LENSAR, Inc. — FY2021 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2021; comparisons are to FY2020 unless noted. This is an annual filing, not a standalone Q4 report. The filing provides Q4 procedure volume but does not provide clear standalone Q4 financial results.
Business context
LENSAR develops and sells or leases femtosecond laser systems for cataract surgery, along with procedure licenses, patient interface devices and services. Its installed LENSAR Laser System base grew to approximately 255 systems in 16 countries from approximately 225 a year earlier. The next-generation ALLY system, combining a femtosecond laser and phacoemulsification technology, was under FDA review and had not yet launched.
Financial and operating performance
| Metric | FY2021 | FY2020 |
|---|---|---|
| Total revenue | $34.5 million | $26.4 million |
| Gross profit and gross margin* | $17.8 million; 51.7% | $14.1 million; 53.4% |
| Operating loss | $(19.7) million | $(18.5) million |
| Net loss | $(19.6) million | $(19.8) million |
| Net loss per share, basic and diluted | $(2.09) | $(4.28) |
| Adjusted EBITDA, non-GAAP | $(10.0) million | $(6.9) million |
| Net cash used in operating activities | $(9.0) million | $(13.8) million |
*Gross profit and margin are calculated from reported revenue and cost of revenue, before intangible amortization.
- Product revenue was $26.2 million, up 32.3%; lease revenue was $5.0 million, up 37.9%; and service revenue was $3.2 million, up 10.1%.
- Procedure volume rose 35% to 131,495. Q4 volume was 41,642, the strongest quarter; the company says Q4 is typically its strongest season.
- Approximately 86% of FY2021 revenue came from recurring sources, excluding system sales. Management attributed revenue growth mainly to the recovery in procedure volume after COVID-related shutdowns in 2020.
- Operating expenses increased to $37.5 million from $32.6 million, primarily reflecting higher ALLY research and development costs. R&D expense rose 63.6% to $12.4 million; SG&A was broadly flat at $23.9 million.
- Gross margin declined year over year as system sales, which have lower margins than procedure licenses, increased. Adjusted EBITDA loss widened despite improved operating cash use; this non-GAAP measure excludes stock-based compensation.
Liquidity, debt and obligations
- Cash and cash equivalents were $31.6 million at year-end, down from $40.6 million. Operating cash outflow was $9.0 million; investing outflow was $0.4 million; financing inflow was $0.4 million.
- Current assets were $44.8 million and current liabilities were $8.7 million. Total liabilities were $11.6 million and stockholders’ equity was $54.9 million.
- The filing reports no outstanding related-party note or preferred stock at year-end. Operating lease liabilities totaled $3.3 million; these are lease obligations, not reported borrowings.
- Minimum component purchase obligations were approximately $4.6 million. Potential ALLY-related obligations include $2.4 million in contingent milestone payments and royalties of 3% on certain ALLY revenue.
- Management expected cash and product-generated cash to fund operations through the anticipated ALLY clearance and launch and into 2023, but expected to need additional capital to continue operations beyond 2023. No formal revenue or earnings guidance is provided.
Material changes, outlook and risks
- Revenue recovered from pandemic-disrupted FY2020 and exceeded that year by 30.6%, while net loss improved only slightly. Operating loss increased, reflecting investment in ALLY; interest expense fell to zero after the 2020 recapitalization.
- The FDA accepted the first ALLY 510(k) submission for substantive review in February 2022. Subject to clearance, LENSAR expected a controlled launch in the second half of 2022, followed by a separate submission for phacoemulsification features later in 2022. Those features were not to be activated before clearance. Timing and clearance were not assured.
- Management reported that procedure volume had returned to pre-pandemic levels in 2021, but COVID-related supply disruptions, longer lead times and inflation in component, labor and transportation costs continued and were expected to persist. Single-source suppliers and a third-party phacoemulsification component manufacturer add execution risk.
- Other significant risks include ongoing losses and future financing needs; patient out-of-pocket costs for advanced procedures; uncertain reimbursement and adoption; competition from larger medical-device companies; distributor and customer concentration; and regulatory, product-liability and intellectual-property risks.
- Two customers represented 16% and 13% of FY2021 revenue. Three customers accounted for 37%, 13% and 10% of year-end accounts receivable. Management identified no material legal proceedings or material internal-control deficiencies; disclosure controls and internal control over financial reporting were assessed as effective.
Key facts for investors to verify
- Progress, timing and scope of FDA clearances for both stages of ALLY, and whether the planned launch and commercialization milestones were achieved.
- Cash burn, cash runway and financing requirements relative to management’s stated expectation of funding into 2023; assess potential equity dilution or debt terms.
- Whether recurring procedure revenue and system utilization continue to grow, and whether gross margin recovers as product mix and supply costs change.
- Exposure to major customers, distributors and single-source suppliers, including collectability of receivables and the effect of supply-chain constraints.
- ALLY’s actual adoption, pricing, procedure economics and reimbursement environment compared with management’s expectations.