Q4 2021 Rxsight Inc Earnings Call

March 8, 2022

Thank you for standing by and welcome to our X sight fourth quarter 2021 earnings conference. At this time all participants are in a listen only mode. If you required any theory any assistance during the conference. Please press Star Zero now, it's my pleasure to turn the conference to Philip Taylor the floor is yours.

Operator: Thank you for standing by, and welcome to RxSight Q4 2021 Earnings Conference. At this time, all participants are in a listen-only mode. If you require any assistance during the conference, please press star zero. Now it's my pleasure to turn the conference to Philip Taylor. The floor is yours.

Thank you operator, presenting today, our Rx sites, President and Chief Executive Officer, Ron Kurtz, and Chief Financial Officer, Shelley Thunen earlier today, our X sight released financial results for the three months and full year ended December 31, 2021, a copy of the press release is available on the <unk>.

Philip Taylor: Thank you, operator. Presenting today are RxSight's President and Chief Executive Officer, Ron Kurtz, and Chief Financial Officer, Shelley Thunen. Earlier today, RxSight released financial results for the three months and full year ended December 31, 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, March 8, 2022 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.

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 March eight 2022, 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 or SEC filings can be found on our website or on the SEC's website.

Philip Taylor: 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. Investors are cautioned not to place undue reliance on forward-looking statements. We 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 & Events section on our Investor Relations page. With that, I'll turn the call over to CEO Ron Kurtz.

Investors are cautioned not to place undue reliance on forward looking statements.

We 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 <unk> Dot com on the Investor calendar page of the news and events section on our Investor Relations page with that I'll turn the call over to CEO Ron Kurtz.

Good afternoon, everyone and thank you for joining us I'll.

Ron Kurtz: Good afternoon, everyone, and thank you for joining us. I'll begin with an overview of our progress in 2021 and more specifically in Q4, followed by a discussion of our plans for further growth in 2022. Shelley Thunen will then take us through the financial details for Q4 as well as for our twenty twenty-two guidance. After which, we will open up the call for questions. 2021 was a very productive year for RxSight. We accelerated the adoption of our Light Adjustable Lens or LAL, completed a successful IPO, introduced key product advancements like ActivShield, and rapidly expanded our US commercial team. These accomplishments, coupled with the LAL's unique ability to deliver precisely customized vision for patients, as well as to expand premium cataract surgery revenue for doctors and practices, have created substantial momentum for RxSight to drive continued growth in 2022.

I'll begin with an overview of our progress in 2021 and more specifically in Q4, followed by a discussion of our plans for further growth in 2022.

Shelley Thunen will then take us through the financial details for Q4 as well as for our 2022 guidance after which we'll open up the call for questions.

2021 was very productive year for our excite we accelerated the adoption of our light adjustable lens, where LEL completed a successful IPO introduced key product advancements like active shield and rapidly expanded our U S commercial team.

These accomplishments coupled with the <unk> unique ability to deliver precisely customize vision for patients as well as to expand premium cataract surgery revenue for doctors and practices have created substantial momentum for our excite to drive continued growth in 2022.

Our primary growth driver is building out the infrastructure of post operative L. A O treatments. This involves both the sale of late delivery devices were ltd's to new practices as well as the training of new doctors and staff, thereby enabling more patients to select the <unk> L for premium cataract surgery.

Ron Kurtz: Our primary growth driver is building out the infrastructure of postoperative LAL treatments. This involves both the sale of light delivery devices or LDDs to new practices, as well as the training of new doctors and staff, thereby enabling more patients to select the LAL for premium cataract surgery. In Q4, we added 45 LDDs to the network of clinical sites offering postoperative LAL treatments, bringing the installed base to 206 at the end of 2021 and representing a substantial increase from the 31 LDDs sold in Q3 of 2021. We believe our strong Q4 LDD sales were driven by a combination of factors, including positive references from existing RxSight customers using our ActivShield LAL, favorable seasonality, and expanding productivity of our LDD sales force and process.

In the fourth quarter, we added 45 L. D. These to the network of clinical sites offering postoperative L. L treatments, bringing the installed base to 206 at the end of 2021 and representing a substantial increase from the 31 L. D. D sold in Q3 of 2021.

We believe our strong Q4 L. D. D sales were driven by a combination of factors, including positive references from assisting our excite customers using our active shield LEL favorable seasonality and expanding productivity of our L. D D salesforce in process.

As we have noted before peer to peer technology endorsements are very important in ophthalmology and willingness to recommend our excite to a friend or colleague is the key question, we ask on our annual customer survey.

Ron Kurtz: As we have noted before, peer-to-peer technology endorsements are very important in ophthalmology, and willingness to recommend RxSight to a friend or colleague is the key question we ask on our annual customer survey. For the survey performed in Q4 2021, just after the conversion of all RxSight practices to the ActivShield LAL, we recorded an extremely high 97% willingness to recommend. I'll discuss more about ActivShield in a moment, but we believe the very positive reception this technology advancement received from then current RxSight practices influenced a number of new accounts to purchase LDDs in Q4 so that they could offer the LAL to their patients. In Q4, we also likely benefited from favorable seasonality, which is a long-standing occurrence within ophthalmic capital equipment purchasing cycles.

For the survey performed in Q4 2021, just after the conversion of all our safe practices to the active shield L. A L. We recorded an extremely high 97% willingness to recommend.

I'll discuss more about axis shield in a moment, but we believe the very positive reception. This technology advancement received from then current Arctic site practices influenced a number of new accounts to purchase Leds in Q4, so that they can offer the LDL to their patients.

In Q4, we also likely benefited from favorable seasonality, which is a longstanding occurrence within ophthalmic capital equipment purchasing cycles.

Ron Kurtz: The annual meeting of the American Academy of Ophthalmology, the largest ophthalmic conference of the year, returned to an in-person event in Q4. Though international attendance was low, we experienced excellent engagement and interactions with a high volume of US doctors, both in our booth and at other venues. With good visibility to their overall capital spending in 2021, many of these practices were able to move ahead with LDD purchases and take advantage of end-of-year tax savings. The last driver of Q4 performance we will discuss is our LDD sales force, which increased from six professionals at the time of the IPO in July to 18 at the end of Q4. This highly experienced team has deep relationships with doctors in their regions and has continued to mature and expand the LDD sales funnel as we further penetrate the market.

The annual meeting of the American Academy of Ophthalmology, the largest ophthalmic conference of the year returned to an in person event in Q4.

Though international attendance was slow we experienced excellent engagement and interactions with a high volume of U S doctors, both in our booth and at other venues.

With good visibility to their overall capital spending in 2021. Many of these practices. We're able to move ahead with L. D D purchases and take advantage of end of the year tax savings.

The last driver of Q4 performance, we will discuss as our L. D D Salesforce, which increased from six professionals at the time of the IPO in July to 18 at the end of Q4. This.

This highly experienced team has deep relationships with doctors in their regions and has continued to mature and expand the L. D. D sales funnel as we further penetrate the market.

While growth of our L. D. D installed base is a major driver for increased <unk> sales. The 2959 L. A LS implanted during the fourth quarter represented a significant jump from the 1900 seventy-seven implanted during Q3.

Ron Kurtz: While growth of our LDD installed base is a major driver for increased LAL sales, the 2,959 LALs implanted during Q4 represented a significant jump from the 1,977 implanted during Q3. We saw increased LAL use across both new and established accounts from Q3 to Q4, suggesting that the introduction of ActivShield was continuing to have an impact on utilization. ActivShield provides an extra layer of UV protection on the surface of the lens, giving doctors and patients confidence that they will not damage the LAL if they are not fully compliant with UV protective glasses. Coupled with the patient's ability to test drive and optimize their vision, this additional level of confidence creates a positive feedback loop. Importantly, in Q4, we also began a collaboration with RxSight practices to collect real-world clinical data on an ongoing basis.

We saw increased L. A U L. A L use across both new and established accounts from Q3 to Q4, suggesting that the introduction of active shield was continuing to have an impact on utilization.

Active shield provides an extra layer of UV protection on the surface of the lands, giving doctors and patients confidence that they will not damage. The L. A L. If theyre not fully compliant with you'd be protective glasses.

Coupled with the patient's ability to test drive and optimize their vision. This additional level of confidence creates a positive feedback loop.

Importantly in Q4, we also began a collaboration with Rx site practices to collect real world clinical data on an ongoing basis.

Ron Kurtz: So far, approximately 70 practices have agreed to share data captured and stored on their LDD, which includes the final refraction of each patient, as well as other useful clinical information. In a subset of approximately 50 practices operating under an IRB-approved protocol, we also began to collect additional data 1 to 3 months after completion of all light treatments.

So far approximately 70 practices have agreed to share data captured and stored on their L. D. D, which includes the final refraction of each patient as well as other useful clinical information in.

In a subset of approximately 50 practices operating under an IRB approved protocol. We also began to collect additional data one to three months after completion of all light treatments.

Ron Kurtz: A preliminary snapshot of both these datasets was shared at the American-European Congress of Ophthalmic Surgery or AECOS last week, indicating that over 90% of more than 500 eyes analyzed to date had very low residual refractive error after the final adjustment, less than a half diopter of residual sphere or astigmatism. These real-world results, which included a number of complex patients, are superior to any reported for other premium IOLs and are on par with both our Phase 3 data and published reports for LASIK, which is considered the standard for refractive procedure accuracy and precision. In a validation of observations we have previously noted, approximately 75% of patients elected to customize their vision in both eyes to optimize their binocular vision at a range of distances.

A preliminary snapshot of both these datasets with shared at the American European College, Falmouth surgery or a coast.

Last week, indicating that over 90% of more than 500 is analyzed to date at very low residual refractive error. After the final adjustment left less than a half day after a residual sphere werent stigmatism.

These real World results, which included a number of complex patients are superior to any reported for other premium white wells and are on par with both our phase III data and published reports for Lasik, which is considered the standard for refractive procedure accuracy and precision.

And a validation of observations we have previously noted approximately 75% of patients selected to customize their vision in both eyes to optimize their buying ocular vision at a range of distances because the L. D. D. Also records the target refraction in each adjustment. The collected data also indicates that for me.

Ron Kurtz: Because the LDD also records the target refraction at each adjustment, the collected data also indicates that for more than half of patients, the refractive goal was changed during the adjustment period, suggesting most patients were taking advantage of the ability to test drive and make small adjustments to their vision. Approximately 160 LAL eyes also underwent depth of focus evaluation, demonstrating an extended range of vision without glasses, similar to currently marketed enhanced and extended depth of focus IOLs. However, unlike these IOLs, the LAL minimizes residual refractive error and does not increase glare or halo, or reduce best corrected or contrast vision relative to a conventional monofocal IOL. Additional presentations of this expanding data set are planned for the American Society of Cataract and Refractive Surgery, or ASCRS meeting in May, as well as at the AAO meeting in October.

More than half of patients. The refractive goal was changed during the adjustment period, suggesting most patients were taking advantage of the ability to test drive and make small adjustments to their vision.

Approximately 160 L. L is also underwent depth of focus evaluation, demonstrating an extended range of vision without glasses similar to currently marketed enhanced and extended depth of focus on our wells.

However, unlike these other wells the L O L. A L minimizes rescission will refractive error and does not increase glare halo or reduce best corrected or contrast vision relative to a conventional month focal as well.

Additional presentations of this expanding dataset are planned for the American society of cataract and refractive surgery, where a S. C. A R. S meeting in May as well as at the AAN meeting in October .

Ron Kurtz: We also anticipate that our newly formed team of LAL account managers will use this data to help doctors optimize their results and educate their teams, and patients on the clinical benefits of the LAL. Because the patient's refractions are stored in our LDD, we are the only cataract company that can easily collect such large-scale data. I would also like to provide an update on the lower cost to manufacture LDD, which we have reported on previously. As you may recall, this device will have the same functionality and performance as our current LDD, and so we do not consider it a growth driver. However, its introduction is expected to reduce our cost of sales and improve our gross margin. We continue to expect to receive FDA approval for this device in Q2 of this year.

We also anticipate that our newly formed team of L. A L account managers will use this data to help doctors optimize the results and educate their teams and patients on the clinical benefits of the L. L.

Because the patient's refraction or stored in our L. D. D. We are the only cataract company that can easily collect such large scale data.

I would also like to provide an update on the lower cost to manufacture L. D D, which we have reported on previously.

As you May recall this just by <unk> will have the same functionality and performance as our current L. D D and so we do not consider it a growth driver. However, its introduction is expected to reduce our cost of sales and improve our gross margin. We continue to expect to receive FDA approval for this device in Q2 of this year.

Ron Kurtz: However, we expect to ship our current LDD at least through the end of the year to mitigate significant industry-wide supply chain risks. Since components for our current LDD have been in the supply chain longer, we believe we are more likely to be able to procure them during this difficult period. I also want to provide an update on our request for labeling changes related to indoor UV spectacles use with the ActivShield LAL. Because the functionality of the ActivShield LAL has already been approved and is being used on a daily basis by doctors and patients, we also do not consider this labeling change to be a growth driver. Based on FDA's request for additional data, we do not anticipate approval for these labeling changes this year.

However, we expect to ship our current L. D D at least through the end of the year to mitigate significant industry wide supply chain risks since.

Since components for our current LCD have been in the supply chain longer. We believe we are more likely to be able to procure them. During this difficult period.

I also want to provide an update on our request for labeling changes related to indoor UV spectacles use with the active shield lay out.

Because the functionality of the active shield L. A L has already been approved and is being used on a daily basis by doctors and patients. We also do not consider this labeling change to be a growth driver base.

Based on Fda's request for additional data, we do not anticipate approval for these labeling changes this year.

Yeah.

Ron Kurtz: As we look to 2022 and beyond, we believe the major growth catalyst for RxSight will continue to be growing awareness of the LAL's superior clinical results, including its ability to allow patients to test drive and optimize their vision before making a final decision. Superior outcomes help practices convert more patients to higher revenue LAL procedures, thereby driving both a better medicine and better business value proposition. By leveraging real world data that we can uniquely collect and increased access to doctors, our expanded sales team is already building on the momentum established in 2021. With that, I'd like to turn it over to Shelley for more details on the Q4 and on 2022 guidance.

As we look to 'twenty two to 2022 and beyond we believe the major growth catalyst for our excite will continue to be growing awareness of the L. L superior clinical results, including its ability to allow patients to test drive and optimize their vision before making a final decision.

Superior outcomes help practices convert more patients to higher revenue L. A L procedures, thereby driving both a better medicine and better business value proposition.

By leveraging real world data that we can uniquely can collect and increased access to doctors. Our expanded sales team is already building on the momentum established in 2021.

With that I'd like to turn it over to Shelly for more details on the fourth quarter and on 2022 guidance.

Shelley Thunen: Thank you, Ron, and good afternoon, everyone. Total revenue in Q4 2021 was $8.4 million, a 46% increase sequentially compared to the quarter ended 30 September 2021, and a 71% increase compared to Q4 2020. Looking at revenue by product line, we sold 45 LDD systems in Q4 2021, generating $5.3 million in sales, compared to 31 LDDs, driving $3.7 million of LDD sales in Q3 2021 and 23 LDDs in Q4 2020 for $3.3 million in sales. As expected, in our early stage of commercialization, LDDs continued to dominate the sales mix, representing 63% of our revenue in Q4 2021.

Thank you Ron and good afternoon, everyone.

Total revenue in the fourth quarter of 2021 with $8 $4 million, an increase of 46% sequentially compared to the quarter ended September 30th 'twenty, 'twenty, one and a 71% increase compared to the fourth quarter of 2020 looks.

Looking at revenue by product line, we sold 45 <unk> systems in the fourth quarter of 2021 generating $5 $3 million in town.

Sales compared to 31, Ltte striping $3 $7 million of LTE details third quarter in 2021 and 'twenty three ltvs in the fourth quarter of 2020 for $3 $3 million in sales.

As expected in our early stage of commercialization Ltvs continue to dominate the sales mix, representing 63% of our revenue in the fourth quarter of 2021.

Shelley Thunen: We sold 2,959 LALs in Q4 of 2021, generating sales of $2.9 million, compared to 1,977 LALs, driving $1.9 million of LAL sales in Q3 of 2021, and 1,577 LALs for $1.5 million of LAL sales in Q4 of 2020. Q4 gross profit was $2.9 million, or 34% of revenue, compared to a gross profit of $1.3 million or 23% of revenue in Q3 of 2021, and a $1.4 million gross profit in Q4 of 2020 or 28% of revenue. The sequential and year-over-year increases in gross profit were primarily due to higher sales volumes.

We sold 2959 from the fourth quarter of 2021 generating sales of $2 $9 million compared to 1977.

It's driving $1 $9 million of sales in the third quarter of 2021.

And 1577 four.

For $1.5 million of <unk> sales in the fourth quarter of 2020.

Fourth quarter gross profit was $2 9 million or 34% of revenue.

<unk> to gross profit of $1 $3 million or 23% of revenue in the third quarter of 2021, and a $1 4 million dollar gross profit in the fourth quarter of 2020 or 28% of revenue.

The sequential and year over year increases in gross profit were primarily due to higher sales volume.

Shelley Thunen: Selling, general, and administrative expenses for the three months ended 31 December 2021 were $11.6 million, compared to $9.1 million for the three months ended 30 September 2021, and $4.4 million in the same period of the prior year. Sequential increase in SG&A expenses in Q4 2021 compared to Q3 2021 was primarily due to increased headcount in sales and marketing, increased cost to operate as a public company, and an increase in stock-based compensation. Research and development expenses for the three months ended 31 December 2021 were $5.9 million compared to $5.4 million for the three months ended 30 September 2021, and $5.3 million in Q4 2020.

Selling general and administrative expenses for the three months ended December 31, 2021 were $11.6 million compared to $9 $1 million for the three months ended September 32021, and $4 $4 million in the same period in the prior year.

The sequential increase in SG&A expenses in the fourth quarter of 2021 compared to the third quarter of 2021 was primarily due to increased head count in sales and marketing increased Cogs operators public company and an increase in stock based compensation.

Research and development expenses for the three months ended December 31, 2021 were $5 $9 million compared to $5 $4 million for the three months ended September 30th 'twenty, 'twenty, one and $5 $3 million in the fourth quarter of 2020.

Shelley Thunen: The increase in research and development expenses sequentially and as compared to the prior period resulted from higher consumable materials for testing and prototype expense. Our research and development expenses can vary quarterly depending upon stage of development of products and timing of clinical studies. Our net loss in Q4 2021 was $15.7 million or $0.58 per share, basic and diluted, attributable to common stock using a weighted average share count of 27.4 million common shares. I would also like to highlight 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.

The increase in research and development expenses sequentially and as compared to the prior period resulted from higher consumable materials for testing and prototype expense are.

Our research and development expenses can vary quarterly depending upon stage in development of products and timing of clinical studies.

Our net loss in the fourth quarter of 2021 was $15 $7 million or 58 cents per share basic and diluted attributable to common stock using a weighted average share count of $27 4 million common shares.

I would also like to highlight the non-GAAP disclosure in the press release for the noncash stock based compensation expense and the change in the fair value of warrants as it provides investors with useful comparative information.

Shelley Thunen: Stock-based compensation in Q4 2021 was $2.9 million, and there was no change in fair value of warrants in the quarter, resulting in a non-GAAP loss of $12.8 million and a basic and diluted loss per share of $0.47. Moving to the balance sheet, we ended Q4 2021 with $159.3 million of cash equivalents, and short-term investments. Long-term debt was $39.8 million. During 2021, our cash use, excluding the proceeds of $15 million in debt and $119.6 million of net proceeds from our initial public offering, was $44.2 million.

<unk> based compensation in the fourth quarter of 2021 was $2 $9 million and there was no change in fair value warrants in the quarter.

Resulting in a non-GAAP loss of $12 $8 million and a basic and diluted loss per share of 47 cents.

Moving to the balance sheet, we ended the fourth quarter of 2021 one.

$159 $3 million in cash cash equivalents and short term investments.

Long term debt was $39 $8 million.

During 2021, our Kashi is excluding the proceeds of $15 million in debt and $119 6 million of net proceeds from our initial public offering was $44 $2 million.

Moving to guidance, we expect revenue for the full year of 2022 to be between $44 million and $40 million and $44 million, an increase of 77% to 100% over the full year 2021.

Shelley Thunen: Moving to guidance, we expect revenue for the full year of 2022 to be between $40 million and $44 million, an increase of 77% to 100% over the full year 2021. We continue to expect to see seasonality in 2022, with Q2 and Q4 generally the strongest for capital equipment, which is our LDD, and slower IOL growth in Q3 as doctors and patients take time off during the summer. Gross margin is expected to be between 35% and 36% of revenue. In 2022, we expect higher margin LAL revenue increasing as a percentage of sales, offset by pressure from higher costs to produce our LDD due to supply chain constraints.

We continue to expect to see seasonality in 2022 with the second and fourth quarter is generally the strongest for capital equipment, which is R. L. D D and slower I O L crowd in the third quarter as doctors and patients take time off during summer.

Gross margin is expected to be between 35 and 36% of revenue in 2022, we expect higher margin LEL revenue, increasing as a percentage of sales offset by pressure from higher cost to produce our LDP due to supply chain constraints.

Shelley Thunen: As Ron noted, we plan to ship our current LDD throughout 2022 and expect gross margin expansion in 2023 as a result of the introduction of our lower cost to manufacture LDD. We expect operating expenses to be between $86 million and $90 million. While we expect increases in research and development in 2022 over 2021, the majority of operating expense is in SG&A as we increased our combined LDD and LAL sales personnel from 6 at the time of our IPO at the end of July 2021 to 32 as of December 31, 2021, and we expect to be at 38 by the end of Q2 2022. In addition, we have commenced Phase 4 clinical studies Ron mentioned earlier, which are charged to sales and marketing.

As Ron noted we plan to ship our current LTV throughout 2022, and expect gross margin expansion in 2023 as a result of the introduction of our lower cost to manufacture L. D D.

We expect operating expenses to be between $86 million and $90 million, while we expect increases in research and development in 2022 over 'twenty 'twenty. One the majority of operating expense is in SG&A as we increased our combined L D D and Els.

L. A L sales personnel from six at the time of our IPO at the end of July of 'twenty. One to 32 at December 31, 2029, and we expect to be at 38 by the end of the second quarter of 2022 in.

In addition, we have commenced phase four clinical studies, while I mentioned earlier, which are charged with sales and marketing while.

Shelley Thunen: While most of the SG&A expense is in sales and marketing, there is some increase in G&A for the cost of being a public company borne over 12 months rather than the 5 months in 2021. We estimate non-cash stock-based compensation to be approximately $12 to 13 million versus $7.6 million in 2021. Now I will turn the call back to Ron for closing remarks.

While most of the SG&A expense is in sales and marketing there is some increase in G&A for the cost of being a public company for over 12 months rather than the five months in 2021.

We estimate noncash stock based compensation to be approximately $12 million to $13 million versus $7 $6 million in 2021.

Now I will turn the call back to Ron for closing remarks.

Ron Kurtz: Thank you, Shelley. To conclude our prepared remarks, we're proud of the progress made in 2021 and look forward to continued momentum in 2022, another important year as we work with our customers to establish a new standard that meets or exceeds the progressively higher expectations of premium cataract patients. Now, operator, please open the call for questions.

Thank you Shelly.

To conclude our prepared remarks, we're proud of the progress made in 2021 and look forward to continued momentum in 2020 to another important year as we work with our customers to establish a new standard that meets or exceeds the progressively higher expectations of premium cataract patients.

And now operator, please open the call for questions.

Operator: Thank you. Ladies and gentlemen, if you have a question, simply press star then one on your telephone to get in the queue. To withdraw the question, press the pound key or the hash key. One moment while we compile the Q&A roster. First question comes from Charles Ellson with Wells Fargo. Please go ahead.

Thank you and ladies and gentlemen, if you have a question simply press Star then one on your telephone to getting the Kim to withdraw the question press the pound key or the hash key.

One moment, while we compile the county roster.

First question comes from Charles <unk> with Wells Fargo. Please go ahead.

Hi, Thanks for taking the question.

Charles Ellson: Hi. Thanks for taking the question. Hi, Ron and Shelley. First, congrats on the strong quarter. First question and a quick follow-up, just digging in a bit on the 2022 guidance. When you look at just the total dollar amounts, why does it look like OpEx is growing faster than revenue in 2022? Just curious, you talked a bit about where the spending is going, but I guess, how should we think about leverage based on that beyond 2022? I have a quick follow-up.

Ron Shelley first congrats on the strong quarter.

First question just.

And a quick follow up just digging in a bit on the 2022 guidance.

So first of all why is it looks when you look at the just the total total dollar amount quite why does it look like.

Opex is growing faster than revenue in 2022, I'm, just curious where that you talked a bit about where the spending is going but I guess, how should how should we think about leverage out based on that beyond 2022, and then I have a quick follow up.

Good question. Thank you very much Charles.

Shelley Thunen: Good question. Thank you very much, Charles. Yes, it is increasing this year faster than revenue, in part because we are making significant investments in sales and marketing. This is a year of significant investment as we take our sales and marketing team to 38. In addition, sales and marketing is also bearing the cost of our Phase 4 studies, and that's a major driver in SG&A. Overall, as we think about SG&A, the sales and marketing component of it is about 70% of the total, and so, very heavy on the SG&A. It's a year of investment. As we continue to grow in 2022, we gave guidance of $40 to 44 million in revenue. We wanna be able to leverage that and set ourselves up for 2023 as well.

Yes. It is increasing this year faster than revenue in part because we are making significant investments in sales and marketing. This is a year of significant investment as we take our sales and marketing team to 38. In addition sales and marketing is also bearing parts of our phase four studies.

And that's a major driver in SG&A.

Over all as we think about SG&A, the sales and marketing component of it is about 70% of the total.

And still very heavy on the SG&A. So it's a year of investment as we continue to grow in 2020 can we gave guidance of 40.

$244 million in revenue.

We want to be able to leverage that and set ourselves up for 2023 as well.

Alright, Thanks, and then just a quick question on cadence. So you mentioned Q2 and Q4, so typical seasonality a little bit heavier.

Charles Ellson: All right. Thanks. Just a quick question on cadence. You mentioned Q2 and Q4, so typical seasonality or a little bit heavier. I guess just looking in the near term, what about Q1? It looks like last year, Q1 was close to like a 30% step down from the prior Q4 at the start of last year. Is that a fair spot to think about that, the start of Q1 2022 might be down a similar amount, or are there any other puts and takes that might make that a little bit different?

I guess just looking in the near term what about Q1. So it looks like last year Q1 was a close.

Close to like a 30% step down from the prior Q4 at the start of last year is that a is that a fair.

They are spot to kind of.

Think about that the start our Q1 'twenty two might be Dallas similar amount or are there any other puts and takes that might make that a little bit different.

Shelley Thunen: Yeah. I think the puts and takes are the following. First of all, we have a higher install base as we exit, you know, 2021 and going into 2022, right? I think that Q1 is important for us because that way you can generate more LAL sales. The second thing is we saw very little COVID impact from the end of 2021 and in Q1 of this year. Looks like it's ended. We'll see. I think that this quarter is different, and we would not expect to see that level of step down.

The puts and takes in the following first of all we have a higher installed base as we exit.

'twenty, one and going into 'twenty two right. So I think that the first quarter is that's important for us because that way you can generate more LEL sales. The second thing is as we saw very little Covid impact.

At the end of 2021 and in the first quarter at this year. It looks like attended we'll see.

I think that this quarter is different and we would not expect to see that level of step down.

Great. Thanks Kelly.

Charles Ellson: Great. Thanks, Shelley.

And thank you.

Shelley Thunen: Thank you.

Your next question comes from Robbie Marcus with JP Morgan.

Operator: Thank you. Your next question comes from Robbie Marcus with J.P. Morgan. The line is open.

He's helping.

Robbie Marcus: Oh, great. Thanks for taking the question. Maybe, you know, if you give us thoughts on how we should think about LDD versus LAL placements throughout 2022. Is the mix shifting at all? And then I have a follow-up. Thanks.

Great. Thanks for taking my question.

You know if you'd give us thoughts on how we should think about L. D D versus L. A L placements.

Throughout 2022 is the mix shifting at all.

And then I have a follow up thanks.

Shelley Thunen: Okay. Thank you, Robbie. Thank you for being on the call. The mix is shifting a little bit for the entire year of 2021. LDD sales represent about 61% of revenue, and we don't see, you know, the LDD, ASP coming down significantly during the year. It should remain relatively stable, and then as all capital equipment does, it tends to come down a little bit the deeper you get into the new customer base. It will shift more. If I think about the growth, you know, it's pretty heavy at 77% to 100%. In our guidance, you'll see growth obviously both in LDD and LAL, but higher in LAL, and we'll see some shift during the year.

Okay. Thank you Ravi.

Thank you for being on the call. The mix is shifting a little bit for the entire year 2021, LTE sales represented about 61% of revenue and we don't see you know the L. D. D. S P coming down significantly during the year. It should remain relatively stable and then as all capital.

Equipment does it tends to come down a little bit deeper you get into your into the new customer base.

But it will shift more and if I think about the crowd you know its pretty heavy at 77% to 100% and our guidance you'll see growth obviously, both in L. D D and lay out but higher in L. A Alan will see some shifts during the year I still expect that.

Shelley Thunen: I still expect that LDD revenue will exceed the revenue for LAL, but not by much, not as much as it did last year.

L D D.

Revenue will exceed the revenue per L L, but not that much not as much as it did last year.

Robbie Marcus: Shelley, I think originally the expectation was that the LDD price could come down materially over time, starting in 2022.

And Shelly I think originally the expectation was that the L. D D price could come down materially over time, starting in 2022, just to remind us what what happened there why it's not coming down how we should think about future pricing.

Robbie Marcus: Shelley, I think originally the expectation was that the LDD price could come down materially over time, starting in 2022.

Shelley Thunen: Mm-hmm.

Robbie Marcus: Just to remind us what happened there, why it's not coming down, how we should think about future pricing.

Shelley Thunen: Yeah. No, I think that, you know, the good news is that it remains stable in the Q2, Q3, and Q4 of 2021, and we look at it being relatively stable in this Q1 of 2022 as well. We haven't had to bring down the price. I think that the strong references from our existing customers, ActivShield, some pickup in terms of volume, which obviously make the practices more profitable, have allowed us to maintain our price much better than we originally thought.

Yeah, No I think that the good news is is that it remains stable in the second third and fourth quarters of 2021, and we look at it being relatively stable in this first quarter of 'twenty two as well we haven't had to bring down the price I think that the strong references from our existing customers.

Active shield.

Some pickup in terms of volume, which obviously might be on.

The practices more on.

More profitable have allowed us to maintain our price on.

Much better than we originally thought.

Great and then last from me Shelly.

Robbie Marcus: Great. Last from me, Shelley, the gross margin guidance was somewhat lower than we were hoping for in 2022. Maybe just walk us through the different puts and takes there. How much is inflation-

Margin guidance was somewhat lower than we were hoping for in 2022, maybe just walk us through the different puts and takes there how much of inflation FX et cetera.

Shelley Thunen: Mm-hmm.

Robbie Marcus: FX, et cetera?

Shelley Thunen: Yeah. You know, I think, you know, two things. Of course, one is that, you know, we continue to expect to receive FDA approval for our lower cost LDD by the end of Q2 of this year. However, as Ron mentioned, it is less risky in an increasingly more difficult supply chain environment for us to source products that are already in the supply chain rather than newer chips and components that, while we might have on order, are not yet as available. So we took the less risky approach from a revenue viewpoint, but that brings down our margin. While I know our costs in Q1 and Q2, in Q3 and Q4, I am anticipating some cost increase, primarily chips, components, and sheet metal.

Yeah.

Thank you know two things of course, one is is that you know we continue to expect to receive FDA approval for our lower cost L. D. D. On by the end of the second quarter of this year. However, as Ron mentioned it is less.

Less risky in increasingly more difficult supply chain environment for us to source product that are already in the supply chain rather than newer chips and components.

Matt.

While we might have on order are not yet.

Is available. So we took the less risky approach from a revenue viewpoint, but that brings down our margin and <unk>.

And while I know our costs.

In the first and second quarter in the third and fourth quarter I am anticipating some cost increase primarily chips components and sheet metal and so that is offset in part by the fact that our L. A L. A has a much higher volume and it's growing faster than the L. D D.

Shelley Thunen: That is offset in part by the fact that our LAL has a much higher volume, and it's growing faster than the LDD. As you recall, of course, you know, at volume, we expect that LAL, you know, in future years to be somewhere in the 85% to 90% margin level, but certainly not this year. The LAL price remains consistent. You know, overall, our ASPs are very, you know, we sell it for $1,000, and that remains very stable. Then our cost of the LAL remains stable throughout the year as we build to a level loaded build plan to fulfill both our sales requirements as well as stocking new ASCs as we add new customers. Ron, would you add anything to that?

And as you recall of course, you know about.

We expect that L L.

In future years to be somewhere in the 80, 85% to 90% margin level, but certainly not this year. The L. L price remains consistent our AUM.

For all our Asps are very.

You know, we sell them for thousands of dollars and that remains very stable and then our cost of the L. L remained stable throughout the year as we build to a level loaded bill planned to fulfill both our sales requirements as well as stocking new agencies as we add new customers. So Ron would you add anything to that.

Ron Kurtz: Nope. I think you got it all.

No I think you have it all.

Shelley Thunen: Okay. Thank you.

Thank you alright, thanks a lot.

Philip Taylor: Great. Thanks a lot.

Robbie Marcus: Great. Thanks a lot.

Shelley Thunen: Thank you very much, Robbie.

Thanks again retirement.

Philip Taylor: Thank you.

Robbie Marcus: Thank you.

Your next question comes from Ryan Zimmerman with D. T. I G. Your line is open.

Operator: Your next question comes from Ryan Zimmerman with BTIG. Your line is open.

Ryan Zimmerman: Great. Thanks for taking the questions. Congrats on the strong end to the year. Ron and Shelley, just maybe you could talk about the top-line guidance for a moment. It's a little bit better than I think the Street was expecting, and, you know, I'd love to get your view around, you know, your line of sight on LDD sales and kind of how that's, you know, come together, relative to your expectations for 2022. You know, what you learned in 2021, you know, that kind of gives you that confidence that you can count on some of those LDD sales, as we look ahead to 2022. I have a follow-up.

Great. Thanks for taking my questions. Congrats on a strong end to the year.

Maybe you could talk about the top line guidance for a moment, it's a little bit better than I think the street was expecting them.

Love to get.

Your line of sight on LPG sales.

Kind of how that's.

Come together.

Relative to your expectations for <unk>.

Now what you learn in 'twenty, one that kind of gives you that confidence that you can count on some of those sales.

At the 'twenty, two and then I have a follow up.

So thank you Ryan So I think you know one thing to think about it is the backdrop of the.

Ron Kurtz: Thank you, Ryan. I think, you know, one thing to think about is the backdrop of the market that we're operating in. As you know, cataract continues to increase in volumes as the population ages and people's visual demands increase. That also drives the premium cataract surgery market. Of course, practices and doctors are also more focused on that market as the reimbursements for conventional IOLs have dropped. There's just a lot of focus in the market for premium, and, you know, our results, our clinical results are, you know, outstanding. That certainly drives happy patients, but it also drives greater revenue. That's something that we've seen in our practices.

The market that we're operating in and as you know cataract continues to increase in volumes as the population ages in People's visual demands increase.

That also drives the.

The premium cataract surgery market.

And of course, our practices and doctors are also more focused on that market as the.

As the reimbursements for conventional wells have dropped so there's just a lot of focus in the market for.

Premium and you know our results our clinical results are.

Outstanding and pay in that.

Certainly drives happy patients, but it also drives greater revenue and that's something that we've seen in our practices and that information of course is past peer to peer to Pratt.

Ron Kurtz: That information, of course, is passed peer to peer to practices considering adopting RxSight, and that's helped build our funnel along with the expansion of our sales team. It's just added to our growing confidence with the placement of new LDDs and establishment of new accounts. Shelley, do you wanna add something?

Practices, considering adopting our X sight and that's helped build our funnel along with the expansion of our sales team. So it's just added to our growing confidence with the placement of new L. D DS and establishment of new accounts Shelly do you want to add some yeah I would also like to talk about.

Shelley Thunen: Yeah, I would also like to talk about LALs, because one of our goals is to continue to increase LAL growth as well. You know, one thing that helps us is the COVID impact as we exited 2021 and went into this Q1 2022 has been nominal. We think the momentum that we had in the Q4 has continued into the Q1 as well. We're very focused on that. I think our new LAL sales force, of course, we added 14 of those people in five months in 2021, so they're still in training. You know, I think hopefully we'll see some generation in the H2 of the year from their productivity as well.

L L. Because one of our goals is to continue to increase LDL growth as well and you know one.

One thing that helps us.

Covid impact as we exited 2021 and went into this first quarter of 2022 was the nominal we thank the men mentum that we had in the fourth quarter has continued into the first quarter as well.

And so we're very focused on that I think our new El Al Salesforce of course, we added 14 that those people in five months in 2021, so there's still in training.

You know I think hopefully we'll see some.

Generation in the second half of the year from their productivity as well.

Thanks for thanks for that all of that color there and then just as you're.

Ryan Zimmerman: Thanks for that, all that color there. Then just, you know, as you think about the install base up to 206 now on the LDD side, have you moved beyond in any capacity? I think when we first, you know, thought about the company, you know, the focus was initially on kind of the higher volume premium practices. Are you seeing any adoption beyond that group at this point, or is that something we should think about when the LDD pricing could come down, potentially in 2023? Thanks for taking the questions.

Thinking about the installed base up to two O six now on the LTV side.

Beyond in any capacity I think when we first thought about the company.

The focus was initially on kind of a higher volume premium practices are.

Are you seeing any adoption beyond that at this point or is that something we should think about when that will be the pricing could come down potentially in 'twenty sorry, thanks for taking the questions.

Ron Kurtz: Thanks, Ryan. I think, you know, we've always had a range of practices. I would, although we are focused obviously on higher volume premium practices, there are also some lower volume practices that do a high percentage of premium. We've had a range of practices in our innovators and early adopters group. We're certainly expanding beyond that into the, you know, what I would consider the early majority.

Thanks, Ryan So I think you know, we've always had a range of practices there.

I would although we are focused obviously on a higher volume premium practices, they're all system.

Lower volume practices to do a high percentage of premium and so we've had a range of practices.

In our innovators and early adopters group.

We're certainly expanding beyond that into the you know what I would consider the early majority and there.

Ron Kurtz: There are a number of practices in that group that are higher volume, sometimes higher volume conventional cataract surgery with lower penetration of premium, and they're looking to the Light Adjustable Lens as a way that they can build their premium volumes without having to offer LASIK, which is, you know, more common with high volume premium practices.

There are a number of practices in that group that are higher volume sometimes.

Higher volume.

Conventional cataract surgery with lower penetration of premium and they're looking to the light adjustable lenses a way that they can build their premium volumes without having to offer a lasik.

Which is.

Moat more common with high volume premium practices.

Ryan Zimmerman: Got it. Thanks for taking the questions.

Got it.

Thanks for taking the questions.

Shelley Thunen: Thank you.

Thank you.

Thank you next question is from Danielle <unk> with SBB Leerink. Your line is open.

Operator: Thank you. Next question is from Danielle Antalffy with SVB Leerink. Your line is open.

Hey, this is Aaron on for Danielle. Thanks, So much for taking a question.

Erin: Hey, this is Erin on for Danielle. Thanks so much for taking our questions. I was just hoping if you guys maybe could provide some color on maybe the typical adoption curve of some of these new customers. You know, how long after an LDD is placed, does it take for these practices to get ramped up to speed? I guess just kind of trying to think about how these 45 new placements in the quarter will contribute to revenue throughout the year.

[Analyst] (SVB Leerink): Hey, this is Erin on for Danielle. Thanks so much for taking our questions. I was just hoping if you guys maybe could provide some color on maybe the typical adoption curve of some of these new customers. You know, how long after an LDD is placed, does it take for these practices to get ramped up to speed? I guess just kind of trying to think about how these 45 new placements in the quarter will contribute to revenue throughout the year.

I'm, hoping if you guys maybe you could provide some color on maybe the typical adoption curve at some of these new customers and you know how long after an L. D play.

Does it take for you know these practical to get ramped up to speed I guess, just kind of trying to think about how do you quantify new placements in the quarter walk will contribute trapping you throughout the year.

Yeah, you know again as I said earlier I think that there's a lot of variability. It really is practice to practice dependent at this point are clearly its in our interest to have practices adopt.

Ron Kurtz: Yeah. You know, again, as I said earlier, I think that there's a lot of variability. It really is practice to practice dependent at this point. Clearly, it's in our interest to have practices adopt our LAL at the highest level as quickly as possible. We certainly are focused more and more on that, especially with our new LAL account managers. That is their primary focus. But there can be a range, and we can see, you know, some practices are more conservative. They'll wanna start out with, you know, a few patients a month, get their feet wet and then expand.

We are excited the highest.

At the highest level as quickly as possible and we certainly are focused more and more on that especially with our new L. L account managers that is their primary focus.

But there can be a range and we can see you know some practices are more conservative they'll they'll want to start out with.

Patients are months get their feet wet and then expand in some practices will go will get will base. It more on on the information that they've gotten from a similar practices that already have the technology and will be more aggressive out of the gate. So it's still a range, but I would say Jeff.

Ron Kurtz: Some practices will get, you know, base it more on the information that they've gotten from similar practices that already have the technology and will be more aggressive out of the gate. It's still a range, but I would say generally, you know, we're seeing practices adopt at a slightly quicker pace than they otherwise were previously. Some of that may be also due to ActivShield.

<unk>.

We're seeing practices.

Adopted a slightly quicker pace than they otherwise than they were previously and some of that may be also due to active shield.

Okay, great. Thanks.

Erin: Okay, great. Thanks. I was just wondering if you could maybe touch on some of, you know, where you guys are gaining share from. Is it primarily that people are choosing LALs over other premium IOLs? Or are you also, you know, maybe picking up some patients who would have not otherwise gotten a premium IOL?

[Analyst] (SVB Leerink): Okay, great. Thanks. I was just wondering if you could maybe touch on some of, you know, where you guys are gaining share from. Is it primarily that people are choosing LALs over other premium IOLs? Or are you also, you know, maybe picking up some patients who would have not otherwise gotten a premium IOL?

I was just wondering if you can maybe touch on some of them you know where you guys are gaining share from is it primarily and that your.

People are teething lel's over other premium IL al or are you also you know maybe picking up some patients who would not otherwise thought and opinion.

Yeah, We did a survey last year, where we looked at where LLS.

Ron Kurtz: Yeah, we did a survey last year where we looked at where LAL implants were coming from. At that time, it looked like about 1/3 were coming from patients who otherwise would have gotten a monofocal IOL, about 1/3 from patients who otherwise would have gotten a toric or astigmatism-correcting IOL, and about 1/3 from patients who would have gotten a presbyopia-correcting IOL. We haven't repeated that survey yet, but I don't see anything in the anecdotal data that we get that would suggest that it's different. You know, we get a lot of patients who would not have been good candidates for a multifocal IOL.

Implants were coming from and.

At that time, it looked like about a third were coming from.

Patients, who otherwise would have gotten a mono focal y O L. About a third from patients who otherwise would have gotten a toric, where stigmatism correcting I O L and about a third from patients who would've gotten a presbyopia correcting higher well.

We haven't repeated that the.

The survey, yet but I.

I don't see anything in the in an anecdotal data that we get that wood. So.

Suggests that it's different.

We get a lot of patients who would not have been good candidates for a <unk>.

Multifocal I O L. A this offers them a great opportunity to.

Ron Kurtz: This offers them a great opportunity to, you know, get great vision with reduced spectacle use, and does not reduce contrast vision or the quality of vision for eyes that might otherwise be more sensitive to that. For patients who otherwise might be getting, might have thought about just getting a toric or astigmatism-correcting IOL, we, you know, correct astigmatism at about twice the rate as a standard toric IOL, and we also correct sphere and offer a broader range of vision. That's a competitive advantage.

Get great vision with.

With reduced spectacle use and does not reduce contrast vision or the quality of vision for.

Or is that might otherwise be more sensitive to that for patients who otherwise might be getting might've thought about just getting a toric, where it stigmatism correcting I well we.

Correct astigmatism at about twice the rate as a standard toric I O L and we also correct sphere and offer.

He is.

A broader range of vision.

So that's a competitive advantage and then obviously versus multifocal out wells its really for patients who don't want to compromise on quality of vision, who want to be able to.

Ron Kurtz: Obviously, versus multifocal IOLs, it's really for patients who, you know, don't wanna compromise on quality of vision, who wanna be able to be sure that they're going to maintain excellent vision under all conditions, including at night. It's, you know, I think it's still roughly in the percentages that we've previously stated.

Be sure that they're going to maintain excellent vision under.

While conditions, including at night, and so you know I think it's still roughly in the percentages that we've previously stated.

Okay, great. Thanks, so much for taking my question.

Erin: Okay, great. Thanks so much for taking our questions.

[Analyst] (SVB Leerink): Okay, great. Thanks so much for taking our questions.

Thank you I'm not showing any further questions in the queue Sir.

Ron Kurtz: Thank you.

Operator: Thank you. I'm not showing any further questions in the queue, sir.

Great well, thank you very much everyone.

Ron Kurtz: Great. Well, thank you very much, everyone. I wish you the best for the rest of your day.

Wish you the best for the rest of your day.

And with that ladies and gentlemen, we conclude our program for today. Thank you for your participation and you may now disconnect.

Operator: With that, ladies and gentlemen, we conclude our program for today. Thank you for your participation, and you may now disconnect.

Hello.

Yes.

Okay.

[music].

Okay.

Sure.

Okay.

[music].

Yes.

Okay.

Yes.

Okay.

Thanks.

[music].

Q4 2021 Rxsight Inc Earnings Call

Request a DemoDemo

RXST

Rxsight

Earnings