LENSAR, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; unaudited. LENSAR is a commercial-stage medical-device company developing and selling femtosecond laser systems and related products for cataract surgery. It became an independent public company in October 2020.
Key financial results
Amounts in millions, except per-share data and percentages.
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Total revenue | $7.043 | $5.906 | +19.3% |
| Product revenue | $5.158 | $4.103 | +25.7% |
| Lease revenue | $1.111 | $0.976 | +13.8% |
| Service revenue | $0.774 | $0.827 | -6.4% |
| Gross profit / gross margin | $3.894 / 55.3% | $3.568 / 60.4% | Margin down about 5.1 points |
| Operating loss | $(5.200) | $(3.099) | Loss increased |
| Net loss | $(5.182) | $(3.686) | Loss increased |
| Net loss per share, basic and diluted | $(0.56) | $(3.44) | Share-count comparison affected by recapitalization and spin-off |
| Net cash used in operating activities | $(4.619) | $(6.364) | Cash use declined |
Higher system and procedure-license sales drove revenue growth. Product costs rose 73.3%, faster than product revenue, partly because laser-system sales carry lower gross margins than procedure licenses. SG&A increased 26.3% to $6.035 million, and R&D increased 74.8% to $2.746 million, including higher ALLY development and personnel costs. Stock-based compensation was $2.320 million versus $0.047 million in the prior-year quarter. Adjusted EBITDA, a non-GAAP measure, was a loss of $2.239 million versus a loss of $2.220 million.
Balance sheet, liquidity and cash flow
- Cash and cash equivalents were $35.866 million at March 31, 2021, down $4.733 million from year-end 2020. Cash used in investing activities was $0.114 million; financing activities provided no cash.
- Total assets were $73.543 million and total liabilities were $9.214 million. The company reported no note payable or preferred stock outstanding following its 2020 recapitalization; long-term operating lease liabilities were $3.189 million.
- Management said cash on hand and expected product cash generation should fund operations through the anticipated ALLY clearance and launch in the latter half of 2022. The filing says additional capital will be needed to continue operations beyond 2022.
- Operating cash use improved year over year, but the company remains loss-making and expects operating losses and cash outflows for the foreseeable future.
Material changes and business developments
- Product and service revenue increased particularly in the United States, where sales volume exceeded pre-pandemic levels. The installed base of LENSAR systems rose from approximately 225 at December 31, 2020 to approximately 230 at March 31, 2021.
- Revenue from recurring sources represented approximately 91% of Q1 2021 revenue, versus 99% in Q1 2020; the difference primarily reflects the contribution of system sales.
- Interest expense fell to zero from $0.604 million after the 2020 recapitalization eliminated the PDL note and Series A preferred stock liabilities.
- Comparisons with Q1 2020 require caution: prior-period results include $1.585 million of PDL corporate allocations, while 2021 includes substantially higher stock-based compensation. The company also completed its spin-off and a one-for-nine reverse stock split in 2020.
Outlook, risks and contingencies
- LENSAR expected to submit a 510(k) application for its next-generation ALLY integrated cataract treatment system by the end of Q1 2022 and, subject to FDA clearance, begin commercialization in the latter half of 2022. Timing depends on regulatory review and the development and clearance of a phacoemulsification component supplied with Oertli.
- Management expects R&D to rise as ALLY development advances and SG&A to increase as the company prepares for a potential launch. No specific full-year revenue or earnings guidance is provided.
- COVID-19 continued to disrupt commercial operations and supply availability. LENSAR reported sufficient inventory to mitigate disruptions to date, but warned that further disruption could affect system manufacturing and ALLY development.
- Key risks include sustained operating losses and future financing needs; FDA clearance and commercialization of ALLY; reliance on suppliers, including single-source suppliers and Oertli; customer willingness to pay for procedures that are generally not covered by third-party payors; competition; and dependence on international distributors.
- Two customers represented 12% and 11% of accounts receivable, respectively. Contractual obligations included approximately $2.106 million of minimum component purchases due by September 30, 2021. Potential ALLY-related payments include $2.4 million of contingent milestones and a 3% royalty if specified conditions apply.
- The company reported no material legal proceedings and no off-balance-sheet arrangements. Management concluded disclosure controls were effective at the reasonable-assurance level.
Important facts for investors to verify
- Whether ALLY development, Oertli’s component clearance, the planned Q1 2022 submission, and the expected second-half 2022 launch remain on schedule.
- Whether cash, operating cash burn, and financing plans are sufficient to fund operations beyond the anticipated ALLY launch.
- Whether gross margin can recover as product mix changes and system and procedure-license sales develop.
- Whether COVID-related component shortages, customer concentration, or distributor performance affect revenue and delivery capacity.
- How recurring revenue, stock-based compensation, and the effects of the 2020 spin-off and recapitalization shape comparisons in future reports.