LENSAR, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. Although the request refers to 2023 Q4, this is an annual filing; quarterly revenue and profit figures are not provided in the supplied text.
Business context
LENSAR develops and sells or leases femtosecond laser systems for cataract surgery, along with procedure licenses, patient-interface consumables and services. The company is shifting its commercial focus from the LENSAR Laser System to its next-generation ALLY System, designed to combine laser treatment and phacoemulsification in one operating room. ALLY had U.S. FDA clearance and clearances in India and the Philippines; applications or certification efforts for other markets were ongoing.
Financial results and liquidity
Amounts below are in millions of dollars unless stated otherwise.
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Revenue | $42.2 | $35.4 | +19.2% |
| Product revenue | $31.6 | $26.0 | +21.9% |
| Lease revenue | $6.4 | $5.9 | +9.0% |
| Service revenue | $4.1 | $3.5 | +16.9% |
| Cost of revenue | $21.1 | $15.4 | +36.7% |
| Operating loss | $(12.2) | $(20.2) | Loss narrowed |
| Net loss | $(14.4) | $(19.9) | Loss narrowed |
| Net loss per share | $(1.31) | $(1.96) | Improved |
| Net cash used in operating activities | $(9.7) | $(14.9) | Cash use decreased |
Revenue growth was primarily driven by $4.8 million of higher system sales and $0.9 million of higher procedure volume. Procedure volume increased to 137,012 from 132,113. Cost of product revenue rose faster than revenue, partly because system sales have lower margins than procedure licenses and ALLY inventory costs were fully included in production costs. Total cost of revenue equaled about 50.0% of revenue in 2023, versus 43.6% in 2022, before separate intangible amortization.
SG&A was $26.1 million, down 3.9%, reflecting lower stock compensation and professional fees and a $1.4 million employee retention credit, partly offset by higher ALLY launch-related sales and marketing costs. R&D fell 48.0% to $6.1 million, mainly following ALLY’s FDA clearance and the cessation of expensing pre-launch inventory costs. Management expects SG&A to rise to support U.S. and international commercialization.
At December 31, 2023, cash and cash equivalents were $20.6 million, with $3.9 million of short- and long-term investments; management separately reported cash, cash equivalents and investments of $24.6 million. Current assets were $46.4 million and current liabilities $11.6 million. Inventory was $15.7 million, up from $11.7 million a year earlier. The company reported no conventional borrowing balance in the supplied balance sheet; it had $8.5 million of warrant liabilities and $13.7 million of redeemable convertible preferred stock classified as temporary equity.
Cash increased by $5.9 million during 2023, principally reflecting $19.8 million of financing cash inflows, including proceeds from the May 2023 preferred-stock and warrant placement. This was partly offset by $9.7 million used in operations and $4.2 million used in investing. Management said existing cash and expected product-sale and lease proceeds should fund operations for at least one year from the financial statements’ issuance date.
Material changes and unusual items
- In May 2023, LENSAR raised $20.0 million gross from NR-GRI through preferred stock and warrants; net proceeds were approximately $19.1 million. The preferred stock is convertible into 7.94 million common shares, and warrants cover 4.367 million shares. Full conversion and exercise could represent approximately 52.1% of common shares outstanding on the filing’s stated basis.
- The warrants are recorded as liabilities and remeasured at fair value. The resulting $2.9 million 2023 expense reduced reported earnings; the amount is valuation-sensitive and may fluctuate.
- The placement resulted in a Section 382 ownership change that limits use of some tax attributes. A full valuation allowance remained against most deferred tax assets; no income tax provision was recorded for either year.
- The $1.4 million employee retention credit reduced 2023 SG&A and is described as nonrecurring. Adjusted EBITDA, a non-GAAP measure, was a loss of $4.5 million versus a loss of $10.2 million in 2022.
- Minimum component purchase obligations were approximately $6.5 million over the following 12 months. Operating lease liabilities totaled $2.3 million. Certain acquired intellectual property may generate a 3% royalty on specified revenue once related ALLY phacoemulsification features are cleared and operational.
Outlook, risks and contingencies
Management expects near-term operating losses and cash outflows while expanding commercialization, pursuing regulatory clearances and investing in development. The filing gives no numerical revenue or earnings guidance. Key risks include adoption and production of ALLY, regulatory timing outside the United States, single-source suppliers and supply-chain costs, inflation, competition, and patients’ willingness to pay for advanced procedures that are often not covered by insurers. The company specifically reported reduced South Korean revenue following a change in insurance coverage for cataract surgery.
A stockholder class action challenges disclosures related to the 2023 private placement. LENSAR denies the allegations, but stated it could not predict the outcome or reasonably estimate a possible loss. The company also disclosed potential continuing tax and indemnification obligations related to its former parent, PDL BioPharma. No material cybersecurity threat was identified as having materially affected, or reasonably likely to materially affect, the company.
Most important facts for investors to verify
- Reconcile the customer concentration disclosures: the business section says one customer represented 13% of 2023 revenue, while the audited revenue note says one customer represented 10%.
- Track cash burn against management’s at-least-one-year liquidity statement, considering the $6.5 million purchase commitment, planned commercial spending and continuing losses.
- Assess ALLY placements, procedure utilization, margins and international certification progress; the filing does not provide a clear numerical placement target or revenue outlook.
- Review the potential dilution, redemption and governance effects of the preferred stock and warrants, including North Run’s reported 46.9% voting power and the warrants’ fair-value liability.
- Monitor the class action, supply-chain exposure, inventory growth and South Korean reimbursement-related demand.