Sight Sciences, Inc. Q2 FY2025 Earnings Call

Good day, and thank you for standing by. Welcome to the Sight Sciences' Second Quarter 2025 Earnings Results Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Paul Badawi, Co-Founder and Chief Executive Officer. Please go ahead.

Thanks, Trip. Our strong second quarter performance underscores the value of our proven interventional technologies for treating glaucoma and dry eye disease. These results also reflect the dedication and consistent efforts of our team in effectively supporting eye care providers and the patients they serve. Our second quarter revenue of $19.6 million was driven primarily by solid execution and growing momentum in our Surgical Glaucoma segment. Within Surgical Glaucoma, sequential growth in both ordering accounts and procedural utilization marked meaningful progress as we strengthen our position as the market leader in implant-free MIGS. We are also continuing to work towards positive reimbursement coverage and/or payment decisions for TearCare this year. In addition, we delivered operational excellence, achieving excellent gross margins, diligent expense management, and reduced cash usage. Reflective of this execution, we are raising our full year 2025 revenue guidance to $72 million to $76 million, while maintaining our full year 2025 guidance on adjusted operating expenses. Now diving into our Surgical Glaucoma segment. We believe the growing demand for minimally invasive glaucoma treatments represents a significant long-term market opportunity. And we believe we are well positioned to capitalize on the ongoing shift in surgeon behavior towards procedural interventions. As a reminder, this is only the second full quarter operating within the new MIGS environment where Medicare coverage in most states restricts performing multiple MIGS procedures in combination with cataract surgery. We are pleased with our performance and the resilience of our Surgical Glaucoma segment in this environment. We continue to have conviction in our ability to drive adoption of OMNI based on multiple factors, including the ongoing shift in surgeon mindset towards interventional glaucoma, our market-leading position in the MIGS industry, our focus on meaningful long-term surgeon relationships and customer engagement, OMNI's comprehensive procedure profile and usability, and its proven long-term safety and efficacy. In the second quarter of 2025, our Surgical Glaucoma revenue was $19.2 million, down 5% compared to the second quarter of 2024 and up 12% compared to the first quarter of 2025. Our stronger-than-anticipated second quarter performance reinforces our confidence in the OMNI procedure as a leading solution in interventional glaucoma care. We remain focused on executing with agility in this evolving environment and are actively improving our commercial strategy to sustain momentum and drive growth. We are also making consistent progress across multiple strategic priorities designed to drive long-term growth and shareholder value. These efforts include enhancing our competitive positioning, investing in targeted commercial resources, expanding the pseudophakic standalone OMNI market, and building on the early traction with the OMNI Edge, our latest MIGS innovation. I'll now walk through our recent achievements in support of these initiatives. First, I want to expand more on the commercial progress we saw in the second quarter, where we have been focused on growing ordering accounts and increasing account utilization. We reached a record high for ordering accounts in the second quarter, up 6% sequentially and 4% versus the same period in the prior year due to both reengagement efforts with accounts who had ordered previously but had gone dormant and also new accounts ordering for the first time. We also saw a 4% sequential increase in surgical glaucoma utilization and improvements in our average selling price, contributing to our strong quarterly performance above expectations. Next, I want to look at the early success we have seen with the recent launch of OMNIEdge, the latest evolution of our OMNI platform. OMNIEdge is designed to meet the diverse preferences of surgeons and the evolving needs of patients in today's MIGS landscape. Since launch, surgeons have responded positively and are achieving strong outcomes with our new technology. We believe that with this next-generation technology, we will drive further improvements in OMNI utilization. Lastly, we have also been focused on educating surgeons and their clinic staff on the importance of addressing the unmet need for pseudophakic patients whose glaucoma remains uncontrolled and could benefit from a standalone OMNI procedure. While it is difficult to track specific metrics on adoption, we are helping more customers learn how to identify these patients and implement standalone procedures as part of their clinical practice. Turning to our Dry Eye business. We have been intentionally executing our long-term strategy to create reimbursed market access for our interventional dry eye technology, TearCare. We have developed best-in-class interventional MGD technology, delivered superior long-term clinical outcomes demonstrated through randomized controlled clinical trials, and established coding for this procedure. We have been increasing customer advocacy and advancing our market access initiatives to establish equitable reimbursement for TearCare. In the second quarter of 2025, our Dry Eye revenue was $0.3 million, a decrease from $1.1 million in the second quarter of 2024, primarily due to fewer SmartLids sales, which was a result of our focus on achieving reimbursed market access for TearCare procedures. We were pleased to announce the publication of the 24-month results of the SAHARA RCT, demonstrating the durability of the TearCare procedure for the treatment of dry eye disease. The results show mean signs and symptoms for participants in Stage 3 of the SAHARA trial remained statistically significantly better than study baseline at all time points up to 24 months. The results further validate the durability, consistency, and strong clinical benefits of TearCare as an interventional therapy for dry eye disease.

Thanks, Paul. Unless noted, all results are for the second quarter of 2025 and all comparisons are to the same period in the prior year. In the second quarter of 2025, total revenue was $19.6 million, an 8% decrease. Surgical Glaucoma revenue was $19.2 million, a decrease of 5%. This expected decrease was primarily due to an 11% decrease in account utilization, which was the result of the impact on the MIGS market from the coverage restrictions in the recent Medicare LCDs, partially offset by a higher number of ordering accounts and higher average selling prices. Ordering accounts were up 4%, demonstrating our ability to grow our customer base, albeit at slightly lower volumes. Our Dry Eye revenue was $0.3 million, a decrease from $1.1 million. This expected decline was primarily due to fewer SmartLids sales, which was a result of our focus on achieving reimbursed market access for TearCare procedures. In the second quarter of 2025, we dedicated more resources towards working with our eye care provider partners on appeals of previously submitted claims with a lower volume of new claims submissions and a lower average selling price of our SmartLids compared to the first quarter of 2025. Gross margin was 85%, down slightly from 86%. Surgical Glaucoma gross margin was 86% compared to 88%, primarily due to higher overhead cost per unit, tariff costs, and product sales mix, partially offset by higher average selling prices. We incurred $0.1 million in Surgical Glaucoma cost of goods sold associated with tariffs. Dry Eye gross margin was 38% compared to 47%, primarily due to product sales mix and higher overhead cost per unit. Total operating expenses were $28.3 million, a decrease of 9% compared to $31 million, primarily due to lower legal fees. Adjusted operating expenses were $24.4 million, a decrease of 8% compared to $26.6 million. Our net loss was $11.9 million or $0.23 per share compared to a net loss of $12.3 million or $0.25 per share. We ended the quarter with $101.5 million of cash and cash equivalents and $40 million of debt, excluding unamortized discount and debt issuance costs. Cash used was $7.3 million compared to $9.1 million. As a reminder, we have not received any monetary damages awarded in our successful jury trial verdict in our patent infringement case against Alcon. We are awaiting the judge's final order whether to confirm the jury's verdict, establish ongoing royalty damages and/or determine any potential enhancements. And the final ruling is subject to appeal. In addition, in the second quarter, Alcon filed petitions with the U.S. Patent and Trademark Office, seeking reexamination of the patents we asserted in the litigation. We intend to defend our patents vigorously in front of the USPTO. Moving to our revenue outlook for full year 2025. We are raising our revenue guidance to $72 million to $76 million compared to our prior guidance of $70 million to $75 million. This revenue guidance range includes revenue of approximately $1 million for full year 2025 for our Dry Eye segment. This guidance does not contemplate achievement of reimbursement coverage and/or payment decisions for TearCare in 2025. While we outperformed our revenue expectations in Dry Eye in the first half of 2025, we expect revenue to be modest until sufficient reimbursed market access is achieved. Looking closer at the third quarter of 2025, we expect Surgical Glaucoma revenue to be down by mid-single digits compared to the same period in the prior year. I also want to expand on our tariff exposure, which is applicable only to our imported products and does not impact overhead or other cost of goods sold. Based on the current tariffs incurred to date and assuming the current 30% China tariff rate and our current revenue expectations, including product mix and related inventory on hand. We expect that our Surgical Glaucoma segment's tariff exposure would increase the segment's cost of goods sold by between $1 million to $1.5 million for full year 2025, down from the prior estimate of $3.5 million to $4.5 million. However, we note that this is still a very fluid situation and the pause on China tariffs expire August 12, and it is uncertain what the tariff rate will be after that expiration. We expect Dry Eye gross margin in the second half of 2025 to be similar to the gross margin seen in the first half of 2025, taking into account expected average selling prices and overhead absorption. We expect our Dry Eye gross margin to expand significantly with higher volumes associated with reimbursed market access if and when reimbursed market access is achieved. As a reminder, we have been working on additional third-party manufacturing locations. And we expect these facilities will begin producing a portion of our volume, starting with our OMNIEdge product line in the first quarter of 2026. We are also reaffirming our adjusted operating expenses guidance expectations for full year 2025 of $101 million to $105 million, representing an increase of 0% to 4% compared to 2024. Our estimated 2025 adjusted operating expenses still include investments in pseudophakic standalone Surgical Glaucoma market development, TearCare market access, and focused research and development projects. We are proud of the progress made this quarter, both operationally and strategically. And we remain focused on further penetrating and expanding the Surgical Glaucoma and Dry Eye markets as we execute and deliver on our long-term goals and build for our future.

Operator, please open the line for questions.

Congrats on a good quarterly beat here. Sorry about that. I wanted to first touch on the Surgical Glaucoma business and a pretty strong quarter relative to your expectations. I think you guys had expected at least a high single-digit decline there and only mid-single digits. So maybe talk about what's driving the underlying strength there, at least relative to your expectations and what that means for the standalone market opportunity? And then I'll just ask my second question upfront on TearCare. I appreciate the commentary on reimbursement there. Do you expect now reimbursement wins to be in 2026 versus this year? Or how should we think about that? What should we be on the lookout for?

Thanks, Danielle. This is Matt. I'll handle at least the first one on Surgical Glaucoma. I appreciate the sentiments on the quarter. We felt really proud of our team's performance. As we've talked about and as we referenced in the comments, obviously, we're facing some headwinds this year relative to the LCD that went into effect and the elimination of combo mix. But I think one of the things we do appreciate is a relative stability in the market, which allows us to plan, allows our teams to plan, allows them to focus on all the activities that are critical to get back to a cadence of consistent and predictable performance, which is really what we start to see coming together. And so I think that the environment is stable. It's certainly still competitive as we've shared in prior comments. We have new competitors coming into the space, but certainly it's not getting any easier. But I do believe our team is as focused as ever and is executing on what we've always understood the value of OMNI to be as one of the leading MIGS and certainly the leading implant-free MIGS in the market. We definitely continue to see some tailwinds with the introduction of our newest OMNIEdge in the marketplace and we're seeing good traction with that. And we believe that has some additional runway in the second half of the year. To the second part of your question as it relates to standalone, we're still early days in the standalone effort. But again, our team has been very focused and very deliberate in our approach to some early account qualification and activation efforts, and we're seeing continued traction. We're also benefiting from and grateful for the broader awareness across the market with a focus on interventional glaucoma. There's a very healthy and robust MIGS market as it exists today. But there's still a tremendous opportunity for market expansion into subsegments of the market that are being underserved, we believe, based on the quality of interventional technologies such as OMNI that are available. So we look forward to continuing to provide future updates on our market development effort. But to date, we believe we're on track in line with our expectations for where we intended to be this year. And we'll continue to build momentum through the back half of the year into '26.

And Danielle, I'll just add a few things to Matt's comments on the MIGS side and the growth and the performance. Look, I think we've been focused on MIGS for many years. One of the few companies that's been focused for this long. I think our technology, OMNI in a one MIGS world, is a very competitive offering for surgeons and patients. As we've said before, it's very comprehensive on its own. So it can be used in combo cataract, can be used in standalone. It can be used in mild, moderate, and advanced disease. And surgeons appreciate its usability and its comprehensive procedure profile. And so we feel like in this new MIGS environment and in a one MIGS world, our focused team that's been commercializing OMNI for quite some time and the new iterations of our OMNI technology make us very competitive.

In response to your second question about TearCare and coverage, we anticipate payer victories in 2025 and are working towards that timeline. However, we recognize that some factors are beyond our control. We are actively engaged in various initiatives, and we believe that the recent publication of SAHARA, along with the cost utility analysis and the continued increase in claims from different payers, is helping us establish a solid foundation. We remain confident that TearCare should be covered and that we will ultimately achieve reimbursed market access over time.

Okay. But it doesn't make you feel like you won't ever get the opportunity; it's still very much on the table, right? Or is there something in the conversation that makes you unclear?

Yes, Danielle, I think our conviction grows, frankly. While we don't control the timing, the conversations with payers have been of high quality, continued conversations and the more recent publications that we discussed in the prepared remarks are critical. That's the foundation to drive reimbursement and coverage. We now have, we believe, everything that's necessary to support successful coverage determinations. That's SAHARA Stage 1 published, SAHARA Stage 2, the 12-month published, now SAHARA Stage 3, the 24-month published, the budget impact model published, the cost utility analysis published, and our RVU analysis. So those 6 items are kind of the foundation, which creates a very compelling story for payers and is leading to very high-quality conversations. In terms of timing, it's not in our control. But we still very much believe it's a when, not if.

This is Kyle Winborne on for Adam. Congrats on a good quarter. I guess maybe first for me, if we could just kind of dig in a little more on some of the competitive dynamics. I respect kind of your commentary around there that it's still very relevant, top of mind. Just with regards to kind of some of the trialing and launches that we saw throughout this year. Are you maybe seeing some of these headwinds kind of start to abate? Are you maybe taking some share given the strong performance this quarter? Just any more color on the competitive dynamics would be helpful.

Yes. I think the main commentary I have is we don't necessarily believe that the competitive environment has subsided. I believe that we, as an organization and specifically our Surgical Glaucoma sales team are performing better than we have in prior periods. And as I stated in my former response or my previous response, I think part of that can be attributed to, again, while we're facing headwinds as a result of the elimination of combo MIGS. We at least have a stable environment. And so we're able to focus on the market dynamics in front of us that are known to us. We’re able to focus on our customers and our customers' needs. And we're able to continue to highlight the broad appeal of OMNI in particular, given its comprehensive efficacy and usability for providers. And so again, I think the focus of our team has been exceptional. Certainly a bit of a tailwind as we've added EDGE to our portfolio to better tailor our engagement with customers based on what their needs and preferences are and what they're trying to provide to their patients. Obviously, we focus a lot on OMNI, but Sight has continued to perform well in the market as well and growing. And so for those providers who are looking for an alternative solution to OMNI, it's great to have that tool in our pocket. But again, we still see a lot of competitive dynamics. It's a desirable market, a lot of interest to try to replicate the success that OMNI has. And I think also going back to Paul's prior comments, we have a very experienced sales organization. We have an established market-leading solution in OMNI. And the team is continuing to execute very effectively. And so we look forward to continuing that through the second half of the year.

That's very helpful. Regarding guidance, I understand the raise is close to where the beat was in Q2. Could you provide more details on the expected performance for Q3 and Q4? I believe you mentioned a mid-single digit decline for glaucoma in Q3. How does that translate to Q4? On the higher end, could it potentially be flat or show positive growth year-over-year? What are your thoughts on the performance trends for the second half of the year?

Yes. Great question. And as we said in the prepared remarks, we do expect around a mid-single-digit decline for the Surgical Glaucoma business, which would imply kind of at the midpoint of guidance that you're looking at slightly up for the fourth quarter. Now remember, the fourth quarter is our easiest comp of the year on the Surgical Glaucoma side because you had half of the quarter already impacted by the restrictions on the stacked MIGS procedures. So it, of course, should be returning to some level of growth as we lap those restrictions. On top of that, I would also point out that while we are looking at a kind of mid-single-digit decline for our Surgical Glaucoma business in the third quarter, that actually is our toughest comp. We saw throughout the year last year that the percent of combination procedures being done of stacked MIGS procedures actually increasing up to the point that the MIGS restrictions went into effect. And so because of that, the third quarter was actually the highest percent of those stacked procedures. So that really should show our confidence in our ability to operate in this market and the fact that we are seeing a strong performance from the sales team. And then, of course, on the Dry Eye side, we expect very modest sales over the next period until we have market access established. And so that's what's reflected in guidance is that $1 million total contribution from the Dry Eye segment. Hopefully, that helps.

Filling in for Patrick. Can you talk a little bit more about how conversations with payers are going for TearCare? I appreciate the 24-month SAHARA data in the CUA. But just wondering if you can add a little bit more color on how payers are thinking about this and what the potential target reimbursement level might be?

Yes, I'm happy to take that and others jump in as well. We are pleased with the tone of the discussions. We've had multiple rounds with several payers. And we're continuing to work towards that goal of positive reimbursement coverage for payment decisions for TearCare in 2025. And so I think the tone has been good. There has been high respect for the clinical data that we have produced with the SAHARA readout, Stage 1, 2 and 3, as well as the health economic data. So those are very positive conversations. In terms of actual payment rate, that is something that is uncertain at this point. Obviously, we are producing data for payers, both through claims submissions where they are requesting invoices and requesting information to justify the payment for those procedures. And we are, of course, having our providers provide that information to the payers to establish appropriate reimbursement. We've also done an RVU analysis to outline to payers what we think would be an appropriate payment given the cost of these procedures. So we do think that we have robust evidence and data. And we continue to expect those positive decisions at some point in time in the future. All of that is very positive. What we can't control is the exact timing of those decisions. But we know that we are building a strong case for payers to cover the TearCare procedure.

Just to emphasize, again, on the SAHARA trial, this RCT was designed specifically to allow us to have the quality of conversations we're having today. So it's actually a payer design study, obviously helps with market development as well. But we're here ultimately to elevate the standard of care for patients. And the best way to do that is to innovate and develop new technologies that work better and provide patients with better clinical outcomes than whatever else is available today. And so the SAHARA trial is a head-to-head against the standard of care in dry eye, which today, in terms of prescription eye drops, is cyclosporine. And so it achieves 2 things. It showed how TearCare compares to the gold standard in dry eye, cyclosporine, but it also went beyond that. Another important consideration for payers is the durability of treatment effect. And so it's very rare, if you look at the dry eye category, to see an RCT in a trial, prospective study that follows outcomes out to 2 years. Most dry eye RCTs are a month, 3 months, maybe 6 months max. So between the design of the study being head-to-head against the standard of care and demonstrating either non-inferiority or superiority, demonstrating clinically significant improvements in all signs and symptoms out to 24 months from baseline. We believe we've delivered what payers need to see to support successful coverage.

And as Ali mentioned, we're not surprised by the quality of those conversations. We just don't control the timing, but they are advancing.

Nice quarter. I'll start with MIGS. I guess 2 questions on MIGS. First question just on share. Paul, maybe if you can talk a bit about share dynamics in MIGS that you're seeing year-to-date as surgeons kind of continue to digest the LCD impact? Any insights you have there would be great.

Tom, it's Matt. I'll take it. So look, I mean, the share dynamics can be a little bit tricky, right? We have a view, obviously, of the percentage of procedures that were combined MIGS procedures and that were eliminated. And obviously, we have our own internal view and estimates of what percentage of our procedures, predominantly with OMNI were conducted in a combined MIGS setting. And so that is essentially the offset we entered the year with. And based on that information, we believe that we are winning at a rate higher than 50%. So if you look at those combined procedures of which OMNI was utilized as another MIGS, 50% of those units of MIGS sales going away as a result of only being able to use one MIG. From our own internal view, we know that we are performing better to that. And that is certainly a contributor to the positive performance we've seen in Q1 and Q2. Again, a credit and testament to our team and their focus on engaging our customers and making sure that they understood what our surgeon providers were looking for as they reconciled the new MIGS environment and elimination of combo. As we think about, okay, then what is the share shifting as a result of us believing that we're winning better than 50% of the procedures that we were participating in a combined manner as well as you heard in the prepared remarks, increased number of active accounts. Although utilization decreased compared to last year, it increased sequentially, indicating that we are attracting new customers in addition to capturing a fair share in the mixed MIGS sector. This leads us to conclude that our performance is improving beyond merely maintaining our position, and we believe we are gaining market share. Ultimately, we'll continue to evaluate the claims data to understand where that share shifting is. Certainly from other competitors in the market space, there could be a mix of price and unit volume playing into results. So it's hard to read through all of that until we have more of the information from a claims perspective. But as we evaluate the environment, understanding new competitors are coming in, looking at the impact of elimination of combo mix and looking at our own internal data, record number of active accounts and sequential growth in utilization, we feel really good about how we're performing in the market. Again, our team is doing an incredible job with focus and execution.

And then sort of similar question, but more market related. Matt or Paul, can you talk a bit about just what you're seeing in terms of, call it, eye or visit growth in MIGS, sort of setting aside the LCD device headwinds? And how does that maybe inform your view on 2026 MIGS growth once we lap the LCDs?

Yes. And I can actually start there, maybe just for a little bit of data here. Obviously, the visits have been growing slightly. And of course, the claims data has been coming down. So we look at it both ways in the MIGS category. We haven't yet seen the second quarter data, Tom. So it is a bit hard for us to kind of use what's a pretty outdated data on the first quarter. And of course, that was the first quarter post the MIGS environment. So for us to provide specific data on exactly how it's trending, I think it's harder for us to say outside of visits was maintained to slight growth in this transition period and that is something that we expect to continue to grow. The market estimates have been in that high single-digit range for MIGS procedure visits. So that's the best we can provide today in terms of procedure data, but feel free to add on to that.

No, we're excited, Tom. I think we're performing well. We know that the MIGS market in terms of devices used will get back to growth in 2026. And so we're excited and focused on exiting this year in a strong position as we can so that we can capitalize on that return to growth. As Matt mentioned, I think our team has been focused. I think we're demonstrating commercial excellence. And we're also demonstrating the utility of the OMNI technology in terms of its comprehensive procedure profile for primary open-angle glaucoma patients.

Congrats on a solid quarter. I wanted to start with a follow-up related to guidance for the second half of the year. Clearly, it sounds like you're outperforming your kind of expectations on the OMNI side following the LCD challenges. Accounts look good. OMNIEdge is contributing. You had nice sequential growth. Just curious about kind of why not bring the guide a little bit higher. I think at the midpoint of the guide, it still implies sequentially down from a Surgical Glaucoma standpoint, but it feels like a lot of things are going your way.

Yes. Thanks, Frank. Good question here. And while we do feel good about the data, good about the performance year-to-date on the Surgical Glaucoma side. We do think it's really important in position that we're in to have appropriate and achievable guidance. So that is part of our factors when we put out these guidance numbers that we're trying to make sure that we don't get out ahead of any market factors or any additional headwinds that may come our way.

And then maybe just a follow-up on OMNIEdge and apologies if this was covered earlier. Just curious how your customers are using it differently? And is this cannibalizing some of your old OMNI? Or is this an incremental patient characteristic that they're using this on? Just any other kind of deeper thoughts into that launch would be great.

Yes. So I think it's a combination of multiple things. And so look, I mean, the reality is OMNI Ergo, which preceded Edge in the market and continues to maintain a strong presence in the market, has been an outstanding device and obviously holding a market-leading position in the implant-free MIGS space. And so there's a lot of strong utility there. As we continue to see the MIGS space evolve, I think there's a lot of interest in surgeons understanding of how best to treat the underlying disease state, being able to customize the MIGS procedure intervention based on either their specific physician preference or their patient need. And one of the considerations associated with a comprehensive procedure like OMNI is how much of a canaloplasty is relied on the vasodilation of the canal as well as the trabeculotomy. And so with OMNIEdge, we've introduced a higher volume of viscoelastic to be that allows the surgeon to be delivered into the canal. And so that's where a lot of the interest is. But it really, I think, again, comes down to customization. The embodiment of the device and usability is in line with Ergo with some increases in viscoelastic based on physician preference. And this is one of the great things as we continue to engage the market and really understand the preferences of providers. We have an incredible platform in OMNI that we can continue to evolve. And Paul made the comments earlier around the comprehensive nature of OMNI.

And just to add to Matt's comments, we've talked a lot about our sales execution excellence. Our marketing team is locked in. Our R&D teams are locked in on MIGS. And so we're paying, as Matt said, very close attention to the market, paying close attention to our customers and their feedback to us. And while EDGE is the latest, it's not going to be the last. And we continue to innovate, make EDGE even better and come out with future versions of OMNI that meet the evolving MIGS landscape needs.

I'm showing no further questions at this time. I would now like to turn the call back to Paul Badawi for closing remarks.

Thank you for attending today's call. We appreciate your interest in Sight Sciences. And we look forward to updating you on our progress in the future. Thank you all.

Thank you. This does conclude the program. And you may now disconnect.