Rxsight Inc at Needham Healthcare Conference (Virtual) Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: David Saxon - Needham & Company - Analyst : So with that, I guess we'll jump into the Q&A. Maybe to start, I wanted to see if you could talk about the procedure volume trends you're seeing during the first quarter and maybe remind us what's assumed in guidance.

Question: David Saxon - Needham & Company - Analyst : Okay, got it. And then our recent checks indicate that staffing across ophthalmic practices is having somewhat of an impact on premium IOL penetration. I know you're not going to comment on what you're seeing in the first quarter, but I just wanted to hear your high-level thoughts on penetration, maybe where it ended the year last year and maybe what you saw up until you reported fourth quarter -- I guess, beginning of March.

Question: David Saxon - Needham & Company - Analyst : Yeah, right. Okay. That makes sense. But even if a practice is experiencing staffing shortages, you're essentially saying, it's very profitable for them to do premium IOLs. So those procedures are going to get prioritized over, say, monofocal or any other type. Okay. Yeah, that makes sense. And then I guess I wanted to hear your thoughts on how a potential recession might impact the premium IOL market. I mean, the vast majority of patients are of retirement age. So how do you think about how recession might impact their discretionary spending?

Question: David Saxon - Needham & Company - Analyst : Okay. Yeah, that makes a ton of sense. Moving on to RxSight-specific questions. So you ended the year with an LDD installed base of 400. How many practices make up your target market in the US? And can you give us a sense of how many accounts have multiple LDDs placed?

Question: David Saxon - Needham & Company - Analyst : Okay. We've heard from some doctors who work out practices with multiple LDDs. So I just wanted to hear your thoughts on that opportunity, placing multiple LDDs at an existing account and how you think about that relative to just placing an LDD at, say, a new account?

Question: David Saxon - Needham & Company - Analyst : Okay. Yeah, and then for new customers, can you talk about how long the typical sales cycle is and what you're hearing from the LDD sales force in terms of the main reasons why an account would get an LDD?

Question: David Saxon - Needham & Company - Analyst : Okay. Yeah, I mean, you make a good point on the return on investment side. I wanted to ask, are you still seeing the price of the LDD as being a meaningful area of pushback? Or has the LDD sales team learned how to address that topic and demonstrate, if you're doing X number of IOL procedures a month, this is your payback period?

Question: David Saxon - Needham & Company - Analyst : Okay. And then I wanted to ask -- I mean, are we getting to a point where for a practice to be competitive in their region or market, do they need an LDD and to be able to offer the LAL?

Question: David Saxon - Needham & Company - Analyst : Okay. I just want to pause real quick. I know we've been talking about a couple of different acronyms. So LDD, that's light delivery device. That's what is used to adjust the lens. Light adjustable lens, that's the LAL. I just want to make sure anyone who's listening who isn't familiar is on the same page. So in terms of the lower cost LDD, light delivery device, can you remind us the timeline of that launch and expected cadence of working that into the field? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 19, 2023 / 6:15PM, RXST.OQ - Rxsight Inc at Needham Healthcare Conference (Virtual)

Question: David Saxon - Needham & Company - Analyst : Okay, got it. And then in terms of utilization, that's been tracking very strong. I calculated, on a quarterly basis, I think you ended the fourth quarter around 26, 27. I think you look at it on a monthly basis, call it, high single 8 or 9. So where can that go over time? And is there anything you see in the market that would limit the continued growth in utilization that you've been seeing?

Question: David Saxon - Needham & Company - Analyst : Okay. And so when you look at the accounts that are above that average utilization, are they doing anything differently in terms of structuring the workflow around the light treatment aspect or having some lower level staff do it or is there any secret to optimizing their LDD utilization?

Question: David Saxon - Needham & Company - Analyst : Okay, got it. I mean, I think you've commented in the recent past that new account utilization is increasing faster to a higher level. So I guess that would imply, just based off what you just said, that the doctors are buying in sooner. So is there -- I guess, is the LAL rep doing any different -- anything differently to drive that?

Question: David Saxon - Needham & Company - Analyst : Okay, that makes a ton of sense. On the commercial teams, so you mentioned they're split into two sales forces. Wanted to hear if you could give an update on where they stand from a headcount perspective and how you're thinking about hiring over the next few quarters or the balance of the year.

Question: David Saxon - Needham & Company - Analyst : Okay. I wanted to ask a quick question on international. I think you're commercial in Germany and Mexico, correct me if that's wrong, but wanted to hear how you're thinking about the international opportunity or if the US is just the main focus for the next few years?

Question: David Saxon - Needham & Company - Analyst : Yeah, okay. And would those APAC or other regions be through distributors or would you build out a director sales force?

Question: David Saxon - Needham & Company - Analyst : Okay, got it. All right. Well, I wanted to move on to some financial questions. So guidance assumes LAL revenue growth faster than LDD revenue, which would obviously result in a tailwind for gross margins. So how should investors think about sequential gross margin expansion throughout the year? Are there any headwinds that we should be aware of or, as LALs increase as a mix of revenue, if that just naturally drives gross margin expansion?

Question: David Saxon - Needham & Company - Analyst : Okay. And then I think you've been pretty clear with your pricing strategy on the light delivery device, with the lower cost to manufacture the system coming out, you're not going to lower the device price.

Question: David Saxon - Needham & Company - Analyst : Longer term, is there more opportunity to take out price -- sorry, to take out cost of manufacturing? Or is this the lowest cost to manufacture design that you see out there?

Question: David Saxon - Needham & Company - Analyst : Okay. And can you remind us what the lifetime is for the LDD and what the replacement cycle is like?

Question: David Saxon - Needham & Company - Analyst : Okay, got it. And then on operating expenses, can you just remind us what you're expecting in terms of the mix between SG&A and R&D and how we should think about that mix evolving in the outer years?

Question: David Saxon - Needham & Company - Analyst : Okay. Yeah, that kind of answered my next question. I was just going to ask on what you're working on in R&D, whether it's incremental label expansion, stuff like that, or something more meaningful. It sounds like it's the first -- you're just continuing to improve the system in the lens. So that's very clear. So I wanted to ask -- you did a secondary, I think that may have been in February, maybe it was March. I forget. Can you just remind us how much you raised? Why do you think that was the right amount and how you're thinking about the balance sheet and where that takes you over the next couple of years?

Question: David Saxon - Needham & Company - Analyst : Yeah, most definitely. And then you also have a term loan out there, and I believe you have access to more. So maybe just remind us when and under what circumstances you can tap that incremental debt financing.

Question: David Saxon - Needham & Company - Analyst : Okay, got it. And then recently, I guess it was last month, Alcon hosted a big investor event. They did talk about a tunable IOL. It doesn't sound like it's going to be ready until sometime after 2027. So that doesn't seem like anything near term. I wanted to see -- are you aware of any other competitive projects around some adjustable IOL like that? Or is that pretty much the only thing that's on the horizon?

Question: David Saxon - Needham & Company - Analyst : Okay. Yeah, I mean, I think the market leader working on something that you're doing certainly validates the platform you've built. So -- okay, and then I guess, why I do want to just remind anyone who's tuning in, if you do want to ask a question, you can submit it through the conference portal. A big industry conference, ASCRS, is in a couple of weeks. So for those who are going, is there anything you want to call out in terms of data around the LAL or any sort of presentations from doctors?

Question: David Saxon - Needham & Company - Analyst : Got it. All right. Well, we're about out of time, and I don't see any questions in the queue. So I think we'll wrap it there. But Ron and Shelley, thank you so much for joining us this afternoon, and looking forward to catching up in a couple of weeks in San Diego.