Sight Sciences(SGHT) - 2023 Q3 - Quarterly Report

FORM 10-Q Filing Information This section details the filing specifics for Sight Sciences, Inc.'s Quarterly Report on Form 10-Q for Q3 2023, including company identification and stock information Filing Details This document is a Quarterly Report on Form 10-Q for Sight Sciences, Inc., covering the period ended September 30, 2023 - Sight Sciences, Inc. filed a Quarterly Report on Form 10-Q for the period ended September 30, 2023[2] Filing Details Table | Metric | Value | | :----------------------------------- | :------------------- | | Commission File Number | 001-40587 | | State of Incorporation | Delaware | | Trading Symbol | SGHT | | Exchange Registered | The Nasdaq Global Select Market | | Common Stock Outstanding (Nov 1, 2023) | 48,749,876 shares | | Filer Status | Non-accelerated filer, Smaller reporting company, Emerging growth company | Table of Contents This section provides an organized list of all chapters and their respective page numbers within the report Special Note Regarding Forward-Looking Statements This section cautions readers about forward-looking statements, which are subject to risks and uncertainties that may cause actual results to differ materially Forward-Looking Statements Disclaimer This section highlights that the report contains forward-looking statements subject to risks and uncertainties, and actual results may differ materially - The report contains forward-looking statements, which are subject to risks and uncertainties, and actual results may differ from those expressed[10][11][13] - Key areas of forward-looking statements include reimbursement, market entry, competition, strategic realignment, debt compliance, infrastructure growth, intellectual property, government regulation, key personnel, future financing, disease impact, stock price volatility, emerging growth company status, and internal controls[12] - The company does not undertake to update any forward-looking statements to reflect events or circumstances after the report date, except as required by law[15] PART I. FINANCIAL INFORMATION This part presents Sight Sciences, Inc.'s unaudited condensed consolidated financial statements and management's discussion and analysis for the period Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for Sight Sciences, Inc., including the Balance Sheets, Statements of Operations and Comprehensive Loss, Statements of Stockholders' Equity, and Statements of Cash Flows, along with their accompanying notes - The financial statements are unaudited and prepared in accordance with GAAP for interim periods[35] Condensed Consolidated Balance Sheets (Unaudited) - Key Figures (in thousands) | Metric | Sep 30, 2023 | Dec 31, 2022 | | :----------------------------------- | :----------- | :----------- | | Cash and cash equivalents | $144,501 | $185,000 | | Total current assets | $173,559 | $209,677 | | Total assets | $176,641 | $213,073 | | Total current liabilities | $14,331 | $17,817 | | Long-term debt | $33,765 | $33,313 | | Total liabilities | $49,572 | $52,997 | | Total stockholders' equity | $127,069 | $160,076 | | Accumulated deficit | $(284,099) | $(239,243) | Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - Key Figures (in thousands) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :----------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Revenue | $20,009 | $18,677 | $62,305 | $50,788 | | Gross profit | $17,332 | $15,749 | $53,200 | $42,092 | | Loss from operations | $(13,411) | $(21,845) | $(46,164) | $(66,901) | | Net loss and comprehensive loss | $(13,035) | $(22,229) | $(44,856) | $(69,335) | | Net loss per share (basic & diluted) | $(0.27) | $(0.46) | $(0.92) | $(1.45) | Condensed Consolidated Statements of Cash Flows (Unaudited) - Key Figures (in thousands) | Metric | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(40,700) | $(60,463) | | Net cash used in investing activities | $(527) | $(841) | | Net cash provided by financing activities | $728 | $436 | | Net change in cash and cash equivalents | $(40,499) | $(60,868) | | Cash and cash equivalents at end of period | $144,501 | $199,819 | Condensed Consolidated Balance Sheets (Unaudited) This section provides the company's unaudited financial position, detailing assets, liabilities, and equity as of specific dates Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) This section presents the company's unaudited financial performance, including revenues, expenses, and net loss for the reported periods Condensed Consolidated Statements of Stockholders' Equity (Unaudited) This section details changes in the company's equity accounts, including common stock, additional paid-in capital, and accumulated deficit Condensed Consolidated Statements of Cash Flows (Unaudited) This section outlines the company's cash inflows and outflows from operating, investing, and financing activities for the reported periods Notes to Condensed Consolidated Financial Statements (Unaudited) This section provides detailed explanations and additional information supporting the condensed consolidated financial statements Note 1. Company and Nature of Business This note describes Sight Sciences, Inc. as an ophthalmic medical device company and its operational segments, highlighting its history of losses - Sight Sciences, Inc. is an ophthalmic medical device company focused on surgical and nonsurgical technologies for eye diseases[31] - The company operates in two segments: Surgical Glaucoma (OMNI® Surgical System, SION™ Surgical Instrument) and Dry Eye (TearCare® System)[32] - The company has incurred losses and negative cash flows since inception, with an accumulated deficit of $284.1 million as of September 30, 2023, and expects future losses[33] Note 2. Summary of Significant Accounting Policies This note outlines the key accounting principles and estimates used in preparing the financial statements, including recent ASU adoptions - The financial statements are prepared in accordance with GAAP for interim periods and reflect normal recurring adjustments[35][36] - Management's estimates and assumptions are critical for areas like credit losses, inventory obsolescence, useful lives of assets, stock option fair value, and income taxes[38] - The company adopted ASU No. 2016-13 (Credit Losses) in Q1 2023 with no material impact, and no other significant ASUs are expected to have a material impact[39][40] Note 3. Fair Value Measurements This note details the company's fair value hierarchy for financial assets and liabilities, including held-to-maturity securities and debt - The company uses a fair value hierarchy (Level 1, 2, 3) for financial assets and liabilities[41][42][43] Held-to-Maturity Securities (in thousands) as of September 30, 2023 | Metric | Amortized Cost | Unrealized Gains | Unrealized Losses | Aggregate Fair Value | | :-------------------- | :------------- | :--------------- | :---------------- | :------------------- | | U.S. treasury securities | $136,256 | $29 | — | $136,285 | - Outstanding debt of $33.8 million (Sep 30, 2023) and $33.3 million (Dec 31, 2022) is classified as Level 2, with amortized cost approximating fair value[44] Note 4. Balance Sheet Components This note provides a detailed breakdown of specific balance sheet accounts, including property and equipment, and accrued liabilities Property and Equipment, Net (in thousands) | Category | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------- | :----------- | :----------- | | Tools and equipment | $2,001 | $2,173 | | Computer equipment and software | $37 | $37 | | Furniture and fixtures | $323 | $282 | | Leasehold improvements | $38 | $38 | | Construction in process | $624 | $475 | | Total | $3,023 | $3,005 | | Less: Accumulated depreciation | $(1,467) | $(1,434) | | Property and equipment, net | $1,556 | $1,571 | Accrued and Other Current Liabilities (in thousands) | Category | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------- | :----------- | :----------- | | Accrued expenses | $2,550 | $5,307 | | Current portion of lease liabilities | $910 | $1,033 | | Short term interest payable | $376 | $348 | | Other accrued liabilities | $1,459 | $1,087 | | Total | $5,295 | $7,775 | Other Noncurrent Liabilities (in thousands) | Category | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------- | :----------- | :----------- | | Long term interest payable | $1,437 | $1,194 | | Noncurrent portion of lease liabilities | — | $635 | | Other noncurrent liabilities | $39 | $38 | | Total | $1,476 | $1,867 | Note 5. Debt This note details the company's senior secured Term Loan, including its principal amount, maturity, and repayment schedule - As of September 30, 2023, the company had a $35.0 million senior secured Term Loan with MidCap Financial Services, maturing November 1, 2025[49][50] - The Term Loan is secured by substantially all company assets and includes customary affirmative and negative covenants, with the company in compliance as of September 30, 2023[50] Long-term and Short-term Debt (in thousands) | Metric | Sep 30, 2023 | Dec 31, 2022 | | :----------------------------------- | :----------- | :----------- | | Term Loan (principal) | $35,000 | $35,000 | | Less: debt discount & issuance costs | $(1,235) | $(1,687) | | Total amounts outstanding | $33,765 | $33,313 | | Total accrued and other current liabilities | $33,765 | $33,313 | Term Loan Repayment Schedule (in thousands) as of September 30, 2023 | Year | Amount | | :----------- | :------- | | 2023 (remainder) | — | | 2024 | $2,917 | | 2025 | $32,083 | | Thereafter | — | | Total repayments | $35,000 | Note 6. Commitments and Contingencies This note outlines the company's operating lease commitments and ongoing legal proceedings, including a patent infringement lawsuit - The company has operating leases for its corporate headquarters and a supply agreement, with a weighted-average remaining lease term of 0.8 years as of September 30, 2023[55][56][57] Operating Lease Expense and Cash Flow (in thousands) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Operating lease expense | $288 | $168 | $869 | $514 | | Cash paid for operating leases | $295 | $168 | $885 | $509 | - The company is involved in a patent infringement lawsuit against Ivantis, Inc. and Alcon Inc. regarding the Hydrus® Microstent, with a jury trial scheduled for April 8, 2024[60] - As of September 30, 2023, the company does not believe any legal proceedings would have a material adverse effect on its business[61] Note 7. Stockholders' Equity This note details the company's authorized and outstanding common stock, as well as shares reserved for future equity issuances - The company's certificate of incorporation provides for 200,000,000 authorized shares of common stock and 10,000,000 authorized shares of preferred stock, with no preferred shares issued[65] Common Stock Reserved for Future Issuances | Category | Sep 30, 2023 | Dec 31, 2022 | | :----------------------------------- | :----------- | :----------- | | Common stock available for future grant | 7,442,482 | 6,099,584 | | Common stock options issued and outstanding | 4,705,390 | 4,819,906 | | Restricted stock units outstanding | 1,853,657 | 1,014,123 | | Shares available for future purchase under ESPP | 1,630,570 | 1,226,123 | | Total | 15,632,099 | 13,159,736 | Note 8. Equity Incentive Plans This note describes the company's equity incentive plans, including stock option and RSU activity, and related compensation expense - The company operates under the 2021 Incentive Award Plan (superseding the 2011 Plan) for stock options and RSUs, and the 2021 Employee Stock Purchase Plan (ESPP)[67][68][70][81] Stock Option Activity Summary | Metric | Number of Shares (Sep 30, 2023) | Weighted-Average Exercise Price (Sep 30, 2023) | | :----------------------------------- | :------------------------------ | :----------------------------------- | | Balances as of Dec 31, 2022 | 4,819,906 | $9.67 | | Grants | 755,499 | $9.79 | | Forfeited/cancelled | (704,631) | $12.45 | | Exercised/released | (165,384) | $1.68 | | Balances as of Sep 30, 2023 | 4,705,390 | $9.57 | | Vested and exercisable as of Sep 30, 2023 | 2,671,146 | $7.79 | Stock-Based Compensation Expense (in thousands) | Category | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :----------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Cost of goods sold | $77 | $39 | $206 | $117 | | Research and development | $549 | $259 | $1,664 | $1,012 | | Selling, general and administrative | $3,231 | $2,925 | $9,251 | $8,600 | | Total stock-based compensation expense | $3,856 | $3,223 | $11,121 | $9,729 | Note 9. Net Loss per Share Attributable to Common Stockholders This note presents the calculation of basic and diluted net loss per share, along with potentially dilutive securities - Basic and diluted net loss per share are the same due to the company's net loss position[86] Net Loss per Share Attributable to Common Stockholders (in thousands, except per share data) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :----------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net loss attributable to common stockholders | $(13,035) | $(22,229) | $(44,856) | $(69,335) | | Weighted-average shares outstanding | 48,671,049 | 47,910,541 | 48,538,517 | 47,728,845 | | Net loss per share | $(0.27) | $(0.46) | $(0.92) | $(1.45) | Potentially Dilutive Securities Excluded from Diluted EPS | Category | Sep 30, 2023 | Sep 30, 2022 | | :----------------------------------- | :----------- | :----------- | | Stock option awards | 4,705,390 | 5,028,066 | | Restricted stock units | 1,853,657 | 700,873 | | Total | 6,559,047 | 5,728,939 | Note 10. Segment Information This note provides financial performance details for the company's two reportable operating segments: Surgical Glaucoma and Dry Eye - The company has two reportable operating segments: Surgical Glaucoma (OMNI, SION) and Dry Eye (TearCare)[89][90] - Segment performance is evaluated primarily based on gross profit and gross profit margin[89] Segment Operating Results (in thousands) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Revenue: | | | | | | Surgical Glaucoma | $18,425 | $17,072 | $57,158 | $46,842 | | Dry Eye | $1,584 | $1,605 | $5,147 | $3,946 | | Gross profit: | | | | | | Surgical Glaucoma | $16,423 | $15,140 | $50,350 | $41,470 | | Dry Eye | $909 | $609 | $2,850 | $622 | | Gross margin: | | | | | | Surgical Glaucoma | 89.1% | 88.7% | 88.1% | 88.5% | | Dry Eye | 57.4% | 37.9% | 55.4% | 15.8% | Note 11. Subsequent Events This note discloses significant events occurring after the reporting period, including strategic realignment and Medicare coverage changes - On October 17, 2023, the company initiated a strategic realignment, including a ~10% workforce reduction, to cut operating expenses and extend cash runway[94] - A cash restructuring charge of approximately $1.3 million is expected in Q4 2023 due to severance and benefits[94] - On October 26, 2023, WPS Government Health Administrators (a MAC) published a Final LCD classifying canaloplasty in combination with trabeculotomy ab interno (OMNI procedure) as investigational, effective December 24, 2023, impacting ~8% of 2022 Surgical Glaucoma revenue[95] - On November 6, 2023, the company amended its credit agreement, requiring a minimum of $50 million in unrestricted cash and adjusting Term Loan principal payment commencement[96] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's analysis of the company's financial performance, liquidity, and recent developments, including strategic realignment and Medicare coverage - Sight Sciences aims to transform ophthalmology and optometry by developing and commercializing devices for prevalent eye diseases, focusing on restoring natural physiological functionality[99][103] - The company's commercialized products are in Surgical Glaucoma (OMNI, SION) and Dry Eye (TearCare), primarily sold through a direct sales model[100] - Recent developments include a strategic realignment with a 10% workforce reduction and a Medicare Administrative Contractor (WPS) publishing a Final LCD classifying OMNI procedures as investigational, impacting future revenue[94][95][107] Overview This section provides an overview of Sight Sciences' mission to transform eyecare through its proprietary devices for glaucoma and dry eye disease Recent Developments This section highlights key recent events impacting the company, including strategic realignment and Medicare coverage determinations Factors Affecting Our Business and Results of Operations This section discusses various internal and external factors that influence the company's business performance and financial outcomes Components of Our Results of Operations This section breaks down the key revenue and expense categories that constitute the company's financial results Results of Operations This section analyzes the company's financial performance by comparing revenue, gross profit, and operating expenses across different periods Comparison of the Three Months Ended September 30, 2023 and 2022 This section compares the company's financial results for the three-month periods ended September 30, 2023, and 2022 Revenue and Gross Profit (Three Months Ended Sep 30, in thousands) | Metric | 2023 | 2022 | Change ($) | Change (%) | | :-------------------- | :----- | :----- | :--------- | :--------- | | Total Revenue | $20,009 | $18,677 | $1,332 | 7.1% | | Surgical Glaucoma Revenue | $18,425 | $17,072 | $1,353 | 7.9% | | Dry Eye Revenue | $1,584 | $1,605 | $(21) | (1.3)% | | Total Gross Profit | $17,332 | $15,749 | $1,583 | 10.1% | | Surgical Glaucoma Gross Margin | 89.1% | 88.7% | 0.4% | - | | Dry Eye Gross Margin | 57.4% | 37.9% | 19.5% | - | Operating Expenses and Net Loss (Three Months Ended Sep 30, in thousands) | Metric | 2023 | 2022 | Change ($) | Change (%) | | :----------------------------------- | :----- | :----- | :--------- | :--------- | | Research and Development | $4,239 | $6,053 | $(1,814) | (30.0)% | | Selling, General and Administrative | $26,504 | $31,541 | $(5,037) | (16.0)% | | Total Operating Expenses | $30,743 | $37,594 | $(6,851) | (18.2)% | | Net Loss and Comprehensive Loss | $(13,035) | $(22,229) | $9,194 | 41.4% | | Other Income, net | $1,886 | $766 | $1,120 | (146.2)% | Comparison of the Nine Months Ended September 30, 2023 and 2022 This section compares the company's financial results for the nine-month periods ended September 30, 2023, and 2022 Revenue and Gross Profit (Nine Months Ended Sep 30, in thousands) | Metric | 2023 | 2022 | Change ($) | Change (%) | | :-------------------- | :----- | :----- | :--------- | :--------- | | Total Revenue | $62,305 | $50,788 | $11,517 | 22.7% | | Surgical Glaucoma Revenue | $57,158 | $46,842 | $10,316 | 22.0% | | Dry Eye Revenue | $5,147 | $3,946 | $1,201 | 30.4% | | Total Gross Profit | $53,200 | $42,092 | $11,108 | 26.4% | | Surgical Glaucoma Gross Margin | 88.1% | 88.5% | (0.4)% | - | | Dry Eye Gross Margin | 55.4% | 15.8% | 39.6% | - | Operating Expenses and Net Loss (Nine Months Ended Sep 30, in thousands) | Metric | 2023 | 2022 | Change ($) | Change (%) | | :----------------------------------- | :----- | :----- | :--------- | :--------- | | Research and Development | $14,129 | $17,626 | $(3,497) | (19.8)% | | Selling, General and Administrative | $85,235 | $91,367 | $(6,132) | (6.7)% | | Total Operating Expenses | $99,364 | $108,993 | $(9,629) | (8.8)% | | Net Loss and Comprehensive Loss | $(44,856) | $(69,335) | $24,479 | (35.3)% | | Other Income, net | $5,465 | $846 | $4,619 | 546.0% | Cash Flows This section analyzes the company's cash generation and usage from operating, investing, and financing activities Liquidity and Capital Resources This section discusses the company's ability to meet its short-term and long-term financial obligations and its available funding sources Critical Accounting Policies and Estimates This section outlines the accounting policies and estimates that require significant judgment and can materially impact financial reporting Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks, primarily interest rate risk and foreign currency exchange rate risk - The company's primary market risks are interest rate risk and foreign currency exchange rate risk[159] - No material changes to market risks were reported since the Annual Report[159] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were not effective as of September 30, 2023, due to a material weakness in internal control over financial reporting - Disclosure controls and procedures were not effective as of September 30, 2023, due to a material weakness in internal control over financial reporting[160] - The material weakness stems from a lack of sufficient full-time accounting personnel with requisite experience and deep technical accounting knowledge to identify and resolve complex accounting issues and ensure proper segregation of duties[161][163] - Despite the material weakness, management concluded that the condensed consolidated financial statements fairly present the financial position, results of operations, and cash flows in conformity with GAAP[160] - Remediation efforts include increasing accounting and financial reporting personnel and formalizing review procedures, but further validation and testing are required[162][163] PART II. OTHER INFORMATION This part covers legal proceedings, risk factors, equity security sales, defaults, and exhibits, providing additional context to the financial information Item 1. Legal Proceedings The company is not currently a party to any legal proceedings, regulatory matters, or other disputes that would individually or collectively have a material adverse effect on its business, financial condition, operating results, liquidity, or future prospects, beyond what is disclosed in Note 6 - The company does not believe it is a party to any legal proceedings that would have a material adverse effect on its business, beyond what is disclosed in Note 6[166] - Legal proceedings, regardless of merit or outcome, may adversely impact the company due to defense and settlement costs, and diversion of management time[166] Item 1A. Risk Factors This section updates and reiterates key risks affecting the company, including challenges in securing and maintaining adequate third-party reimbursement for its products, particularly in light of recent Medicare coverage determinations - The company faces significant risks related to obtaining and maintaining adequate third-party coverage and reimbursement for its Surgical Glaucoma and TearCare products[168][169] - A Final LCD from WPS classifying OMNI procedures as investigational, effective December 24, 2023, is expected to adversely impact revenue, and similar policies from other MACs (covering ~63% of 2022 Surgical Glaucoma revenue) would have a material adverse effect[171][183][184] - The strategic realignment and workforce reduction initiated in October 2023 may incur higher-than-expected costs, fail to achieve anticipated savings, and disrupt business operations[178][179][180] - The company has a history of significant losses, expects to incur future losses, and its ability to achieve or sustain profitability is uncertain, especially given potential impacts from reimbursement changes[182][183] - The company is highly dependent on revenue from OMNI and SION technologies, which accounted for over 90% of total revenues in 2022, making it vulnerable to factors negatively impacting these products[184] - The company's significant debt ($35.0 million Term Loan) and associated covenants, including minimum revenue targets and cash requirements, pose risks to its ability to operate and secure future financing, particularly if revenue is adversely affected by reimbursement changes[191][192][195] - The price of the company's common stock is highly volatile and can fluctuate due to various factors, including changes in reimbursement policies and market conditions, as evidenced by a substantial decline following the Final LCD publication[197][198] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section confirms no material changes in IPO proceeds use and no unregistered equity sales or issuer purchases - No material change in the intended use of proceeds from the July 2021 IPO[202] - No unregistered sales of equity securities occurred[203] - No issuer purchases of equity securities occurred[204] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - No defaults upon senior securities were reported[205] Item 4. Mine Safety Disclosures This item is not applicable to the company - This disclosure item is not applicable to Sight Sciences, Inc.[206] Item 5. Other Information No other information was reported under this item - No other information was reported under this item[207] Item 6. Exhibits This section lists all documents filed as exhibits, including organizational documents, agreements, and certifications - The exhibits include organizational documents (Restated Certificate of Incorporation, Amended and Restated Bylaws), employment agreements, the Fourth Amendment to the Credit and Security Agreement, and certifications (CEO, CFO)[210] Signatures This section contains the official signatures certifying the accuracy and completeness of the report Report Signatures This section confirms the report was duly signed by the Chief Financial Officer on November 7, 2023 - The report was signed by Alison Bauerlein, Chief Financial Officer, on November 7, 2023[213]