Good morning, and thank you for your participation. [Operator Instructions] As a reminder, this conference call will be recorded. I would now like to turn the call over to Cameron Radinovic of Burns McLellan. Mr. Radinovic, please go ahead.

Thank you. Good morning, and welcome to the LENSAR fourth quarter and full year 2021 financial results conference call. Earlier this morning, the company issued a press release providing an overview of its financial results for the quarter and full year ended December 31, 2021. This press release is available on the Investor Relations section of the company's website at www.lensar.com. Joining me on the call today is Nick Curtis, Chief Executive Officer of LENSAR, who will review the company's recent business and operational progress. Following his comments, Tom Staab, Chief Financial Officer of LENSAR, will provide an overview of the company's financial highlights before turning the call back over to Nick for closing remarks. Today's conference call will contain forward-looking statements, including those statements regarding future results, unaudited and forward-looking financial information as well as the company's future performance and/or achievements. These statements are subject to known and unknown risks and uncertainties, which may cause the company's actual results, performance or achievements to be materially different from any future results or performance expressed or implied in this presentation. You should not place undue reliance on these forward-looking statements. For additional information, including a detailed discussion of the company's risk factors, please refer to the company's documents filed with the Securities and Exchange Commission, which can be accessed on the website. In addition, this conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, March 3, 2022. LENSAR undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this live conference call. It is my pleasure to turn the call over to Nick Curtis. Nick?

Thank you, Cameron, and good morning to everyone listening. Thank you for joining us on our fourth quarter and full year 2021 conference call. 2021 was a year of continued progress and execution for LENSAR, and I'm proud of all that we've accomplished since becoming a public company in the fall of 2020, despite facing the lingering challenges associated with the global COVID-19 pandemic. 2021 represented a return to our historical growth trends as well as meeting our development milestones leading up to our 510(k) filing for ALLY in the first quarter of 2022. Our full year revenue increased 31%, and procedures sold were up 37% over 2020. It's also an important metric to note, procedures were up approximately 22% in 2021, as compared to pre-pandemic levels in 2019, signifying a return to our historical trend of delivering 20-plus percent growth on an annual basis. In addition to steady growth in procedure volumes, we saw increases in both system sales and lease placements for our current product offering, LENSAR Laser System with Streamline and IntelliAxis Refractive Capsulorhexis. This is yet another indication reflecting our continued demand and confidence from the surgeon community and the value of our leading-edge cataract surgery technology. Even with the difficulty of placing capital equipment in new accounts, including the more time-consuming operating procedures and controls our surgeons and site space in the backdrop and uncertainty of the pandemic, we were successful in increasing our worldwide installed base of systems over 10% in 2021. One of the key benefits to the gradual easing of COVID-related restrictions has been our ability to engage in more direct in-person sales and marketing activities with physicians as well as industry events. Even though we were successful in adapting our operations to whatever situation the pandemic presented, face-to-face interactions and the…

Thank you, Nick. Our fourth quarter and full year 2021 financial results are included in our press release issued earlier this morning, but I'd like to take this opportunity to expand on that information by adding some color to the remarks contained in the release. Revenue was $11.2 million in the fourth quarter of 2021 compared to $8.3 million in the fourth quarter of 2020. All individual components of revenue, product, lease and service increased from the fourth quarter of 2020. It was a very strong quarter for us, with total revenue increasing $2.9 million or 35% over the fourth quarter of 2020. The increase in 2021 total revenue was primarily driven by increased procedure volume generating approximately $1.8 million, with the remainder due to system sales and lease placements. In the fourth quarter of 2021, we sold 41,642 procedures compared to 30,503 procedures sold in the fourth quarter of 2020. Our procedure volume increased 37% over the fourth quarter of 2020 and 30% over the fourth quarter of 2019. Gross margin for the quarter was $5.6 million and represented a gross margin percentage of 50.2%. We increased gross margin $1 million in the quarter over the $4.7 million recorded in the fourth quarter of 2020. Total operating expense for the fourth quarter of 2021 were $9.5 million compared to $11.5 million in the fourth quarter of 2020. This decrease was largely due to less noncash stock compensation expense, somewhat offset by an increase in R&D expenditures. The increase in R&D for the fourth quarter of 2021 was related to additional costs for the continued development of ALLY as we neared our 510(k) filing as well as materials purchased for the manufacture of ALLY, which totaled approximately $1 million in the quarter. Total stock-based compensation in the fourth quarter of…

Thank you, Tom. I really appreciate everyone taking the time to listen this morning. And I'm going to turn the call back over to the operator, and we look forward to your questions.

[Operator Instructions] Your first question is from the line of Danielle Antalffy with SVB Leerink.

And congrats on a really strong 2021 given all the dynamics there. I'm just curious if you could talk a little bit directionally about how to think about 2022 and the cadence. I mean, obviously, you had a strong Q4, even though we did have a COVID surge. Maybe talk a little bit more about what you saw towards the end of Q4 and into Q1 and how to think about procedure volume in the first quarter specifically, obviously, but then if that drives any sort of recovery in the back part of the year. And then I have a few follow-ups.

Sure. Thank you. Danielle, I appreciate the question. So fourth quarter, traditionally in cataract surgery, because people are reaching their deductibles and have health care funds to spend at the end of the year, so traditionally, fourth quarter from a procedure perspective, cataract surgery-wise would be a strong quarter. But we're also see -- and so historically, fourth quarter has always been the best quarter of the year for the number of procedures. And then there's some drop-off of procedures in the first quarter as compared to fourth quarter overall cataracts, and then they build again towards the fourth quarter of the year. So that's traditionally. Now with the COVID and the pandemic, it's been a little bit different. Volumes have been -- overall cataract surgery volumes have been less than what they were previous, but it seems that people are more willing to convert to these types of procedures now. And so we've seen strong continued use. The other thing that I mentioned in the call was that we've got some additional system placements that we're putting in, and that was strong in the fourth quarter. So these systems will get installed as we move into the first quarter and get up and running. And so I would expect that we would continue to see some solid procedure growth there.

Okay. Got it. So kind of would it be fair to characterize Q1, and we could take this offline, too, but sort of normal seasonality or maybe more pronounced? Because of Omicron, is the message here you're actually still seeing pretty strong procedure volume and COVID's not having as much of an impact as maybe in some other areas within med tech?

I don't want to jinx us. We seem to see a decent -- certainly decent procedures. It's been a little spotty in areas just because of the COVID, but then it comes back strong. The doctors, if they're not doing surgery in a week or whatnot, when it appears that things slow down, then they're busy and they come back and get back at it.

Yes. Got it. And then I just had 2 higher level questions. One, the utilization, your procedure volumes per system are -- seem much higher than other peers like J&J and Alcon. What is driving that? And how sustainable is that?

So there are several -- it's a really good question because it's important for LENSAR. Really, our system is much more efficient than the other systems, number one, because we can transfer data from the preoperative devices -- in a variety of preoperative devices into the system. It eliminates the need for manual marking and the transposition of data and sort of the surgical planning that the physicians do because the surgical plan comes up automatically, and the system does make some adjustments for the doctor, and they just have to make the choice as to what they're going to do rather than manually controlling some of that. Also the ergonomics of our system are better as well in terms of where and how the system can be placed and used. And then -- so that has a big -- that's a big thing driving the volume. And because we're more efficient that way, they feel more comfortable doing cases. And really, we're publishing a lot of data regarding outcomes. And so we're now showing that surgeons using LENSAR laser can get better outcomes in cataract surgery than people were getting before and what they were getting with the competitive type systems. And so this is driving a higher utilization as they get more confidence in that.

Got it. Okay. And if I could squeeze in one more question, sorry, and then I'll get back on the line.

Sure. It's all right.

Just ALLY, coming in the second half -- or with second half approval, why will -- can you talk a little bit more about ALLY and why it's so disruptive to the market and then sort of how you think this accelerates the growth trajectory from a capital placement perspective and, probably more important, procedure volume perspective?

So the system is really small. It's barely -- it's about the same size as the current phacoemulsification technology. So it could be placed anywhere. Also ergonomically, what we call an adaptive cataract treatment system, it could be placed anywhere within the 250-degree range of the patients. So it's, from an ergonomic perspective, no comparison. The laser is also 4x faster in the cornea and 2x faster in the lens. And we've also -- with this dual-pulse laser we -- for the first time, most of these lasers from all the companies, including LENSAR, we're the first generation, were either optimized for the lens or they were optimized for the cornea, depending on where their roots were from. And so this will be the first device in the marketplace that is optimized for both the cornea and the lens. And so it's -- it will just -- it will change the way that the treatments are being performed, and so very disrupted that way. And so -- and also we've gone to some instantaneous imaging through the use of 6 cameras. And so overall, it will give you better treatments, will cut the procedure time down by up to 2/3 and can be placed anywhere within the environment that the surgeon and the practice decides to put it in.

Your next question is from the line of Ryan Zimmerman with BTIG.

This is Phil on for Ryan. Can you hear me okay?

We can hear you.

All right. Awesome. So the first one right off the bat, how do you think about the early adoption of ALLY, existing LENSAR users or competitive equipment users? And what kind of pipeline do you think you have around ophthalmologists waiting to purchase ALLY?

So a really good question. People that are existing LENSAR users are obviously people that are keenly interested in what we're doing with ALLY. The good news there is that ALLY will do things much faster in a bit of a different way than their current system, but the core feature technologies are going to be the same. So we're going to try, and we're working towards a mix where we're adding -- because we now have the ability to really attract a lot of new customers because, as I mentioned in my remarks, the existing lasers are getting old -- that are in the field from the competitors, they haven't been upgraded like LENSAR has and they're old. And so we believe that we're going to be able to attract a lot of new femtosecond laser users to LENSAR, and we're going to see that from a growth perspective. We obviously have to manage the existing base because we want to grow our business and the number of placements and attract new customers to replace the old technology. But we also know that there's a lot of enthusiasm. So it's going to be a balance there. In terms of the pipeline, we've seen a lot of new physicians interested in replacing the old technology come to the table and look to discuss. And I don't want to say too much now because this is the year-end call and -- but we we're beginning to work very, very hard on the launch, especially now that we filed, so it becomes a reality. And so now we're sort of targeting and lining up the first 10 systems, which are going to be very critical to the next systems after that as we do our controlled launch.

Awesome. Just kind of shifting gears really fast. I appreciate the color you mentioned earlier about publishing those studies to help drive the procedure volume per system. But I was wondering, do you feel like a line of sight on extending those studies to helping with adoption of new physicians in the future?

Most definitely. I mean, that's as succinct as I can put it. Particularly as the -- as doctors that are current femtosecond lasers start to use the ALLY, I believe that it's going to drive more new physicians that have never used femtosecond lasers for one reason or another with results, not being the least of those. They're going to -- we've already seen activity in that regard. I was attending a conference this week, and I had meetings with several people that have not adopted femtosecond lasers that were very curious about ALLY and some of the things we talked about and the clinical data. And so I believe that, that's certainly going to happen as we get this underway.

There are no further questions. I will now turn the call back over to Nick for closing remarks.

Well, thank you. So 2021 was certainly an important year for us, and we're very excited about the filing of ALLY. I appreciate everyone joining the call today and your continued interest in what we're doing at LENSAR. And we certainly look forward to updating you as we make further progress and as we approach the launch of ALLY. Thank you.

This concludes today's conference call. You may now disconnect.