LENSAR Inc

Comparison of the Three Months Ended March 31, 2025 and 2024

Revenue

Total revenue for the three months ended March 31, 2025 increased by $3.6 million, or 34%, compared to the three months ended March 31, 2024.

Product revenue for the three months ended March 31, 2025 increased by $3.5 million, or 47%, compared to the three months ended March 31, 2024. The increase was primarily attributable to increased ALLY System sales of $1.5 million and increased procedure volume of $1.9 million.

The following table provides information about procedure volume:

Service revenue for the three months ended March 31, 2025 increased by $0.1 million, or 12%, compared to the three months ended March 31, 2024. Our U.S. sales represented 55% and 70% of product and service revenue for the three months ended March 31, 2025 and 2024, respectively.

Lease revenue for the three months ended March 31, 2025 decreased by $0.1 million, or 3%, compared to the three months ended March 31, 2024.

The U.S. government has recently implemented significant changes in U.S. trade policy and taken certain actions that may impact our business, including imposing tariffs on certain goods imported into the United States. Some of these changes have triggered retaliatory actions by affected countries that could negatively impact demand for our products in these regions.

Cost of Revenue

Total cost of revenue for the three months ended March 31, 2025 increased by $2.1 million, or 43%, compared to the three months ended March 31, 2024.

Cost of product revenue for the three months ended March 31, 2025 increased by $1.9 million, or 72%, compared to the three months ended March 31, 2024. The increased cost of product revenue was attributable to increased Systems sales, which have a lower gross margin than procedure licenses.

We import certain raw materials for our ALLY Systems and PIDs from regions that may be impacted by the tariffs imposed by the U.S. government. This could result in an increase in the cost of our products and may negatively impact our gross profit margin.

Cost of service revenue for the three months ended March 31, 2025 was consistent with the three months ended March 31, 2024.

Cost of lease revenue for the three months ended March 31, 2025 increased by $0.2 million, or 38%, compared to three months ended March 31, 2024.

Operating Expenses

Selling, General and Administrative. Selling, general and administrative expenses for the three months ended March 31, 2025 increased by $4.4 million, or 64%, compared to the three months ended March 31, 2024. General and administrative expenses increased in the quarter due to acquisition-related costs of approximately $4.2 million incurred in conjunction with the pending Merger with Alcon.

Research and Development. Research and development expenses for the three months ended March 31, 2025 increased by $0.1 million, or 6%, compared to three months ended March 31, 2024.

Amortization of Intangible Assets. Amortization of intangible assets was $0.2 million for the three months ended March 31, 2025, consistent with the three months ended March 31, 2024.

Non-Operating Income and Expense, Net

Non-operating income and expenses, net for the three months ended March 31, 2025 were $21.6 million as compared to $0.7 million for the three months ended March 31, 2024. Non-operating income and expenses consisted primarily of the change in fair value of warrant liabilities in each period.

Non-GAAP Financial Measures

We prepare and analyze operating and financial data and non-GAAP measures to assess the performance of our business, make strategic and offering decisions and build our financial projections. The key non-GAAP measures we use, EBITDA and Adjusted EBITDA, are reconciled to net loss below for the three months ended March 31, 2025 and 2024.

EBITDA is defined as net loss before interest expense, interest income, income tax expense, depreciation and amortization expenses. EBITDA is a non-GAAP financial measure. EBITDA is included in this filing because we believe that EBITDA provides meaningful supplemental information for investors regarding the performance of our business and facilitates a meaningful evaluation of actual results on a comparable basis with historical results. Adjusted EBITDA is also a non-GAAP financial measure. We believe Adjusted EBITDA, which is defined as EBITDA and further excluding stock-based compensation expense, change in fair value of warrant liabilities, and acquisition-related costs provides meaningful supplemental information for investors when evaluating our results and comparing us to peer companies as stock-based compensation expense and change in fair value of warrant liabilities are significant non-cash charges and acquisition-related costs are not recurring. We use these non-GAAP financial measures in order to have comparable financial results to analyze changes in our underlying business from quarter to quarter. However, there are a number of limitations related to the use of non-GAAP measures and their nearest GAAP equivalents. For example, other companies may calculate non-GAAP measures differently, or may use other measures to calculate their financial performance and, therefore, any non-GAAP measures we use may not be directly comparable to similarly titled measures of other companies. Investors should not consider our non-GAAP financial measures in isolation or as a substitute for an analysis of our results as reported under GAAP.

Liquidity and Capital Resources

Overview

For the three months ended March 31, 2025 and 2024, we had net losses of $27.3 million and $2.2 million, respectively, and as of March 31, 2025, we had an accumulated deficit of $170.6 million. The change in fair value of warrant liabilities increased net loss by $21.7 million in the three months ended March 31, 2025, and it is difficult to predict how the fair value of warrant liabilities will impact our future results. The change in fair value of the warrant liability was a result of an increase in the Company’s stock price of approximately 158% during the three months ended March 31, 2025. We expect to continue to incur losses and operating cash outflows for the near-term future as we continue to build our commercial and clinical infrastructure and pursue further regulatory clearances of our ALLY System. In addition, acquisition-related costs have been significant and we will continue to incur these costs while the Merger process is ongoing.

Our liquidity needs will be largely determined by our ability to successfully commercialize our products and the progression, additional regulatory clearances or certifications and launch of the ALLY System in additional jurisdictions in the future.

The ALLY System has received regulatory approval in the United States, EU, India, Taiwan, South Korea, as well as certain other countries. In addition, we are pursuing an additional marketing or certification application through our distributor in China, but this process could take multiple years. Our growth, market presence and ability to sell the ALLY System will depend on whether the ALLY System receives additional regulatory clearances or certifications and the timing of these clearance or certifications, among other factors. In addition, our future revenue and cash flows will depend on, among other factors, our installed base of Systems and the timing of and applicable clearances for our ALLY System.

We expect selling, general and administrative expenses to increase from current levels to support the expansion efforts in the U.S. and internationally for the ALLY System. The successful commercialization of the ALLY System depends in part on the Company’s ability to produce the ALLY System in sufficient quantities, within requested timing and at an acceptable price to satisfy customer demand.

Our primary sources of liquidity are our cash and cash equivalents, cash from the sale and lease of our Systems and the sale of our consumables. In addition, we received a $10.0 million cash deposit associated with the Merger. The deposit is considered the property of Alcon. We maintain cash balances with financial institutions in excess of insured limits. As discussed above, ongoing global supply chain disruptions, inflationary pressures and other macroeconomic conditions have negatively affected our capital requirements and more operating capital may be needed to fund our operations in the future. As of March 31, 2025, we expect our current cash, cash equivalents, and investments, together with cash generated from the future sale and lease of our products, to be sufficient to operate our business. Based on our current operating plan, we believe we have sufficient cash and cash equivalents on hand to support current operations for at least one year from the date of issuance of the financial statements included in this Quarterly Report.

In the future, we may need to raise additional capital through equity or debt financings, borrowings under credit facilities or from other sources to continue our operations. We may issue securities, including common stock, preferred stock, warrants, and/or debt securities through private placement transactions or registered public offerings in the future. If we issue equity securities to raise additional capital, our existing stockholders may experience dilution, and the new equity securities may have rights, preferences and privileges senior to those of our existing stockholders. Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders. In addition, if we raise additional capital through collaboration, licensing or other similar arrangements, it may be necessary to relinquish valuable rights to our products, potential products or proprietary technologies, or grant licenses on terms that are not favorable to us.

We expect our revenue and expenses to increase in connection with our on-going activities, particularly as we continue to execute on our growth strategy, including expansion of our sales and customer support teams, as well as increasing our fleet of equipment under lease. The primary factors determining our cash needs are the funding of operations, which we expect to continue to expand as the business grows, and enhancing our product offerings through the commercialization of the ALLY System. Our future liquidity needs, and ability to address those needs, will largely be determined by the success of our commercial efforts and those of our distributors; the ongoing impact of global macroeconomic conditions and supply chain issues on our business; and the timing, scope and magnitude of our commercial and development activities.

In May 2023, we entered into a Securities Purchase Agreement, or SPA, with NR-GRI Partners, LP, or NR-GRI, whereby we sold to NR-GRI, for an aggregate purchase price of $20.0 million, an aggregate of 20,000 shares of a newly established series of preferred stock designated as “Series A Convertible Preferred Stock, par value $0.01 per share”, which has a stated value of $1,000 per share and is convertible into shares of the Company’s common stock, and warrants, the Warrants, to purchase an aggregate of 4.4 million shares of our common stock, the Private Placement. Fifty percent of the Warrants have an exercise price equal to $2.45 per share, and 50% of the Warrants have an exercise price equal to $3.0625 per share, subject in each instance to adjustments as provided under the terms of the Warrants. Net proceeds from the transaction were approximately $19.1 million after offering expenses. The Series A Redeemable Convertible Preferred Stock, if converted, would result in the issuance of 7.9 million shares of our common stock. Additionally, the terms of our Series A Redeemable Convertible Preferred Stock restrict our ability to incur debt in excess of $1.0 million or issue new shares in an amount greater than 10% of our outstanding common stock as of May 18, 2023 without the approval of the holder of the Series A Redeemable Convertible Preferred Stock (subject to certain exceptions).

Our ability to raise additional funds will depend, among other factors, on financial, economic and market conditions, many of which are outside of our control, and we may be unable to raise financing when needed, or on terms favorable to us. If the necessary funds are not available from these sources, we may have to delay, reduce or suspend the scope of our sales and marketing efforts, research and development activities, or other components of our operations. Any of these events could adversely affect our ability to achieve our business and financial goals or to achieve or maintain profitability and could have a material adverse effect on our business, financial condition and results of operations. Additionally, the extent and duration of the impact that global economic uncertainty may have on our stock price and on those of other companies in our industry is highly uncertain and may make us look less attractive to investors and, as a result, there may be a less active trading market for our common stock, our stock price may be more volatile, and our ability to raise capital could be impaired, which could in the future negatively affect our liquidity and financial position.

Our material contractual obligations and commercial commitments at March 31, 2025 primarily consist of $2.5 million in operating lease liabilities for our facility lease, $0.7 million in lease obligations for additional facility space not recorded on the balance sheet, and $9.9 million in remaining minimum purchase obligations for inventory components for the manufacture and supply of certain components within the next 12 months. Our contractual obligations have increased due to supply chain issues that have necessitated us to enter into longer-term and more expensive per unit contracts to build and source inventory to satisfy the expected commercial demand for the ALLY System, if approved by regulatory authorities or certified by notified bodies in the applicable regions. We expect to meet these requirements through cash and cash equivalents and cash provided by operations. Some of these amounts are based on management’s estimates and assumptions about these obligations, including their duration, timing, anticipated actions by third parties and other factors. Because these estimates and assumptions are necessarily subjective, the obligations we will actually pay in future periods may vary from those described. In connection with the proposed Merger with Alcon, we expect to incur additional liabilities, which primarily represents transaction fees that are contingent upon the consummation of the Merger.

Cash Flows

The following table summarizes, for the periods indicated, selected items in our condensed statements of cash flows:

Operating Activities

Net cash used in operating activities for the three months ended March 31, 2025 was $6.9 million, consisting primarily of a net loss of $27.3 million and a decrease in net operating assets of $3.2 million, partially offset by non-cash charges of $23.6 million. The decrease in net operating assets was primarily due to changes in inventories. Non-cash charges primarily consisted of depreciation, amortization, stock-based compensation, and change in fair value of warrant liabilities.

Net cash used in operating activities for the three months ended March 31, 2024 was $5.3 million, consisting primarily of a net loss of $2.2 million and a decrease in net operating assets of $4.5 million, partially offset by non-cash charges of $1.3 million. The decrease in net operating assets was primarily due to changes in inventories and accrued liabilities, offset by changes in accounts receivable. Non-cash charges primarily consisted of depreciation, amortization, stock-based compensation, and change in fair value of warrant liabilities.

Investing Activities

Net cash provided by investing activities for the three months ended March 31, 2025 was $0.5 million, consisting primarily of investment maturities, offset by purchases of investments.

Net cash used in investing activities for the three months ended March 31, 2024 was $1.2 million, consisting primarily of the purchase of investments, offset by investment maturities.

Financing Activities

Net cash provided by financing activities for the three months ended March 31, 2025 was $9.7 million, consisting primarily of the acquisition-related deposit received from Alcon.

Net cash used in financing activities for the three months ended March 31, 2024 was not significant.

Critical Accounting Estimates

The preparation of financial statements and related disclosures in conformity with U.S. Generally Accepted Accounting Principles, or GAAP, and the discussion and analysis of our financial condition and operating results require our management to make judgments, assumptions and estimates that affect the amounts reported in our condensed financial statements. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. The impact of accounting estimates and judgments on our financial condition and results of operations due to global macroeconomic conditions has introduced additional uncertainties. We evaluate our estimates and assumptions on an ongoing basis. Actual results may differ from these estimates and such differences may be material.

There have been no significant and material changes in our critical accounting estimates during the three months ended March 31, 2025, as compared to those disclosed in “Management's Discussion and Analysis of Financial Condition and Results of Operations” included in the Annual Report.

Recently Issued Accounting Standards

See Note 2, Summary of Significant Accounting Policies, to our unaudited condensed financial statements included in this Quarterly Report for a discussion of recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of March 31, 2025.