Good day and thank you for standing by. Welcome to the Sight Sciences First Quarter 2023 Earnings Results Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Philip Taylor, Investor Relations. Please go ahead.

Thank you for participating in today's call. Presenting today are Sight Sciences Co-Founder and Chief Executive Officer, Paul Badawi, Chief Financial Officer, Ali Bauerlein; and Head of Corporate Strategy, Tom Huang. Earlier today, Sight Sciences released financial results for the three months ended March 31, 2023. A copy of the press release is available on the company's website at investors.sightsciences.com. I would like to remind everyone that comments made by management today and answers to questions will include forward-looking statements within the meaning of the federal securities laws. Those include statements related to Sight Sciences anticipated financial performance and operating results, market opportunity, business strategy and plans for developing and marketing new products. Forward-looking statements are based on estimates and assumptions as of today are neither promises nor guarantees and are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied by these statements. A description of some of the risks and uncertainties that could cause actual results to differ materially from those indicated by the forward-looking statements on this call can be found in the Risk Factors section of the annual report on Form 10-K filed with the Securities and Exchange Commission. The company undertakes no obligation to publicly update or revise any forward-looking statements, except as required by law. I will now turn the call over to Paul.

Thanks, Philip. In the first quarter of 2023, we continue to penetrate and expand the glaucoma and dry eye markets. We generated total revenue of $18.8 million, growing 26% compared to the first quarter of 2022 and in line with our expectations. Our strong performance out of the gate and progress advancing underlying business drivers, including surgeons trained on OMNI, positions us well to meet our financial and operating objectives for the year. We are reiterating our expectation for 2023 revenue to range between $89 million and $94 million. First quarter surgical glaucoma revenue was $17.3 million, up 25% compared to the same period in the prior year, and dry eye revenue was $1.5 million, representing growth of 47%. We also came in below our $30.5 million average adjusted operating expense target. Healthy revenue growth, strong gross margins and disciplined spending drove strong operating leverage improvement, demonstrating further progress toward achieving cash flow breakeven in 2025 with a substantial cash cushion. As I'll discuss in more detail later, our ambitious clinical program continues to chart new territory in glaucoma and dry eye. We expect to have near-term readouts for two landmark studies this year, where we seek to demonstrate the clinical superiority of both OMNI and TearCare versus the existing therapeutic standards of care in glaucoma and dry eye, two of the most prevalent diseases in eye care, which taken together represent total addressable market opportunities of over $16 billion. Demonstrating clinical superiority with both OMNI and TearCare is an ambitious clinical goal and represent our original mission and purpose to elevate patient care with transformative innovations that will create sustainable long-term value. Turning to our business units. In surgical glaucoma, our main objective is to provide surgeons with the best microinvasive solutions for their patients regardless of disease state…

Thanks for that kind introduction, Paul, and hello, everyone. Thanks for joining us today. I'm excited and proud to join the team, and I look forward to meeting new faces and reconnecting with friends across the investment community in my new role. Now let's get into the numbers. Total revenue for the first quarter was $18.8 million, representing 26% growth compared to the first quarter of 2022. As a reminder, the first quarter is typically the slowest of the year for us. Surgical glaucoma revenues for the first quarter were $17.3 million, up 25% versus the comparable period. We continue to show strong underlying growth fundamentals in customer retention and ordering facility. Additionally, we saw strong new account additions and surgeon training activity. Over 1,000 customers ordered surgical glaucoma products in the first quarter, up 26% compared to the prior year period. Our commercial team did a tremendous job introducing our technology to customers in the first quarter. Our customer acquisition funnel remains strong, creating great momentum for 2023. We trained over 150 U.S. surgeons on OMNI and over 130 on SION during the first quarter. Our dry eye revenues for the first quarter were $1.5 million, up 47% compared to Q1 2022. We grew our installed TearCare base to 1,184 facilities as of March 31, 2023, versus 632 as of March 31, 2022. Gross margin for the first quarter was 84% compared to 80% in the prior year comparable period. The increase was primarily due to the margin impact from our voluntary replacement of TearCare hubs in the first quarter of 2022. Our operations team continues to perform well as driving manufacturing efficiencies and top-tier margins. R&D expenses were $4.7 million compared to $5.6 million in the first quarter of 2022. And SG&A expenses were $28.7 million compared to…

[Operator Instructions] Our first question comes from the line of Matthew O'Brien with PSE. Your line is now open.

Hey, this is Phil on for Matt. Thanks for taking our questions. And just for starters, I want to talk about the -- a touch on the reimbursement changes this year. What are you seeing on that front, specifically as it relates to canaloplasty of course this year and perhaps the potential for goniotomy down the road? And what are you seeing on the developed customer relation to retention rate for OMNI?

Yes, hi. So on the first question regarding canaloplasty reimbursement, the change we've discussed in the past, there was a review of the CAT 1 codes, the most commonly used CAT 1 codes and MIGS a couple of years ago, Canaloplasty-66174 was one of those codes and bypass stenting was the other code that was reviewed by the Rock. And following that review and analysis, it was concluded that the pro-fee would be reduced sequentially over two years. So it got reduced from $950 to $750 in the first year and $750 to $600 in the second year, and that's the $600 pro-fee rate is something that's in effect as of January 1 of this year. From a -- what does that mean perspective, if you think about it relative to other procedures, either competing MIGS procedures, and/or cataract surgery alone, the pro-fee moving to $600 while it's never something that surgeons, facilities, manufacturers get excited about. The fee hasn't necessarily changed relative to anything else. So it's still north of cataract surgery alone. It still has a premium to stenting, and it was below goniotomy last year, and it remains below goniotomy. So relatively speaking, it hasn't changed, and we feel fine about overall where the reimbursement is.

Yes. And I can take the second part of the question. You had asked about retention rates. We're very pleased with the retention rates that we continue to see in the business. We're still continuing to see in the high 90 percentile ranges for customer retention, which we really think is optimal and excellent and shows the true benefits of our technologies and how much customers do like to use the products. So I do want to reiterate that, that continues to be a very strong metric for the company.

Glad to hear that. And for my follow-up, can you just expand a bit on the DTC pilot? How is that progressing? And what are your thoughts for that Q2 execution phase, I believe it was.

Yes, sure. I can take that question. We're still in the early stages of that. We are on track, though, as we said on the last call, Q1 was really for us to design that program and Q2 was for us to do the trial of the direct-to-consumer initiative, and we're in the midst of that. It's too early for us to give a specific readout of results -- but we really did this study and are doing this study because we believe there is strong consumer interest in better treatments, both for glaucoma and dry eyes. So we're hoping to prove out that thesis. And as we have more information to report, we will let you guys know.

Great, thanks so much.

And your next question comes from the line of Tom Stephan with Stifel. Your line is now open.

Great. Hi everyone. Thanks for taking the questions. I'll start with the near-term one just on trends in market share. Paul, maybe if you can talk about what surgical glaucoma trends in the quarter looked like for you? And maybe what that has looked like entering 2Q? Anything you saw in the competitive environment broadly? Maybe any shifts you would call out or that developed? And then if just tack on to that, I want to ask about market share. A key competitor last night, I think reported flat quarter-over-quarter U.S. results. But surgical glaucoma for you is down. I think maybe in the high single-digit range. Just your thoughts there and how investors should be viewing that comparison, maybe just based on what you are seeing play out year-to-date? And then I have a follow-up.

Yes. Hi, Tom, I'll take the first question in terms of trends, what we're seeing. I think we're seeing a good operating environment. Last year, there were a number of new products that were introduced early in the year that kind of stabilized by the end of the year. And I think we're -- we headed into first quarter this year in a far more stable environment. And I think our business performance is a reflection of it. That's both in combo cataract as well as Standalone. I think both business lines, OMNI's use in mild-to-moderate combo cataract is growing nicely, and we continue to take share there as we have been for several years. Our Standalone business, OMNI's use in moderate standalone and also in advanced standalone prior to more invasive surgeries, that's picking up as well. And again, as I mentioned in the prepared remarks, some of the data that we look at and the claims analysis, it does show that the standalone market is indeed growing, and we believe that we're a key driver behind that growth. So we feel great about the operating environment we're in. We feel great about the predictability, and we feel great about the growth rates in both combo cataract as well as standalone.

Okay, got it. And then just a longer-term question to pivot, I just want to ask about standalone glaucoma. I think I asked something similar last call, but obviously, there's some new devices coming in maybe over the next 12 months standalone stent, I guess currently is rolling out and then a drug delivery device, and they're notably trying to expand into the standalone MIGS market. So how should we be thinking about the impact that could have on MIGS more broadly. Is it fair to think about -- and I want to put words into your mouth. Is it fair to think about these products and other companies' efforts toward expanding the interventional mindset, call it, maybe isn't that positive more broadly for the mix space? Thanks.

Yes. Great question, Tom. First of all, I do think this is a standalone market estimated at $5 billion in its infancy today. I do believe that more companies, more resources devoted to the significant education of the market to drive market development is a positive driver for everybody. I do believe in that. As it relates to our competitive positioning, we're obviously very passionate about OMNI and what it can do for standalone patients. The clinical data speaks for itself. We have a growing body of clinical evidence and standalone, mild, moderate and severe, that's very compelling, and it all goes back to our reason for being. And I think that's on display very clearly in standalone cases. And that's to offer surgeons something that is minimally invasive, a manner as possible, can address as much of the underlying disease as possible. And when we can offer surgeons that kind of technology that can comprehensively restore disease anatomy and restore outflow and do so more than any other technologies, we believe that we create a very competitive safety and efficacy proposition. So I'll just ask everybody to imagine this. You're sitting in the angle -- you've advanced your solution across the anterior chamber, and you're now sitting in the Iridocorneal angle and you have options. What should you do at that point for this standalone patient. We believe strongly that at that moment, you're already in the eye that you should comprehensively address if much of the diseased underlying anatomy as possible. And when you do that, you can hopefully mitigate the need or do way with the need altogether for meds. So that's our goal with OMNI. We continue to iterate on the product and technology so that we can make it more and more usable, user-friendly and more effective. And ideally, we can help surgeons get their patients off of meds. And so we have a strong bias that if you're going to go into the eye and do angle surgery on a standalone basis, make it as comprehensive as humanly possible. And we do that with OMNI.

Hey Tom, this is Tom. I just wanted to answer your question on market share as well. In terms of our growth this quarter year-over-year at 25%, that was about 7x higher than the other company you referenced in terms of quarter-over-quarter -- or sorry, year-over-year growth. So I think we still -- we're still continuing to take a lot of share in MIGS overall and continue to develop the Standalone spec segment.

Really appreciate all the color. Thanks guys.

Thank you.

Your next question comes from the line of Mike Arens with William Blair. Your line is now open.

Great. Hey everyone. Thanks for taking the questions. So maybe just to start here with one on the Ergo-Series. Have the usability improvements help you reach a new segment of surgeons at all since it was launched, maybe those that are more focused on procedure efficiency than previous OMNI-users, such as maybe a higher-volume cataract surgeons, for example?

Yes, great question. And yes, it's helped in multiple ways. It's helped with our existing customer base, optimize the surgical experience, the handle, the usability is better. The tip of the device in the angle is better, the catheter entry into the canal is better. And so just having designed the system to help make the procedure more reproducible helps surgeons become even more confident in the restored outflow procedures that our OMNI technology facilitates. So I'd say it made our current customer base happier. I think it does help surgeons who maybe had tried OMNI or maybe resident or fellows and thought it a little challenging. It can help them become more confident in it. And lastly, importantly, anytime you've got a new product and something exciting and new to talk about, we have a very -- a significant commercial infrastructure, very effective commercial sales force. It allows them to go in with something new to those surgeons who might not have tried OMNI yet, but we're considering it. And so I think that's been a nice advantage also.

Got it. That makes sense. And then maybe just one on TearCare, if you guys were to see positive results from the six-month readout, of course, there's the longer-term data still. But what would be the next steps, if any, you guys would expect to take maybe in the remainder of the year and next year from a regulatory or commercial standpoint?

Yes. So from a regulatory perspective, we currently have a very nice label. We've already expanded the label of TearCare. Could we use the results of SAHARA, if successful, to expand the label further, potentially signs and symptoms indication potentially, but that's not the primary objective of the study. The study is oriented around supporting payer decision-making. And so in terms of timing, expect this summer for us to announce a top line readout. We're aiming to then submit for publication in a top-tier journal. Again, this all assumes success, but we would aim to submit in a top-tier journal in the late summer or early Q3 time frame, hopefully, have a publication on the six-month clinical outcomes in a top journal by end of year. And then with that data, we would be very excited to go and have very compelling discussions with the clinical data as well as in parallel, a health economic analysis in terms of how TearCare not only can hopefully offer superior dry eye treatments for patients, but also help payers and their bottom line. So we'll be running that analysis in parallel this year. And so by the end of the year, we'll be ready to go to payers with this complete reimbursement package and early 2024, we'd be making the round with payers, and that would obviously be a very exciting exercise and we would be quite aggressive in the execution of that exercise.

Got it, that's very helpful. Thanks guys.

Thanks.

And I see no further questions at this time. I will now turn the call back over to Paul Badawi, CEO.

Thank you all for your interest in Sight Sciences. We appreciate it and have a great rest of your day.

This concludes today's conference call. Thank you for your participation. You may now disconnect. Have a good day.