RxSight, Inc. (RXST) Q3 2023 Earnings Call Transcript

RxSight, Inc. (NASDAQ:RXST) Q3 2023 Earnings Convention Name November 9, 2023 4:30 PM ET

Firm Contributors

Alex Huang – Director, Investor Relations

Ron Kurtz – President and Chief Government Officer

Shelley Thunen – Chief Monetary Officer

Convention Name Contributors

Craig Bijou – Financial institution of America

Larry Biegelsen – Wells Fargo

Joseph Conway – Needham & Co

Rohin Patel – JPMorgan

Steven Lichtman – Oppenheimer

Operator

Good day, and thanks for standing by. Welcome to the RxSight Third Quarter 2023 Earnings Name. [Operator Instructions] Please be suggested that at present’s convention is being recorded. I’d now like handy the convention over to your first speaker at present, Alex Huang. Please go forward.

Alex Huang

Thanks, operator. Presenting at present are RxSight President and Chief Government Officer, Dr. Ron Kurtz; and Chief Monetary Officer, Shelley Thunen. Earlier at present, RxSight launched monetary outcomes for the three and 9 months ended September 30, 2023. A duplicate of the press launch is out there on the corporate’s web site.

Earlier than we start, I want to inform you that feedback and responses to questions throughout at present’s name mirror administration’s view as of at present, November 9, 2023, and can embody forward-looking and opinion statements, together with predictions, estimates, plans, expectations and different info.

Precise outcomes might differ materially from these expressed or implied because of sure dangers and uncertainties. These dangers and uncertainties are extra totally described in our press launch issued at present and in our filings with the Securities and Alternate Fee, or SEC. Our SEC filings could be discovered on our web site or the SEC’s web site. Traders are cautioned to not place undue reliance on forward-looking statements, and we disclaim any obligation to replace or revise these forward-looking statements.

We may also talk about sure non-GAAP monetary measures. Disclosures relating to non-GAAP monetary measures, together with reconciliations with the most comparable GAAP measures could be discovered within the press launch. Please notice that this convention name shall be accessible for audio replay on our Investor web site. With that, I’ll flip the decision over to President and Chief Government Officer, Dr. Ron Kurtz.

Ron Kurtz

Good afternoon, and thanks for becoming a member of us. In a couple of minutes, Shelley will evaluate our third quarter monetary outcomes and steerage for the stability of the 12 months. However I needed to first spotlight a number of constructive developments that we consider will additional strengthen RxSight’s skill to penetrate and increase the high-growth premium cataract market.

Within the latter a part of the third quarter, we launched our reconfigured mild supply gadget or LDD, and see gross sales of our earlier LDD model. Whereas providing equivalent performance, the brand new LDDs diminished footprint addresses practice-based constraints with an up to date design that has elicited very favorable suggestions, together with at its first public exhibit on the RxSight sales space throughout final week’s Annual Assembly of the American Academy of Ophthalmology or AAO.

Even with a modest worth enhance, the reconfigured LDDs ROI stays extremely engaging, usually paying for itself in about six to 9 months, assuming roughly 9 to 10 mild adjustable lens implantations per 30 days.

Additionally on the AAO assembly, there have been quite a few displays discussing the LAL, indicating continued development and consciousness and curiosity. This included real-world medical information on 738 bilateral LAL topics from almost 80 medical websites that continues for instance the clear benefits of postoperative adjustability.

Per earlier information readouts, 97% of LAL topics achieved uncorrected binocular distance imaginative and prescient of 2025 or higher and 87% achieved 2020 or higher. 91% of LAL topics achieved uncorrected binocular close to imaginative and prescient of J2 or higher, which suggests they might learn 5-point sort with out glasses, whereas 79% may learn at J1 or higher equal to 4-point sort.

Slightly below 80% of topics determined to optimize imaginative and prescient in a single eye premier and intermediate distances sometimes called blended imaginative and prescient. For many of those topics, the refractive distinction between the eyes was fairly small at 1.25 diopters or much less. The outcomes confirmed that 97% of blended imaginative and prescient LAL sufferers achieved 2020 for higher uncorrected distance imaginative and prescient and 95% obtain J2 or higher uncorrected close to imaginative and prescient.

Slightly below 25% of all LAL topics within the research have been post-refractive sufferers. Nevertheless, there have been no variations in visible outcomes between eyes that had earlier refractive surgical procedures and those who had not, though it’s usually thought-about to be harder to realize optimum leads to post-refractive eyes.

Additionally through the AAO assembly, preliminary Section I medical research outcomes have been reported on a brand new member of the Mild Adjustable Lens household referred to as the LAL Plus. Authorised by the FDA earlier this 12 months, this new lens has a proprietary optical design that additional extends the depth of focus earlier than mild remedies, however with the identical skill to customise and ship high-quality imaginative and prescient because the LAL.

We consider this mixture of high quality and expanded vary shall be very engaging to premium Iowa surgeons and their sufferers, notably to those that favor distance dominant imaginative and prescient in each eyes and is perhaps contemplating an alternate similar to multifocal lens that may be related to diminished high quality of imaginative and prescient.

We shall be increasing our ongoing Section IV LAL medical research to generate extra real-world information whereas persevering with a managed business launch for the LAL Plus within the first half of 2024. Surgeons and practices already acquainted with the LAL can seamlessly add the LAL Plus to their premium follow as there are not any variations within the surgical process or post-op adjustment course of.

The LAL will proceed to supply excellent visible outcomes for these sufferers who’re more likely to make the most of extra blended imaginative and prescient or who produce other ocular situations similar to earlier corneal refractive surgical procedure. We consider that with each the LAL and LAL Plus, docs can present almost any affected person with exact high-quality imaginative and prescient throughout a full vary of distances whereas avoiding elevated charges of glare, halos or lack of distinction sensitivity widespread to multifocal IOLs, thereby delivering the best stage of affected person satisfaction.

The reconfigured LDD and LAL Plus are good examples of our strategy to innovation, which focuses on the continual enchancment of our know-how to drive progressive adoption by sufferers and practices.

By way of such product enhancements, industry-leading medical outcomes and individualized high-touch customer support, we stay totally targeted on serving to docs ship the absolute best imaginative and prescient to premium cataract sufferers, thereby additionally serving to their practices to develop and prosper.

With that, I am going to flip the decision over to Shelley for a recap of our quarterly monetary efficiency and steerage outlook for the stability of 2023.

Shelley Thunen

Thanks, Ron. Good afternoon, everybody. RxSight generated third quarter 2023 income of $22.2 million, up 76% in comparison with $12.6 million within the 12 months in the past quarter, and up 7% in comparison with $20.8 million within the second quarter of 2023.

We offered 13,657 LALs within the third quarter of 2023, up 107% and eight% in comparison with 6,595 models and 12,622 models in the identical 12 months in the past quarter and second quarter of this 12 months, respectively. Third quarter 2023 LAL unit gross sales generated income of $13.5 million, up 117% and 9% in comparison with $6.5 million and $12.4 million within the third quarter of 2022 and second quarter of 2023, respectively.

This sequential efficiency is per the standard seasonality patterns for cataract surgical procedure volumes, which are usually softer within the third quarter due primarily to summer season trip schedules. LAL income as a share of whole income was 61%, up from 52% and 60% within the third quarter of 2022 and second quarter of 2023, respectively.

We offered 66 LDDs within the third quarter of 2023, up 35% in comparison with 49 models within the 12 months in the past interval and comparatively even with 67 models within the prior quarter. Third quarter 2023, LDD gross sales generated income of $7.9 million, up 39% and three% versus the third quarter of 2022 and second quarter of ’23, respectively.

As of September 30, 2023, our LDD put in base elevated to 589 models, up 72% and 13% versus the third quarter of 2022 and the second quarter of 2023, respectively. As Ron indicated earlier, we launched the reconfigured LDD through the third quarter and phased out gross sales of the prior model. These reconfigured models, that are cheaper to fabricate, represented roughly one third of our unit gross sales through the interval.

A worth enhance carried out at launch listed our whole LDD ASP as in comparison with Q2, 2023 by about $5,000 to simply over $120,000 within the third quarter. We anticipate the upper ASP for the reconfigured LDD to be maintained as we shut out 2023 and enter 2024. Launch of the reconfigured LDD with the next common promoting worth and decrease price to fabricate, together with the continued shift in income combine drove a rise within the gross margin within the third quarter to roughly 62% in comparison with 42% within the 12 months in the past quarter and 58% within the second quarter of this 12 months.

SG&A bills within the third quarter of 2023 have been $19.1 million, up 28% versus $14.9 million within the 12 months in the past quarter, reflecting shares implementation and consulting prices and elevated bills in gross sales and medical personnel prices and journey. On a sequential foundation, SG&A bills have been up 5%, primarily because of delicate implementation and consulting prices.

R&D bills within the third quarter of 2023 rose 11% to $7.1 million in comparison with $6.4 million in the identical 12 months in the past quarter and $7.4 million within the second quarter of 2023. The change versus the 12 months in the past quarter was primarily because of elevated headcounts and related enhance in salaries and stock-based compensation.

We reported a GAAP web loss within the third quarter of 2023, up $12.4 million or a lack of $0.35 per fundamental and diluted share utilizing weighted common shares excellent of 35.7 million shares. This compares to a GAAP web lack of $16.8 million or $0.61 per share on a fundamental and diluted foundation utilizing a weighted common shares excellent of 27.7 million shares in the identical 12 months in the past quarter.

Noncash stock-based compensation and loss on extinguishment of debt within the third quarter of 2023 was $4.1 million and $1.4 million, respectively, leading to a non-GAAP lack of $6.9 million or a lack of $0.19 per fundamental and diluted share. Please discuss with the unaudited non-GAAP reconciliation and disclosure included in at present’s press launch for extra comparative info.

As beforehand reported, we raised $11.7 million web of charges and bills in July below our at-the-market or ATM program. We used these proceeds and money reserves to repay our remaining $20 million debt stability. We ended the third quarter of 2023 with money, money equivalents and short-term investments of $131.9 million in comparison with $147.1 million at June 30, 2023. The change displays the online influence of the ATM proceeds, ESPP contributions and inventory choice workout routines, web of the $20 million debt discount.

Excluding the proceeds from financing and capital actions and use of capital for principal debt repayments, money utilized in working actions through the third quarter was $7 million in comparison with $9.5 million within the second quarter of 2023. The change was due primarily to a decrease web loss pushed by larger gross revenue and a discount in curiosity expense.

Turning now to steerage, primarily based on our third quarter 2023 efficiency, we’re growing our 2023 income steerage vary to $85 million to $87 million, up from prior steerage of $81 million to $86 million. Our new steerage implies a year-over-year development charge of 73% to 78%.

We’re additionally growing our 2023 steerage vary for gross margin to 61% to 61% versus prior steerage of 58% to 60%. The rise displays the fourth quarter full advantage of improved gross margin from the reconfigured LDD with the next ASP and decrease price to fabricate. Our 2023 working expense steerage vary narrows to $106 million to $107 million, which incorporates noncash stock-based compensation of $15 million to $16 million.

This annual steerage translate to fourth quarter 2023 income steerage of $25 million to $27 million, gross margin of 61% to 62%, and working expense of $31 million to $32 million. Since late 2022, we have now raised $101.1 million, web of charges and bills by means of our confidentially marketed public providing or CMPO and ATM program, paid off our $40 million termed out mortgage and lower our annualized curiosity expense by roughly $5.6 million.

As beforehand indicated, we consider our money and short-term funding balances, mixed with no excellent debt will go away us properly positioned to realize profitability from operations with a wholesome stability sheet.

With that, I am going to flip the decision again to Ron.

Ron Kurtz

Thanks, Shelley. To summarize, LAL volumes within the third quarter continued their constructive advance whereas favorable LDD unit traits offered an encouraging indicator for rising LAL utilization in future intervals. We’re happy with the early embrace of our newly launched LDD and the potential of the LAL Plus to additional widen the addressable affected person base and stimulate extra process development in 2024 and past.

Our increasing Section I medical information paints an more and more clear and convincing image of the superior visible outcomes postoperative adjustability can ship to sufferers whereas creating sustained worthwhile income streams that assist practices thrive.

With surgeon adoption on the rise, we stay very optimistic in regards to the future potential of our distinctive know-how to reshape and increase the premium cataract market and create long-term worth for our RxSight sufferers, docs and shareholders.

In these difficult occasions, we drastically respect that RxSight is just not depending on authorities reimbursement selections and caters to a extremely fascinating affected person demographic with a robust U.S. preliminary focus and a big world alternative. In distinction to different medical areas, we additionally don’t see publicity to GLP-1 or different potential pharma merchandise.

And now I am going to ask the operator to open the decision for questions.

Query-and-Reply Session

Operator

Presently, we are going to conduct the question-and-answer session. [Operator Instructions] First query comes from Craig Bijou with BoA Securities. Go forward. Your line is open.

Craig Bijou

Nice. Thanks. Good afternoon and congrats on one other sturdy quarter. So I needed to start out with, I respect a few of your feedback on the Q3 seasonality. And clearly, the This fall or the steerage assumes a This fall step up.

So primarily based on what you are seeing so far within the quarter, simply needed to see, is This fall type of monitoring in direction of regular seasonality that you’d have seen in previous years? And particularly, how ought to we take into consideration the seasonality influence on each utilization and LDD placements?

Shelley Thunen

Yeah. Whereas we do not touch upon intra-quarter outcomes, we are going to say that we anticipate This fall to be seasonally the strongest quarter of our 12 months. Usually is, and also you actually see that within the income steerage.

Craig Bijou

Acquired it. Thanks, Shelley. After which possibly for Ron, simply on LAL Plus. I respect these feedback. And possibly simply what’s totally different about LAL Plus? So clearly, it feels like it is going to be improved upon LAL and a few higher medical outcomes. However is the method, the becoming course of or something totally different? Is pricing going to be totally different? Is the price for you guys to fabricate totally different?

Ron Kurtz

So when it comes to the medical course of, it is equivalent, each from the surgical procedure in addition to the LDD remedy. And from a monetary facet, it is also equivalent from our perspective when it comes to pricing. And we actually simply need the physician to decide on the perfect LAL for that individual affected person.

We predict that the LAL clearly has served as an ideal alternative, notably for these sufferers as we see in our research who select blended imaginative and prescient and/or who might need different situations similar to being post-refractive.

And we really feel that the LAL Plus goes to be notably sturdy for these sufferers who is perhaps extra inclined to decide on distance dominant imaginative and prescient in each eyes and is perhaps contemplating a multifocal lens, however want to keep away from a few of the drawbacks of that know-how.

Craig Bijou

Nice. Thanks for taking the query.

Shelley Thunen

And I’d simply add, sure, you requested about manufacturing price. That is precisely the identical as LAL.

Operator

The subsequent query comes from Robbie Marcus with JPMorgan. Go forward. Your line is open.

Rohin Patel

Hello, everybody. That is truly Rohin on for Robbie. I simply need to say congrats on one other good quarter right here. Simply two from me. The primary is simply how are you eager about penetration at present throughout your LDD base? And the way ought to we take into consideration the expansion in LDDs relative to LAL subsequent 12 months and past?

Clearly, you have seen a reasonably good sequential step-up as a share of whole gross sales. So simply when you may present some shade on the place that ought to settle out, that will be useful.

Shelley Thunen

So let me simply make clear. I feel you are asking about penetration of LDDs within the U.S. market. Is that what you are asking?

Rohin Patel

Yeah. Simply type of making an attempt to get at like how a lot development is left in LDD placements. Clearly, over time, LAL will make up the vast majority of your revenues. I feel that is type of how folks mannequin it out, however simply needed to get a way for like, the place that ought to plateau on the LDD aspect?

Shelley Thunen

Yeah. You recognize, we have at all times mentioned that there is about 30,000 ophthalmologists within the U.S. and about 10,000 of these carry out cataract surgical procedure. We have just lately gotten up to date information that about 4,000 carry out about 70% or 80% of the premium procedures. In order that’s getting a bit extra distributed than the three,000 that we have now talked about earlier.

However we expect that the LDD is a perfect approach for each physician, even these that aren’t doing premium procedures to enter the premium market with a low capital price and nice outcomes for his or her sufferers. Ron, possibly you need to add one thing else about that?

Ron Kurtz

Sure, I’d agree. Clearly, we’re targeted on docs who’re doing probably the most premium procedures initially. However as we proceed to increase, we would like to have the ability to supply this to different docs who might haven’t been historically targeted on the premium market, however more and more see this as their major approach to construct the income of their follow and to thrive.

And actually, I do not suppose we all know what the higher restrict of LDD placements goes to be over time as practices develop, as they open new workplaces, et cetera.

Rohin Patel

Thanks. That is actually useful. Only one extra from me. I suppose, utilization was additionally sturdy once more within the quarter. So simply needed to dive into the place type of lots of this development is coming from. Is it extra from type of your prime customers? Or did you see it as being broad-based within the quarter? After which simply to observe up, how do you anticipate your addition to type of development in 2024, when you can present just a few preliminary shade there?

Shelley Thunen

So I feel that the utilization and the rise in procedures comes from two areas prefer it at all times does. New surgeons who’ve gotten put in usually within the earlier quarter and the start of this quarter, the third quarter, and that is at all times a development driver. But additionally, we search for elevated utilization as properly.

And whereas absolutely the variety of LAL procedures went up 8% within the quarter as in comparison with the second quarter, usually, you do type of see rather less sequential development within the third quarter simply due to seasonality. And so the utilization per physician per LDD, nevertheless you need to have a look at it, general is a little bit bit decrease.

However that is only a operate of seasonality, however we take pleasure in persevering with to develop our general set up base, and that grows the variety of procedures even in 1 / 4 that is perhaps thought-about a little bit weaker. However we see development amongst all forms of our prospects.

Rohin Patel

Nice. Thanks.

Operator

The subsequent query comes from Larry Biegelsen with Wells Fargo. Go forward. Your line is open.

Larry Biegelsen

Hey, guys. Thanks for taking the query. Possibly switching gears to the brand new LDD. Shelley, a few questions on that. How will that play out when it comes to the gross margin influence? I feel we have now assumed that the present LDD has a gross margin of about 25%. How ought to we take into consideration the gross margin of the brand new LDD? And also you gave some useful shade right here on the ASPs. It seems to be like the brand new LDD has an ASP of about $130,000. Is {that a} good quantity to make use of going ahead? And do you anticipate the overwhelming majority of latest programs to be with the brand new LDD going ahead?

Shelley Thunen

Sure. You actually did math from my commentary as properly. It was a few 10%, possibly a little bit bit extra enhance when it comes to the ASP in comparison with our earlier product general. And when you suppose again to a few of the commentary that we made beforehand, we had mentioned that our purpose for capital gear is between 20% and 25% gross margin, and we have been under that quantity. And that was actually a operate of the truth that the fabric prices had elevated a lot with chip and different part shortages as properly.

Whereas we do not get away the margin between each merchandise, there are two issues which might be driving the margin up. One is the ASP, which is very nice in addition to the truth that it is inexpensive to fabricate primarily as a result of the fabric is inexpensive.

Larry Biegelsen

And also you anticipate going ahead, the brand new LDD to mainly exchange the previous one when it comes to system gross sales?

Shelley Thunen

Yeah. Now we have already made that transition on the pre LDD to the reconfigured LDD and that may signify our full This fall income from the LDD.

Larry Biegelsen

You bought it. I am simply curious on worldwide. Something noteworthy within the third quarter for worldwide gross sales? And the way are you eager about new worldwide markets in 2024? Thanks for taking the questions, guys.

Ron Kurtz

Possibly I am going to remark first. We had beforehand talked about that we had begun commercialization in Canada. That continues to go properly. We’re very enthusiastic about our new prospects in Canada and had a chance to assembly final week. After which we’re additionally excited in regards to the world alternative for this product. We’ve not offered a particular timeline for that, however we consider that the LAL goes to be engaging to docs the world over, Europe, Asia, et cetera.

Larry Biegelsen

So no timeline, Ron?

Ron Kurtz

Not at the moment.

Larry Biegelsen

All proper. Thanks.

Operator

Subsequent query comes from David Saxon with Needham & Co. Go forward. Your line is open.

Joseph Conway

Hello, everybody. That is Joseph on for David. Possibly simply staying with geography. Are there, I suppose, any areas within the U.S. that you just nonetheless must get into? Or I suppose you guys are feeling that you just’re properly represented in all these main areas within the U.S.?

Ron Kurtz

I’d say that we’re equally represented geographically. Now we have a great footprint throughout all the key areas, however there’s nonetheless room for development in all of them. And so we have now efforts throughout the nation.

Joseph Conway

Okay, nice. After which, I suppose, expectations for fourth quarter and shifting into 2024. I suppose, round hiring, any shade there could be nice. Do you must increase larger in simply given the brand new LDD and the brand new LAL on the best way? Sure, simply any shade round there could be nice.

Shelley Thunen

Okay. I’ll truly let Ron remark first as a result of the brand new LDD could be very simple to put in. And actually, it is a little bit simpler than our different one, which was only a 4-hour set up. And the brand new LDD may also be moved round inside a clinic offering just a bit bit extra flexibility the place they need to do the sunshine remedies. The LAL and I feel, Ron, the method is strictly the identical. So it would not require extra coaching for a health care provider who already is doing LAL remedies in addition to implanting the LAL.

Ron Kurtz

Sure. So I feel the influence on our area drive is simply going to be the continued development of the set up base and utilization as we prepare extra docs and proceed to do installations. Because the set up base and the variety of implanting surgeons goes up, we do enhance our medical coaching and account administration core a little bit bit to account for that.

Joseph Conway

Okay. That is excellent. Thanks very a lot. If I may simply squeeze one fast one in there. I respect the data on the stability sheet that you just guys gave. However do you suppose you can give any particular timing round working breakeven?

Shelley Thunen

No, we have not executed that but. We’re balanced, and naturally, prime line development together with leverage.

Operator

Our subsequent query comes from Steven Lichtman with Oppenheimer & Co. Go forward. Your line is open.

Steven Lichtman

Thanks. Good night and congratulations. Ron and Shelley, with the rising set up base, to what extent do you suppose we’re at a degree the place surgeons not providing LAL is perhaps shifting out potential sufferers to different workplaces of their space, and that is perhaps one other incremental driver of demand right here? And when you’re not listening to that but, anecdotally, do you see that as a possible primarily based on what you are seeing from present prospects when it comes to advertising packages, et cetera?

Ron Kurtz

Nicely, we hope that is the case. However I’d say that I feel the larger issue is that docs need to have the ability to supply this know-how to their sufferers. They’re making an attempt to offer their sufferers the perfect visible acuity, the perfect medical outcomes that they’ll.

And as they turn into extra conscious of the LAL and its efficiency, both by means of folks of their space or by means of their attendance at conferences just like the AAO, they’re on the lookout for methods to drive their very own companies and specializing in premium IOLs is one of the best ways to try this. It is the one space of their enterprise that they’ll management and it is a win-win for the follow and their sufferers.

Steven Lichtman

After which secondly, R&D remains to be at a wholesome p.c of gross sales even on the upper base. We noticed the LAL Plus after all. How ought to we take into consideration the way you’re taking a look at form of the funding right here? Ought to we search for continued incremental developments? Are you focusing extra on medical information? Are you able to discuss a little bit bit about the place your R&D focus is general?

Ron Kurtz

Nicely, I’d look again to what we have executed over the previous a number of years, the place we have continued to drive innovation of the know-how. We have talked about earlier than that we have had over 30 PMA dietary supplements authorised by the FDA since our preliminary FDA approval. And people have pushed — they are often thought-about incremental advances, however cumulatively, they’ve a big influence on each outcomes in addition to the usability of the know-how.

And so that is the best way that we penetrate the market, each on the follow aspect in addition to on the affected person aspect. Persevering with to lift the bar of our know-how, and we’ll proceed to try this for a few years to come back.

Steven Lichtman

Nice. Thanks, Ron.

Operator

I am displaying no additional questions at the moment. I’d now like to show it again to Ron for closing remarks.

Ron Kurtz

Nicely, thanks all on your time and a spotlight at present. As at all times, we respect your curiosity in RxSight, and we look ahead to updating you on our progress in future quarters. Goodbye.

Operator

This does conclude this system. Chances are you’ll now disconnect.