Sight Sciences, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; unaudited. Sight Sciences develops and commercializes ophthalmic devices. Its Surgical Glaucoma segment sells the OMNI Surgical System; its Dry Eye segment sells the TearCare System. Amounts below are in millions of dollars unless otherwise noted.
Financial performance
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Revenue | $14.9 | $8.6 | +72.3% |
| Gross profit / margin | $11.8 / 79.6% | $6.3 / 73.4% | +$5.5; +6.2 percentage points |
| Research and development | $5.6 | $3.4 | +64.1% |
| Selling, general and administrative | $28.4 | $14.6 | +95.2% |
| Operating loss | $(22.2) | $(11.7) | Loss increased $10.5 |
| Net loss | $(23.3) | $(12.2) | Loss increased $11.0 |
| Basic and diluted loss per share | $(0.49) | $(1.29) | Prior period affected by lower post-IPO share count |
| Cash used in operating activities | $(22.0) | $(12.9) | Use increased $9.1 |
- Revenue by segment: Surgical Glaucoma revenue was $13.9 million, up 70.4%; Dry Eye revenue was $1.0 million, up 103.8%. Surgical Glaucoma represented 93.2% of total revenue. Management attributed growth to more OMNI ordering facilities and higher utilization, and to expansion of TearCare’s installed base.
- Margins: Surgical Glaucoma gross margin improved to 89.3% from 77.2%, reflecting OMNI manufacturing cost reductions and volume efficiencies. Dry Eye gross margin fell to negative 52.5% from 10.7%, primarily due to a $0.9 million TearCare SmartHub recall charge. Total gross margin improved despite the Dry Eye decline.
- Expense growth: SG&A rose $13.8 million, including higher personnel and stock-based compensation, professional services, marketing, training, events, demos and travel. R&D increased with headcount and clinical study spending. Total stock-based compensation was $3.0 million versus $0.3 million.
Liquidity, debt and cash flow
- At March 31, 2022, cash and cash equivalents were $238.6 million, down $22.1 million from year-end 2021. Current assets were $255.3 million and current liabilities were $12.0 million.
- Term loan principal was $35.0 million (carrying amount $32.8 million); the $5.0 million revolver was undrawn and available. The loan is secured by substantially all company assets, including material intellectual property. The company reported compliance with all financial and non-financial covenants.
- Scheduled principal repayments are $1.5 million in 2023, $17.5 million in 2024 and $16.0 million in 2025. Principal payments were scheduled to begin in December 2022, subject to conditions that could defer commencement.
- Management expects existing cash and available borrowings to fund operations for at least 12 months. The filing also says further financing may be needed if revenue, gross margins or cost control fall short of expectations.
Outlook, risks and other material items
- No numerical revenue or earnings guidance is provided. Management expects continued net losses for at least several years and expects R&D and SG&A spending to rise with clinical, product-development, commercial and public-company investments.
- COVID-19 and its variants may affect elective procedures, customer demand and suppliers. The company reported prior procedure cancellations and cautioned that future effects on demand, supply chain, liquidity and cash flows remain uncertain. Products are made by third-party manufacturers.
- TearCare procedures generally lack meaningful Medicare or private-payor reimbursement, and patients typically pay out of pocket. Management expects Dry Eye margins to remain below Surgical Glaucoma margins in the near and medium term.
- In March 2022, the company announced a voluntary recall of TearCare SmartHub 1.0 devices to ensure regulatory compliance following FDA 510(k) clearance in December 2021. Replacement-device costs of $0.9 million were expensed in Q1; replacements began in March and were expected to be completed by the end of Q2 2022.
- The company is suing Ivantis over alleged infringement of four patents relating to the Hydrus Microstent; Ivantis counterclaimed that the patents are not infringed and/or invalid. No trial date was set, and the company said it could not predict the outcome or estimate potential financial impact.
- Disclosure controls and procedures were deemed ineffective because of previously identified material weaknesses in internal control over financial reporting, including insufficient accounting staffing and technical expertise and inadequate segregation of duties and review. Remediation was underway but required further validation and testing. Management said the financial statements fairly presented the reported periods.
Key facts for investors to verify
- Whether OMNI revenue growth and higher Surgical Glaucoma margins persist as manufacturing capacity and sales expand.
- The full financial, regulatory and customer impact of the SmartHub recall, including completion of replacements.
- Whether TearCare adoption, repeat SmartLid sales and reimbursement access improve Dry Eye economics.
- Operating cash burn, planned spending and the timing of term-loan repayments relative to available liquidity.
- Progress on internal-control remediation and developments in the Ivantis patent litigation.