RxSight Inc. Q1 2023 Earnings Call
Okay.
Okay.
Welcome to the Rx side first quarter 2023 earnings conference call.
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After the speaker's presentation, there will be a Q&A session.
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Now like to hand, it over to Alex Wong.
Associate Director Investor Relations. Please go ahead.
Thank you operator, presenting today, our Rx site, President and Chief Executive Officer, Dr. Ron Kurtz, and Chief Financial Officer, Shelley Thunen earlier.
Earlier today, our excite released financial results for the three months ended March 31 2023.
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 questions. During today's call reflect management's view as of today may nine 2023.
Will include forward looking statements and opinions 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 today and in our filings with the Securities and Exchange Commission or SEC.
Our SEC filings can be found on our website or the SEC's website <unk>.
Investors are cautioned not to place undue reliance on forward looking statements and we disclaim any obligation to update or revise these forward looking statements. We will also discuss certain non-GAAP financial measures disclosures regarding non-GAAP financial measures, including.
<unk> 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 investor website with that I will turn the call over to President and Chief Executive Officer, Dr. Ron Kurtz.
Thank you Alex good afternoon, and thank you for joining us the RSA team extended its track record of solid goes growth with first quarter 2023 results that underscore the increasing adoption and utilization of our unique light adjustable lighting system, which is the only premium cataract solution that customizes our pace.
Station after surgery and consistently deliver superior high quality outcomes across a broad range of individual needs and preferences I'll discuss how doctors are leveraging our systems distinct advantages in a few minutes, but first Shelly will provide an overview of our first quarter 2023 financial performance.
Thank you Ron and good afternoon, everyone. Our excite generated first quarter 2023 revenue of $17 $5 million up 96% compared to $8 $9 million in the year ago quarter, and up 9% compared to $16 $1 million in the fourth quarter of 'twenty.
'twenty two.
We sold 36 <unk> in the first quarter of 2023 up 40% compared to 40 units in the year ago quarter and down 2% compared to 57 units in the fourth quarter of 2022.
First quarter 2023 L. D D sales generated revenue of $6 $5 million up 42% and down 2% versus the first and fourth quarters of 2022, respectively. The Ldds sales include Canada, where we received approval and sold our first L. D D.
The fourth quarter of 2022, and another five ltvs in the first quarter of 2023.
Excluding these U S. L. D. D sales were 56 and 51 for the fourth quarter of 2022, and first quarter of 2023, respectively.
The sequential shifts in the U S is consistent with first quarter capital equipment seasonality typical for ophthalmology analyst coupled with significant interest in Canada as of March 31, 2023 R. L. D. D installed base stood at 456 units up 85%.
And 14% versus the first and fourth quarters of 2022, respectively.
We sold 10523 for $10 $4 million in the fourth in the first quarter of 2023.
153% and 16% compared to the first and fourth quarters of 2022, respectively.
<unk> revenue represented 59% of total revenue in the first quarter of 2023 up from 46% and 56% in the first and fourth quarters of 2022, respectively.
SG&A expenses in the first quarter of 2023 were $16 $3 million up 19% versus $13 $6 million in the year ago quarter, reflecting increased expenses and sales and marketing personnel costs and travel and increased noncash stock based.
<unk> expense in sales marketing and G&A on a sequential basis SG&A expenses were up 5% due primarily to an increase in noncash stock based compensation expense increased sales and marketing personnel costs and travel.
R&D expenses in the first quarter of 2023 rose, 7% to $7 $2 million compared to $6 $7 million in both the first and fourth quarters of 2022.
The change primarily reflects the usual fluctuations, we experience material utilization and timing of clinical studies.
We reported a GAAP net loss in the first quarter of 2023 of $13 $2 million or a loss of 42 cents per basic and diluted share using weighted average shares outstanding of 31 6 million shares.
This compares to a GAAP net loss of $17 $6 million or 64 cents per share on a basic and diluted basis in the same year ago quarter.
Note that stock based compensation in the first quarter of 2023 was $3 $3 million, resulting in a non-GAAP loss of $9 $9 million or a loss of 31 cents per basic and diluted share. Please refer to the unaudited non-GAAP reconciliation and disclosure.
<unk> and today's press release for Mark Comparative information.
We ended the first quarter of 2023 with cash cash equivalents and short term investments of $153 9 million compared.
Compared to $105 $8 million at December 31, 2022.
Change reflects the 60 point $64 $5 million in net proceeds from our at the market and confidentially marketed public offering in the first quarter of 2023 minus cash used for operating activities of $16 5 million in the quarter for normal business operations and to pay.
Accrued expenses from 2022, which included annual incentive compensation.
We are increasing our 2023 revenue and gross margin guidance and reiterating our operating expense guidance as follows.
Revenue of $79 million to $84 million up from previous guidance of 78 million to $83 million, implying year over year growth of 61% to 71% and assuming continued sequential quarterly growth with potential seasonality in the third quarter.
Gross margin of 56% to 58% up from our previous guidance of 52%, 54%. The new guidance range compares to full year 2022 gross margin of 43, 5% and is driven primarily by an increasing revenue contribution from.
The higher margin LEL and some gross margin contribution from the lower cost to manufacture L. D D, which we expect to start delivering in the second half of 2023.
The increase in margin guidance relative to our prior guidance for 2023.
Flex material price decreases we've been able to achieve related to our current L. D D as well as freight savings and improvement in other costs included an L. L cost of sales.
While we expect gross margin to keep.
Improved throughout the year they may vary depending on the mix between LDL and L. D day revenue in any one quarter.
Operating expenses of $105 million to $108 million, representing a 24% to 28% rise over 2022, reflecting our ongoing investments to build a large durable post operative light treatment support infrastructure for sustained L. L procedure growth.
Note that operating expense estimates include noncash stock based compensation expense between 15 and $16 million.
Our 2023 interest expense should largely be offset by interest income given our higher levels of cash cash equivalents and marketable securities from our equity raises in the fourth quarter of 2022 and during the first quarter of 2023.
Finally, we anticipate decrease in cash used from operations for the remainder of 2023. Moreover, we do not anticipate the need to raise additional capital or incur additional debt in order to reach profit from operations with that ill turn the call back to Ron.
Thank you Shelly.
I'd like to begin with a recap of the annual meeting of the American Society of cataract, and refractive surgery, or <unk>, Crs, which wrapped up in San Diego yesterday with overall attendance reported to be back to pre pandemic levels. The meeting was very productive for our excite with continued growth and positive awareness of the light adjust.
<unk> system and many opportunities for our team to interact with current and prospective customers.
In addition to more than 10 L. A L focused presentations in the main Aas Crs program. The Rx side Booth featured a series of talks from L. A L users, who discuss their outcomes methods for integrating <unk> into their practices and how they position with patients relative to non adjustable aol's one of the highlights today as Crs.
For our excite was a presentation by Dr. John <unk>, which documented how the <unk> was used in 341 bilaterally implanted L. L patients from 45 Rx site customer sites in this cohort approximately 20% of patients chose to maximize distance vision in both eyes with over 99.
Percent, achieving 2025 or better distance vision, and 93% able to read J three or six point font about.
About three quarters of patients chose to optimize <unk> for near and intermediate vision with 95% of these patients still seeing 2025 or better at distance and 94% able to reach a two or five part.
Finally, a smaller group of patients about 6% elected to optimize both sides for intermediate and near vision with 95% still seeing 2025 or better at a distance and over 91% able to read Jay one or four fund importantly, approximately two thirds of subjects changed their refractive goals after being able to.
Test drive their vision during the white adjustment process reinforcing the value of postoperative adjustability for both precision and customization.
While about a quarter of the 341 patients had undergone a prior corneal refractive procedure like Lasik there were no significant outcome differences in this group compared to the three quarters of patients with no previous history of corneal surgery.
It is more difficult to achieve excellent refractive results with noninterest Boyer wells in patients who have undergone lasik or have other ocular conditions and these patients also may not be good candidates for colonial laser touch up procedures following cataract surgery.
This real world experience spotlights, the core benefits of our technology relative to competing non adjustable premium I OLS, namely the ability to deliver consistently superior uncorrected by an ocular visual acuity across a wide variety of patient driven goals.
Without the increased rates of glare and halos, where loss of contrast sensitivity that are commonly seen with multifocal at wells.
We believe that <unk> superior visual outcomes are the principal drivers behind our favorable adoption trends.
And as our strong first quarter numbers indicate an increasing number of practices are deciding to incorporate the lay out into their premium offerings.
Not only does this investment allow them to offer the best possible visual outcomes to their premium cataract patients, but it can also broaden their premium IOL patient pool and become a robust generator of profitable practice revenue something that is increasingly important as practice income from other services fall.
Feedback from existing L. A L and planners indicates that roughly 40% of their volume comes from patients who would otherwise have selected a non premium well, while another 32% come from patients who would have otherwise selected a lower priced toric multifocal highwall b.
These statistics indicate that patients are willing to pay more for a procedure that they and their doctor have confidence we will meet their expectations and likely helps explain the LLS continued growth to other relative to other IOR choices.
The additional.
Revenue from upgrading patients to the <unk> also provides a rapid return on investment for the late delivery device of about nine months based on an average of nine <unk> implanted per month.
To help maximize the productivity of our growing LGD installed base, our field team works closely with new and existing customers to integrate the lay out into the clinic workflow by disseminating best practices and key success factors, then maximize benefits and efficiencies with our system. We also provide ongoing strategic.
<unk> clinical and marketing support to ensure that doctors and staff members throughout the practice are well informed and enthusiastic LEL providers.
I'll wrap up by saying that we plan to continue to leverage our better technology and customer focus to allow doctors to establish a successful new private pay ophthalmic franchise that offers distinct and meaningful advantages to patients and practices.
A survey.
Conducted by Helio research and presented at the <unk> accelerator meeting with responses from over 250 U S. Ophthalmologists supports this thesis.
It found that premium IL procedures were believed to be the most likely to increase practice growth over the next five years with the light adjustable lens anticipated to make the most positive impact on patient care.
We are still early in the process I'm confident that these benefits coupled with favorable demographic and economic trends will help us build a durable high margin business that also rewards our employees and shareholders.
With that I'll ask the operator to open the call for questions.
Thank you.
At this time, we will conduct a Q&A session. As a reminder to ask a question you will need to press star one one on your telephone and wait for your name to be announced.
To withdraw your question. Please press star one again, please standby, while we compile the Q&A roster.
Our first question comes from Robbie Marcus from.
J P. Morgan. Please go ahead.
Hi, This is Allen on for Robbie Congratulations on the credit core order to start off the year I just had a few quick ones just starting with the quarter itself, but what are you seeing when it came to adoption from new stores versus same stores and how is utilization continuing to trend for the docs that you've brought onboard.
Thank you Alan for your question and one of the metrics the street looks at but not the way we run the business with number of LLS per ldds per month right.
And Q4, and Q1 were very similar and that was what we expected during this quarter because the fourth quarter is typically your highest volume.
<unk> and of course, we went from seven five to $8 nine between third quarter and the fourth quarter of last year, which was a big jump. So we're very happy to see that sustained right about the same number in the first quarter of this year.
Thanks, and then a quick follow up what are you guys seeing in the capital environment with rising interest rates, what kind of strength, you're seeing in demand for <unk> and are you seeing that continuing so far in the second quarter. Thank you.
Alright, Thank you Alan so.
One thing to recall is that our capital equipment.
As in the $125000 range.
So.
Thats not as high.
As you know.
Some of the hospital based capital equipments that.
May be may be more affected by those trends.
Overall.
As we said the ROI for a late delivery device is very quick and it enables practices to tap into.
That high profit.
Premium market more effectively.
So we continue to see strong demand for the LGD and.
We would anticipate that to continue.
Thank you Juan.
While mommy for our next question.
Our next question comes from Craig Bayou from Bank of America. Please go ahead.
Good afternoon. Thanks, Thanks for taking my questions Congrats on a strong start.
Wanted to start with some of the comments on.
The seasonality, obviously, recognizing that Q1 has some seasonality in there, but wondering if you could provide maybe a little bit more color on the cadence throughout the year on how we should be thinking about one ltvs.
And then also the utilization.
Sure the LLS.
Okay. Thank you very much Craig yes on the LTV side typically what we see in industry.
And of course for U S base is that you see the strongest quarters for LTV to be in the second and fourth quarters.
And then the third quarter, the weakest and the first quarter kind of intermediate within it but a little bit of seasonality and that's really driven by the fact that in the first quarter people are.
<unk> already just getting their capital budgets, together and making decisions for the year. However, this quarter, we have really strong results in the first quarter.
Both from our sales in the U S as well as from Canada, which is a new market for us.
And so that's a little unusual, but we've seen that before for the LTE in the third quarter. It tends to be a little weaker just because of the fact that doctors are on vacation and are not making as much decisions than a pop up in the fourth quarter now we have largely ground through these dynamics right.
Overall, but we're certainly aware of it.
And then on the procedure side again.
We're growing in procedures really two ways. So first of all adding Leds and having new customers in the mix and that helps the absolute number and then we're also looking to increase the productivity in each one of our practices. So we have account managers and clinical personnel in the field that work with.
The individual accounts to train them on use of the LGD train new doctors in our practice as well as train on what we call the infrastructure, which is the.
Ability for them to integrate this into their practice, but you do see some seasonality in the third quarter, a little bit and then high pop up and certainly within our numbers, we've got a high pop up in the fourth quarter.
Bit more than usual and then of course, we were able to maintain that productivity in the first quarter, which we were very pleased by.
Got it thanks Shelly.
Helpful.
And apologies if I missed it but on the gross margin the very strong gross margin in Q1.
Obviously mix plays into.
But was.
Was there improvement on on the LDC side.
And then as we think going ahead.
For the rest of the year.
With the lower cost LDP coming on I guess why.
Why is that.
Recognizing you raise gross margin guidance, but why is that the kind of the right.
The right range and could it be higher given your strong Q1 performance.
Yes, thank you very much yet the Q1 performance.
Performance was unusually strong at 59% and we increased our guidance based on first quarter results.
$2, 56% to 58% as well and we did get some material cost savings that we were able to push through on our existing LCD and of course that inventory moves very quickly. So we're getting that benefit in the first and second and even into the third quarter on our existing L. D D.
At the margin, we expect some additional improvement obviously from our lower cost to manufacture LTV as well.
And then of course Mitch.
But it was really generated primarily by the fact that some of the costs that are usually period costs in the first period for both the Ll and LD D as well as over absorption of labor were important to us in the first quarter. So we're not moving up the guidance to that level.
For the balance for the entire year.
Okay. It.
It makes sense, thanks for taking the questions.
Thank you very much.
Thank you.
One moment for our next question.
Yeah.
Our next question comes from David Saxon.
From Needham <unk> co. Please go ahead.
Hi, This is Joseph on for David.
First one just wanted to know if you guys got any takeaways from the customer event.
Friday.
And maybe just the general feedback that you got it from.
Crs this year.
Alright, Thank you Joseph.
<unk> had strong.
Strong feedback throughout the Crs show I think.
Generally.
People are people who attend the show are very very aware of the light adjustable ends and the benefits that it offers both to patients and practices.
And they express that by attending our.
Our.
Evening event in high number and then.
Having a very steady and strong.
Booths attendance, both that our talks in the booth as well as just in between those.
So overall I think the meeting was was very good meeting for us.
And indicative of excellent interest in the technology.
Sure that's great to hear.
And then maybe I guess.
<unk>.
Just touching on the gross margin long term.
I think in the past you guys had.
<unk> talked about $80 to 90%.
At scale.
Do you still feel confident in that number or.
And if you do how should we think about the time to get there is that going to be here in the next few years or longer term.
Just given the growth that we've seen thank you.
Thank you very much we have always said that the.
Oh, it could be a gross margin product in 80% plus range, but it's a pretty high volume because the vast majority of the costs for the LDL is fixed overhead right and modest amount of labor and a small amount of material, but your overhead for your molding and.
Your chemistry facilities in clean rooms, and all of that is really what determines that we haven't yet given.
An expectation of when that would be but I don't see it in the short term, we're just continuing to growth that each and every year.
Okay. Thank you very much.
Thank you.
Thank you.
One moment for our next question.
Our next question comes from Ryan Zimmerman from BP I G.
Please go ahead.
Hey, good afternoon, thanks for taking the questions sorry.
Sorry, I missed you guys at Crs.
Wanted to ask a couple of questions.
Some of our competitors in the Io space have called out.
CIO Mark of weakness.
And curious.
And again your thoughts on that I mean, clearly you guys are not seeing that in the results today, but.
No.
Why do you think.
That is and kind of what is your view.
The broader PCL market today, and then I have a follow up.
Yes, Thank you Ryan and I think it's always good for those who aren't as familiar to remind that <unk> stands for presbyopia correcting <unk> and that is.
One of the.
Segments of premium wells, the other being toric I wells and now of course adjustable aol's and there are other.
Saw that in 2008 2009, when torok I wells first became available in large numbers and we saw movement from P. C. I wells to <unk> and I think you're seeing a similar effect now where people are moving towards quality of vision, which of course is <unk>.
Good for us.
Yeah, no that's how far on an eternally aligns with kind of what the largest care play. It just reported this evening.
A second question I want to ask about is just your installed base now is pushing 456.
That is 456 years excuse me you know.
What does it take in your view to service that's growing installed base and just kind of help us level set us maybe on the sales force size and plans going forward.
Be a capital R. Consumable because you are now at this reaching some pretty sufficient scale.
So it is you know Ryan R. We you know we we currently have about 40 people in our sales force and they're divided roughly equivalent between the L. D D or capital equipment side, and the L. A L or procedure side and you know we we.
We feel good about our L. D. D sales force that's that has been in place for a little bit longer period of time, we started growing that soon after the I P. O nearly two years ago and we feel that we've you know we're covering the the U S market quite well.
The I L. A L. Salesforce came in a little bit later and of course as the installed base grows.
Their function is Oh, two onboard new accounts with working closely with our clinical training and fields. Other field staff, but also to drive adoption add existing customers and so as their local installed base grows.
<unk> add you know to that number as appropriate.
Sounds good. Thank you guys for taking my question.
Thank you.
Thank you.
Well normally for him next question.
Our next question comes from Steve <unk> from Oppenheimer. Please go ahead.
Thank you Hi, Brian and Shelley wanted to ask two L. D. D questions first U S came in ahead as as you noted chili, which which bodes well wondering if you could talk to you you know the type of account set your new park getting hear more.
Lee in that or maybe in the pipeline are you continuing to focus on you know higher volume.
Premium focused docks or are you getting any interest, particularly coming off of the conference. Even you know this past weekend from abroad or array of potential customers just qualitatively and what are you seeing out there in terms of the type of customer <unk>, you're you're targeting.
Oh well thanks for the question Steve You. Your you know really we see you know continue strong interest from those higher volume sites, which of course can make the R O y.
<unk>.
Calculations work pretty easily.
There and so those are still or the the line lion's share of of our customers are a new customers, but we continue to see smaller practices, who may not have been as involved with the premium I O L space also.
Show significant interest and some of our best customers are those are those because we typically will represent a larger fraction of their premium my wall practice.
If they if they haven't been doing much in the way of premium <unk> prior to that.
So it's a mix, but you know we think we we have something.
Something to offer to both of those groups.
Great and then on the other side of L. D. D. You know that the Canada numbers, obviously still you know still relatively small, but but notable can you talk to you what the opportunities you see in Canada Yep as as you expand out there and then maybe just more broadly how you're thinking of.
About you know other regions outside of the U S potentially for expansion.
Yeah, well you know, Canada, obviously because of its proximity it's got a a good population 40 million people. It's a significant cataract market very similar lot of commonalities in terms of practice patterns with the U S.
So it's a natural extension for US we have a excellent distributor in Canada, yeah, who knows that market very well as well and so.
You know, we think that's going to be as it.
Already shown itself to be a strong area for growth.
Uhm.
You know beyond that where where where we're continuing to look at opportunities like that you know primarily in Europe and Asia. Although you know those those will be a little bit later in terms of timeframe.
Alright, great. Thanks Man.
Thank you.
Thank you.
One moment for our next question.
Our next question comes from Lawrence <unk> from Wells Fargo. Please go ahead.
Good afternoon. Thanks for taking my question and congrats on a nice quarter couple from me <unk> thinking about product in future product enhancements, what what's the pipeline look like.
The next.
Here too.
Thank you Larry So you know I think that we're going to continue to do what we've done as you know we've had about 25 P. M. A supplements since our initial F D a approval.
These tend to be.
You know <unk> evolutionary improvements that move the product forward address you know things that we think can improve our market share and functionality and we continue to invest.
In in those and will continue to bring those to market as they as they get approvals.
But nothing to call out <unk> areas that you're focused on.
Nothing specific at this time.
Okay fair enough and and by our map it looks like.
Your share of 80, I O L. A.
What about five per cent in the first quarter of 2023 I Dunno. If if your math is similar I guess my question is where do you think that could go over time, how do you. How do you think about the ultimate penetration here. Thank you.
Well you know my own view is that in the in the long run adjustability is going to be a differentiating factor for premium my wells and that eventually.
You know most if not all premium my walls will need to be adjustable to gain those the benefits of that feature and so you know as we have a nice.
Headstart, we're continuing to drive both our market share and product development and our goal is to become the standard for premium I wells, which generally means that were at least 50 per cent of the market that doesn't happen tomorrow, but over the long term that's that's our goal.
Alright, thanks for taking the questions.
Thank you. Thank you.
Thank you.
I am showing no further questions I will now turn the call over to Doctor Kurtz Foreclosing remarks.
Well. Thank you all for your time and attention today. We appreciate your interest in our excite and we look forward to updating you on our progress in future quarters.
Goodbye.
Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
Mmm.
[music].