LENSAR, Inc. Q4 FY2023 earnings call

• Nick Curtis highlighted 2023 was a strong year, with ALLY exceeding expectations, placing 44 systems (50% above initial guidance) in 2023, half with new surgeons converting from competitive devices. Despite issues in South Korea, excluding it, revenue grew 26% and procedures grew 15%. Time and motion studies show surgeons can save up to 8 minutes per case, staff up to 19 minutes, benefiting ASCs. Four peer review papers support ALLY's astigmatic guiding technology.
• Thomas Staab discussed Q4 2023 revenue up 18% to $12.1 million, full year revenue up 19%. Gross margin details, noting Q4 margins affected by higher system sales. Operating expenses in Q4 2023 were $8.1 million, down $1 million from Q4 2022 due to less stock compensation and professional expenses.

Fourth quarter revenue was $12.1 million, up 18% from Q4 2022. Full year 2023 revenue increased 19% compared to 2022, marking the highest annual revenue in company history. ALLY systems: 44 placed in 2023, exceeding initial guidance of 30 placements. Worldwide installed base grew 13% to ~305 systems. Fourth quarter procedure volume increased nearly 20% year-over-year, and full year procedure volume was up 4% from 2022. Excluding South Korea, 2023 revenue grew 26% and procedures grew 15%. Gross margin for Q4 2023 was 43%, full year 2023 gross margin was 50%, and expected to be ~50% in 2024. Recurring procedure revenue has an approximate 80% gross margin, while system sales have lower margins.

• Expect gross margin to be approximately 50% in 2024. Anticipate receiving EU clearance for ALLY later in 2024. South Korea represented less than 1% of 2023 product and service revenue, and while the market may recover, it's a small part. Growth potential due to international expansion and market dynamics, including EU clearance and potential in Southeast Asia.

• Ongoing issues in South Korea with third-party payors affecting premium cataract procedures. Dependence on US market for ALLY growth. Interest rate environment potentially affecting private equity investment in adopting ALLY. Regulatory clearance timelines for EU and other regions could impact international expansion.

Q: How are you thinking about 2024 adoption with a strong pipeline and growing sales force?

A: Momentum is high, activity level is the highest ever, with significant presentations at meetings driving interest. Uptake expected to continue growing.

Q: How is the data on ALLY's benefits being utilized to drive adoption?

A: Time and motion studies show substantial savings, which private equity groups are receptive to. Continued education and peer-to-peer referrals as installed base expands are key.

Q: Which international markets offer the most potential in 2024?

A: Europe (especially Germany, Austria, Switzerland) is significant with expected EU clearance later in 2024. Southeast Asia (Hong Kong, Taiwan, Philippines) may see presence later in the year, though smaller.

Q: When will the sales force be at desired levels and see productivity?

A: New VP of Sales joined in December, new processes for lead management and marketing-sales interaction. Expansion of territories, with expectations of productivity picking up as processes mature.

Q: Margin dynamics for 2024, including system sales impact?

A: System sales have a lower gross margin initially. It takes 60-90 days for installed systems to ramp up and generate higher margins. Expect margins to be ~50% in 2024, with recurring revenue kicking in more in 2025 and beyond as installed base expands