Good morning and thank you for your participation. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. As a reminder, this conference call will be recorded. I would now like to turn the call over to your host, Cameron Radinovic of Burns McClellan. Mr. Radinovic, please go ahead.

Thank you. Good morning and welcome to LENSAR's First Quarter 2021 Financial Results Conference Call. Earlier this morning, the company issued a press release providing an overview of its financial statements for the first quarter ended March 31, 2021. This press release is available on the investor relations section of the company's website at www.lensar.com. Joining me on the call today is Nick Curtis, Chief Executive Officer of LENSAR, who will review the company's recent business and operational progress. Following his comments, Tom Staab, Chief Financial Officer of LENSAR, will provide an overview of the company's financial highlights for the first quarter before turning the call back over to Nick for closing remarks. Today's conference call will contain certain forward-looking statements, including those statements regarding future results, unaudited and forward-looking financial information, as well as the company's future performance and/or achievements. These statements are subject to known and unknown risks and uncertainties which may cause the company's actual results, performance or achievements to be materially different from any future results or performances expressed or implied in this presentation. You should not place undue reliance on these forward-looking statements. For additional information, including a detailed discussion of the company's risk factors, please refer to the company's documents filed with the Securities and Exchange Commission, which can be accessed on the website. In addition, this conference call contains time-sensitive information accurate only as of the date of this live broadcast, May 5, 2021. LENSAR undertakes no obligation to revise or otherwise update any forward-looking statements to reflect events or circumstances after the date of this live conference call. At this time, it is my pleasure to turn the call over to Nick Curtis. Nick?

Thank you, Cam, and good morning to everyone listening. Thank you for joining us on our first quarter 2021 conference call. I'm pleased to report that we have continued the positive momentum, which began in the second half of last year, showing a gradual rebound from the COVID-19 pandemic. We continue to observe positive industry trends in the first quarter of 2021 in most of the regions in which we operate, as seen through a recovery of elective surgeries, specifically in premium cataract procedures. Furthermore, we're beginning to see procedure growth as compared to pre-pandemic levels in certain markets. This recovery and growth includes the US, our largest operating region where our procedures sold increased 19% as compared to the first quarter of 2020. While this increase is certainly encouraging, we know the situation globally remains very fluid, varying from region to region. Last week, we became aware of lockdowns and the related suspension of elective procedures in both Turkey and India from late April until now, with these lockdowns likely continuing throughout May until authorities get their increasing infection rates under control. It's a sad situation and our thoughts go out to the people in these countries with the hope of swift corrective action, including vaccines, and a return to their normal lives. While it's clearly difficult to predict what may happen in the coming months, we continue working hard and focusing our efforts on those markets that are less impacted by the pandemic, where we can truly make a difference, while continuing to communicate regularly with our partners in each of these markets. This is helping stabilize performance in the near term, but more importantly should serve us well in ramping more quickly as markets begin to reopen. In the near term, these lockdowns do have some effect on our business with an impact on procedure volume and a delay in new system placements that limits our immediate growth. However, India and Turkey represented less than 10% of our 2019 and 2020 revenue. So we expected a noticeable but not drastic impact on our second quarter revenue. The silver lining is that cataracts do not go away or resolve without treatment. Ultimately, these patients will return to have their cataracts treated as these markets reopen, creating inherent resiliency in the cataract surgery market. Overall, we believe our first quarter performance gives us cause for cautious optimism as it relates to the rest of the year. Although the threat of COVID is not completely gone away, we've seen signs that suggest a gradual return to a new normal, as vaccination rates and access to vaccines continue to increase, particularly in the United States. In addition to the 19% increase in US procedure sold in Q1, global procedures sold were up approximately 21% over the first quarter of last year, an increase of nearly 5,000 procedures. Another encouraging sign for the industry, at least in the US, is a return of certain medical congresses to an in-person format. In fact, our team will be at the 2021 Hawaiian Eye and Retina meeting next week in Maui. Perhaps more importantly, the American Society of Cataract and Refractive Surgery, or ASCRS Annual Meeting in July, is currently planned to be an in-person meeting. On the other hand, several European meetings have either been postponed and optimistically rescheduled for later in the year or canceled altogether as a result of spikes in COVID in varying degrees of vaccine rollouts from country to country. As I mentioned in our year-end earnings call in March, we believe our current generation LENSAR Laser System was Streamline 4 and IntelliAxis remains the most advanced laser available to cataract surgeons today. We believe that the use of our technology enables better performance for surgeons and synergistically superior outcomes for patients. Let's turn to our next generation system ALLY. We continue to receive enthusiastic feedback from the ophthalmic community, particularly around the new opportunities and efficiencies that ALLY will enable. Ally is viewed as a significant advancement in the armamentarium to treat cataracts, one that builds upon the technological leadership we've established with our current generation LENSAR Laser System and considerably expands the value-add that we will be able to offer cataract and refractive surgeons. I mentioned the ASCRS annual meeting earlier. As a congress for cataract and refractive surgeons, it's one of the most important LENSAR market-specific meetings in our industry. I'm proud to say that LENSAR will be there with our LENSAR Laser System and we'll be showcasing ALLY in a series of private, appointment-only demonstrations to a sizable audience of leading cataract and refractive cataract surgeons. I look forward to sharing key takeaways from the meeting when we report our second quarter results in August. We continue to make great progress in the development of ALLY and remain on track to file the 510k application in the first quarter of 2022 and launch ALLY later in the year. In addition, we recently successfully completed a DEKRA notified body audit to the EU MDR requirements and as a result are well positioned for transitioning toward ALLY in Europe. Now let me turn the call over to Tom to cover our financial highlights for the quarter.

Thank you, Nick. Our first quarter 2021 financial results are included in our press release today. But I'd like to add a little color to those written remarks. Revenue was $7 million, compared to $5.9 million in the first quarter of 2020, reflecting a 19.3% increase. The increase in revenue was primarily driven by sales of laser systems and increased procedure licenses sold, particularly in the United States, where procedure volumes exceeded pre-COVID levels. In the first quarter of 2021, there were a total of 28,122 procedures sold, compared with 23,225 procedures sold in the first quarter of 2020, reflecting a 21.1% increase, thus you see first quarter 2021 worldwide procedure volume returning to and exceeding 2020 levels in the aggregate. These procedure levels were prior to the shutdowns that have occurred in India and Turkey that Nick mentioned in his remarks, but we still expect to have procedure volume growth in most markets, particularly in the United States going forward in 2021. Although we have had some system placements in the first quarter of 2021, the pandemic continues to depress laser system sales or what we consider nonrecurring revenue. As our revenue streams are analogous to the razor-razorblade subscription model, the depression of system placements retards our future growth. That is, the more systems we place, the more high-margin recurring revenue we enjoy in the future. In the COVID environment, there's a mindset of caution and uncertainty among physicians when making capital purchases and this overhang may continue as long as the pandemic persists. Fortunately, our recurring US revenue, which we define as all revenue other than laser system sales, has proven resilient upon surgeon practices reopening for business after a complete shutdown of elective procedures in March and April last year. When evaluating the composition of our revenue, approximately 91% of our revenue was attributable to recurring sources for the three months ended March 31, 2021, compared to 99% for the three months ended March 31, 2020, as we had no system sales in that quarter. Gross margin for the quarter was $3.9 million, or 55% of total revenue, an increase in dollars from $3.6 million and gross margin percentage of 60% in the first quarter of 2020. The decrease in our gross margin percentage was attributed to laser system sales, which have a much lower gross margin than procedure revenue. R&D expenses were $2.7 million and $1.6 million for the quarters ended March 31, 2021, and 2020, respectively. The increase was primarily due to additional costs for the continued development of ALLY in anticipation of our 510k filing with the Food and Drug Administration in the first quarter of 2022, as well as increased personnel expenses, which includes an increase in stock-based compensation expense. Selling, general, and administrative expenses for the quarter ended March 31, 2021 were $6 million, an increase of $1.3 million, or 26.3%, compared to $4.8 million for the first quarter of 2020. The increase was primarily due to increased personnel expenses, which was largely attributable to stock-based compensation. Total stock-based compensation expense recorded for the quarters ended March 31, 2021, and 2020, was $2.3 million and $85,000 respectively. With the spin-off and recapitalization of the company, stock-based compensation expense represents a significant expense for us going forward. But it is a non-cash expense, so it does not affect our cash runway or our ability to fund the filing and launch of ALLY. As of March 31, 2021, we have $12.4 million of unrecognized stock-based compensation expense, which will be recognized before the end of 2023. Approximately $3.8 million of this will be recognized in the remainder of 2021. Looking forward, we expect to expand our commercial infrastructure to increase market share, and then further expand infrastructure prior to the launch of ALLY in 2022. However, with the ongoing pandemic, we are moderating our immediate expansion plans and judiciously adding infrastructure when it immediately contributes to our business. We are also monitoring our supply chain, which has been impacted by the ongoing pandemic. At this point, we have been able to adjust our operations to meet both our immediate needs and future objectives. But we are incurring higher costs due to the scarcity of items. Net loss for the quarter ended March 31, 2021 was $5.2 million or a loss of $0.56 per share, compared to a net loss of $3.7 million or loss of $0.44 per share in the first quarter of 2020. Adjusted EBITDA for the first quarter of 2021, which factors in the effects of the stock-based compensation expense, was a $2.2 million loss and compares to an equivalent $2.2 million loss in the first quarter of 2020. Consistent with the fourth quarter of 2020, if you add that cash base R&D expenses from our adjusted EBITDA, the result approximates to zero. Thus, our commercial operations are cash flow neutral when evaluating our EBITDA operations, without considering normal working capital fluctuations in our balance sheet accounts. Simply said, our adjusted EBITDA or cash used in the first quarter of 2021 corresponds directly to cash used in the development of ALLY. As of March 31, 2021, we had cash and cash equivalents of $35.9 million, compared to $40.6 million at December 31, 2020. Cash utilized in the first quarter of 2021 was $4.7 million. Based on our cash position and operational forecasts, we believe we have sufficient cash to fund our operations through the filing of our 510k application and the expected launch of ALLY in 2022. Now I'd like to turn the call back over to Nick for some closing remarks.

Thank you, Tom. The solid and continued progress in expanding market share and growth over the last three quarters is a testament to the persistence of our team and the technology we have developed. I believe that we're well positioned to continue to grow LENSAR into a market leader in the refractive cataract surgery space. Our dedication to producing relevant, significant core technology features which provide our partner surgeons the treatment tools, and the practice efficiencies to provide industry leading outcomes and improve the patient experience is the foundation for everything we do. Our ALLY system has the potential to disrupt the cataract surgery market, as it will represent a revolutionary advancement to the cataract surgery treatment ecosystem that surgeons have available to provide superior patient care and enable the ability to restore high quality vision to their patients. I'm truly appreciative of the excitement and the reception that we've received from the ophthalmic community. And I'm thrilled to have the opportunity to showcase it at the ASCRS to expand on the enthusiasm we've seen thus far. We look forward to updating you on the development of ALLY as we get closer to the filing of the 510k. And I'll turn the call back over to the operator and we look forward to your questions.

Our first question comes from Richard Newitter of SVB Leerink.

Hey, Nick and Tom. It's Jamie on for Rich. Thanks for taking my question. So obviously nice procedure performance here in Q1. I was just wondering, can you talk a little bit more about the volume trends you saw through in the US and international markets and how you're seeing that trend heading into the second quarter? Appreciating some of your comments here around the US lockdowns that are taking effect. And then maybe just within that how the utilization for the system is trending relative to some of the metrics you've quoted in the past, and the more normalized levels you've seen pre-COVID?

Sure, let me begin by discussing the market outlook regarding how procedures are expected to rebound both in the US and globally. There's a discussion about a backlog that could take around two years to clear due to COVID before returning to what is considered normalized levels. Recent reports on cataract procedures from 2020 indicate that we've actually performed better and gained market share during this period, achieving an additional growth of 2% to 3% despite a contracting market. This suggests that, especially in the US, the reimbursement environment and the return of doctors to work have led to increased conversion rates. While there are fewer cataract patients overall, more advanced technology premium cases are being performed, particularly as patients have experienced a decline in their condition due to delays in surgery. Internationally, the situation varies by country. For instance, in Germany, there are encouraging signs of recovery, mainly due to a favorable reimbursement system akin to that of the US. We are also seeing some potential new business developments there. China presents a different scenario; it may take longer for us to fully realize our potential in that market due to the relatively nascent system for premium intraocular lenses and lower penetration rates. In Turkey and India, we had some promising activity, especially in India before the recent shutdown, and we continue to keep track of developments there which could present growth opportunities. Our primary focus remains on the US and Europe, where we have more control over our operations. In South Korea, despite some impacts from COVID, we are navigating through reimbursement challenges while looking forward to new opportunities in those markets. Did that address your question, Jamie?

Yes, I guess from a quarterly cadence perspective, how are you guys thinking about your procedure growth? Or are you thinking about it in terms of being sequential improvement across worldwide, and geographically are just kind of helped calibrate me a little bit, considering Q1 did have very strong performance, just trying to get a better sense of how to think about the cadence moving through the remainder of the year on procedure growth, and then I have a couple of follow up.

Sure. So in the cataract business in general, obviously, there's been a lot of unprecedented territory coverage over the last, since the end of 2019. Traditionally, in the cataract, there's some seasonality, particularly when you look at getting into the summer months where Europe goes on vacation for nearly an entire month during that time, and in the United States, obviously, as well, people are not as focused on their cataract surgery. So traditionally, the third quarter, you would see fewer procedure numbers overall, but we're still seeing, and we're small enough but right now, we're still seeing some positive trends that relate to growth for us; it's increased market share in relation to procedures and uptake. I would say that we're cautiously optimistic that we will sequentially continue to grow the business through this quarter. Looking towards the third quarter to minimize the seasonality.

As you review our operating regions, which include the US, EU, and the rest of the world, the US has shown a strong recovery, which we have noted over the past six months. This trend was evident in the latter half of 2020 and continues into the first quarter. The EU has rebounded to pre-COVID levels, though not as robustly as the US. Conversely, the rest of the world has experienced significant fluctuations and has not yet returned to what we consider pre-COVID levels. The situation is further complicated by challenges in Turkey and India. While these regions do not constitute a large part of our business, they impact our overall results. Looking ahead to the second quarter, I anticipate strong procedure growth in the United States, moderate performance in the EU, and likely underperformance in the rest of the world. As we approach the third quarter, there are seasonal factors to consider, but I expect a very strong fourth quarter, keeping in mind how the pandemic continues to evolve and the progress of vaccinations, especially in the rest of the world.

Got it. That's super helpful, Tom. Thank you for that. On the capital environment side. I was just wondering if you could, from a housekeeping perspective, what was the ending install base in Q1, and then just commenting on the current capital environment in Q1, considering there was just another larger competitor that reported a strong capital quarter on their refractive and laser equipment. Just wondering what you're seeing, hearing in the marketplace, and how you expect that trend to progress throughout the rest of the year as well.

So we saw some growth in our overall base of business. So we're up to approximately 230 systems installed globally. We did convert a couple of systems in the United States that were on rentals to purchase the deals, and that was reflected in the results for the quarter there. Our pipeline is probably the deepest that it's ever been right now. What we've been doing in terms of messaging with ALLY and getting some of these previews and whatnot is creating a lot of interest in LENSAR. We're working towards motivating people to change today in order to get on board with where LENSAR is going. Although there was some delay to the expansion of the base, we still expanded the base in the first quarter. I would expect in the second quarter here that we will continue to expand the base, albeit with a little fewer capital sales; I'd say more placements, although we are forecasting some capital sales there as well.

Okay, that's super helpful. Lastly, I guess, on the P&L, I think Tom said gross margin was 60%. I just wanted to make sure I heard that correctly. Because I think I was calculating it to be about 55%. Nonetheless, ahead of our thinking, so just curious how we should be thinking about that through the rest of the year. And as well as OpEx just because that did come in a little bit higher than expected.

Yes, so you're exactly right, Jamie; the 60% referred to the 2020 quarter. The 55% is for the '21 first quarter. So your numbers are correct. Obviously, that is a nice gross margin for us. We had a couple of system sales, maybe not as robustly as what we would like. As Nick mentioned, if we're successful in the second quarter in placing systems, you may take a couple of points off the gross margin to place those systems because ultimately system sales have a much lower margin than procedures. But the faster we place systems, the more benefit we get in future high-margin procedure growth. That's sort of how we're thinking. What was your other question, Jamie?

Just on the OpEx side of things, it came in a little bit higher at least versus what we were thinking in the quarter. So just calibrating us on how to think about that for the balance of the year? Thanks.

Yes, so we're trying to build the commercial infrastructure. We made some significant strides increasing the number of positions, particularly in the United States where we have a direct sales force with the hopes that pays off. Due to the pandemic, we kind of moderated that. I would think that G&A run rate is going to be about the same, and that our R&D run rate is going to increase because the closer we get to the Q1, 2022 filing of ALLY, the higher our R&D expenses will be. My guess is you'll start seeing that uptick in Q2, and then Q3 and Q4 really starting significantly in Q3, and then continuing in Q4.

So we're building systems, and we're starting our facility expansion in order to increase manufacturing capability, and all those activities are going on now.

So the one thing I would say is, as you see the investment in R&D, you should view that as a very positive thing, because that puts more certainty around the Q1 '22 filing and the expectations for ALLY when we launch that in 2022.

Jamie, I just want to mention one other thing; in order for us to stay on timeline regarding the filing for ALLY and our progress there, given some of the supply chain considerations that we're dealing with right now, we’re looking at it in the big picture, longer term. We're willing to pay a little more where we can pay more to get the supply chain into our system so we can continue to build these systems and get what we need to be done from a clinical perspective to keep the progress going. That sort of serves us well right now. But we want to continue that.

Our next question comes from Kevin Cai of Madison Avenue.

Hi, Nick. Hi, Tom. Good morning. Can you hear me, all right? Nick, so my first question is how do you see the competitive landscape for ALLY as we get closer to launch?

I still see the competitive landscape being sort of LENSAR; there's really only one other company that I can see right now that has a device that they're working on. It's a company from overseas, and they don't have a present brand and don't have any present business. They don't necessarily come out of the medical device business. I wish them well because all ships rise when people are paying attention to various technologies. But I don't view that there's going to be a significant number of competitors as we move towards the market with ALLY, certainly not on rollout.

We really view ALLY as a disruptive technology. That's disruptive as we compare it to any potential competitive devices, too. We are incurring a lot more cost and putting a lot of effort in making sure we meet this Q1 '22 deadline, which is difficult in the pandemic environment. You see in any of the 10-Ks that are coming out in Q1, a lot of industry, a lot of companies are running into supply chain issues. So far we've navigated that because it's so important for us to get ALLY out because we think it's such a great technology.

We think we have great technology, as well as very opportunistic timing in terms of getting it out. I think this pre-seeding of the market for us and these introductions of the product and the various meetings we are attending and in speaking at are bearing some fruit in terms of the increasing pipeline for us with the current generation and the interest that people have today.

Got it. Thank you, very helpful. Assuming we have a successful launch of ALLY, can you help us understand what a range of outcomes might look like in terms of ALLY revenue that we will generate?

Yes, so Kevin, we obviously as we get closer to the launch will think about the guidance that we give. We're at a point now where it doesn't really behoove us to give any type of guidance other than to say that we view ALLY as a very, very disruptive technology and really a significant opportunity for the company. To Nick's prior remarks, there's just not a whole lot of competition out there. We think that we have the best mousetrap, and based on the feedback that we're getting via the KOL, it's not just in our minds, it's broadly shared amongst the community.

Just suffice to say that we're going to have pretty high expectations for our performance there.

There are no further questions in the queue at this time. So I will turn the call back over to Nick.

So I'd like to really thank everyone for joining our call today and also for your continued interest and support in LENSAR. We look forward to updating you as we make further progress as we approach the filing and the launch of ALLY. Stay tuned. Thank you.

Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines.