LENSAR, Inc. (LNSR) Q3 2026 Earnings Report, Transcript and Summary

Good morning, and thank you for your participation. [Operator Instructions] As a reminder, this conference call will be recorded. I would now like to turn the call over to Lee Roth, President of Burns McClellan, Investor Relations Adviser to LENSAR. Mr. Roth, please go ahead.

Thanks, Audra. Good morning, everyone, and welcome to the LENSAR Third Quarter Financial Results Conference Call. Earlier this morning, we issued a press release providing an overview of our financial results for the third quarter of 2026 ended September 30. This release is available on the Investor Relations section of our website at www.lensar.com. Joining me on the call today is Nick Curtis, Chief Executive Officer, and Mike Rossi, Interim Chief Financial Officer of LENSAR, who will provide an overview of recent developments, operational highlights and financial results. Following these prepared remarks, we'll turn the call back over to the operator to take your questions. Before we begin, I'd like to remind you all that today's call will contain forward-looking statements, including statements regarding our future results. Unaudited and forward-looking financial information as well as information on our future performance and/or achievements. These statements are subject to known and unknown risks and uncertainties, which may cause our actual results, performance or achievements to be materially different from any future results or performance expressed or otherwise implied during this call. You should not place any undue reliance on these forward-looking statements. For additional information, including a detailed discussion of the company's risk factors, please refer to our documents filed with the Securities and Exchange Commission, which can be accessed on the website. In addition, this call contains time-sensitive information accurate only as of the date of this live broadcast, Tuesday, November 10, 2026. LENSAR undertakes no obligation to revise or otherwise update any forward-looking statements to reflect events or circumstances that occur after the date of this live call. With that said, it's now my pleasure to turn the call over to our CEO, Nick Curtis. Nick?

Thank you, Lee. Before getting into the quarter, I'd really like to put our results into context. As we discussed on our second quarter call in August, the third quarter is historically the slowest period of the year in our space, reflecting summer vacations and extended holidays in various regions of the world and the timing of surgical schedules, including purchasing decisions. In addition, timing-wise, we were just getting back on track after the disruption earlier this year. No surprise that seasonality was evident in our results, particularly compared to what was an extremely solid second quarter against a year ago period that saw a bolus of ALLY system sales and placements. To be clear, this performance was consistent with what we had anticipated. More importantly, the underlying indicators we focus on to assess the foundational health of the business, including procedure volume, recurring revenue and the growth of our installed base continue to move in the positive direction on a year-over-year basis. Total revenue in the third quarter was $14.1 million, a 1% decline from the $14.3 million a year ago, primarily reflecting lower capital system sales revenue against a strong prior year comparison. At the same time, recurring revenue increased 17% to $12.6 million. Procedure revenue grew 17% to $9.2 million and procedure volume increased 12% to 52,545 procedures. We also continued to gain market share during the quarter, reaching 24.5%, up from 24.1% in the second quarter. This market share growth continued to come from a combination of competitive femtosecond users making the switch to ALLY and femtosecond-naive surgeons adopting our technology. Importantly, 42% of our installs over the last 12 months have been with these surgeons that were heretofore not using lasers. As we continue to move forward, this segment represents a significant sales channel opportunity for overall market growth and the continued growth of our installed base and revenues. As I've said before and would like to emphasize, the long-term value of our business is not simply measured by how many systems we place in any one quarter. It is measured by what happens after the installation, how surgeons incorporate ALLY into their practices, how utilization develops and how those procedures translate into a growing base of recurring revenue. It is this practice procedure integration that aligns LENSAR with both the surgeon and patient interest. Surgeons using ALLY are able to deliver better outcomes to the patient with much higher efficiencies, benefiting the patient, surgeon and staff and in turn, LENSAR. In the third quarter, recurring revenue represented 89% of total revenue compared to 75% a year ago. While this number fluctuates based on the volume of system sales in any given quarter, the current revenue mix represents significant progress in optimizing the composition of our business, which further strengthens the foundation on which we can continue to grow. We placed 10 ALLY systems during the quarter, bringing the global ALLY installed base to approximately 225 systems compared with approximately 185 a year ago. Our total laser installed base reached approximately 450 systems worldwide, and we exited September with 12 ALLY systems in backlog awaiting installation. Each ALLY installation expands our opportunity to support our surgeon partners in performing more refractive cataract procedures while continuing to increase recurring revenue over time. In addition to these ongoing efforts, we're committed to identifying additional avenues for growth and extending the reach of our technology. We believe there are meaningful opportunities to build on our existing presence, both domestically and internationally, and further strengthen our competitive position over time. One of the things I'd like to emphasize is that LENSAR was built on innovation. We maintained a strong presence at key medical conferences throughout the third quarter, which provided valuable opportunities to engage directly with surgeons and prospective customers. These interactions have led to active discussions with several high-volume accounts and are creating opportunities for additional competitive wins as we continue to demonstrate the differentiated capabilities of ALLY. Innovation puts us in a position we are in today, and it remains central to how we intend to compete and gain further ground in the cataract surgery market. We're going to continue to advance the capabilities of ALLY, support our surgeon partners with education, training and service as well as deepen our relationships with distributors and prospective customers, efforts that we expect will contribute to growing adoption, continued expansion in the footprint of our market-leading technology and even greater utilization as our users become familiar with the numerous advantages ALLY brings to their practice and business. Looking ahead, we're also excited about the next phase of innovation for the ALLY platform. During the quarter, we had the opportunity to showcase our newest robotic docking capabilities at the AAO Annual Meeting, generating enthusiasm, interest and engagement from surgeons and prospective customers. Building on that momentum, we anticipated introducing -- we anticipate introducing these features by the end of the first quarter of 2027. We believe these advancements will further enhance the surgical experience, strengthen the differentiation of our robotic laser technology and support our continued efforts to expand adoption of ALLY. What continues to give us this confidence is that our installed base is continuing to expand. Our systems are supporting more procedures than they did a year ago and recurring revenue continues to grow. Those are the critical building blocks of the durable business we're working to create. Our commitment remains steadfast: grow the installed base drive increased utilization, expand recurring revenue and continue investing strategically in the innovation and commercial capabilities that differentiate LENSAR. I really want to thank our surgeon partners for their continued support and faith in us and our technology as well as our employees for their dedication to excellence. LENSAR remains a surgeon-centric organization. We increase the efficiencies, improving the outcomes and experience for the surgeon, staff and the patients they serve. And with that, I'm going to turn the call over to Mike, and he's going to walk you through the financial results in more detail. Mike?

Thanks, Nick. I'll provide some additional context around our third quarter performance, starting with the balance sheet and liquidity. As of September 30, 2026, cash and investments totaled $12.6 million as compared to $18 million at December 31, 2025, with cash burn for the quarter of $900,000, an improvement over historical trends as cash earnings show improvement. I would note that during the quarter, we secured a $10 million revolving line of credit, which increases total available liquidity to $22.6 million and provides us room to continue to invest in areas such as equipment placements as we grow. We remain focused on managing our resources with discipline while supporting our commercial priorities and longer-term growth opportunities. Turning to the P&L. Total revenue was $14.1 million compared with $14.3 million in the third quarter of 2025, a decline of approximately 1%. System revenue was $1.5 million compared with $3.5 million in the prior year period, reflecting the timing of system sales. That decline was substantially offset by continued growth in our recurring revenue streams. Recurring revenue increased 17% year-over-year to $12.6 million compared with $10.8 million last year and accounted for 89% of third quarter revenue, up from 75% a year ago. Procedure revenue increased 17% to approximately $9.2 million and lease and service revenue reached approximately $1.7 million for the quarter. Procedure volume totaled 52,545 compared with 46,811 in the third quarter of 2025, an increase of 12% due to installed base growth as well as utilization improvement in the U.S. As Nick noted, volume declined sequentially from the second quarter, consistent with the seasonal trends we mentioned on our August call. On a year-over-year basis, however, continued growth in procedure volume and procedure revenue reinforces the importance of utilization across our installed base. We placed 10 ALLY systems during the quarter, bringing our total installed ALLY base to approximately 225 systems and our total installed base to approximately 450 systems. We ended the quarter with 12 ALLY systems in backlog pending installation. Gross margin was 58% for the quarter compared with 42% a year ago, reflecting an improved revenue mix and lower than historical service cost. From an expense standpoint, SG&A was approximately $8.1 million compared with $12 million in the third quarter of 2025. A year-over-year decline in SG&A was primarily attributable to expense associated with the Alcon transaction in the 2025 period, partially offset by approximately $1.2 million in expenses associated with strategic initiatives aimed at expanding our global commercial footprint and access to ALLY. Research and development expenses were approximately $1.3 million compared to $1.4 million a year ago. Our operating loss narrowed to approximately $1.4 million compared with an operating loss of $7.6 million in the third quarter of 2025. We reported a GAAP net loss of approximately $4.7 million compared with a net loss of $3.7 million a year ago. The current quarter included a $3.4 million net noncash expense associated with the change in fair value of warrant liabilities compared with a $3.7 million noncash gain in the prior year quarter. Adjusted EBITDA was positive $1.7 million compared to negative $300,000 in the third quarter of 2025. This was lower sequentially from positive $3.6 million in the second quarter due to seasonally lower revenue and the $1.1 million tariff refund recorded in Q2, but represents a significant improvement over the prior year and reflects the progress we have made in the underlying operating performance of the business. As always, we expect some quarter-to-quarter variability in results as system placement seasonality and the timing of commercial investments affect reported performance. Overall, the quarter demonstrated continued year-over-year growth in the recurring revenue streams that are increasingly important to our business alongside disciplined management of our operating expenses. Nick will now close this out with some final thoughts.

Thanks, Mike. As we look ahead, our priorities haven't changed. We're focused on the continued expansion of the ALLY installed base, increasing utilization across our systems, strengthening our relationships with surgeon partners and distributors and continuing to lead innovation in the space. As we anticipated, the third quarter was seasonally slower and lower system sales revenue versus an unusually active third quarter of 2025 weighed on our top line. But recurring revenue grew 17%, procedure volume increased 12% and our installed base has continued to expand. These are really important indicators of the progress we're making and the foundation we're building for the future. We've made meaningful progress in rebuilding our commercial momentum, strengthening our recurring revenue base and positioning LENSAR for its next phase of growth. While we are still a work in progress, I believe we're getting stronger, becoming more focused as a company and have a clear line of sight on the significant opportunities in front of us. As we approach the end of 2026, we're looking forward to closing out the year on a strong note and continuing to build on the progress we've made. We remain focused on driving further growth in recurring revenue and procedure volume, expanding adoption of the ALLY system and delivering the innovative technology and support our surgeon partners have come to expect from LENSAR. We have a lot to be proud of this year and even more to look forward to. I'm confident in our team, our technology and the direction that we're heading, and I'm excited about what lies ahead for LENSAR. I thank you all for joining our call today and for your continued interest and support always. We look forward to updating you on our progress as we work towards closing out the year. We'll now open the line for suggestions -- for questions, sorry.

[Operator Instructions] We'll take our first question from Alex Nowak at Lucid Capital Markets.

Okay. I was hoping we could talk a bit more about the backlog of systems and the funnel -- funnel for system demand out there into next year. If we look back last year at this time, the backlog was looking a little bit higher going into Q4 2025. Are you seeing any tightening in the market for CapEx? Any change on the competitive dynamics? Is this just LENSAR having to regroup after the Alcon merger termination? Or just what are you seeing generally out there for the future funnel?

Alex, thanks for the question. They're very good here. I'm going to give you a kind of a funny answer because I'm seeing kind of all of the above, if you will. Part of this, as far as the outside U.S. is concerned, it was a funny timing, right? Because certainly, as we were getting closer to what was the end of the Alcon transaction, the distributors really were thinking it was the end of their relationship with LENSAR. So things kind of went more towards a halt, if you will. And we're in the process of re-jump-starting all of that and have some significant activity going on. And then literally, the next quarter, you have the summer holidays. And on top of that, you also had some changes in reimbursement that came into play outside U.S. and particularly in Germany and Switzerland, Germany being one of our most robust markets. And so doctors are on holiday come back to see some reimbursement changes and then need to figure that out. I'm seeing that in activity come back and starting to come back very strong in those markets. And so I'm looking forward to that on a going-forward basis. The market, as you know, here in the U.S., up and down, cataract surgery total volumes overall as the big companies report that have IOLs, the total volume down slightly, which is the first time in the history I've been in business where I've seen the cataract market actually a little bit slower. On the other hand, with reimbursement dynamics, which there's continued pressure on, I think doctors will be focusing more and more on these advanced technology procedures that are a win-win. It's a win for the physician and for the practice from a financial perspective, and it's a win for the patient because the patient gets better results, and these are more permanent results. Cataracts also don't go away, so they'll come back. So from that perspective, just kind of a little bit of a mix here, but I'm certainly not overly pessimistic. I'm more optimistic as we move towards the end of the year and we move into next year.

Okay. That makes sense. And on the OUS distributor front, this is just a real quick follow-up to that. Do you think everything is in place now in Q4 so you can hit 2027 sprinting? Or do you think 2027 kind of starts off maybe a little bit slower because we don't have those distributors maybe fully up and running and then it kind of, let's say, gets better as the year goes on?

I think you're going to see a ramp there.

Okay. Got it. And then just one other question on the continuous innovation at LENSAR. You spoke a little bit about this in the prepared remarks. But I was hoping we can get a little more specific about some of the new products and the new features that we would expect over the coming years. What should we be paying attention to? And then any of the key clinical publications we should also be watching?

Yes. Thanks. Another good question. So we're -- if you think about LENSAR, we're very much sort of an interactive robotic cataract laser with the physician. And so you should be thinking about LENSAR as moving more towards automation and robotics and -- but always interactive with the physician. Very important in the surveys that we've done, patients are very open and receptive to robotic-type surgeries, having seen them in other medical specialties, but they want their surgeon involved. And so you're going to see more robotic features here. You'll also see some expansion of capability. We're going to be working towards doing more corneal-based procedures, adding some capabilities in terms of doing FLACS and the ability to do flaps in LASIK as well as other corneal incisions and procedures that physicians are doing. This will require a different PID, and we're working on that patient interface device now more so than it is any big change to the laser, if you will, on that. The robotic docking that I referred to, you'll see that move more towards an automation where the system will both locate and dock to the patient's eye on a fully automated basis. You'll see that sooner than later. And then we're looking at the integration of other technologies, looking at the integration, perhaps revisiting phacoemulsification with the laser, looking at perhaps the integration of an operating microscope and perhaps looking at different type of laser modalities for yet additional procedures, thinking of ALLY being more of a workstation.

We'll move next to Ryan Zimmerman at U.S. Bancorp BTIG.

Congrats on the quarter here. So a couple of things, though, to ask about. One, the procedure growth is still certainly well ahead of the cataract market. Can you parse out maybe the U.S. versus OUS dynamics and help us understand kind of how it's looking geographically from a procedure standpoint?

Yes. So I would say that the U.S., because we started a little bit earlier, we introduced ALLY to the U.S. in advance. And so U.S. is a little further ahead, both in terms of system numbers as well as the procedure numbers. And also the reimbursement factor in the U.S. is favorable for the surgeons, to be able to implement these technologies and certainly, with the improved efficiencies that ALLY brings in getting into the OR, I think we're going to continue to see both robust activity and the ability to replace some of these older competitive systems as well as procedure growth as the cataract market comes back. OUS is still for us, kind of a work in progress. And I say work in progress just because the activity had really shut down to such a degree. And then just as we were getting going again, we run into the seasonality with the holidays in various regions of the world. So I view that more of a work in progress because we had really just introduced ALLY into those markets for 6 months before -- not even 6 months before the Alcon deal was announced. So still a work in progress there, but that should -- I'm counting on OUS to deliver some robust business to us here as we get into mid-2027, if you will.

Okay. And then, Mike, for you, I mean, the margins were well ahead of where we were expecting. And it looks like the PID pricing is up just a little bit. I just want to understand what you think you can do in margins and if we should think about the PID pricing stepping up a little bit.

Yes, sure. So on the PID pricing, I'd say that is a reflection of the mix that Nick talked about. U.S. is stronger there. So we're selling direct there versus the distribution markets outside the U.S. So that is stronger right now. Yes, exactly. So the ASP is higher in the U.S. I'd also say just for margin for the quarter, one, just with systems being down and procedure revenue being, call it, 80% gross margin basically. That's a big factor from a mix perspective. Also, I mentioned services costs were just low for the quarter, which was just lower activity there than normal. I'd say that was just low for the quarter, basically, probably won't repeat in the future. So...

Okay. Very helpful. And then, Nick, just you alluded to some things with the pipeline, interesting to hear about and certainly exciting. I don't know if you're ready to kind of reveal more as it relates to the pipeline or not, but if you have anything around timing or anything, that would be appreciated.

Yes. So Ryan, what I will say is that, as I mentioned in the prepared remarks, you'll see these robotic docking features coming, I'd say, at the end of the first quarter into second quarter 2027. I'm exploring the potential opportunities. Some of this involves some strategic relationship. And so we're exploring and considering the different integration potential aspects with phacoemulsification and looking at various operating microscope type technology to integrate. Those are longer-range projects for us. But just to give you an idea, the femtophaco project for us, given the fact we had done it before and have space in the device and know how to integrate and do all of that if we were to find the right relationship there, that would be less than 2 years, somewhere between 18 months and less than 2 years with the other projects being in that likely 3- to 5-year range.

We'll move next to Wes Villegas at Lake Street Capital Markets.

This is Wes on for Frank. I guess my first question is, now that ALLY is around half of this installed base, how are you approaching upgrading your legacy LENSAR laser customers to ALLY? And what should we think about for modeling recurring revenue over time here?

So a good question. Thanks, Wes. The one thing that we see pretty consistently doesn't matter where you are, so to speak, in U.S., outside U.S., is that as we migrate to ALLY, we generally see a 15% thereabouts increase once people are feeling comfortable and trained in the ALLY. So we see it sort of flatten out for, let's say, 30 to 60 days because they're going through transition and maybe they're -- in some cases, they're moving it into the operating room and getting used to fully sterile procedures versus having done in a procedure room previous with first-generation devices. And so we see about a 15% to 20% increase which is consistent with the numbers that we've been reporting on a procedure increase basis once they get ALLY. And so you'll generally see that. We are conservative in terms of -- like outside U.S., you're seeing some redeployment of LLS systems. So as OUS begins to order more systems, let's say, you'll see the installed base increase at a little more rapid rate than what you see now because there's some redeployment with lower volume accounts that are realizing some of the benefits of femtosecond laser and based on the practices that are leading the way and have started with ALLY in growing. So ultimately, those will start to switch out and you'll see where the installed base may flatten for a period of time. We're still doing deals, but those may be exchanged units. But for -- in the immediate term, you'll see more ALLYs and you won't see necessarily a decommission on a one-for-one basis, you'll see some redeployment of those, particularly in the OUS markets.

Got it. Just one more follow-up here, if you don't mind. You guys were essentially breakeven here in Q3. I'm curious, with OpEx trending a little higher towards the back half as you invest commercially, how should we start thinking about the cash use generation into 2027?

Right now, as we kind of look forward a little bit, we have some inventory investment to deal with. So there's a little bit of that as well as some -- basically some fees to pay off from the Alcon acquisition, which were extended. So I'd say $1 million to $2 million of kind of cash kind of burn in the rest of the year effectively. And that's probably -- we should get closer to breakeven at some point in 2027.

And that concludes our Q&A session. I will now turn the conference back over to Nick Curtis for closing remarks.

So thank you so much for spending a part of your morning with us today. We're excited about our future and looking forward to speaking with you again here as we move towards year-end and look forward to 2027. Thanks for joining the call.

And this concludes today's conference call. Thank you for your participation. You may now disconnect.