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 Lee Roth, President of Burns McClellan, Investor Relations Adviser to LENSAR. Mr. Roth, please go ahead.

Thanks, Josh. Once again, good morning, everyone, and welcome to the LENSAR Fourth Quarter and Full Year 2025 Financial Results and Strategic Update Conference Call. Earlier this morning, the company issued a press release providing an overview of its financial results for the fourth quarter of 2025. This 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; and Tom Staab, Chief Financial Officer of LENSAR, who will provide an overview of recent developments, our go-forward strategy and our Q4 financial results. Following these prepared remarks, we'll turn the call back over to the operator to answer your questions. Before we begin, I'd like to remind you all that today's conference call will contain forward-looking statements, including statements regarding our 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 implied on this call. We caution you not to place any undue reliance on these forward-looking statements. For additional information, including a detailed discussion of the 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, March 31, 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 Nick Curtis, Chief Executive Officer of LENSAR. Nick?

Thank you, Lee. Good morning, everyone. I appreciate you joining us today. It is no doubt an understatement to say 2025 was a unique and unprecedented year for LENSAR. We take great satisfaction knowing that the leading eye care company in the world, Alcon, publicly recognized the value of ALLY and LENSAR given the joint acquisition announcement made in March of 2025. This validates our statement that ALLY is the best next-generation technology, delivering significant and relevant performance improvements in each of the critical elements of laser-assisted cataract surgery, including advanced ergonomics, efficiencies, imaging and automated treatment planning with a dual modality laser. ALLY is the only system that employs machine learning and compute power during treatment planning and optimized treatment to deliver outcomes that are better than any first-generation competitor. The termination of the acquisition agreement was a mutual pragmatic decision made after a year of focused effort and considerable expense from both sides. While this acquisition was approved overwhelmingly by our stockholders, ultimately, we made the decision to terminate because the Federal Trade Commission would seek to enjoin the merger. While both parties work towards offering acceptable accommodation to allow it to close, it became clear the FTC was not open to changing their position. We were disappointed in the outcome. However, the upside of this process is the validation of the ALLY Robotic Laser Cataract System superiority compared to all other first-generation lasers available today as well as the value attributed to LENSAR based on the success the product has achieved since its launch and its future potential. Therefore, with new resolve and new purpose, we're excited to emerge and reengage as an independent company, picking up where we left off 12 months ago. We've spent the last 2 weeks working on initiatives and jump-starting relationships with…

Thank you, Nick. I'd like to discuss our fourth quarter and fiscal 2025 results. However, my remarks will be succinct and pointed for 2 reasons. One, our fourth quarter and 2025 results were impacted by conducting our operations under the previously contemplated acquisition by Alcon; and two, we start the second quarter as a stand-alone company tomorrow. So I'll highlight the relevant aspects of Q4 and our 2025 results as they relate to our future results and operations. In association with the termination of the merger, there are some significant adjustments to our future financial statements that I'd like to highlight. First, the $10 million merger deposit that was being held in our bank account becomes ours. Thus, the cash that we report at December 31 of $18 million is ours with full title and the $10 million deposit liability will be eliminated in our first quarter 2026 results. Second, we recorded $17.1 million in total acquisition costs in 2025, with $14 million of those expenses unpaid as of December 31. With the termination of the merger, approximately $4.3 million of the unpaid balance will be eliminated or written off by concession of our acquisition advisers and then $5 million of the remaining liability will be payable starting in May 2027, a significant payment deferral. Lastly and importantly, as Nick has mentioned, we have reengaged with our key stakeholders, including our distributors, and we start today with the help of these key stakeholders to reestablish our stand-alone operations at an operating cadence more similar to prior to the announcement of our acquisition. Our performance in the fourth quarter was solid with a total revenue of $16 million, representing a 4% decline year-over-year, primarily as a result of lower system sales. As you look at regional sales, U.S. ALLY sales were…

[Operator Instructions] Our first question comes from Frank Takkinen with Lake Street Capital Markets.

A lot to cover. So maybe I'll start with the distributor commentary, Nick, it sounds like the conversations you've had over the last few weeks have been really positive, but I did hear the comment of exercising a little conservatism as you reengage with those folks and think about kind of how that's going to actually translate to OUS system revenues. What more can you tell us there? And how should we be thinking about reading into that commentary and applying it to our models as we think about growth reaccelerating throughout 2026 or 2027?

Sure. Frank, good to hear from you. It's been a while since we've done these calls. So the business outside U.S. is different in a lot of cases, particularly in a few of the countries where you don't have as many private practice and, let's say, ambulatory surgery center owners where they can make the decision or a private equity group that makes the decision, for example, in Germany, where we have a large private equity group, and we are one of the primary suppliers there. And so in some of the -- particularly Southeast Asia, some of these go on tenders. And given the uncertainty, they were hesitant to engage in a tender because they're over an extended period of time. So for example, they'll start reengaging in these tenders and those tenders take time. And quite frankly, we may have lost a few renewals in the short term from some of these deals, not our deals where they had our systems, but where we had an opportunity to, let's say, quickly replace a competitive system. And so I just expect that it's going to take us several quarters to really reinvigorate, get out and assess where some of those tenders are, where we have opportunities and begin to do that as well as participating in some of the various conferences like we do here. And so I just caution to say that -- because we had this massive quick start when we got the ALLY approved 2 years later, now essentially, there's been 0 activity for the last 9 months and so there'll be some restart-up. And it's not like there's a backlog sitting there because essentially, these distributors didn't -- again, we're planning for life without LENSAR that they didn't expect to be distributing on a going-forward basis. So they're really enthused. And I just say it's going to take us a little time to get back to that sort of momentum that we had in the last quarter of 2024.

Yes. Very helpful. And then as we think about placements going forward, it's -- to me, it seems like there's 2 phenomenons going on. OUS likely more capital placement oriented. And then in the U.S., with each incremental placement, it gets incrementally harder. So maybe there's less upfront payment and more kind of lease-based placements. How should we think about that throughout the year and a mix of maybe kind of more lease-based or usage-based placements versus actual capital sales throughout the year?

Yes, great question. So as you know, and as Tom had indicated, when we sell a system outside the U.S., when it leaves our dock, we essentially we recognize revenue on the system sale itself. And so it's a very quick recognition. In the U.S., the rev rec is different. You have to get the system installed. You have to begin training and the system is accepted by the customer, the end user, before you begin to recognize revenue. And on procedure deals or when we do placements and really even when we sell a system in the U.S., usually, you're looking at in the neighborhood of close to 60 days before you really start getting into the revenue phase that they get to some normal procedure volume because you're training people and you're getting the systems put up in place and procedures and whatnot. Traditionally, we've been in the neighborhood of somewhere north of 50% sold systems in the U.S. and, let's say, 50-50 or perhaps even a little bit more on the sold versus the placed. And I would expect that, that's probably going to drop a little bit. What we've seen is that the competition, they lack the system, they go out with procedures, and they try to drive a price competitive versus what we do with the value proposition with a much more efficient, faster, better treatment overall. So I think that over the next couple of quarters, you'll see us go from that sort of 50%, 55% sales sold systems versus placed systems in the U.S. to a lower percentage, particularly as OUS takes a little time to sort of ramp up there. Does that help you in terms of the percentage?

Yes. No, that's very helpful. I appreciate that. And then maybe just the last one for Tom. I heard the comment, a 10% increase in cash OpEx. So I just want to make sure I understand that. Essentially, if we look at 2025 OpEx and back out the $17.1 million of M&A-related expense and then grow that 10%, -- is that what you're inferring? So you would be in the neighborhood of kind of $38 million, $39 million of operating expense for 2026?

That's exactly right, Frank. The only thing that I'll say is the way we look at things is cash-based operating expenses. So we threw out sort of amortization as well as stock-based comp and then it's the 10% off that base. But yes, you're correct.

Our next question comes from Ryan Zimmerman with BTIG.

So maybe just to start, I don't think I heard the procedure growth was still really good worldwide. And I'm wondering if you could comment, Nick, on U.S. procedure growth because I think you also faced a tougher comp there. We saw a bit of a slowdown in cataract volumes through much of 2025. Maybe you could just comment on kind of where that stands? And then as you think about the business going forward, I appreciate that the system dynamics will be choppy as you kind of get the train out the station. But talk to us about the recurring revenue side of things, particularly around procedures and how you think that will kind of function as we look ahead to 2026?

Yes. Thanks. Good to hear from you, Ryan. I appreciate your questions. So as Tom had mentioned, we exited the year with $46 million, approximately $46 million in recurring revenue, and that was ramping closer to $50 million when you look at the fourth quarter and on a rolling forward basis. And so we're really -- our business is becoming very healthy on the recurring revenue side. It was 79% of our revenue in the fourth quarter. And so as we go forward, we expect that those 200 installed systems will continue to produce. We're doing approximately about 600 procedures a year or so on average on the ALLY units in the U.S. on a going-forward basis on average. And so that's quite a bit higher than what the average installed base is. We expect that, that's actually going to continue. And because of what we do with astigmatism management, we started to see more femtosecond laser naive, we refer to as femto-naive, which represented 50% of our new business in the fourth quarter. So we expect that to continue and to continue to grow as well. Now those accounts of caution take a little bit longer to get to the -- they take longer to ramp because they've never done lasers before and they're putting in a new system and they're getting trained and they have to train staff and educate patients and whatnot. So that will take us a quarter, 2 quarters to get those folks sort of up to speed as more new customers come on, but representing a pretty large segment and a lot of -- particularly when you look at cataract surgery reimbursements and the need to deliver better outcomes, our astigmatism management over 65% of procedures that we do involve some form of astigmatism management. So I think you'll see the mix of customers that heretofore are replacing older competitive devices and so on average, we do 20%, 27% more procedures than the national average 0of systems. And so we take about a 60-day ramp and you see those procedures coming up to where our averages are or more. And then you'll see a mix of newer customers and maybe some of the office-based surgery centers, which is trending moving into office-based suites, where those are lower volume accounts take a little more time. So you may see the average number of procedures drop slightly, but you'll see more systems doing those and whereas the current installed base will continue to grow.

Okay. Very helpful. Just to circle back, Tom, on expenses. I appreciate the math and commentary that you gave. It's very helpful. But I guess my question is, in this transitory period, I imagine expenses came down artificially. Now you do also need to kind of, again, get the train up the station, if you will. And so when you think about kind of the cadence of expenses and appreciating kind of where it's going, shouldn't we see some type of kind of acceleration, foot on the gas pedal, if you will, to get things -- get kind of operations coming again. I'm just wondering if the 10% is the right number as I think about kind of into '27 and beyond, I guess. I know it's a little premature, but it just seems like there's kind of multiple vectors here, cross currents around operating expenses for '26.

So very astute question and a very good observation, Ryan. I mean, yes, we're -- our expenses did go down over the last 13 months just because of being under the acquisition process. And with the -- even though our advisers discounted and extended the payment terms, that's still a big nut for us to cover as a small company. And so we're being very judicious in our expenses and the increases are all going to be commercial for the most part in 2026. And then as our distributors come online and we see a larger contribution of sales outside the United States and more cash flow coming in, I fully envision ramping up our commercial activities in 2027 well beyond 10% -- but we're kind of in this moderation phase until we're certain and how quickly our distributors can come back after this 13-month lag where they effectively put their pencils down.

Right. No, understood. And when you think about kind of what's entail, and this is more direct to that, Nick, I guess, like yes, you've had conversations with the distributors outside the U.S. They understand where you guys are at as a company now, not going through with the merger. Does your thinking around your OUS efforts change? Does it -- do you see bigger opportunities than maybe you thought about before? And is there room to go beyond kind of the markets that you were in kind of premerger. Some of those approvals were really good. We saw a really good uptake in Europe. But now the question is, as a stand-alone, does your aperture change, I guess, particularly outside the U.S.

Yes. So a really, really great question. So you're starting to delve a little bit into some strategy here. So I've seen -- it's really interesting because in terms of especially replacing some of the older systems from competition that are out there. And so I've seen some interest in a few other countries that heretofore, we have not gone into. And so I'm going to be looking at a few opportunities such as Australia and New Zealand, in particular, where there's actually quite a bit of interest in replacement of older systems there. And that would be one market that we haven't been into that we may look into. I think that we'll see in Southeast Asia, our activity come back there. Like I said, there's more of a tender business there. And so it's going to take us a little more time where I see there'll be some systems there this year. But I think that really as we get into 2027 into first, second quarter of 2027, we'll see quite a bit more growth in that Southeast Asia market. And I think there's a lot more expansion growth in Europe into countries where heretofore, we haven't been in because, again, not to underemphasize or overemphasize, ALLY addresses a lot of the shortcomings as to the reasons why people abandon femtosecond laser-assisted cataract surgery before. And because we have this good installed base in the U.S. and our business is growing, it's almost been an advantage getting the approvals later outside the U.S. because it's helpful for the distributors where they see that there's uptake here in the replacement of competitive devices. And so there's a lot of systems outside U.S. where they're sitting in accounts that are just not very productive. And I feel like competitive systems. And so we'll have some opportunity there. I don't see the opportunity coming back in South Korea anytime soon. As you know, they've got big issues around reimbursement and insurance company reimbursement there, but that's been away from us for quite a while. So it doesn't impact our business negatively or positively, if you will. And I think we probably need to look at some other markets in South America, Latin America, where heretofore, we haven't been either. But I think now we can address some of these things. But those are longer term. I think we'll see Europe come back, and we'll have some opportunity outside of Germany that we hadn't really gone after before. I think our distributors are interested in doing that, and we've made some additional relationships there. And I think we'll see Southeast Asia in various countries there we do business come back strong, and then we'll look at a few of these other markets.

Okay. I appreciate it. I know this -- again, this call was a maybe change in plan from what everyone expected, but it's good to hear from you guys, and we'll get the dust off and move forward.

Ryan, you know what, that's life and life throws your curves. And the reality is what you do to adjust and how you pivot and how you decide to move from there. You've got 2 choices. You can quit or you can come out fighting. And I've never quit, and I have to come out fighting so.

Thank you. I would now like to turn the call back over to Nick Curtis for any closing remarks.

I really appreciate everyone joining us today. It's been invigorating to do a call after not having the call for about a year now. While the termination of the merger was not the outcome that we anticipated, I think it really positions us to -- the positive there is it positions us to move forward with a much greater focus and control as an independent company. As a stand-alone company, we certainly know we have the best product available. I think it was -- came out loud and clear through the process here, and we're ready to capitalize on the significant market opportunities that lie ahead. Rebuilding momentum is going to take several quarters, but our priorities are very clear, and I believe our team is aligned to deliver. We're confident that on the path it really is enabling us to unlock even greater long-term value for our surgeons, patients and shareholders, and we look forward to sharing our progress with you all as we move forward. And so in closing, I just want to say once again, LENSAR is back. Thank you.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.