual marking and the transposition of data and sort of the surgical planning that the physicians do because the surgical plan comes up automatically and the system does make some adjustments for the doctor and they just have to make the choice as to what they're going to do rather than manually controlling some of that. Also, the ergonomics of our system are better as well in terms of where and how the system can be placed and used. And then, you know, so that has a big, that's a big thing driving the volume. And because we're more efficient that way, they feel more comfortable doing cases. And really, we're publishing a lot of data regarding outcomes. And so we're now showing that surgeons using Lensar laser can get better outcomes in cataract surgery than people were getting before and what they were getting with the competitive type systems. And so this is driving a higher utilization as they get more confidence in that.
spk05: Got it. Okay. And if I could squeeze in one more question, sorry, and then I'll get back on the line. Just Ally, you know, coming in the second half or with second half approval, can you talk a little bit more about Ally and why it's so disruptive to the market and then sort of how you think this accelerates the growth trajectory from a capital placement perspective and probably more important procedure volume perspective. Thanks so much.
spk00: So the system is really small. It's barely, it's about the same size as the current phacoemulsification technology. So it can be placed anywhere. Also ergonomically, what we call an adaptive cataract treatment system, it can be placed anywhere within a 250 degree range of the patient. So it's, from an ergonomic perspective, no comparison. The laser is also, four times faster in the cornea and two times faster in the lens and we've also um with this dual pulse laser we for the first time most of these lasers from all the companies including lens are with the first generation were either optimized for the lens or they were optimized for the cornea depending on where their roots were from and so this would be the first device in the marketplace that is optimized for both the cornea and the lens and so it's it's it will change the way the treatments are being performed. And so very disrupted that way. And also we've gone to some instantaneous imaging through the use of six cameras. And so Overall, it'll give you better treatments, will cut the procedure time down by up to two-thirds, and can be placed anywhere within the environment that the surgeon and the practice decides to put it in.
spk05: Super helpful. Thank you so much.
spk00: Thank you.
spk04: Your next question is from the line of Ryan Zimmerman with VTIG.
spk03: Hey, guys. This is Phil on for Ryan. Thanks for taking the question. Can you hear me okay? Can hear you. All right, awesome. So the first one, right off the bat, how do you think about the early adoption of Ally, you know, existing Lensar users or competitive equipment users, and what kind of pipeline do you think you have around ophthalmologists waiting to purchase Ally?
spk00: So, really good question. You know, People that are existing Lensar users are obviously people that are keenly interested in what we're doing with Ally. The good news there is that Ally will do things much faster in a bit of a different way than their current system, but the core feature technologies are going to be the same. So we're going to try and we're working towards a mix where we're adding because we now have the ability to really attract a lot of new customers because, as I mentioned in my remarks, the existing lasers that are in the field from the competitors, they haven't been upgraded like Lensar has, and they're old. And so we believe that we're going to be able to attract a lot of new femtosecond lasers laser users to lens are and and we're going to see that from a growth perspective, we obviously have to manage the the existing base. Because you know we want to grow, you know our business and the number of placements and attract new customers to replace the old technology. But we also know that there's a lot of enthusiasm. So it's going to be a balance there. In terms of the pipeline, we've seen a lot of new physicians interested in replacing old technology come to the table and look to discuss. And I don't want to say too much now because, you know, this is a year-end call, but we're beginning to work very, very hard on the launch, especially now that we've filed so it becomes reality. And so now we're sort of targeting and lining up the first 10 systems which are going to be um very critical to the to the next systems uh after that as we as we do our our our controlled launch awesome thanks for that color uh just kind of shifting gears really fast um i appreciate the color you mentioned earlier about publishing those studies you know to help drive the procedure volume per system
spk03: But I was wondering, do you feel like a line of sight on extending those studies to helping with adoption of new physicians in the future?
spk00: Most definitely. I mean, that's as succinct as I can put it. Particularly as doctors that are current femtosecond lasers start to use the Alli I believe that it's going to drive more new physicians that have never used femtosecond lasers for one reason or another with results not being the least of those. We've already seen activity in that regard. I was attending a conference this week, and I had meetings with several people that have not adopted femtosecond lasers. that were very curious about Ally and some of the things we talked about and the clinical data. And so I believe that that's certainly going to happen as we get this underway.
spk03: Awesome. Glad to hear. And thanks for answering the questions, too. No problem.
spk04: There are no further questions. I will now turn the call back over to Nick for closing remarks.
spk00: Well, thank you. 2021 was certainly an important year for us, and we're very excited about the filing of Ally. I appreciate everyone joining the call today and your continued interest in what we're doing at Lensar, and we certainly look forward to updating you as we make further progress as we approach the launch of Ally. Thank you.
spk04: This concludes today's conference call. You may now disconnect.
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