LENSAR, Inc. (LNSR) Q2 2026 Earnings Call Transcript

Hello, and welcome to LENSAR, Inc. Second Quarter 2026 Results Conference Call. I would now like to turn the call over to Lee Roth, President of Burns McClellan, Investor Relations Adviser to LENSAR. Mr. Roth, please go ahead.

Thanks, Towanda. Good morning, everyone, and once again, welcome to the LENSAR Second Quarter 2026 Financial Results and Strategic Update Conference Call. Earlier this morning, the company issued a press release providing an overview of our financial results for the second quarter of 2026. This release is available on the Investor Relations section of our website at www.lensar.com. Joining me on the call today is Nick Curtis, Chief Executive Officer; and Mike Rossi, Interim Chief Financial Officer of LENSAR, who will provide an overview of recent developments, our go-forward strategy and financial results. Following these prepared remarks, we'll turn the call back over to the operator to take your questions. Before we begin, I'd like to remind you all that today's call will contain forward-looking statements, including statements regarding future results, unaudited and forward-looking financial information as well as information on the company's future performance and/or achievements. These statements are subject to known and unknown risks and uncertainties, which may cause our actual results, performance or achievements to be materially different from any future results or performance expressed or otherwise implied on this conference call. We caution you not to place any undue reliance on these forward-looking statements. For additional information, including a detailed discussion of the company's risk factors, please refer to our documents filed with the Securities and Exchange Commission, which can be accessed on the website. In addition, this call contains time-sensitive information accurate only as of the date of this live broadcast, August 13, 2026. LENSAR undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this live call. With that said, it's now my pleasure to turn the call over to our Chief Executive Officer, Nick Curtis. Nick?

Thank you, Lee, and good morning, everyone. Thanks for joining us today. We appreciate it. Before I get into the quarter, I'd like to spend a moment reflecting on where we are as a company. As many of you know, the first half of 2026 marked an important turning point for LENSAR. The proposed merger with Alcon was terminated towards the end of Q1. And in the second quarter, we returned to operating as an independent company with a renewed focus on executing our strategy and building the business for the long term. One thing that's become very clear over the past several months is that the market demand for ALLY is as strong as ever. Our team remains focused on supporting our surgeon partners, advancing the adoption of ALLY and continuing to execute our strategy. Their diligence, pride and deep commitment enabled us to quickly reset, and I'm really proud of what we've accomplished in Q2. While quarterly financial performance will always be critical and important, I've said before that our success over the next several quarters should be measured by more than just the numbers on the income statement. The metrics we're focused on are the ones that position us for sustainable long-term growth, rebuilding our commercial momentum, expanding our installed base, increasing utilization across that base, growing recurring revenue and continuing to strengthen our relationships in addition to building new relationships with surgeons around the world. Now diving into the quarter. We're very pleased with our performance in the second quarter. We delivered 18% total revenue growth with Q2 revenue of $16.5 million, 20% recurring revenue growth to $13.7 million and 23% procedure revenue growth to $10.2 million, while also achieving our strongest adjusted EBITDA performance to date. Overall, it was another quarter that demonstrated the strength and resilience of our business model, continued demand for the ALLY system and early evidence of renewed momentum across the business. One of the things I'm most encouraged by is the continued growth of our recurring revenue. As we said before, the long-term value of our business isn't simply measured by the number of systems we place in any given quarter. It's measured by what happens after those systems are installed as the practices get comfortable with the ALLY, see the outcomes they deliver for their patients and ramp up their conversions to laser-assisted cataract surgery. This quarter is another great example of that. LENSAR laser systems performed 31% more procedures as compared to MarketScope's stated national average of installed systems. As a result, procedure revenue increased 23% year-over-year, driving recurring revenue to 83% of total revenue. As our installed base continues to expand and utilization increases, recurring revenue becomes an even more meaningful driver of long-term growth and creates greater visibility into our financial performance. We're also beginning to see those operating trends translate into improved profitability. Delivering our strongest adjusted EBITDA performance reflects not only higher revenue, but also the operating leverage we're realizing as recurring revenue becomes a larger portion of our business. That's exactly the type of financial profile we're working to build as we continue to scale. Another metric we're encouraged by is our continued market share expansion. In the U.S., procedure market share increased to 24.1% in the second quarter as compared to 23.4% in the first quarter and 21.4% in the second quarter of last year. Those gains are a result of the continued growth of our installed base, increasing utilization across existing customers and installations of lasers into accounts that had not previously performed laser-assisted cataract surgery. This is a direct reflection of the value and technology differentiation surgeons are seeing from the ALLY system. As the recurring revenue increased, procedure volume was another highlight this quarter. We performed more than 58,600 procedures, up 13% from the second quarter of last year and a solid 8% over the first quarter. As we continue expanding our installed base and supporting our surgeon partners, we believe we're well positioned to build on these gains and further strengthen our competitive position in the quarters ahead. We continue to make solid progress in growing our installed base. During the quarter, we placed 10 ALLY systems, up from 7 placements in the first quarter, bringing our installed base to approximately 215 ALLY systems worldwide. Combined with our legacy LENSAR laser systems, our global installed base reached 445 systems, up from approximately 410 systems a year ago. We also exited the quarter with 13 ALLY systems in backlog. One data point I'd like to highlight is that ALLY now accounts for nearly half of our global installed base. That's a significant milestone and reflects the continued adoption we're seeing from our next-generation platform. More importantly, every new ALLY installation creates another long-term recurring revenue opportunity to strengthen the base of business and contribute to our gross margins. As we stated previously, our strategy is consistent: expand our installed base, support our surgeon partners with best-in-market education, training and service, which is resulting in increased utilization on systems in the field and continuing to grow our recurring revenue business. The progress we've made this quarter from higher sold system placements and procedure growth to expanding recurring revenue and building a healthy installation backlog gives us confidence that we're executing well against those priorities. Overall, we're very pleased with the momentum we carried through the second quarter: an expanding installed base, increasing utilization, growing recurring revenue and our strongest adjusted EBITDA performance to date all reinforce that we're building a stronger, more durable business. We remain focused on creating long-term value for our shareholders while continuing to support our surgeon partners and the patients they serve. As we continue to engage with our partner customers and prospective partner customers, we've expanded our meeting presence to include the ESCRS in Q3 2026 Europe. Europe has the potential to be an increasingly important market for us, and this will be the first time we've taken a direct presence at this meeting. We're making this investment to continue to educate surgeons in the region and further increase interest in the ALLY robotic laser cataract system. Before I hand things over to Mike, I'd just like to emphasize that we're exactly where we want to be. We've put the uncertainty of the past year behind us, and we're fully focused on executing our strategy, and we see evidence of this execution in our top line growth. The progress we've made this quarter from growing our installed base and recurring revenue to increasing utilization and building our backlog gives us confidence that we're rebuilding the momentum we had before the merger announcement and positioning the business for sustainable long-term growth. It is too early to tell; however, it's important to note that historically, cataract surgery procedures are the lowest of the year in the third quarter given extended holidays in various regions of the world and summer vacations in the U.S. We continue to work tirelessly to deliver the results we expect and continue to be proud of. I would also like to thank all of our partner customers for their continued support and, of course, all the LENSAR employees for their commitment and dedication to excellence as well as continuous improvement. And with that, I'll turn the call over to Mike to walk through the financial results in more detail.

Thanks, Nick. It's been great to get to know the LENSAR business the last two months and see the strong results delivered in Q2. Let me provide some additional context around our performance during the quarter. Let me start with our balance sheet. We ended the second quarter with $13.6 million in cash and cash equivalents compared to $18 million at the end of 2025. During the quarter, we were essentially breakeven in cash flow after using $4.4 million of cash in Q1 as positive adjusted EBITDA was offset by investments in inventory and working capital to support future growth. Turning to the P&L. We delivered another strong quarter with total revenue of $16.5 million, representing 18% growth over the second quarter of 2025. This performance was driven by continued momentum in our recurring revenue business, which increased 20% year-over-year to $13.7 million and represented 83% of total revenue during the quarter. Procedure revenue increased 23% year-over-year to $10.2 million, reflecting continued utilization growth across our expanding installed base. Procedure volume reached 58,682 procedures, an increase of 13% compared to the prior year period, reinforcing the strength of our recurring revenue model and reflecting improved utilization over Q1 2026. During the quarter, we placed 10 ALLY systems, bringing our installed base to approximately 215 ALLY systems, an increase of 30% from a year ago. Our total installed base reached 445 systems, up 9% year-over-year, and we ended the quarter with a backlog of 13 ALLY systems pending installation, providing continued visibility into future placements. Gross profit in the quarter was approximately $9.8 million, representing a gross margin of approximately 59% compared to approximately 50% in the second quarter of 2025. We recorded a $1.1 million benefit in cost of goods sold related to a tariff refund in Q2. Without this benefit, gross margin was 52%. This improvement reflects the higher revenue and increased contribution from higher-margin recurring revenue. From an expense standpoint, we continue to demonstrate disciplined cost management. SG&A expenses declined significantly over the year to $6.1 million, reflecting the absence of the $4.2 million of merger-related costs incurred during the prior year period, while research and development spending remained focused on supporting our innovation pipeline. Second quarter 2026 expenses, particularly SG&A, were reflective of the continued early reemergence of LENSAR following the deal termination. Looking ahead, we expect operating expenses to trend modestly higher, approaching historical levels as we begin to increase investment in commercial efforts to support continued growth. Total operating expenses declined to $7.6 million. These improvements translated into strong bottom line performance. We reported GAAP net income of $3.5 million compared to a net loss of $1.8 million in the second quarter of 2025. We delivered adjusted EBITDA of $3.6 million, representing our strongest quarterly adjusted EBITDA performance to date. These results were driven by higher revenue, lower operating expenses and a $1.1 million tariff refund that I mentioned. With GAAP net income growth partially offset by lower noncash income associated with the change in the fair value of warrant liabilities. Looking ahead, we expect to see a certain degree of variability in our income and EBITDA over the next several quarters as our operating expenses continue to normalize as a result of the strategic investments I mentioned. Nick will now close this out with some final thoughts on the quarter.

Thanks, Mike. So as we look ahead, we're encouraged by the momentum we've built through the first half of the year. This quarter demonstrated continued demand for the ALLY system, strong growth in recurring revenue and procedures, the expansion of our installed base and our strongest adjusted EBITDA performance to date. More importantly, it reinforces that our strategy is working. As Mike discussed, we expect our spending levels to gradually expand as we continue investing in our commercial organization and other key growth initiatives. Those investments are highly strategic and reflect our confidence and optimism in the long-term opportunity ahead. We're focused on building a larger installed base, increasing utilization across our growing fleet of ALLY systems and further expanding our high-quality recurring revenue business. We believe those fundamentals will continue to drive operating leverage and position the company for sustainable long-term growth. While we're pleased with the progress we've made, we believe we're still in the early stages of capturing the opportunity ahead. With the momentum we're seeing across the business and the strength of our recurring revenue model, we remain confident in our ability to create long-term value for our shareholders while continuing to deliver differentiated technology that benefits surgeons and the patients that they serve. Thank you all for joining our call today and for your continued interest in LENSAR. We look forward to updating you as we make further progress throughout the year, and we'll now open the line for questions.

Our first question comes from the line of Frank Takkinen with Lake Street Capital Markets.

I was hoping to ask about the composition of the backlog and get some insight into how you're thinking about Q3 and Q4. When looking at that backlog, is it U.S.-based or OUS-based? And any color on whether they are expected to be sales or placements and how that influences Q3 and Q4 expectations?

That's a great question, Frank. It's a bit of both. We have some backlog with purchase orders, primarily for fourth quarter delivery outside the U.S., given the holiday season and whatnot that I mentioned towards the end of my remarks. And then some backlog in the U.S., with a few sold and placed systems. I haven't looked too granularly at those because some of those are facilities that we're still waiting for them to finish the facility where they're a new facility, for example, one out West that has had delays in construction and getting into. So I'm a little unclear on the ones in the U.S. yet due to those systems going into new facilities.

Okay. Fair enough. That makes sense. I appreciate that color. And then how should we think about recurring revenue per procedure? I know it's not a perfect calculation if you're looking at procedure volume and recurring product revenue. But it seems like that is ticking up a little bit if you're just using kind of the math and reverse engineering into it. Obviously, that's not perfect math, but how should we kind of think about that ASP going forward? And can we see that improve over time?

I see the ASP staying fairly steady here. It may increase slightly because more U.S. systems are in place, and U.S. procedures tend to have a higher ASP than procedures through distributors outside the U.S. So you'll see a modest increase in the ASP as the U.S. installed base continues to grow. The timing is hard. As you know, as these systems get installed, it takes somewhere between 60 and 90 days for them to fully ramp up to their productive utilization, and because we're placing a higher number of systems into customers that are femto-naive—new customers coming in, who had not previously done laser-assisted cataract surgery—that grows the market segment but takes time for those customers to ramp. Net-net, we expect to start seeing more legacy LENSAR laser system customers gradually move to ALLY systems. When we sell ALLY systems, you will see an increase in CapEx at the time of sale, but revenue from procedures will ramp faster due to the ALLY system's capabilities. However, those are sometimes more moderate volume accounts to begin with, which is one reason they've continued with the legacy system. So it's a bit complex from a modeling perspective.

Okay. Very helpful. And then maybe if I can just have one more question, a big picture related. Last quarter, you outlined an objective of reestablishing and reaccelerating your distributor relationships outside the U.S. Maybe an update on that would be good and how we're thinking about that objective.

Work in progress; it's continued work in progress. I mentioned it would take several quarters for me to feel comfortable that things were fully back. ESCRS, as I remarked, will be a direct presence for us. I have important meetings set up there and I'm participating in an innovation session and doing a presentation on LENSAR to a wide audience on that Sunday. So I would say stay tuned for some news after ESCRS. The transaction slowed much of the activity, and restarting it takes time as customers go through their cycles. I don't yet have as direct a view through the distributor network to the end user as I'd like, so we'll be doing a lot of meetings at ESCRS and bringing energy and enthusiasm. Europe has potential to be an important market for us.

Our next question comes from the line of Ryan Zimmerman with BTIG.

Nick, just congrats to you and the team showing a lot of resilience in terms of coming out of the transaction, breaking and putting up the results you did this quarter, really hats off to you there. I'd like to just ask on ALLY pricing. The pricing on the systems has bounced around a little bit in the last few quarters. Maybe talk to me about kind of where you see that trending over time. We appreciate the metrics. You're giving a lot more metrics this quarter, which is great to see. But how do you think about the durability and stability of pricing on ALLY as you move into the rest of the year and maybe longer term?

Yes, Ryan, thank you for the kind words. We work hard every day. Regarding pricing on ALLY systems, I'm assuming you mean sold systems. Those prices are not a major concern for me because when we sell systems in the U.S., we receive favorable returns on the CapEx, which helps our objectives. You'll see prices on sold ALLY systems remain relatively flat. Prices dip when we sell more to distributors, while U.S. direct sales carry a higher price. For private equity groups that own practices, pricing can vary depending on how many systems they commit to purchasing; we may adjust pricing for volume commitments. Those differences aren't huge. On procedures, we have tiered pricing structures: the more volume a practice drives, the better pricing they receive; lower volume means higher pricing. We true up on a quarterly basis with those partners, so that can introduce some quarter-to-quarter variability. Overall, system prices should stay relatively stable, and recurring revenue should continue to grow. Over the next few quarters you might see what looks like some flattening, but that can be due to replacing legacy LENSAR systems with ALLY systems. When that happens, you'll get a bump in CapEx at sale but revenue should ramp as utilization increases.

Very helpful. And the gross margins, even stripping away the tariff refund, were good — in that 52% range. My question is, with the recurring revenue now running at about $55 million annually, is this a new level that you can sustain on the gross margin side? Mike, I know you're only two months into the role, but I would appreciate your thoughts on this because, obviously, it has the potential to really start to pick up as the recurring revenue grows faster.

Yes, that's exactly right. What you're seeing is the effect of recurring revenue growing as a proportion of total revenue. The company had previously talked about gross margins in the high 40s; I think we're comfortably around where we are now. With the recurring revenue model growing as it is, I think that's a more sustainable gross margin profile.

Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back to Nick Curtis for closing remarks.

I really appreciate everyone's interest in LENSAR and tuning in today. As you can see, we're a work in progress here, and I'm pleased with where we are. Thank you for joining the call. Stay tuned — more news as we continue to go. See you next quarter.

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