Q2 2021 Rxsight Inc Earnings Call

September 9, 2021

[music].

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the RxSight Q2 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star and then the number one on your telephone. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Philip Taylor. Thank you. Please go ahead, sir.

Ladies and gentlemen, thank you for standing by and welcome to the Rx side second quarter 2021 earnings conference call.

This time, all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press Star and then the number one on your telephone if you require any further assistance. Please press star zero.

I would now like to hand, the conference over to your speaker today. So they trip Taylor. Thank you. Please go ahead Sir.

Philip Taylor: Thank you, operator. Presenting today are RxSight President and Chief Executive Officer, Ron Kurtz, and Chief Financial Officer, Shelley Thunen. Earlier today, RxSight released financial results for the three months ended 30 June 2021. A copy of the press release is available on the company's website. Before we begin, I would like to inform you that comments and responses to your questions during today's call reflect management's views as of today, 9 September 2021 only and will include forward-looking statements and opinion statements, including predictions, estimates, plans, expectations, and other information. Actual results may differ materially from those expressed or implied as a result of certain risks and uncertainties. These risks and uncertainties are more fully described in our press release issued earlier today and in our filings with the Securities and Exchange Commission. Our SEC filings can be found on our website or on the SEC's website.

Thank you operator, presenting today, our Rx site, President and Chief Executive Officer, Ron Kirk and Chief Financial Officer, Shelley Thunen earlier today <unk> released financial results for the three months ended June 32021, a copy of the press release is available on the company's website.

Before we begin I would like to inform you that comments and responses to your questions. During today's call reflect management's views as of today September nine 2021, only and will include forward looking statements and opinion statements, including predictions estimates plans expectations and other information actual results.

<unk> may differ materially from those expressed or implied as a result of certain risks and uncertainties. These risks and uncertainties are more fully described in our press release issued earlier today and in our filings with the Securities and Exchange Commission or SEC filings can be found on our website or on the SEC's website.

Philip Taylor: Investors are cautioned not to place undue reliance on forward-looking statements. We will disclaim any obligation to update or revise these forward-looking statements. We will also discuss certain non-GAAP financial measures. Disclosures regarding these non-GAAP financial measures, including reconciliations with the most comparable GAAP measures, can be found in the press release. Please note that this conference call will be available for audio replay on our website at rxsight.com on the investor calendar page of the news and events section on our investor relations page. With that, I will turn the call over to CEO Ron Kurtz.

Investors are cautioned not to place undue reliance on forward looking statements, we will disclaim any obligation to update or revise these forward looking statements.

We will also discuss certain non-GAAP financial measures disclosures regarding these non-GAAP financial measures, including reconciliations with the most comparable GAAP measures can be found in the press release.

Please note that this conference call will be available for audio replay on our website at Rx site Dot com on the Investor calendar page of the news and events section on our Investor Relations page.

With that I will turn the call over to CEO Ron Kurtz.

Ron Kurtz: Thank you, Trip, and welcome everyone to RxSight's first earnings call as a publicly traded company. As you know, we completed our initial public offering at the end of July, and I'd like to begin by expressing our entire team's appreciation for the high level of investor participation that resulted in a total of approximately $120 million in net proceeds to support RxSight's ongoing collaboration with doctors, practices, and patients to optimize vision after cataract surgery. Our strong Q2 results demonstrate continued physician and patient adoption of our technology. In Q2, we generated $4.9 million in revenue, representing 41% growth compared to Q1 of this year. This revenue was driven by sales of 25 light delivery devices, or LDDs, and 1,825 light adjustable lenses, or LALs.

Thank you trip and welcome everyone to Rx sites first earnings call as a publicly traded company.

As you know we completed our initial public offering at the end of July and I'd like to begin by expressing our entire team's appreciation for the high level of investor participation that resulted in a total of approximately $120 million in net proceeds to support Rx sites ongoing collaboration with doctors' practices and patients to <unk>.

<unk> vision after cataract surgery.

Our strong second quarter results demonstrate continued physician and patient adoption of our technology in the second quarter, we generated $13.0 million in revenue, representing 41% growth compared to Q1 of this year.

This revenue was driven by sales of 25 late delivery devices, or LTE DS and <unk> thousand 825 light adjustable lenses or else.

Ron Kurtz: With this progress, our installed base of LDDs grew to 130 practices that have completed over 8,000 LAL implants since US commercial launch. Before I turn it over to Shelley Thunen to review the Q2 financial results in more detail, I'd like to provide an overview of the RxSight opportunity for those who are newer to our story. RxSight is focused on delivering optimal visual outcomes for patients after cataract surgery, which is the most common global surgical procedure across all surgical specialties. Annual cataract surgery volume, which typically exceeds 4 million procedures in the US and nearly 30 million globally, dominates surgical ophthalmology, accounting for several times the combined annual number of glaucoma, corneal refractive, and retinal surgeries.

With this progress our installed base of Ldds grew to 130 practices that have completed over 8000 implants since U S commercial launch.

Before I turn it over to Shelley Thunen to review the Q2 financial results in more detail I'd like to provide an overview of the Rx site opportunity for those who are newer to our story.

Are excited and focused on delivering optimal visual outcomes for patients after cataract surgery, which is the most common global surgical procedure across all surgical specialties.

Annual cataract surgery volume, which typically exceeds 4 million procedures in the U S. Nearly 30 million globally dominate surgical ophthalmology accounting for several times the combined annual number of glaucoma corneal refractive and retinal surgeries.

Ron Kurtz: In cataract surgery, the eye's natural lens, which has become cloudy or less transparent with age, is removed and replaced with a clear plastic intraocular lens or IOL. About 85% of the time, patients receive a conventional IOL that replaces the main spherical focusing power of the natural lens, primarily for distance vision. Conventional IOLs do not correct for astigmatism or presbyopia, which together affect nearly all cataract patients. Nearly all patients implanted with a conventional IOL will need to use glasses after cataract surgery to achieve their best vision. In the US, where Medicare pays for the vast majority of cataract procedures, doctors receive a little over $500 for the actual surgical procedure, the preoperative visit, and all postoperative visits out to three months, while the reimbursement for the IOL is about $150.

In cataract surgery, the eyes natural lands, which has become cloudy or less transparent with age is removed and replaced with a clear plastic intraocular lens or I O L about 85% of the time patients receive a conventional <unk> that replaces the main spherical focusing power the natural lands primarily for distance.

<unk> vision.

Conventional wells do not correct for astigmatism, presbyopia, which together affect nearly all cataract patients and so nearly all patients implanted with a conventional I well will need to use glasses after cataract surgery to achieve their best vision.

In the U S, where Medicare pays for the vast majority of cataract procedures doctors receive a little over $500 for the actual surgical procedure. The preoperative visit and all postoperative visits out to three months, while the reimbursement for the <unk> is about $150.

Ron Kurtz: In contrast, for more than 15 years, patients have also been able to choose to pay out of pocket for a premium or advanced technology IOL that also corrects for astigmatism and/or presbyopia and can reduce dependence on glasses after cataract surgery. These premium procedures now make up about 15% of the total cataract volume in the US and about 10% globally. The out-of-pocket fee paid by patients is separate from the reimbursement received from Medicare or commercial payers and ranges from about $1,500 to $5,000 in the US, depending on the IOL used and local pricing. About two-thirds of this additional fee pays for increased work by the doctor or practice, and about a third is used to pay for increased cost of the premium IOL, which can range from about $400 to $1,100.

In contrast for more than 15 years patients have also been able to choose to pay out of pocket for a premium or advanced technology <unk> that also corrects for astigmatism and presbyopia and can reduce dependence on glasses after cataract surgery.

These premium procedures now make up about 15% of the total cataract volume in the U S and about 10% globally.

The out of pocket fee paid by patients is separate from the reimbursement received from Medicare or commercial Payors and ranges from about 500 to $5000 in the U S. Depending on the Iot used in local pricing.

About two thirds of this additional fee pays for increased work by the Doctor practice and about a third is used to pay for increased cost of the premium my well, which can range from about 400 to $1100.

Ron Kurtz: Now, until the introduction of the RxSight Light Adjustable Lens, cataract patients considering a premium IOL have had to make decisions before surgery about their priorities for distance, intermediate, and near vision, as well as their willingness to accept trade-offs between visual quality and range of vision. They also have had to depend entirely on their surgeon's ability to select the precise focusing power of the IOL that once implanted, would produce their desired visual outcome. These high-stakes decisions can lead to suboptimal results and bothersome visual symptoms such as glare, halo, and loss of contrast vision, which cannot be easily modified after surgery except with another surgical procedure such as LASIK. In comparison, the Light Adjustable Lens enables a premium process that provides much higher confidence for achieving optimal vision after cataract surgery, both for the patient and the doctor.

Now until the introduction of the Rx site light adjustable lens cataract patients considering a premium while well have had to make decisions before surgery about their priorities for distance intermediate and near vision as well as their willingness to accept tradeoffs between visual quality and range of vision.

They also have had to depend entirely on their surgeon's ability to select the precise focusing power of the <unk> that once implanted would produce their desired visual outcome.

These high stakes decisions can lead to suboptimal results and bothersome visual symptoms, such as glare Halo and loss of contrast vision, which cannot be easily modified after surgery, except with another surgical procedures such as lasik.

In comparison, the light adjustable wins enables a premium process that provides much higher confidence for achieving optimal vision after cataract surgery, both for the patient and the doctor because of the focusing powered DLA al can be modified noninvasively after implantation in the eye using Rx sites.

Ron Kurtz: Because the focusing power of the LAL can be modified non-invasively after implantation in the eye using RxSight's office-based light delivery device or LDD, doctors can perform a standard refraction after surgery to specifically fit the LAL to the patient, the same process routinely used for prescribing glasses, contact lenses, and selecting LASIK targets. Not surprisingly, the overall precision and accuracy of the LAL procedure is also very similar to these other refractive corrections, allowing the LAL to deliver 20/20 distance vision without glasses at about twice the rate of competing premium IOLs.

Office space late delivery device or LDP doctors can perform a standard refraction after surgery to specifically fit the layout to the patient.

The same process routinely used for precise prescribing classes contact lenses and selecting lasik targets.

Not surprisingly the overall precision and accuracy of the <unk> procedure is also very similar to these other refractive corrections, allowing the <unk> to deliver 2020 distance vision without classes at about twice the rate of competing premium mile wells.

Ron Kurtz: As reported by several of our customers, patients are able to leverage this precision as well as the LAL's broadened and elevated depth of focus to select visual corrections in both eyes that optimize both the range and quality of vision, with up to twice as many patients with 20/20 vision at all distances using both eyes compared to leading multifocal IOLs. Unlike these other premium IOLs, the LAL is not associated with loss of contrast vision or increased glare halo as compared to a conventional monofocal IOL. Using postoperative adjustability, we believe that doctors and practices adopting RxSight technology are able to confidently deliver optimal quality and range of vision to their patients and to expand their premium IOL business by converting a larger percentage of patients to higher revenue procedures.

As reported by several of our customers patients are able to leverage this precision as well as the <unk> broadened and elevated depth of focus to select visual corrections in both eyes that optimize both the range and quality of vision with up to twice as many patients with 2020 vision at all distances using.

Both eyes compared to leading multifocal <unk>.

Unlike these other premium my wells the <unk> is not associated with loss of contrast vision, where increased glare halo as compared to a conventional mono focal as well.

Using postoperative adjustability, we believe the doctors and practices adopting Rx site technology are able to constantly deliver optimal quality and range of vision to their patients and to expand their premium eyewear business by converting a larger percentage of patients to higher revenue procedures.

Ron Kurtz: In a recent survey of RxSight practices, two-thirds of the patients receiving an LAL were converted from either conventional IOL procedures that provide no additional revenue or from non-adjustable astigmatism-correcting IOLs that typically provide less than half the revenue of a Light Adjustable Lens procedure. The higher reported revenue from LAL procedures leads to a rapid payback period for the Light Delivery Device with higher ongoing revenue thereafter. We believe it is the combination of better visual outcomes and higher premium IOL revenue that defines the RxSight value proposition, attracting doctors and practices to offer this technology to their patients. To facilitate LAL adoption, we are focused on increasing our network of Light Delivery Devices, as well as the number of doctors recommending and using the Light Adjustable Lens in the relatively concentrated ophthalmic market.

In a recent survey of Rx site practices, two thirds of the patients receiving an L. A L where confer converted from either conventional ioo procedures that provide no additional revenue or from non adjustable stigmatism correcting our wells that typically provide less than half the revenue of a white adjustable lens procedure.

The higher reported revenue from <unk> procedures leads to a rapid payback period for the light delivery device with higher ongoing revenue thereafter.

We believe it is the combination of better visual outcomes and higher premium <unk> revenue that defines the Rx side value proposition, attracting doctors and practices to offer this technology to their patients.

To facilitate <unk> adoption, we are focused on increasing our network of late delivery devices as well as the number of doctors recommending and using the light adjustable lens in the relatively concentrated ophthalmic market.

Ron Kurtz: As previously announced, we are very excited that Steve Everly joined RxSight last month as Vice President of US Sales. He is working directly with Eric Weinberg, our Chief Commercial Officer, and the rest of our commercial team on executing our growth strategy. Today, they are continuing to expand our US commercial team, including both the core team primarily focused on selling light delivery devices and a larger group mainly tasked with LAL procedural growth. Since the end of Q1 2021, we've expanded our total commercial team from 55 to 76. This includes an increase in the LDD sales force from 6 to 9, with planned further expansion to 12 by the end of the year, as well as an increase in our procedure focus team from 36 to 51 employees.

As previously announced we are very excited that Steve Everly joined Rx site last month, as Vice President of U S sales.

He is working directly with Eric Weinberg, our chief commercial officer, and the rest of our commercial team on executing our growth strategy today. They are continuing to expand our U S commercial team, including both the core team primarily focused on selling late delivery devices into larger group, mainly tasked with Ohio procedural.

Yeah.

Since the end of the first quarter of 2021, we've expanded our total commercial team from 55% to 76. This includes an increase in the <unk> salesforce from six to nine with planned further expansion to 12 by the end of the year as well as an increased of our procedure focus team from 36.

<unk> to 51 employees.

Ron Kurtz: In addition to these sales and marketing efforts, we continue to advance our product to improve patient outcomes and surgeon experience. We have introduced a number of important technology developments since our initial commercial launch, including increasing the range of astigmatism correction in IOL powers and reducing the number of required light treatments. Beginning in early Q3, we introduced a next generation Light Adjustable Lens we call ActivShield, which reduces the LAL sensitivity to UV light from the environment and therefore reduces the potential consequences of non-compliance with UV protective glasses used prior to the last light treatment, thereby addressing concerns over potential patient lapses that may have previously limited which patients were offered the LAL. ActivShield also adds flexibility for the timing of postoperative light treatments that might otherwise have been more tightly scheduled so they could be completed more quickly.

In addition to these sales and marketing efforts, we continue to advance our product to improve patient outcomes and surgeon experience. We have introduced a number of important technology developments since our initial commercial launch, including increasing the range of astigmatism correction in ioo powers and reducing the number of required light treatments.

<unk>.

Beginning in early Q3, we introduced our next generation light adjustable lens, we call active shield, which reduces the <unk> sensitivity to UV light from the environment and therefore reduces the potential consequences of noncompliance with UV protective glasses used prior to the last slide treatment.

Thereby addressing concerns over potential patient lapses that may have previously limited, which patients were offered the layout.

Active shield also adds flexibility for the timing of postoperative late treatments that might otherwise had been more tightly scheduled so they could be completed more quickly.

Ron Kurtz: Given the importance of these improvements and customer excitement around them, our team was able to ramp production of the ActivShield LALs and the necessary upgrade kits for the light delivery device so that we could rapidly roll out the updates. We're happy to announce today that all US light delivery devices are fully upgraded for use with the ActivShield LAL and the vast majority of ambulatory surgery centers have the ActivShield LALs available for use. Now, while we did meet with some customers in May at the Hawaiian Eye meeting, we've been able to have additional in-person conference opportunities in July, both at the AECOS and ASCRS meetings.

Given the importance of these improvements and customer excitement around them. Our team was able to ramp production of the active shield LLS and the necessary upgrade kits for the late delivery device. So that we could rapidly rollout the updates we're happy to announce today that all U S light delivery devices are fully upgraded for you.

<unk> with the active shield layout and the vast majority of ambulatory surgery centers have the active shield <unk> available for use.

Now, while we did meet with some customers in may at the Hawaiian eye meeting, we've been able to have additional in person conference opportunities in July both at the <unk> and ASP Crs meetings.

Ron Kurtz: Despite the pandemic, the ASCRS conference, which is traditionally the second-largest ophthalmic meeting, was well attended, particularly at our booth on the exhibit floor, where we had over 15 talks by our four doctors, as well as 10 presentations at the meeting itself. It's noteworthy that this was our first opportunity to exhibit at a live meeting since our US commercial launch, as all meetings were canceled after Q1 2020 due to COVID. We were also able to have our first in-person user group meeting with over 70 customers attending a highly interactive program. We are, of course, cognizant of the continuing pandemic, and though US cataract procedures have steadily increased since the low point of Q2 2020, we are closely monitoring for potential impacts from the rise of the Delta and other COVID-19 variants.

Despite the pandemic the Crs conference, which is traditionally the second largest ophthalmic meeting was well attended particularly at our booth on the exhibit floor, where we had over 15 talks by and for doctors as well as 10 presentations at the meeting itself.

Its noteworthy that this was our first opportunity to exhibit at a live meeting since our U S. Commercial launch is all meetings were canceled after Q1 2020 due to COVID-19.

We were also able to have our first in person user group meeting with over 70 customers attending a highly interactive program.

We are of course cognizant of the continuing pandemic in the U S. Cataract procedures has steadily increased since the low point of Q2 2020, we are closely monitoring for potential impacts from the rise of the Delta and other COVID-19 variance.

Ron Kurtz: The vast majority of cataract procedures are performed in ambulatory surgery centers that remain open despite the rise in COVID related hospitalizations. However, there may be more pronounced effects in some geographic regions, and it is possible that attendance at the American Academy of Ophthalmology meeting in New Orleans, scheduled in early November, may be affected by local COVID conditions as well as the effects of Hurricane Ida. With that, I'd like to turn it over to Shelley for details on the Q2 financial results.

The vast majority of cataract procedures performed in ambulatory surgery centers that remain open despite the rise in COVID-19 related hospitalizations.

There may be more pronounced effects in some geographic regions and it is possible that attendance at the American Academy of Ophthalmology meeting in New Orleans scheduled in early November may be affected by local COVID-19 conditions as well as the effects of Hurricane Ida.

With that I'd like to turn it over to Shelly for details on our second quarter financial results.

Shelley Thunen: Thank you, Ron. Good afternoon, everyone. In Q2 2021, total revenue was $49 million, a 41% increase compared to the prior quarter ended 31 March 2021, and an 81% increase compared to Q2 2020. Looking at revenue by product, we sold 25 LDD systems in Q2 2021, generating $3.0 million in revenue compared to 13 systems driving $1.008 million in LDD sales in Q1 2021 and 15 systems driving $2 million in sales in Q2 2020. As expected in our early stage, LDDs dominate revenue at 61% of our revenue in Q2 2021 and 53% in Q1 this year.

Thank you Ron good afternoon, everyone in the second quarter of 2021 total revenue was $13.0 million, an increase of 41% compared to the prior quarter ended March 31, 2021, and an 81% increase compared to the second quarter of 2020.

Looking at revenue by product, we sold 25 LDC systems in the second quarter of 2021 generating $3 million in revenue compared to 13 systems driving a million eight MDT sales in the first quarter of 2036 system driving.

$2 million in sales in the second quarter of 2020.

As expected in our early stage Ltte's dominate revenue at 61% of our revenue in the second quarter of 2074% in the first quarter of this year.

Shelley Thunen: We sold 1,825 LALs in Q2 2021, generating revenue of $1.8 million compared to 1,567 LALs, driving $1.5 million in LAL sales in Q1 2021, and 661 LALs generating $619,000 of LAL revenue in Q2 2020. We should note that comparative LAL sales in Q2 2020 were impacted by the shutdown of nearly all elective procedures in the US in mid-March 2020. Q2 gross loss was $800,000 compared to $1 million gross profit or 32% of revenue in the quarter ended 31 March, and $500,000 gross loss in Q2 2020.

We sold 1825 <unk> in the second quarter of 2021 generating revenue of one 8 million compared to 1567.

Driving one 5 million in LVL sales in the first quarter of 2021.

661, LLS generating 619000.

Revenue in the second quarter 2020.

We should note the comparative LVL sales in the second quarter of 2020 were impacted by the shutdown of nearly all elective procedures in the U S. In mid March 2020.

Second quarter gross loss was $800000 compared to 1 million gross profit was 32% of revenue in the quarter ended March 31.

And $500000 quest loss in second quarter of 2020.

Shelley Thunen: The sequential decrease in gross profit was primarily due to a $1.7 million inventory reserve for the previous generation of LAL inventory due to the recent introduction of a new LAL, which includes our ActivShield technology that Ron just discussed. Had we not taken a reserve for the previous version of our LAL, our gross profit in Q2 would have been $900,000 or 18% of revenue. In addition, two other factors affect our gross profit. First, our product mix between our low margin capital equipment like delivery device and our higher margin LAL significantly impacts our overall margin. In Q1 2021, our LDD sales represented 53% of revenue, and in Q2, LDD sales represented 61% of revenue.

Sequential decrease in gross profit was primarily due to a $8.0 million inventory reserve for the previous generation of.

Inventory.

The recent introduction of a new LEL, which includes our active shield technology that Ron just discussed.

Had we not taken a reserve for the previous version of our prop.

Profit in the second quarter would have been $900000 or 18% of revenue.

In addition to other factors affect our gross profit first or product mix between on low margin capital equipment delivery device and our higher margin <unk>.

Significantly impacts our overall margin.

In the first quarter of 2021, our LDP sales represented 53% of revenue.

In the second quarter LGD sales represented 61% of revenue.

Shelley Thunen: Finally, the average selling price decreased as anticipated in Q2 2021, including purchases by a corporate customer who is expanding their footprint to new centers and a new affiliated buying group. Selling, general, and administrative expenses for the three months ended 30 June were $6.5 million, compared to $5.6 million for the three months ended 31 March and $3.2 million in the same period of the prior year. The increase in SG&A in Q2 2021 compared to Q2 2020 was primarily due to increased headcount in sales and marketing and the increase in salaries in 2021 after temporary salary and bonus decreases starting in Q2 2020 due to COVID-19 cost reduction measures.

Finally, the average selling price decreased as anticipated in the second quarter of 2021, including purchases by a corporate customer who is expanding their footprint to these centers and a new affiliated buying agreement.

Selling general and administrative expenses for the three months ended June 30th were $11.0 million compared to $11.0 million for the three months ended March 31, and $5.0 million in the same period the prior year.

The increase in SG&A in the second quarter of 2021 compared to the second quarter of 2020 was primarily due to increased head count in sales and marketing and the increase in salaries in 2021 after temporary salary and bonus decreases starting in the second quarter of 2020.

Due to COVID-19 cost reduction measures.

Shelley Thunen: Research and development expenses for the three months ended 30 June 2021 were $6.6 million, the same as three months ended 31 March 2021 and $5.1 million in the same period of the prior year. The increase in research and development expenses compared to the prior year period was primarily due to increased LAL transfers to research and development for testing.

Research and development expenses for the three months ended June 32021, $12.0 million. The same three months ended March 31, 2021, and $6.0 million in the same period of the prior year.

The increase in research and development expenses compared to the prior year period was primarily due to increase LDL transfers to research and development protesting.

Shelley Thunen: Our net loss in Q2 was $13.5 million or $3.28 per share and $3.53 per share, basic and diluted, respectively, attributed to common stock using a pre-IPO weighted average share count of 4.1 million and 4.2 million common shares, respectively, compared to a $17 million loss or $4.66 per share for both basic and diluted per share loss attributable to common stock using a pre-IPO weighted average share count of 3.6 million shares in Q2 2020. I would also like to note the non-GAAP disclosure in the press release for the non-cash stock-based compensation expense and the change in the fair value of warrants as it provides investors with useful comparative information.

Our net loss in the second quarter was $18.0 million or $31.0 per share and $56.0 per share basic and diluted respectively attributed to common stock using a pre IPO weighted average share count of $5.0 million and $4 two.

Million common shares respectively.

Compared to $17 million or loss of one.

66 cents per share for both basic and diluted per share loss attributable to common stock using a pre IPO weighted average share count of three 6 million shares in the second quarter of 2020.

I would also like to note the non-GAAP disclosure in the press release for the noncash stock based compensation expense and the change in the fair value warrant as.

As it provides investors with useful comparative information.

Shelley Thunen: Stock-based compensation in Q2 2021 was $1.4 million as compared to $1.1 million in Q2 2020. Prior to our initial public offering, we had warrants outstanding, which are valued quarterly, resulting in non-cash expense or income, which are also included in our non-GAAP disclosure. Moving to the balance sheet, we ended Q2 2021 with $61.7 million in cash equivalents, and short-term investments. Long-term debt was $40 million. We are very pleased that in July we completed our initial public offering, which generated approximately $120 million of net proceeds. We are now well positioned to expand our commercial infrastructure, advance and enhance next-generation products, and increase the body of clinical evidence to support broad adoption and utilization of the Light Adjustable Lens technology.

Stock based compensation in the second quarter of 2021, with $5.0 million as compared to $2.0 million in the second quarter of 2020.

Prior to our initial public offering we have warrants outstanding which are value importantly, resulting in noncash expense or income which are also included in our non-GAAP disclosure.

Moving to the balance sheet. We ended the second quarter of 2021 with $68.0 million in cash cash equivalents and short term investments long term debt was $40 million. We're very pleased that in July we completed our initial public offering which generated approximately $120 million of net.

Proceeds.

We are now well positioned to expand our commercial infrastructure advancement have X generation products and increase the body of clinical evidence to support broader adoption and utilization of <unk> technology.

Shelley Thunen: Now I will return the call to Ron for closing remarks.

Now I will return the call to Ron for closing remarks.

Ron Kurtz: Thank you, Shelley. Before we open up the line for questions, I'd also like to make note of our post-IPO press release announcing three new directors of our board, including Bob Palmisano, Robert Warner, and Julie Andrews, who now serve alongside Bill Link, Juliet Bakker, our chairman, Andy Corley, and myself. We're fortunate to be able to draw upon this group's highly relevant experience to guide RxSight through this next phase as a public company focused on delivering an optimal premium IOL solution for patients and doctors, an exciting and rewarding work environment for our employees, and of course, a trusted and valued investment for shareholders. Now, operator, please open the call for questions.

Thank you Shelly and before we open up the line for questions. I'd also like to make note of our post IPO press release announcing three new directors of our board, including Bob Palmisano, Robert Warner and Julie Andrews, who now serve alongside Bill Link Juliet Bakker, our chairman, Andy quarterly and myself, we're fortunate to be.

Able to draw upon this group's highly relevant experience to guide Rx side through this next phase as a public company focused on delivering an optimal premium firewall solution for patients and doctors and it's exciting and rewarding work environment for our employees and of course, a trusted and valued investment for shareholders.

And now operator, please open the call for questions.

Operator: Thank you, Ron. As a reminder, to ask a question, you will need to press star and then the number one on your telephone keypad. To withdraw your question, just press the pound key. Please stand by while we compile the Q&A roster. Your first question comes from the line of Robbie Marcus from J.P. Morgan. Your line is open.

Thank you Ron as a reminder to ask a question you will need to press Star and then the number one on your telephone keypad and so we draw your question press the pound.

Please standby, while we compile the Q&A roster.

Your first question comes from the line of Robbie Marcus from Jpmorgan. Your line is open.

Robbie Marcus: Oh, great. First, congratulations on your Q1 public.

Oh great.

And first congratulations on your first quarter public.

Ron Kurtz: Thank you.

Robbie Marcus: You know, maybe to kick it off, you'd sort of touched on this, but I'd love to hear, you know, what are you seeing in the field in Q3 in terms of impact from Delta and COVID? You know, are you seeing progression off of Q2? You know, anything you can add maybe in relative to where the street sits for Q3 and Q4 sales, I think is what a lot of people are looking for. Thanks.

Thank you.

Yes, maybe to kick it off and sort of touched on this but I'd love to hear you now.

What are you seeing in the field in third quarter in terms of impact from Delta in Covid.

Did you are you seeing progression off of second quarter end.

Anything you can add.

And relative to where the street sets for third quarter and fourth quarter sales I think is what a lot of people are looking for.

Yes.

Ron Kurtz: Great. Well, maybe I'll start a little bit and talk about, you know, what we're hearing about COVID, and then I'll turn it over to Shelley to talk more about the second part of your question. You know, we've sort of been through this movie before. As you know, the COVID has had its ups and downs, and we certainly experienced that in the latter part of 2020 and Q1 2021. You know, where that affected procedures and, you know, maybe made doctors a little bit more hesitant to embark on a new endeavor.

Great well, maybe I'll start a little bit and talk about what we're hearing about Covid and then I'll turn it over to Shelly to talk.

More about the second part of your question.

We don't we sort of been through this movie before.

As you know the.

Covid has had its ups and downs and we certainly experienced that in the latter part of 2020 in the first quarter of 2021.

The.

Where that affected.

Procedures in.

And also.

Maybe made doctors a little bit more hesitant to embark on a new endeavor on the other hand it also.

Ron Kurtz: On the other hand, it also focuses their attention on their business and how they can grow their business. Certainly, with the continued cuts in Medicare reimbursement, premium IOLs and the way and opportunity to grow premium IOLs is top of mind in practices. You know, other than that, really, we just have anecdotal information at this point. There obviously are more parts of the country that are more affected or at different times have been more affected by COVID. Certainly right now in the southeast and the southwest, that seems to be an area where it's particularly where the rise in cases has been particularly severe.

Focus has their attention.

On their business and how they can grow their business and certainly with the.

Hi.

Cuts and continued cuts in Medicare reimbursement premium <unk> and the opportunity to grow <unk> is top of mind and practices.

Other than that really we just have anecdotal.

Information at this point there there are obviously there are parts of the country that are more affected.

At different times have been more affected by Covid.

Certainly right now in the southeast and the southwest that seems to be an area, where it's particularly well.

Where the.

The rise in cases has been particularly severe and that those are areas, where we have a high proportion of our customers.

Ron Kurtz: Those are areas where we have a high proportion of our customers.

Shelley Thunen: Yeah. Just to kind of conclude on Ron's remarks, I think that, you know, there's two components to the business, the LDD. We saw that in the higher periods of COVID earlier, when doctors had to reduce the amount of patients they were seeing; they were more focused. They can make more money with the RxSight system. That's one of the messages we need to continue to bring home to potential customers, is that they're not gonna make it up on, you know, conventional volume, and this is an opportunity for them. I think that's an area of weakness, but also an area of strength for us. Of course, everybody can be impacted in terms of volume of the LALs.

Yes, just two.

Kind of conclude on Ron's remarks, I think.

There's two components to the business the LGD.

We started in the higher periods of Covid earlier, when doctors had to reduce the amount of patients that we're seeing and we're more focused they can make more money.

With the Rx type system and so that's one of the messages we need to continue to bring home to potential customers is that they're not going to make it up on conventional volume and this is an opportunity for them.

So I think that's an area of weakness, but also an area of strength for US and then of course, everybody can be impacted in terms of volume of the LLS and as Ron alluded to we're very strong in areas with good installed base, where there is an uptick in cobalt a little higher than international.

Shelley Thunen: As Ron alluded to, we're very strong in areas with a good install base where there is an uptick in COVID, a little higher than the national average. That's something we need to watch. While we were able to roll out COVID, our ActivShield, that gives us an advantage where customers before were trying to get their patients treated as quickly as possible before ActivShield in order to ensure that the patients did not get an inadvertent exposure to the sun, to UV sunlight. Now they can schedule patients at a more leisurely pace. They don't wanna, you know, push them off, but they can at a more leisurely pace, and that continues to give them flexibility in their business.

Average, so that's something we need to watch and.

While we were able to rollout COVID-19.

Our active shield that gives us an advantage where customers before we're trying to get their patients treated as quickly as possible before active shield in order to ensure that the patients did not get in a certain exposure to.

To use the sunlight now they can schedule patients at a more leisurely pace, they don't want to push them off but they can't ever more leisurely pace and that continued to give them flexibility in their business. So I think there is some upside downside and I think we're very micro economic purpose, just because of the size of the company.

Shelley Thunen: I think there's some upside, downside, and I think we're very microeconomic focused just because of the size of the company versus what a larger competitor would be. I hope that answered your question.

Versus what a larger competitor I hope that answered your question.

Robbie Marcus: Yeah. Maybe, I appreciate that. Maybe to get a little more specific, you know, the Street's looking at a little over $5 million and a little over $7 million in Q3 and Q4 and, you know, about 25, 28, and 36, 38, 40 type of LDD placements in Q3 and Q4. You know, I didn't see you give guidance in the release or on the call. Do you feel comfortable with those sales and LDD placement numbers as you sit here today?

Yeah, maybe.

Hey, Pat maybe to get a little more specific and other strengths looking at a little over 5% a little over $7 million in the third and fourth quarter.

About $53.0

36, 38, 40 type of LTE placements in the third and fourth quarter.

Did you give guidance in the release or on the call do you feel comfortable with.

Those sales and LTV placement numbers as you sit here today.

Shelley Thunen: You know, we didn't give guidance and, you know, that is a very good question, Robbie. Not having given guidance, I think it's a little difficult for us to answer those questions as well. What I will say is that we're very, very focused on LDD sales. That is something we can impact more than we can LAL sales. I think that's important for us because we've got two revenue streams in the business, not just one. I hope that helps a little bit.

No we didnt give guidance and that is a very good question, probably not having given guidance I think it's a little difficult for us to answer those questions as well, but what I will say is that we're very very focused on <unk> sales.

That is something we can impact more than we can lay out sales and I think thats important breath, because we've got two revenue streams in the business not just one SEC.

So I hope that helps a little bit.

Robbie Marcus: Yeah. Maybe a last one from me, and I appreciate that. You know, it's one quarter out of the IPO. I think everybody's just very focused on the model here and the trajectory coming out. I mean, do you feel comfortable with where Street estimates sit at $21 million for 2021? I'll leave it there.

Yes.

Last one from me and I appreciate that.

It's one quarter out of.

Out of the IPO I think everybody is just very focused on the model here in the trajectory coming out I mean.

Do you feel comfortable with where street estimates set at $21 million for 2021.

Shelley Thunen: Well-

Shelley Thunen: Well.

Robbie Marcus: Appreciate it.

Shelley Thunen: Yeah. I think that while we're not giving guidance, I think it's implied.

I'll leave it there I appreciate it yeah yeah.

Think that while we're not giving guidance I think it's implied.

Robbie Marcus: Okay. Thank you.

Okay. Thank you.

Shelley Thunen: Okay. Thank you, Robbie.

Okay. Thank you Ravi.

Operator: Thank you. Your next question comes from the line of Mike DeMarco from Bank of America. Your line is open.

Operator: Thank you. Your next question comes from the line of Clay DeMarcus from Bank of America. Your line is open.

Thank you. Your next question comes from the line of Clay the markets from Bank of America. Your line is open.

Mike DeMarco: Hey, good afternoon. I'll also offer my congratulations. I guess just to maybe build on Robbie's question a little, you know, in this current environment, are you seeing any sort of impediment towards making further LDD placements in the quarter? Just asking that, you know, given the last two quarters, you're in that 50% to 60% of revenues, you know, coming from the LDD. So just wanna, you know, see anything qualitative. Are you seeing any sort of impacts with being able to go into ASCs or go about business development efforts?

Clay DeMarcus: Hey, good afternoon. I'll also offer my congratulations. I guess just to maybe build on Robbie's question a little, you know, in this current environment, are you seeing any sort of impediment towards making further LDD placements in the quarter? Just asking that, you know, given the last two quarters, you're in that 50% to 60% of revenues, you know, coming from the LDD. So just wanna, you know, see anything qualitative. Are you seeing any sort of impacts with being able to go into ASCs or go about business development efforts?

Hey, Good afternoon also offer my congratulations.

Because maybe build on Robbie's question a little.

In this current environment are you seeing.

Any sort of impediment toward making further LDP placements in the quarter.

And just asking that given the last two quarters here in that $50 to 60% of revenue is coming from the LGD.

So just want to see anything qualitative or are you seeing any sort of impacts of being able to go into asc's or.

Go about business development efforts.

Ron Kurtz: Yeah. I would say that not currently. We're able to get into ASCs and, for the most part, get to see doctors. There are, you know, obviously still restrictions in place. For the most part, the team has figured out how to, you know, leverage virtual meetings as well as in-person meetings. We did have the two meetings in July, which were both good meetings for us. We're hopeful that the academy meeting will move forward with good attendance as well, and that'll be a strong meeting for us as well.

Yes, I would say that not currently we're able to.

Get into <unk> and get the.

The most part get to see doctors.

There is.

There are obviously still restrictions in place, but for the most part the team has figured out how to.

Leverage.

Virtual meetings as well as in person meetings.

We did have.

The two meetings in July which were.

Both good meetings for us.

And we're hopeful that the Academy meeting will will move forward with.

Good attendance as well and that will be a strong meeting for us as well.

Shelley Thunen: Yeah. If I could add just a little bit, Ron. I think two of the things that we leverage very much in our sales process, you know, above and beyond the relationship the salesperson has with the doctor is, physician references. Those are still very strong and, that's something easily done over the phone, so it's not impacted by COVID. As well, you know, we've got more clinical data than we did before. You know, we have a nice ROI on the LDD, and we have that study that was done by Hoppe and Company not too long ago, and our salespeople are able to leverage for doctors using their unique pricing, showing them how they can make more money. That hasn't changed. That's again, something that they can do remotely as well as in person.

Yes, if I could add just a little bit Ron I think two of the things that we leverage very much a sales process.

Beyond the relationship the sales person house with the Doctor.

His position references.

Those are still very strong and that's something easily done over the phone.

Not impacted by Covid.

And <unk>.

As well, we've got more clinical data than we did before and we have a nice.

RLI on the <unk>.

<unk>.

We have that study that was done by <unk> company, not too long with al and our salespeople are able to leverage for doctors season, very unique pricing showing them how they can make more money. So that hasnt changed that's again something that they can do remotely as well as in person.

Mike DeMarco: Okay. Thank you for that. Ron, a bigger picture question for you. Just as you think about the kind of catalyst over the next 12 months, 18 months, you know, more upgrades coming to the LAL, the next generation LDD, maybe reductions in the number of required follow-up appointments. You know, how would you frame those various catalysts for investors in terms of their potential impact to the commercial opportunity?

Clay DeMarcus: Okay. Thank you for that. Ron, a bigger picture question for you. Just as you think about the kind of catalyst over the next 12 months, 18 months, you know, more upgrades coming to the LAL, the next generation LDD, maybe reductions in the number of required follow-up appointments. You know, how would you frame those various catalysts for investors in terms of their potential impact to the commercial opportunity?

Okay. Thank you for that.

Ron a bigger picture question for you.

Just as you think about the kind of catalysts over the next.

12 months 18 months.

More more upgrades come into the next generation.

<unk>, maybe a reduction in the number of required follow up appointment.

Would you frame those various catalysts for investors in terms of their potential impact to the commercial opportunity.

Ron Kurtz: Yeah, I guess I would start with education about the benefits of the LAL technology. I think that's been something that, you know, obviously we've begun, but up to now, we've had a small sales force and a small team doing that. We've expanded that team with some very high quality, knowledgeable, experienced people who come from the industry, have a lot of experience, both clinical and business experience. They're, you know, taking the benefits of the technology and the evidence that's been generated directly and consistently to a wider audience. That is an effort that we're gonna continue. We mentioned the growth of the sales team, and that's an important factor and catalyst for continued growth.

Yes, I guess I would start with education about the benefits of the <unk> technology.

I think thats been something that obviously we.

<unk> begun but we've had a small up to now we've had a small sales force and a small team doing that.

We've expanded that team with some very high quality knowledgeable experienced.

People, who come from the industry have a lot of experience, both clinical and business experience and they are taking the benefits of the technology and the evidence that's been generated directly and consistently to a wider audience.

That is an effort that we're going to continue we mentioned the growth of the sales team and that's an important factor and catalysts for continued growth.

Ron Kurtz: You mentioned additional improvements to the technology. Obviously, we just introduced ActivShield. That's really a platform for us. We're going to leverage that for additional improvements to the technology as well as labeling changes to further reduce the requirements for glasses and the number of treatments. Those are in process, and we expect that they'll continue really over the next 12 to 24 months as we make additional submissions to the FDA. You also mentioned, you know, the LDD. We also had improvements to that in our most recent FDA supplement, which have been rolled out along with ActivShield.

You mentioned additional improvements to the technology, obviously, we just introduced active shield.

It's really a platform.

For us.

We're going to leverage that for additional.

<unk>.

Improvements to the technology as well as labeling changes.

To further reduce the requirements for glasses and the number of treatments those are in process and we expect that they'll continue really over the next 12 to 24 months as we.

Additional submissions to the FDA.

And then.

You also mentioned.

The LCD, we also had improvements to that.

In our most recent FDA supplement which has been rolled out along with active shield.

Ron Kurtz: We're continuing to make improvements, particularly in manufacturability, so that we can maintain our margins over the long term. That's going well, and we are planning to make those submissions to the FDA relatively quickly here too, and that would be within that 12-month timeframe. Finally, although it's not top of mind right now because of all of what's going on in the world, our, you know, the potential for expansion internationally is definitely going to be a long-term growth driver. We already have approval in Europe, and we have the ability to expand there.

And we're continuing to make.

Improvements, particularly in manufacturer ability so that we can.

Hi.

Maintain our margins over the long term.

And that's going well and we are.

Planning to make those submissions to the FDA relatively quickly here too and that would be within that 12 month timeframe.

And then finally, although it's not top of mind right now because of all of what's going on in the world are.

The potential for expansion internationally is definitely going to be a long term growth driver, we already have approval in Europe.

And we have the ability to expand there obviously, we've taken a pause there while we let COVID-19 hopefully run its course and let that.

Ron Kurtz: Obviously, we've taken a pause there while we let COVID hopefully run its course and let those countries which have been, probably, more affected than the US in terms of the impact on their cataract surgery volumes recover a bit. We would have the ability to expand there as well as in other wealthy nations around the world, and then ultimately into the large countries in Asia, which have longer regulatory cycles in the 2-year timeframe, but which offer very attractive markets for us. Anything to add there, Shelley?

Those countries, which have been probably more affected than the U S. In terms of impact on their cataract surgery volumes.

Recover a bit and then we would have the ability to expand there as well as in other wealthy nations around the country around the world and then ultimately into the large countries in Asia, which have longer regulatory cycles in the two year timeframe.

But which offer very attractive markets for us.

Shelley Thunen: No.

Anything to add there Shelly.

Mike DeMarco: Okay. Thank you both.

Clay DeMarcus: Okay. Thank you both.

Okay. Thank you both.

Shelley Thunen: Thank you, Mike DeMarco.

Shelley Thunen: Thank you, Clay.

Thank you clay.

Operator: Thank you. Your next question comes from the line of Richard Newitter from SVB Leerink. Your line is open.

Thanks. Thank you. Your next question comes from the line of Richard <unk> from SVP Leerink. Your line is open.

Richard Newitter: Hi. Thanks for taking the questions. Wanted to start off on just the ActivShield rollout. I was wondering if you could just, you know, maybe give us a little bit better understanding of how ActivShield will or is impacting the trajectory here. Is it more on the doctor side and the willingness for existing users to treat a broader array of patients that maybe they may have been worried about compliance, so higher utilization for existing accounts? Or is it more that this is something that's gonna get someone over the hump that might have been reluctant to purchase, you know, a system outright, and this is gonna kinda drive accelerated uptake for new users? Or is it more on the patient side?

Hi, Thanks for taking the questions.

I wanted to start off on just the active shield rollout I was wondering if you could just give us maybe.

Give us a little bit better understanding of how.

Active shield.

Or is impacting the trajectory here or is it more.

On the Doctor side, and the willingness for existing users to treat a broader array of patients that maybe they might have been worried about compliance so higher utilization for existing accounts or is it more that this is something that's going to get somewhat over the hump that might have been reluctant to purchase a system outright.

This is going to kind of drive accelerated uptake for new users.

Richard Newitter: To what extent has the glasses situation been a resistance point for patients? I'd love if you could just comment on those items for a second.

Or is it more on the patient side and to what extent has the.

Richard Newitter: To what extent has the glasses situation been a resistance point for patients? I'd love if you could just comment on those items for a second.

Has the glasses situation I've been a resistance point for patients.

If you could just comment on those those items for a second.

Ron Kurtz: Yeah. I'll start with the last item. We've been, you know, pleasantly surprised that really the use of postoperative glasses has not been reported as being a significant deterrent to patients. Patients typically wear protective glasses after cataract surgery, so this is not so different from what they normally do. You know, they understand that they have a special lens that's gonna be able to be modified after surgery to be able to give them, you know, essentially exactly what they want. The patients are willing to work with, you know, within the confines of that technology. From the doctor's side, you know, I think both of the things that you mentioned, Richard, are correct.

Yes, so I'll start with the with the last item.

Been pleasantly.

Surprised that really the use of post operative glasses has not been reported as being a significant turn to patients patients typically wear protective glasses. After cataract surgery. So this is not so different what they.

What they normally do.

And they understand that they have a special lens, that's going to be able to be modified after surgery to be able to give them essentially exactly what they want and the patients are willing to.

Work with within the confines of that technology.

From the Doctor side, I think both of the things that you mentioned Richard are correct and we're certainly seeing some anecdotal reports of both that.

Ron Kurtz: We're certainly seeing some anecdotal reports of both that our current users are really just ecstatic about having this upgrade to the technology. Even initial, you know, kind of amazement that we were able to make this change and a lot of kudos to our R&D and regulatory teams and our production teams for rolling that out. They have reacted extremely positively. We anticipate that, just as you said, this will open the door to more patients over time being offered the LAL, where you know some perhaps before they were making a you know a personality assessment in the office determining whether that patient was gonna be compliant or not.

Our current users.

Are are really just ecstatic about having this.

Upgrade to that technology.

Even initial kind of amazement that we.

We were able to make this change and.

A lot of kudos to our R&D and regulatory teams and our production teams for rolling that out.

But.

They have reacted extremely positively so we anticipate that just as you said this will open the door to more patients over time.

Being offered <unk> wear.

Perhaps before they were making a.

Our personality assessment in the office determining whether that patient was going to be compliant or not.

Ron Kurtz: We also have heard that for potential new users or new customers who are acquiring the technology for the first time, you know, that this is a big catalyst for them to adopt the technology, that you know having that potential concern was an impediment, and having that, you know, largely removed is a reason to move forward, and we're seeing that as well.

But we also have heard.

Debt for potential new users or new customers.

Who are acquiring the technology for the first time that that this is a big catalyst for them to adopt the technology that.

Having.

Having that potential concern was an impediment and having that largely removed as a reason to move forward and we're seeing that as well.

Richard Newitter: Got it. Thanks for that. You know, maybe, Rachelle, just going back to, you know, it sounds like you're the implication or you've kind of implied that you're comfortable with the consensus revenue forecast. Based on the comments that you provided around being a little more confident in your ability to get placements versus LAL utilization, should we take that kind of, I don't know, implied comfort in the full year revenue as a sign that maybe, you know, you're incrementally more, you know, more heavily reliant on LDDs versus LAL to get there versus you know, maybe a few months ago? Is that a fair assumption that putting the pieces together?

Yeah.

Got it.

Thanks for that.

Maybe just going back to it sounded like you're.

The application.

You've kind of implied that youre comfortable with.

Consensus revenue forecasts and then based on the comments that you've provided around the <unk>.

Little more confident in the.

Your ability to get.

<unk> versus <unk>.

Lal utilization should we take.

That kind of I don't know.

Implied comfort in our full year revenue.

As a sign that maybe.

Youre incrementally more.

More heavily reliant on ldds versus <unk> to get there versus maybe a few months ago is that a fair assumption, but putting the pieces together.

Shelley Thunen: Well, I think that we always have been more reliant on LDD, and that will definitely be true in a capital equipment business. You know, it takes a while to build your procedure business as well. I think your models already reflect that. I think that we have less direct influence on the LAL sales, and that would be the only comment I would make around that. If we're gonna see any weakness from COVID, that's where we would see it. You know, our job is to try and give them reasons why they should not be concerned for our product as well as to continue selling the LDD. We're trying to balance both sets of the business in whatever environment we're in.

Well I think that we always had been more reliant on LTE and that will definitely be true in our capital equipment business. It takes a while to build your procedure business as well.

I think your models already reflect that.

Thank you.

We have less direct influence on the LVL sales.

And that would be the only comment I would make around that if we're going to see any weakness from COVID-19, that's where we would see it and our job is to try and.

Give the reasons why they should not be concerned for our product as well as to continue selling the elder game. So we're trying to balance both sets of the business in whatever environment. We're in.

Richard Newitter: Okay. It sounds like, though, that generally speaking, you know, you're more or less comfortable with the kind of consensus thinking directionally, if I'm hearing you correctly.

Okay.

It does it sounds like though that generally speaking Europe.

More or less comfortable with that.

Consensus.

Thinking directionally.

If im hearing you correctly.

Shelley Thunen: I think you are. Yes.

Thank you yes, okay.

Richard Newitter: Okay. If I could, just one last one. You know, there are a couple of newer competitive launches in the premium IOL category, particularly from Alcon and Vivity. I guess the question here is I'd love to hear your thoughts on how, if at all, that product is getting positioned in the marketplace, given that it's non-diffractive, and that seems to be kind of an area where your value proposition resonates, particularly kind of with blended vision, monovision. Just curious if the launch of that product has kind of changed conversation at all, or the decision matrix for doctors as they explore kind of the new alternatives out there. Thank you.

If I could just one last one there are a couple of new.

Newer competitive launches in the premium IOL category, particularly.

From from Alcon.

<unk>.

I guess the question here is just any any.

Love to hear your thoughts on how if at all that that product is getting positioned.

In the marketplace given that its non diffractive that seems to be kind of an area, where your value proposition resonates, particularly kind of blended division by division.

Curious if the launch of that product is kind of change the conversation at all or the decision matrix for for doctors as they explore kind of the newer new alternatives out there. Thank you.

Yes.

Ron Kurtz: Yeah, I think that, you know, I would say more generally that if you look back at the premium IOL space, there has been a general trend towards less multifocality. While the Vivity lenses and others in the EDOF classes may not be a diffractive multifocal, they are multifocal lenses. They share the same, you know, the same profile in terms of patient symptoms. The general movement has been towards less multifocality. If you go back to the early multifocal lenses, you know, in the 2005 to 2010 timeframe, those were more power, more and less intermediate, more near, less intermediate.

Yes, I think that.

I would.

Say more generally that if you look back at the premium IOL space. There has been a general trend towards less multi <unk> and while the avidity lenses and others in the <unk> classes.

It may not be diffractive multifocal, they are multifocal lenses, so they share the same.

The same profile in terms of patient symptoms.

The.

But the.

The general.

<unk> has been towards less multiple calories. So if you go back to the early <unk>.

Multifocal lenses.

2005 to 2010 timeframe those were high.

More power more.

Less intermediate more near more or less intermediate and then you saw a progression towards less near less a little bit fewer side effects.

Ron Kurtz: Then you saw a progression towards less near, a little bit fewer side effects, and more focused on intermediate. The trifocals that have the Synergy and the PanOptix have been kind of counter to that. I think we're seeing a little bit with the additional introductions, a movement back towards the original trend, which is patients don't like multifocality in general, and so less multifocality is better than more multifocality for a lot of people. Of course, our response to that is no multifocality is the best response and preserve the quality of vision while still giving people a broad range of vision.

And more focused on intermediate.

<unk>.

The trifocal.

The synergy in the Pan optics have been kind of counter to that.

And I think we're seeing a little bit with the additional introductions a movement back towards the original trend, which is patients don't like multifocal <unk> in general and so less multifocal <unk> is better than.

More multi <unk> for a lot of people.

But of course, our response to that is.

No multifocal because he is the best response and preserve the quality of vision, while still giving people a broad range of vision and that's the unique attribute of our technology being able to.

Ron Kurtz: That's the unique attribute of our technology, being able to give people the highest quality distance vision, but then also be able to take advantage of both the broadened and the elevated depth of focus that the LAL has to provide a range of vision, which can be titrated or customized in both eyes with the patient after surgery to provide a binocular solution, a solution with two eyes that gives better results than a multifocal solution with two eyes.

Give people the highest quality distance vision, but then also be able to take.

Take advantage of both the broadened in the elevated.

Depth of focus that the layout has to provide a range of vision, which can be titrated or customized in both eyes with the patient after surgery to provide.

A buying ocular solution.

Solution with two eyes that gives better results than.

<unk> multifocal solution with two eyes.

Shelley Thunen: Ron, wouldn't you say, you know, one of the things that we say about industry is everybody uses the best tools they have available to them. What doctors have done with multifocal toric and EDOF lenses is fit the patient to the best lens that they can, right? Whereas with us, we're doing exactly the opposite.

So Ron wouldn't you say one of the things that we say about industry is everybody uses the best tools they have available to them and what doctors have done with multifocal toric and <unk> lenses is fit the patient to the best lens that they can right, whereas with us were.

Doing exactly the opposite.

Ron Kurtz: Yeah.

Shelley Thunen: Our lens fits the patient.

<unk> fits the patient.

Ron Kurtz: That's right. It's, you know, as Shelley mentioned, that has been the paradigm for the last 15 years, is take what's available and try to predict what that patient is gonna want after surgery and also what they're gonna need from a refractive standpoint. That's just not an exact science. It hasn't been and it won't be, and that's where we represent a paradigm shift where we put in a lens that has high quality vision, the ability to have a broad range of vision, but we titrate it to the patient after surgery.

That's right and so.

As Shelley mentioned.

That has been the.

Paradigm for the last 15 years is take what's available and try to predict what that patient is going to want after surgery and also what theyre going to need from a refractive standpoint, and Thats just not an exact science it hasnt been and it won't be.

That's where we represent a paradigm shift where we.

Put in a lens that has high quality vision the ability to have a broad range of vision, but we titrated to the patient after surgery.

Richard Newitter: Got it. Thank you very much.

Got it thank you very much.

Operator: Thank you. Your next question comes from the line of Lei Huang from Wells Fargo. Your line is open.

Thank you. Your next question comes from the line of <unk> Huang from Wells Fargo. Your line is open.

Lei Huang: Hi, it's Lei calling in for Larry. Thanks for taking my question. I know there's been a couple questions asked already about the revenue and the consensus. I just wanna make sure I'm hearing you clearly. You're comfortable with the current consensus number for 2021. Do you feel the same about the cadence going to Q3, Q4 in terms of what's on the street number?

Hi, its lei, calling in for Larry Thanks for taking my question.

I know there's been a couple of questions asked already about.

The revenue and the consensus I just wanted to Charlotte I'm hearing you.

You are comfortable with the current consensus number for 'twenty one.

Do you feel the same about the.

The cadence going into Q3 Q4 in terms of what's on the street number.

Shelley Thunen: Yeah. I know I've been asked this question before, and so it's a little difficult since we haven't been given guidance, and I know you understand that.

Yes, I know.

I've been asked this question before and so it's a little difficult since we havent been given guidance and I know you understand that yes.

Lei Huang: Yes.

Shelley Thunen: I would say that the growth in cadence in our business is, you know, consistent with what we've seen before and consistent with what we would expect. We would continue to see, you know, we continue to expect that, you know, we would have a couple of, you know, variables, right? That as we get further and further penetrated, as we have more sales people, that the number of LDD placements per quarter will continue to increase, as will the LALs due to the higher install base. I think that, you know, that's our model, and we'll continue to push on that particular model.

I would say that the growth in cadence and our business is consistent with what we've seen before and consistent with what we would expect we will continue this theme.

We continue to expect that.

We have a couple of.

Variable rate debt as we get further and further penetrated thats, we have more salespeople that the number of LDP placements per quarter. We will continue to increase as will the LLS due to the higher installed base and so I think that.

That's our model and we will continue to.

Push on that particular model.

Lei Huang: Got it. Thanks for clarifying that. Just if you can also comment around the ASP trend, how we should think about that just directionally next few quarters?

Got it thanks for clarifying that.

You can also comment around the ASP trend.

Or we should think about that just directionally next few quarter.

Shelley Thunen: Yeah. You know, the ASP trend obviously on the LAL has been very consistent since, you know, introduction. It runs between, you know, $900 and $975 per LAL. You know, some volume discounting in there. Our list price is $1,000. We anticipate that that will continue to be stable. It's very similar to the pricing of the other premium multifocal and other premium IOLs. I think that's well established. Also, the value is very well established, and it's passed on to the patient directly in higher pricing. I think that's very stable. Very typical of capital equipment. The pricing, the ASP tends to come down. It did come down between Q1 and Q2. We expected that. That's not unexpected.

Yes, the ASP trend, obviously on the Ll has been very consistent.

Introduction that rents between $1875.0 per <unk>.

Some volume discounting in there our list prices of $1000, we anticipate that that will continue to be stable.

And it's very similar to the pricing of the other premium multifocal and.

<unk> premium <unk> and so I think thats well established also the value is very well established and it's passed on to the patient directly.

And higher pricing. So I think that's very stable very typical with capital equipment. The pricing the ASP tends to come down it did come down between the first quarter in the second quarter, we expected that that's not unexpected.

Shelley Thunen: I would expect maybe that, you know, we'll stabilize, you know, going forward, you know, not a lot of change, not as much change as we have between Q1 and Q2. That typically it'd be another year or so before we would see any kind of inflection point again. You know, I think inflection is probably too strong a word. It's more always gradual, right? We are happy to have those gradual changes, particularly when we're able to get into loosely affiliated buying groups, new centers. You know, we hope to continue. Those are long-term sales, and they take longer to get. You know, we're certainly working on those.

Expect maybe that will stabilize going forward.

Not a lot of change not as much changes between the first and second quarter.

And that typically it would be another year or so before we would see any kind of inflection point again and.

Think inflection is probably too strong a word it's murray always gradual right and we are happy to have those gradual changes, particularly when we're able to get into loosely affiliated buying group standards.

And we hope to continue those are long term sales and they take longer to GAAP, but.

We're certainly working on that.

Lei Huang: Got it. That's very helpful. Just lastly, can you comment on gross margin? I think you said that the gross margin in, for the quarter, excluding the ActivShield related reserve, would have been closer to 18%. How do we think about that next few quarter? Obviously, the Q1 gross margin was in the 30%.

Got it that's very helpful. And then just lastly.

Can you comment on gross margin I think you said that the gross margin.

Quarter.

Proving that.

The active shale related reserve.

Closer to 18%.

How do we think about that next quarter obviously the.

Q1 gross margin was that was in that 30%.

Shelley Thunen: Yeah, it was. You know, Q1 had lower LDD sales in absolute terms, and it had higher ASP. You know, I think for us, if the LDD sales are more dominant, of course we're gonna have a lower gross margin than if the, you know, let's say it was 50/50 in terms of revenue. I think that, you know, our longer-term, right, which is high margin, but I wouldn't expect high margin in the short run. It's really affected by mix, and the particular customers we get for LDD.

Yes, it was.

Q1.

Lower <unk> sales in absolute terms.

A higher ASP.

And I think for us.

If the LTV sales are more dominant of course, we're going to have a lower gross margin.

Thank you.

Let's say it was 50.50 in terms of revenue.

So I think that.

You know our longer term.

<unk>, which is high margin, but I wouldn't expect high margins in the short run it's really affected by mix and the particular customers we get for LCD.

Lei Huang: Got it. Thank you so much.

Got it thank you so much.

Shelley Thunen: Thank you.

Yes.

Operator: Thank you. Your next question comes from the line of Ryan Zimmerman from BTIG. Your line is open.

Thank you and your next question comes from the line of Ryan Zimmerman from <unk>. Your line is open.

Ryan Zimmerman: Great. Thanks for taking the questions. Congrats on the Q1 out the gate. I won't ask about consensus, so let's start there. I won't ask about that. I will ask, Shelley, you did make a comment about LDDs in the quarter and about new customers. There's a new customer and an affiliated buying group. You know, I'm curious, not expecting you to disclose that necessarily, but you know, is that order, that multisystem order complete, or is there some that could carry in the Q3? You know, what opportunity is there for maybe some of these larger unit deals, as you kind of look at your pipeline of opportunities on the LDD side?

Great. Thanks for taking my questions. Congrats on the first quarter out the gate and I won't ask about consensus. So I'll start there I won't ask about that but but I will ask Shelly you did make a comment about ldds in the quarter and about new customers. So there is a new customer and affiliated buying group and so yes I am.

Curious I'm not expecting you to disclose that necessarily but but.

That order of that multi system order complete or is there something that could carry on the third quarter end.

What opportunity is there for maybe some of these larger unit deals.

You kind of look at your pipeline of opportunities on the LTV side.

Shelley Thunen: Yeah, I'm actually gonna have Ron talk a little bit about buying groups before I make a specific comment relative to the quarter. You know, we don't think of, you know, a buying group or a larger corporate customer as having an end to their, the number of units that they'll buy, right? You know, typically, they have multi centers, they're opening multi centers, and so we view it as a long-term relationship, not necessarily a per quarter relationship. Maybe they don't buy in every single quarter, but they would definitely buy over time. I think those are important questions for customers for us. I will say these particular two groups are not PE groups. Those tend to make more centralized decisions, and they may start, you know, they're a longer term sale.

Yes, I'm actually going to have Ron talk a little bit about buying group before I make a specific comment relative to the quarter.

I don't think.

A buying group.

Or a large corporate customer as having an end to their.

The number of units that they'll buy right typically.

<unk> multi centers are opening multiple centers and so we view it as a long term relationship not necessarily eight per quarter relationship maybe they don't buy in every single quarter, but they will definitely buy over time and I think those are important questions for cut.

Customers for US I will say these particular two groups or not pay groups.

Tend to make more centralized decisions and they may start there are longer term sale, but I think these are all important customers that will continue buying from them.

Shelley Thunen: I think these are all important customers that will continue buying from us.

Ryan Zimmerman: Uh.

Ron Kurtz: Yeah, the only thing that I would add is, as Shelley mentioned, you know, these customers who have, you know, multiple businesses sometimes across different states, they typically will take a measured pace to evaluation. They'll, you know, incorporate that in one or two of their centers. We've already experienced that. Our job is to make those successful, and as we think we're doing, and then move on to the next, as Shelley said, establish long-term relationships with these groups.

Yes, and the only thing that I would add is as Shelley mentioned.

<unk>.

Okay.

Customers who have.

Multiple businesses.

Sometimes across different states they typically will.

We will take a.

A measured pace to evaluation, so they'll incorporate that in one or two of their centers, we've already experienced that.

And our job is to make those successful.

And.

As we think we are doing and then move on to the next as Shelly said established long term relationships with these groups.

Ryan Zimmerman: Understood. Maybe just a thought, somewhat tangential to Rich's question around the introduction of some of the new technologies. You know, as I think about the install base of Constellation and other phaco systems that are out there, again, a little tangential, but they're coming due, you know, over the next, call it year or two, maybe longer. I'm wondering, you know, how that opportunity serves, you know, your interest for LDD sales. Does it present an opportunity? Does it present a challenge as some of the phaco systems are, you know, being thought about for being replaced and so forth? I'd love to get your thoughts on that, Ron.

Understood.

And maybe just a follow up.

Somewhat tangential to Rich's question around the introduction of some of the new technologies, but as I think about the install base of constellations and other FICO systems that are out there again, a little tangential, but they are coming due over the next call it year or two maybe longer and I'm wondering how.

That opportunity.

Serves.

Interest for.

<unk> sales.

It does it present opportunities as a percent of challenge.

Some of the FICO systems are.

Thought about for being replaced and so forth I'd love to hear your thoughts on that Ron.

Ron Kurtz: Yeah. You know, these are just off the cuff, obviously, but you know, the cataract surgery tools that you're mentioning, the phacoemulsification devices and other devices that are used in surgery, are bought by the ambulatory surgery centers, which, while some of those are partly owned or owned by physicians, they're mostly independent, and they have their own budgets and their own buying cycles. We sell the Light Delivery Device to, of course, the practices, typically in the offices, very few associated with ASCs. They're really separate customers. I don't see them as being competitive. They're really.

Yes.

These are just off the cuff, obviously, but the.

Cataract surgery tools that you are mentioning the FICO notification devices and other devices that are used in surgery are bought by the ambulatory surgery centers.

While some of those are partly owned or owned by physicians they are mostly independent.

And they have their own their own budgets and their own buying <unk>.

Cycles, we sell the late delivery device to of course the practices typically in the offices very few associated with ASC.

And so they are really separate customers.

So I don't see them as being competitive.

There really.

Hi.

Ron Kurtz: On the other hand, I don't necessarily see an opportunity, at least, in our current situation, where you know, we're really selling separately to the practices.

But on the other hand, I don't necessarily see.

And opportunity.

At least.

In our current situation where.

We're really.

Selling separately to the practices.

Ryan Zimmerman: Understood. The last one for me, you know, I appreciate the color on the sales force. I'm wondering if you could just elaborate a little bit on the procedure focus team and, you know, kind of what impact, because it is a bit much bigger component than the LDD sales force. You know, what impact do you see within practices, you know, whether it's quantitatively or qualitatively, when you do put those people into a, say, specific geography, you know, in terms of utilization and in, you know, driving adoption of LAL usage? I'd love to understand your thoughts there.

Understood and then the last one for me.

I appreciate the color on the sales force.

And I'm wondering if you could just elaborate a little bit on the procedure focus team and.

What impact.

Because it is a much bigger component.

Then the LGD Salesforce, what impact do you see within practices.

Whether it's quantitatively or qualitatively when you do put those people in to us any specific geography.

In terms of utilization and driving adoption of <unk> et cetera.

To understand your thoughts there.

Ron Kurtz: Yeah. Maybe I would step back a little bit. I mean, we were very proactive in establishing that team, and it's a highly qualified, clinically oriented team, and they've been very successful in educating the whole practice on, you know, not only the attributes of the LAL, but also all the particulars around the procedures, both the implantation as well as the light treatments. That has been really their focus. This is, you know, if you think about this technology, this is a new technology. That education, we have a whole group of people that we have to educate, and so that has been the primary focus of that team.

Yes, maybe I would step back a little bit I mean, we were very proactive in establishing that team and it's a highly.

Qualified clinically oriented team and they've been very successful in.

In educating.

The whole practice on the.

Not only the attributes of the Ohio, but also all the particulars around the procedures both.

The implementation as well as the late treatments.

And that has been really their focus. This is if you think about this technology. This is a new technology.

And.

That education, we have a whole.

Group of people that we have to educate and so that has been the primary focus of that team.

Ron Kurtz: As well as, you know, we've been adding LDDs at a pretty quick clip here, and so they've been having to catch up in maintaining that training, and they do it really well. We receive almost 100% ratings as willingness to recommend with respect to our training and installations team. It's very highly regarded and well thought of and appreciated by our customers, not only initially but on an ongoing basis.

As well as we've been adding ltd's.

Pretty.

Quick clip here and so they have been.

Okay.

Having to catch up and maintaining that training and they do it really well we receive.

Almost 100%.

Ratings as.

As his willingness to recommend with respect to our training and installations team.

Very highly regarded and well thought of and appreciated by our customers not only initially but on ongoing basis now as that team matures and as our installed base matures their focus also.

Ron Kurtz: Now, as that team matures and as our installed base matures, their focus also begins to move more towards utilization and, you know, really helping the practices identify patients who are going to be and expand the number of patients that are gonna benefit from this technology. We've, you know, fortunately, we have some of those people already on board. We're hiring more of those people. Of course, our LDD sales force also has that experience. We intentionally have hired a team that is both strong in capital equipment, but also is very strong in premium IOLs specifically and procedural growth.

Begins to move.

Move more towards you.

Utilization and.

Should really helping the practices.

Identify patients who are going to be and expand the number of patients that are going to benefit from this technology and.

We've.

Fortunately we have.

Some of those people are already on board were hiring more of those people and of course our.

LD the sales force.

Also has that experience we intentionally have hired a team there.

It is both strong and capital equipment, but also is very strong in premium, Iowa, specifically and procedural growth and that will be again over time.

Ron Kurtz: That will be, again, over time, as the install base increases and, you know, be very region-specific, will, become more and more of a focus for the team. Already is.

As the installed base increases and.

Be very region specific will become more and more going to focus for the team over the years.

Ryan Zimmerman: All right. Well, that's it for me. Thanks for taking the questions.

All right.

Is it from me thanks for taking my questions.

Ron Kurtz: Thank you, Ryan.

Ryan Zimmerman: Thank you.

Thank you Brian Thank you.

Operator: Thank you. There are no other questions on queue. I will now turn the call back to Ron.

Thank you there are no other questions on queue I will now turn the call back to Ron.

Ron Kurtz: Great. Thank you. I just wanna thank everyone for their time today and wish everyone a great rest of their day or evening. Thank you.

Great. Thank you I just wanted to thank everyone for their time today and wish everyone. A great rest of the day or evening. Thank you.

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

Okay.

[music].

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