LENSAR, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; filed March 16, 2023. This is an annual report, not a standalone Q4 report, so the supplied filing text does not provide a clear set of Q4-only financial results.
Business context
LENSAR develops and sells or leases femtosecond laser systems and related procedure licenses, patient-interface consumables and services for cataract surgery. In 2022, it shifted manufacturing focus from its LENSAR Laser System to its next-generation ALLY Adaptive Cataract Treatment System. ALLY received U.S. FDA clearance in June, and a controlled initial launch began in August. At year-end, the company reported approximately 270 systems installed across 16 countries.
Financial performance and liquidity
| Metric | FY2022 | FY2021 | Change |
|---|---|---|---|
| Revenue | $35.4 million | $34.5 million | +2.6% |
| Product revenue | $26.0 million | $26.2 million | -1.1% |
| Lease revenue | $5.9 million | $5.0 million | +19.1% |
| Service revenue | $3.5 million | $3.2 million | +7.3% |
| Gross profit | $20.0 million | $17.8 million | +12.0% |
| Gross margin | 56.4% | 51.7% | +4.7 percentage points |
| Operating loss | $20.2 million | $19.7 million | Loss increased $0.5 million |
| Net loss | $19.9 million | $19.6 million | Loss increased $0.3 million |
| Net loss per share | $1.96 | $2.09 | Loss per share narrowed |
| Cash used in operations | $14.9 million | $9.0 million | Use increased $5.9 million |
Gross profit and margin are calculated from reported revenue less cost of revenue, excluding intangible amortization. The company reported Adjusted EBITDA loss of $10.2 million, versus $10.0 million in 2021; this is a non-GAAP measure.
Cash and cash equivalents were $14.7 million at December 31, 2022, down from $31.6 million a year earlier. Current assets were $33.7 million and current liabilities $11.4 million. Total liabilities were $13.9 million, including $2.8 million in operating lease liabilities; the filing reports no borrowing balance. Stockholders’ equity was $42.0 million. Inventory increased to $11.7 million from $6.5 million, principally amid preparation for the ALLY launch. Accumulated deficit was $97.5 million.
Material changes and management commentary
- Procedure volume was 132,113, nearly flat versus 131,495 in 2021. Management attributed the slight decline in product revenue mainly to lower average revenue per procedure, partly offset by higher volume.
- Product cost of revenue fell 24.8%, primarily reflecting the mix and number of system sales, which have lower margins than procedure licenses. Service and lease costs rose with increased installed and leased systems.
- Sales, general and administrative expense rose 13.7% to $27.2 million, including higher ALLY-related commercial activity and professional fees. Research and development expense declined 4.4% to $11.8 million.
- Operating cash use increased, including a $6.9 million cash investment in inventory changes. Investing cash use was $0.1 million. Financing cash use was $2.0 million, principally the $2.4 million contingent consideration payment related to ALLY intellectual property, partly offset by employee stock-purchase proceeds.
- Management expects losses and operating cash outflows in the near term and said current cash plus expected product-sale and lease cash flows should support operations for at least 12 months from issuance of the financial statements. Liquidity beyond that depends on meeting or exceeding revenue and manufacturing plans; management says additional capital will be needed to continue operations beyond that period.
Outlook, risks and unusual items
- Management expected wider U.S. availability of ALLY in 2023 and planned further regulatory submissions internationally. EU certification was submitted in September 2022; approval timing is not assured.
- The initial ALLY launch systems were delivered with phacoemulsification features disabled or removed. A further FDA 510(k) submission for those features depends on a third party obtaining clearance for a predicate phacoemulsification device.
- Supply-chain constraints delayed ALLY materials and launch-stock completion. Inflation, component-price increases, semiconductor availability and single-source suppliers could constrain production, raise costs and weaken demand.
- Advanced laser-assisted procedures often require patient out-of-pocket payments; Medicare and most insurers generally cover traditional cataract surgery, not the incremental cost of these advanced options. Adoption and demand therefore depend partly on patient willingness to pay.
- The filing highlights continued operating losses, limited liquidity beyond one year, potential need for dilutive equity or debt financing, and uncertainty about the company’s ability to continue as a going concern over a longer horizon. The independent auditor included an emphasis-of-matter paragraph regarding funding future operations.
- Supply agreements carried approximately $5.8 million of minimum purchase obligations over the next 24 months. A 3% royalty on certain revenue may apply once ALLY’s phacoemulsification features are cleared and operational.
- The company filed for an approximately $1.6 million Employee Retention Credit in Q1 2023; it had not recognized the amount at year-end because eligibility and proceeds were uncertain. If received in full, approximately $0.25 million of contingent professional fees would be due.
- Management reported no material legal proceedings and no material impairment charges in 2022. It said disclosure controls and internal control over financial reporting were effective; the auditor did not provide an internal-control attestation.
Most important facts for investors to verify
- ALLY production, launch pace and customer adoption, including whether the third-party predicate device and LENSAR’s phacoemulsification feature obtain required clearances.
- Cash burn, inventory conversion, revenue and manufacturing targets, and the timing and terms of any additional financing.
- Whether supply constraints and inflation affect system availability, gross margin or customer pricing and demand.
- Revenue quality and customer concentration: recurring sources represented approximately 86% of 2022 revenue; one customer accounted for 10% of revenue.
- Potential proceeds and fees associated with the Employee Retention Credit, as well as minimum supply commitments and any future ALLY-related royalties.