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. 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 represents 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 or cataract status. Our surgical glaucoma growth strategy focuses on three objectives. The first priority involves training more surgeons on our OMNI technology. Surgeons continue to show strong interest in OMNI. We trained over 150 U.S. surgeons in the first quarter but have reached less than half of the estimated 5,700 mixed train surgeons in the U.S., leaving plenty of runway for us to continue to train more surgeons over the coming years. When we train new surgeons, we further penetrate the legacy combination cataract MIGS segment and surgeons often select POAG patients with concomitant cataracts who are already on their operating room schedule for their first OMNI cases. Our second objective, increasing the utilization of OMNI among our trained surgeon base is a natural extension of our exceptional training program. OMNI's safety, efficacy, intuitive use and broad FDA-cleared label provide us with a uniquely clear path to increase utilization by expanding use of our OMNI technology across the entire population of POAG patients, including the $5 billion standalone opportunity. Once Adept to using OMNI, surgeons gain the necessary confidence to expand their usage to standalone cases as well as more severe combination cataract cases. Now that we have achieved broad customer adoption, increasing utilization among our existing surgeon base is a powerful growth lever. The math is simple. If each of our first quarter active accounts performed just one additional OMNI procedure per month, annual revenue increases by $13 million, which represents just 0.2% of the overall MIGS opportunity. Our third objective is to drive adoption and utilization of SION among specific subsets of surgeons who offer a more basic goniotomy procedure. SION provides surgeons with a complementary technology to OMNI and has gained rapid adoption. Our focus on constantly improving functionality and usability produced our next-generation OMNI technology, the recently launched Ergo series. We successfully executed a smooth introduction and Ergo has gained wide and enthusiastic adoption. OMNI has established a new standard in glaucoma surgery. Based on leading efficacy and usability, our OMNI technology can greatly expand the use of MIGS. OMNI's growth continues to outpace total MIGS market growth as a result of both share taking within the Legacy Combo Cataract segment and market expansion into the Standalone segment as surgeons get more comfortable using OMNI. Our analysis of nationwide third-party claims data indicates strong growth in the Standalone MIGS segment. In 2022, an index we created to track relevant standalone activity grew 26%, well ahead of the high single-digit growth in overall MIGS. To accelerate development of the Standalone MIGS segment, we continue to execute our comprehensive market development program, leveraging targeted field resources, comprehensive patient and physician education, clinical evidence and marketing initiatives. Our multicenter TREY study illustrated the safety and efficacy of OMNI in patients with uncontrolled IOP despite a history of trabecular bypass stent implantation at the time of cataract surgery. We are seeing more surgeons surgically intervening with OMNI and the stented pseudophakic patients whose IOP has become uncontrolled. We are pleased to see that our OMNI technology can be used to help improve the lives of the one million-plus patients who have undergone combination cataract stent implantations and whose pressure may one day become uncontrolled. Last month, Clinical Ophthalmology published an extended follow-up from our ROMEO study involving seven centers and 72 mild-to-moderate glaucoma patients that demonstrated continued safety and effectiveness of our OMNI technology in both standalone and combination cataract settings out to two years. As a reminder, the FDA reviewed the 12-month results from the original ROMEO study when clearing OMNI's expanded label in 2021. So it is very gratifying to see that there is growing evidence of OMNI's highly compelling one-year safety and efficacy results maintained through two years and beyond. Another important clinical program involves our study of the American Academy of Ophthalmology's IRIS Registry, which includes 9,000 MIGS cases. The study analyzes postsurgical outcomes for the leading MIGS technologies in the U.S., including OMNI, iStent and Hydrus. We believe this data further supports our belief in the clinical superiority of OMNI. We plan to present and publish these groundbreaking results, including comparative IOP and medication reduction outcomes at the one and two year marks at multiple medical meetings and in peer-reviewed literature throughout 2023, including at the ASCRS meeting this weekend. We believe the combination of increasing evidence of sustained clinical benefits from use of the OMNI surgical system at two years, coupled with a non-implantable approach that does away with the lifelong concerns of indwelling metallic implants sets a new standard in glaucoma surgery for the future. In striving to provide the best solutions for our customers, we developed the first Bladeless Goniotomy technology, SION, the second product in our surgical glaucoma portfolio. We launched SION last August. The usability, procedural predictability, elegance of the technique and its general interaction with the anatomy are the main factors cited by surgeons who now use SION as their goniotomy technology of choice. As we expected, many of our SION users prioritize a simpler MIGS procedure and were not prior OMNI customers, demonstrating that our portfolio approach has attracted new customers. We have observed a significant positive impact from SION in OMNI accounts with existing goniotomy practices in terms of both overall revenue growth and increased OMNI usage. Among accounts that ordered OMNI in the first quarter of 2022 and both OMNI and SION in the first quarter of 2023, revenue grew 39%. These customers also increased their utilization of OMNI by 16% on average. As intended, SION has proven to be a complementary technology to OMNI and has enhanced our sales growth and commercial strength. On the international front, our launch of direct operations in Germany, our second direct OUS market has gone very well. Germany and the U.K., our other direct OUS market are two of the largest international MIGS markets. We will continue to prioritize expansion in our existing international markets while also considering launches in other countries with attractive market access, regulatory and commercial environments. Before turning our attention to dry eye, I want to take a moment to highlight the activities we have scheduled for ASCRS this weekend in San Diego. Tomorrow, we're hosting a Surgical Glaucoma Investor Symposium that will feature presentations from leading OMNI and SION surgeons. We have several other presentations featuring our technologies throughout the weekend. You can find more information in our recent press releases. Now turning to our dry eye business. There are 14 million diagnosed evaporative dry eye sufferers in the U.S. Our dry eye business has experienced rapid adoption despite lack of coverage by health insurance providers. The cash pay environment has not deterred our over 1,100 customers or the tens of thousands of patients who have sought treatment for meibomian gland disease with our TearCare technology. We have positioned ourselves at the forefront of a transformational shift in dry eye treatment away from eye drops toward interventional procedures. We designed our controlled launch of TearCare to help us optimize the development of this large and underserved market. We have accumulated numerous important findings that we will leverage to serve pent-up demand, especially if we can achieve our market access goals. I'd like to take a moment to recap the dry eye market and our transformative mission with TearCare as we approach the readout this summer of our pivotal SAHARA RCT. Daily artificial tears and daily prescription eye drops are the gold standard treatment in dry eye today and collectively represent many billions of dollars of annual revenue for their manufacturers. Restasis, our comparator in SAHARA, is the top-selling dry eye therapeutic. Despite the significant commercial success of prescription eye drop therapeutics, they don't address meibomian glands, the primary underlying cause of dry eye for most patients, estimated at 86% of all dry eye cases. We designed TearCare to set a new standard in dry eye treatment. Correspondingly, we designed our SAHARA RCT to prove TearCare's superiority over the prescription gold standard with input from eight payer Medical Directors. If successful, the comparative clinical benefits and health economic value of TearCare will serve as the foundation of our market access strategy. As a reminder, in the third quarter of 2022, we completed enrollment of SAHARA, a 345 patient randomized, masked, multicenter superiority study comparing interventional procedural treatment with TearCare to twice-daily prescription eye drop treatment with Restasis. Insurers have paid billions of dollars for Restasis and other dry eye medications. SAHARA has the potential to prove that our TearCare technology can improve clinical outcomes for patients and bottom lines for payers. We are pleased to report that we completed our last six-month patient follow-up in April. As a reminder, it can take several months to complete the data analysis. We plan to release top-line results this summer and present full results at a major medical meeting and publish these results in a leading medical journal later this year. To summarize, we continue to execute across our business, generating strong growth in both surgical glaucoma and dry eye and advancing the underlying commercial, clinical and market access drivers that will bolster further growth. We have built a solid foundation to continue training new customers and expand utilization. Our plan for robust ongoing growth, coupled with our top-tier gross margins and disciplined operating expense spend are positioning us to improve operating leverage and keep us on a path to achieve positive cash flow in 2025. I now have the pleasure of formally introducing Ali Bauerlein as our new Chief Financial Officer. I am thrilled to have Ali on board, a proven entrepreneur and exceptionally talented executive. Ali brings public company CFO experience and a track record of co-founding and leading a rapidly growing med tech business through multiple phases of growth, culminating in over $350 million of annual revenue. Ali is already making a positive impact at Sight in so many ways and is a perfect fit with our team. We're delighted to have Ali help us continue to scale the business the right way and drive towards profitable growth. Over to you, Ali.

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 $28.4 million in the prior year period. Total operating expenses for the first quarter were $33.3 million, a decrease of 2% compared to $34 million in the first quarter of 2022 and in line with our expectations. We continue to drive focused spending. Adjusted operating expense for the quarter was $29.7 million versus our stated 2023 quarterly average target of $30.5 million. Our loss from operations for the first quarter was $17.6 million compared to a loss of $22.2 million in the first quarter of 2022. We had a net loss of $17.1 million, or $0.35 per share in the quarter compared to a net loss of $23.3 million, or $0.49 per share for the first quarter of 2022. We ended the quarter with $167.3 million of cash and cash equivalents and $35 million of long-term debt before debt discount. We've reduced cash usage by 20% compared to the first quarter of 2022. As a reminder, the first quarter includes our annual employee bonus payments. We expect cash usage to decrease in the second quarter due to higher revenue and the absence of bonus payments, partially offset by higher adjusted operating expenses. Overall, we expect operating loss and cash usage will continue to decrease over time as our business model begins to flex the considerable operating leverage driven by our high gross margins and targeted operating spend. Based on our solid start to the year and favorable trends, we are reaffirming our annual revenue guidance of $89 million to $94 million. We expect the first half of 2023 revenue distribution will be similar to what we experienced in 2022. We expect averaging quarterly adjusted operating expenses of approximately $30.5 million will allow us to achieve our plans for the year, but we expect second quarter adjusted operating expenses to be higher than the annual average, given the timing of certain expenditures. We continue to proactively manage our liquidity and operating expenses to maintain our strong cash position. We recently filed a universal shelf S-3 registration statement for good corporate housekeeping. We do not intend to raise capital at this time. We are confident that our robust growth trends, market-leading positions in MIGS and MGD, strong balance sheet, leading gross margins and disciplined spending will enable us to achieve our 30% medium-term revenue growth target and positive free cash flow by year-end 2025, while maintaining a substantial cash cushion. With that, operator, you may open the line for questions. Tom Huang, our Head of Corporate Strategy, will also join us for Q&A.

Our first question comes from 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 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, hello. Regarding the first question about canaloplasty reimbursement, we've previously discussed a review of the CAT 1 codes, which are the most frequently used codes for MIGS that took place a couple of years ago. Canaloplasty-66174 and bypass stenting were part of that review. As a result of the analysis, it was determined that the professional fee would be decreased over two years. The fee was reduced from $950 to $750 in the first year and from $750 to $600 in the second year, with the $600 rate taking effect on January 1 of this year. In terms of its impact compared to other procedures, whether it be other MIGS options or cataract surgery alone, the drop to $600, while not ideal for surgeons, facilities, or manufacturers, hasn't significantly altered its positioning. It remains higher than cataract surgery alone, still commands a premium over stenting, and continues to be below goniotomy, just as it was last year. Overall, we feel positive about the reimbursement status.

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, I can address that question. We are still in the initial phases of the program. However, we are on schedule, as mentioned in the last call. Q1 was primarily focused on designing the program, while Q2 is dedicated to testing the direct-to-consumer initiative, which we are currently conducting. It's still too early for us to provide specific results, but we are conducting this study because we believe there is considerable consumer interest in improved treatments for both glaucoma and dry eyes. We aim to validate that hypothesis, and we will update you as we gather more information.

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 headed into the 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.

I understand. For a broader perspective, I’d like to discuss standalone glaucoma. I believe I previously inquired about this, but there are new devices on the horizon, including a standalone stent that is currently being introduced and a drug delivery device aimed at expanding the standalone MIGS market. How should we view the potential impact of these developments on the MIGS sector overall? Is it reasonable to consider that these products and the initiatives from other companies to promote the interventional approach could have a generally positive effect on the MIGS space? Thank you.

Yes, great question, Tom. I believe this market is standalone and currently valued at approximately $5 billion. It's still in its early stages. More companies and resources dedicated to educating the market will be beneficial for everyone involved. Regarding our competitive position, we are very enthusiastic about OMNI and its benefits for standalone patients. The clinical data is impressive, with a growing amount of evidence for mild, moderate, and severe cases that supports our mission. This is clearly demonstrated in standalone scenarios. Our goal is to provide surgeons with a minimally invasive solution that can effectively address as much of the underlying disease as possible. By offering technology that can thoroughly restore disease anatomy and improve outflow better than other options, we believe we present a strong safety and efficacy proposition. Imagine this: You're in the angle of the eye, having successfully navigated your solution across the anterior chamber, and now faced with a decision about how to proceed for a standalone patient. We strongly feel that at that point, the best course of action is to comprehensively tackle the affected anatomy. By doing so, we hope to reduce or entirely eliminate the need for medications. That’s our objective with OMNI. We are consistently working to enhance the product and technology to make it more usable, user-friendly, and effective. Ultimately, we aim to assist surgeons in getting their patients off medications. If you're going to perform angle surgery on a standalone basis, it should be as thorough as possible, and that’s what we achieve with OMNI.

Hey Tom, this is Tom. I wanted to address your question about market share as well. Our year-over-year growth this quarter was 25%, which is approximately seven times higher than the growth of the other company you mentioned. I believe we are still capturing a significant amount of market share in MIGS overall and we continue to advance the Standalone segment.

Really appreciate all the color. Thanks guys.

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 helped 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 significant commercial infrastructure, and a 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 were 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 timeframe, 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 rounds with payers, and that would obviously be a very exciting exercise, and we would be quite aggressive in the execution of that exercise. 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.