RxSight Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 5, 2024

There are 11 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to the RX Sight Second Quarter 20 24 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.

Operator

I would now like to hand the call over to your speaker, Oliver Maravshovic. Please go ahead.

Speaker 1

Thank you, operator. Presenting today are RXTITE President and Chief Executive Officer, Doctor. Ron Kurtz and Chief Financial Officer, Shelly Tunis. Earlier today, RXTITE released financial results for the 3 months ended June 30, 2024. A copy of the press release is available on the company's website.

Speaker 1

Before we begin, I would like to inform you that comments and responses to questions during today's call reflect management's views as of today, August 5, 20 24, and will include forward looking 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 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. Investors are cautioned not to place undue reliance on forward looking statements as we disclaim any obligation to update or revise these forward looking statements except as may be required by law.

Speaker 1

We will also discuss certain non GAAP financial measures. Disclosures regarding 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 Investor Relations website. With that, I'll turn the call over to our President and Chief Executive Officer, Doctor. Ron Kurtz.

Speaker 1

Ron?

Speaker 2

Good afternoon and thank you for joining us. In a moment, Shelly will provide details on our Q2 results, which set new benchmarks for LAL and LDD sales as well as for overall revenue. While we congratulate and thank both our clinical practice partners and our X Sight team members for these accomplishments, we also believe they support our long term thesis that the unique ability to adjust our intraocular lens post operatively elevates premium cataract surgery, enhancing precision, quality and customization and leading more patients to select a high value premium procedure to achieve top level clinical outcomes. For ophthalmic practices that have experienced persistent reductions in Medicare reimbursements, the LAL premium procedure provides a critical patient pay growth opportunity that is relatively resistant to fluctuations in the economy, unlike procedures such as LASIK that target a younger demographic. Following Shelly's review of our financial performance and guidance, I'll discuss how underlying trends and our continued focus on executions make us confident about RX Sight's near, mid and long term opportunity.

Speaker 3

Thank you, Ron, and good afternoon, everyone. RX Sight generated Q2 2024 revenue of $34,900,000 up 68% compared to $20,800,000 in the year ago quarter and up 18% compared to $29,500,000 in the Q1 of 2024. During the quarter, we sold 24,214 LALs and generated $23,800,000 in LAL revenue, up 92% 20% compared to the same year ago quarter and the Q1 of this year, respectively. In Q2 of this year, LAL revenue represented 68% of total revenue, an increase from 60% in the year ago period and from 67% in the Q1 of 2024. We sold 78 LDDs in the 2nd quarter, up 16% compared to 67 units in the year ago period and up 18% compared to 66 units in the first quarter of this year.

Speaker 3

During the period, LDD sales generated revenue of $10,200,000 up 32% versus the Q2 of 2023 and up 17% compared to the Q1 of 2024. As of June 30, 2024, our LDD installed base stood at 8 10 units, up 55 percent 11% versus the year ago period and the Q1 of 2024, respectively. Gross margin in the Q2 of 2024 was 69.5% compared to 57.8% in the same year ago quarter and 70.1% in the Q1 of 2024. The year over year increase reflects the shift in product mix with a higher margin LAL revenue advancing to 68% of the total as well as increased margins on our LDD. The sequential change of about 0.5 percent and within our guidance of annual gross margin of 68% to 70% is due to a slightly lower average selling price for our LDD in the 2nd quarter of just over $130,500 compared to an ASP of $132,000 in the Q1 of 2024.

Speaker 3

Can vary slightly depending on customer mix with $130,000 continuing to reflect ASP stability following the 10% LDD price increase we took in the Q3 of 2023. SG and A expenses in the Q2 of 2024 were $24,300,000 representing an increase of $6,100,000 or 33% versus $18,200,000 in the year ago quarter. This year over year change was due primarily to an increase in personnel costs and higher stock based compensation expense. On a sequential basis, SG and A expenses increased $1,000,000 or 4% due to primarily higher stock based compensation expense and higher personnel costs. During the Q2 of this year, R expenses rose 12% to $8,300,000 compared to $7,400,000 in the Q2 of 2023.

Speaker 3

This year over year change was primarily attributable to increased facilities, costs and increased stock based compensation. Compared to the Q1 of 2024, R and D expenses in the 2nd quarter increased by $300,000 or 3%, primarily driven by an increase in stock based compensation. Our GAAP net loss in the Q2 of 2024 was $6,100,000 or a loss of $0.16 per basic and diluted share using weighted average shares of 38,500,000 shares. This compares to a GAAP net loss of $13,900,000 or $0.40 per share on a basic and diluted basis in the Q2 of 2023. Moving to the balance sheet, we ended the Q2 of 2024 with cash, cash equivalents and short term investments of $233,300,000 compared to $125,400,000 on March 31, 2024.

Speaker 3

The change in cash balance includes 100 and $7,500,000 net of fees and expenses from our May confidentially marketed public offering or CMPO. Turning now to guidance. Based on our strong Q2 2024 performance, we are increasing our revenue, operating expense and non cash expense guidance as follows. Full year 2024 revenue is now projected to be between $139,000,000 $140,000,000 an increase from our previous guidance of 130 $2,000,000 to $137,000,000 This represents year over year growth of 56% to 57%. The revised revenue guidance reflects an increase of $11,000,000 at the low end of the range and $5,000,000 at the high end of the range compared to our initial 2024 guidance set in January.

Speaker 3

For the remainder of the year, we continue to anticipate sequential quarterly growth with a nominal increase in Q3 factoring in both a very strong second quarter and typical seasonality in the Q3 due to summer vacations taken by both patients and doctors. Operating expenses are projected to increase to between $135,000,000 $136,000,000 up from our previous guidance of $126,000,000 to $130,000,000 or $7,500,000 at the midpoint of guidance and representing an increase of 30% to 31% over 2023. The guidance increase is primarily due to higher non cash stock based compensation expense with the remainder of the increase related to continuing investment in sales and marketing and research and development. The non cash stock based compensation expenses are now expected to be between $29,000,000 $30,000,000 up from our previous guidance of 22 $25,000,000 representing an increase of $5,000,000 at the top and $7,000,000 at the bottom end of the range. The increase is due to stock options and restricted stock units or RSUs granted higher per share prices to date.

Speaker 3

As discussed last quarter, operating expense guidance includes continued efforts to leverage our commercial momentum, grow our educational programs, develop our product pipeline and expand internationally as regulatory approvals are obtained. Finally, please note that our gross margin guidance range remains unchanged at 68% to 70%, which at the midpoint remains 300 basis points higher than our initial 2024 guidance set in January. Our combined revenue and gross margin increases since our initial guidance in January of 2024, excluding the increase in operating expenses, which are largely non cash, contributed an additional $7,500,000 to $11,000,000 to operating income. With that, I'll turn the call back to Ron.

Speaker 2

Thank you, Shelly. RX Sight's strong Q2 performance as well as our revised 2024 guidance is based on our technology's ability to meet the clinical needs of patients and doctors as well as the business needs of practices. While traditional cataract surgery with fixed intraocular lenses generally delivers good results, the unique ability to non invasively modify the LAL after surgery based on direct patient feedback enables doctors to deliver a new level of precision and customization, thereby drawing more patients into the premium IOL category, which is the most significant opportunity for practices to offset long term negative financial trends in their businesses. The aging of the population in the U. S.

Speaker 2

And other developed countries continues to put pressure on health care systems to reduce reimbursements to providers, particularly in eye care. Patient paid procedures like LASIK that may offset some of these effects have proven to be inconsistent revenue replacements as they appeal to a younger demographic whose decisions are easily deferred during downturns in the economy. In contrast, the expanding demographic of patients considering cataract surgery cannot easily defer the procedure indefinitely. Reduced vision interferes with daily activities, has been linked to an increased risk for falls and recently was added as a modifiable risk factor for dementia. Driven by social, work and lifestyle factors, this population has developed high expectation for vision without glasses and is best positioned financially to consider a patient pay premium IOL procedure.

Speaker 2

Practices to convert more patients from their most commonly performed but poorly reimbursed conventional cataract procedure to their highest revenue and highly profitable premium procedure is a major reason why these businesses have and we believe will continue to invest in LDD technology and infrastructure for most, if not all of their locations that serve cataract patients. With a total installed base of just over 800 LDDs in the U. S. And Canada, we believe we are still in the early phase of penetration of these clinical sites. Is acquire and become familiar with adjustable lens technology, our focus is on continued growth in LAL procedures by leveraging the expanded human and physical infrastructure for postoperative light treatments.

Speaker 2

We continue to see growth in monthly utilization across the installed base with the most recent expansion to 11 LALs per LDD per month in the seasonally strong second quarter, up from 10.1 LALs per LDD per month in Q1 of this year. We believe the growing clinical awareness and experience that has driven this trend over the last several years has been accelerated by our strategic clinical and marketing teams. These experts Continued technology development is another key mechanism for growing adoption, with the LAL plus being the latest example. Now midway through its rollout in the U. S, we continue to receive positive feedback from patients and doctors who appreciate its rapid visual rehabilitation and optical quality, with a growing body of data now being presented at clinical conferences.

Speaker 2

The addition of LAL plus also continues to be a catalyst for LDD sales as practices see another reason to add adjustability to their product offerings. As part of our ongoing commitment to innovation, we are pleased to announce FDA approval for an extension of the spherical refractive power range for LAL plus from -two to plus 3 diopters, providing RX Sight with the broadest spherical power range of any astigmatism correcting IOL in the U. S. When coupled with adjustability, this may be particularly useful in highly nearsighted eyes that also typically have less predictable outcomes after surgery. Commercial distribution of the expanded power range is anticipated toward the end of 2024.

Speaker 2

While our primary focus remains on fully developing the U. S. Market, we continue to make progress towards expanding our international regulatory approvals in countries that have already adopted premium IOLs. Given that RX Sight's adjustable IOL technology uniquely addresses globally relevant clinical and business needs, these markets can provide additional growth opportunities. Taken together, we believe we are very well positioned for sustained growth in the years to come and look forward to updating you on our continued progress.

Speaker 2

With that, I'll ask the operator to open the call for questions.

Operator

Certainly. Our first question will be coming from Ryan Zimmerman of BTIG. Your line is open.

Speaker 4

Good morning or good afternoon, excuse me. Lot of earnings calls. I want to ask about the updated guidance or range with the PMA supplement, Ron, for the LAL. I was reviewing the FDA data. Can you just talk about kind of where that range was before and versus now the minus 2 to plus 3 diopters and kind of what you size that opportunity to be as you think about expanded usage there?

Speaker 2

So the power range prior to this approval was plus 4 to plus 30 diopters, which was already a broad range. This, of course, broadens the low end of the range, which, again would be likely most clinically relevant to eyes that are highly myopic or nearsighted prior to cataract surgery. And so it's difficult to know exactly how many of those patients are going to be candidates for this power range. But certainly, it's something that we've been asked by our customers about and we're very pleased that we have this approval now.

Speaker 4

Very nice. And maybe just switching gears to guidance a little bit. As you think about the magnitude of your beat coupled with the size of the guidance increase, it looks like you're building in a little bit more expectation, particularly in 3rd and fourth quarter, Shelly. And one of the things that stood out this quarter, which you noted, Ron, was the acceleration, to 11 units per LDD per month, which really is a step up versus the prior year comparable period from 1Q to 2Q 2023. So as you think about that increase in guidance, kind of what's underpinning those expectations?

Speaker 4

Is that higher utilization from the installed base? Is there a pipeline, particularly within the LDD kind of funnel that you look to and see? Just help us understand kind of what's behind that increase in guidance, particularly in the back half of the year? Thanks for taking the questions.

Speaker 3

Thank you, Ryan. Yes, you are correct. In the Q2 of 2023, our usage was 9.2 LALs per LDD, And we accelerated that to 11 this quarter. And we have seen continuous improvement in that number. Sometimes in the Q3 number goes down a little bit because you have a really large base.

Speaker 3

But it also means that you can increase the number of absolute number of LALs in each quarter. And I think that that's one of the most important parts of our model. 1st, we need to sell an LDD, but second, we need to make our customers successful and their patients happy. And part of that is, 1, adding procedures from new customers, having them accelerate a little bit more rapidly than we had customers do in 2020, 2021, 2022. And we started seeing that for customers installed in 2023 and again in 2024.

Speaker 3

So yes, LAL growth is, as you know, and we've discussed before, an important component to increasing our revenue.

Speaker 4

Thank you for taking the question.

Speaker 2

Thank you, Ryan.

Operator

Thank you. One moment for our next question. Our next question will be coming from Robbie Marcus of JPMorgan. Your line is open.

Speaker 5

Great. Thanks for taking the questions. Congrats on a really nice quarter here.

Operator

Thank you, Rob.

Speaker 5

2 for me. There have been a lot of investor concerns after some conflicting sell side research on sort of the health and the ability to grow on LDDs and LAL adoption. And clearly in the quarter, you had a great LDD number and as we just talked about LAL adoption. So really my question is sort of what are you seeing in the field? Ron, you talked about halfway, who's buying LDDs today?

Speaker 5

Where are they placing them? Are centers on their second or third units yet? Are they getting LDDs at And then I have to imagine And then I have to imagine based on the increase in utilization that you're seeing new users ramp up much quicker than you did 2, 3 years ago and you're still seeing improvements in utilization from existing users. So any kind of color or segment or trends you can talk about in new versus existing users there would be great. Thanks.

Speaker 2

Thank you, Ravi. So maybe I'll take the first part and ask Shelly to talk a little bit about utilization trends. But I'm not sure qualitatively that there's a large difference. We're still at the early phase of penetration of the market. And so we have our new customers are similar to our previous customers that we continue to grow into the market.

Speaker 2

And why any one particular customer decides that this is the right time for them to adopt the LAL versus a previous time is really kind of idiosyncratic to that practice. And we can certainly influence that with our sales team. And as I mentioned, the more we move see in terms of where they're putting the LDDs, as we've noted before, there's LDD within an office is not a capacity limitation to throughput. So it would be highly unusual. I can't think of a case where a office would add a practice would add an LDD to the same office.

Speaker 2

So they're almost always going to a new office that is serving what in that practice's mind serves a different patient population for them. They're either geographically different or for a demographically different in their local environment. And whether that practice is smaller practice with a couple of offices or a larger practices with many offices, that's really what they're doing. They're adding the LDDs to new offices that can then offer that technology to a new patient population.

Speaker 3

Thank you, Ron. As we move to, LAL adoption, I think that as you noted earlier, we have talked about adoption by different cohorts of install. And certainly those folks in 2023 2024 have accelerated faster. But the important thing with that number also is that we have continued to see all cohorts continue to grow. And we think an important part of the component of newer customers getting going faster obviously is, one, we have more references.

Speaker 3

So a friend or colleague is likely to have said to them, just get going, do 5, 6, 7 patients in your 1st week, because you're going to see the results from a larger end than just one patient. And that gives them confidence as well as the fact that we continue to improve in our clinical training, in our account management training in terms of teaching them how to sell the technology as well as how to integrate practice flow for them. And those are all important in adoption. And as Ron said, each time we add a feature function, even a software upgrade, it helps our customers continue to penetrate their market and also gives a new customer another reason to buy. They're able to say, I should be doing more of this now.

Speaker 3

And of course, what we've seen in the last 3 years consistent in each of the customer surveys that we've had run-in the fall is 40% to 44 percent of LAL patients come from what would have been a monofocal patient, a patient that would not have gotten any premium. And then about another third, a little bit more than a third come from torque lenses or astigmatism correction lenses, which they typically sell for less than half of the price of a PCIOL. So within our practice, they have more and more opportunity on the LAL front.

Operator

Would you have anything

Speaker 5

Shelly, maybe just to follow-up on that. What's your latest view on what percentage are coming from monofocal versus share conversion from premium IOL. It's one of the more attractive components of the story that you're actually expanding the market here. So just any color you could give and sort of the receptivity, is it nationally, different pockets, anything you can get? Thanks a lot.

Speaker 3

So I will say that where the data comes from is the survey we've had run by a third party among our existing customers. And that's one of the questions they ask them, and how much you charge for each and what your conversion rate is for each type of patient population. So the last time the survey was run was in the fall of 2023. We usually only run that annually, but the numbers have been very consistent and inching up a little bit. I think we started at 40% and last year was 44.

Speaker 3

That really is information that comes directly from the practice. Other information might be anecdotal at this point in time. I don't know if you see anything when you're out visiting customers, Ron, or not?

Speaker 2

I would I haven't seen anything that would make me suspect that that number has changed.

Speaker 3

Okay.

Speaker 5

Great. Thank you very much.

Speaker 3

Thank you, Robbie.

Operator

One moment for our next question. Our next question will be coming from Steven Lichtman of Oppenheimer and Co Incorporated. Your line is open.

Speaker 6

Thank you. Good evening, everyone, and congratulations on the quarter. I want to start first with LAL Plus. It does seem to be another opportunity to go after new customers. And Ron, you mentioned it being a door opener.

Speaker 6

Can you talk more about what you're seeing on that front? And for those surgeons not yet customers, what they might see with LAL plus that would sort of peak their interest and convert over?

Speaker 2

I would start by saying that LAL and LAL plus are both great quality lenses. They provide both the same degree of adjustability and are more similar than different. And that's why we price the lenses the same, so that we're not we want the doctor to make the best choice for the patient. Feedback that we've received are things on the order of what you would expect from the optical design of the LAL plus which provides perhaps faster visual recovery, particularly for intermediate and tasks and near tasks. And so that feedback is consistent with the optical design, which slightly extends the depth of focus relative to the LAL.

Speaker 3

So anecdotally, Eric Weinberg, who is our Chief Commercial Officer says every sale when you have a new technology, which he's done multiple times starts with a no, entrance to a yes. And so you and he always say to us every time we have a technological advance, right, it gives the customer who's been saying no an opportunity to say yes. And they do that without losing face. They can say, yes, well, I've been waiting for this or this is the reason. And that's important to our LDD sales as well as our LAL sales in existing practices.

Speaker 2

Yes. And I think it also establishes a record that we've carried through at previous companies and now here at RX Sight that we have a long term plan for the technology that will continue to grow the benefits to whoever acquires the technology. And that's important because this is a we're entering into a long term relationship with our customers.

Speaker 6

Great. And then just secondly, you're getting SG and A leverage and you increased the non stock based comp SG and A by less than the revenue increase, so continuing to get leverage. But just given the strength of the balance sheet, any thoughts to accelerating investment on the commercial side? Or is that not something in the near term plans?

Speaker 3

Yes. When we raised the money from the CMPO and what we did say is that this gives us an opportunity to invest more in sales and marketing and also in R and D to accelerate our internal projects, which can take quite a while. And so we had talked about specific things such as additional education for our customers, reaching more out to the optometrists community, and those efforts along with additional marketing and not marketing to our customers, not DTC. And so we had talked about that and where you saw in the increase in OpEx, most of it was in stock based compensation, but about $2,000,000 in 2024 really relates to this additional ability to invest in the business. And what we said at that point in time is while we'll always be careful with OpEx, It takes a while to get all these programs rolling.

Speaker 3

And so we would see more of the fact of these programs in 2025.

Speaker 6

Got it. Thanks, Ron and Shelly.

Speaker 3

Thank you.

Speaker 2

Thank you, Stan.

Operator

Thank you. One moment for our next question, which will be coming from David Saxton of Needham and Company. Your line is open.

Speaker 7

Great. Good afternoon, Ron and Shelly. Thanks for taking my questions. Maybe I'll start on the LDDs, obviously, really strong placement number here in the second quarter. If I look to last year in the Q3, LTV placements were essentially flat sequentially.

Speaker 7

I heard, Shelly, your comments around 3rd quarter modest sequential growth. But specifically for the LDD placements, should we be thinking about a similar sequential trend as we saw last year, so kind of flattish? Or is there any reason why seasonality would be more impactful this year and maybe cause LDD placements to dip sequentially?

Speaker 3

Yes. I think that we did guide specifically that we would have a nominal increase in revenue in the Q3. And I think that's very typical with seasonality. We do see seasonality both in capital equipment as well as in procedures. And so I would expect seasonality on the LDD front.

Speaker 3

And I think that if you go past when we were very early, we always have the law bigger and bigger numbers, right? And that's an important component. And the overall growth story is still tremendously high growth, but wouldn't be as high as it was, say, 2 years ago. So I would suspect that we would have seasonality in LDDs while we're not providing specific guidance and that our most powerful growth is likely to come from LALs just because of the fact that we've added new customers, even though existing customers may have some effect from summer vacations, both for themselves as well as for their patients.

Speaker 7

Okay, got it. Very clear. Thanks for that, Shelly. And then, I'll probably stick with you, Shelly. So gross margin was down sequentially.

Speaker 7

It sounds like that was really just around LDD pricing. The first half gross margin is something like 69.8%, so really at the top of the guidance range. I mean it sounds like LAL mix is going to increase sequentially in the 3rd quarter and maybe even so in the Q4. So why not raise the gross margin guidance? Is there anything in the back half that would pressure on put pressure on gross margins?

Speaker 7

Or is it really just conservatism? Thanks so much.

Speaker 3

I wouldn't call it exactly conservatism overall. I think that's a pretty narrow range for a company of our size. But I do think that other than mix, which while is the most important component of the gross margin, we also have things like period costs, right? And we saw that in the Q4 of last year when people expected because of mix it would be a little higher. But you have certain things that customers don't pay for directly, like cars and what we see is the end of the year, sometimes the ASCs order a little heavier, right, because they're not paying for that inventory.

Speaker 3

And we're rolling out the balance of our ASCs with LAL plus in the 3rd Q4 as well primarily in the Q3. Our inventory is quite balanced and we're able to fulfill the ASCs. So that's really good news. And we're also rolling out alongside our existing injector, a disposable injector. I think Ron talked about that a couple of quarters ago as well.

Speaker 3

So we'll have some things like higher shipping costs and those things can be one time cost service can go up a little up and down in terms of the costs incurred in a quarter. So I always try and leave room for some period costs as well as mix.

Speaker 7

Great. Thanks so much.

Operator

One moment for our next question. And our next question will be coming from Craig Bijou of Bank of America Securities. Your line is open.

Speaker 8

Good afternoon. Thanks for taking the questions. Wanted to follow-up on the LAL plus specifically. And Ron, heard your comments on how it's driving LDD sales. And I'm not sure if with some of your commentary on utilization, if you talked about how LAL plus is impacting that.

Speaker 8

But I'm curious, I know you guys are agnostic given the price, as to LAL or LAL plus but is it driving is utilization higher because you're seeing more LAL plus use or maybe just talk about how we should think about the mix from a dock perspective?

Speaker 2

Well, I mean, we certainly hope that utilization grows because of LAL plus I mean, we wouldn't have introduced it if we didn't think that. But I don't know that it really makes any difference what a doctor uses. We really just want them to use an adjustable lens, a light adjustable lens, whether that's an LAL original or an LAL plus And over I think that different doctors have different opinions, have different patient populations and that will work itself out over time. But overall, we have continued very positive reviews both from the LAL as well as from the LAL plus

Speaker 8

Okay. Thanks. Thanks, Ron. And then maybe following up on some of the international comments that you've been making. I know you've talked about it increasingly over the last few quarters.

Speaker 8

So any perspective on timing or some of the markets that you may be targeting? I know I think we've talked about Asia before, but any perspective on market and timing of potential approval?

Speaker 2

Not in terms of market entry. Obviously, our focus right now is, as you mentioned, approvals. And we're making progress. I would hope that we'll continue to be able to update you as the year progresses. But regulatory approvals are not an exact science.

Speaker 2

And so I'd like to give us a little bit more time as we continue to make progress.

Speaker 8

Great. Thanks for taking the questions. Congrats on the quarter.

Speaker 9

Thank you. Thank you.

Operator

One moment for our next question. Our next question is coming from Larry Biegelsen of Wells Fargo. Your line is open.

Speaker 10

Hey guys, thanks for taking the question and congrats on the quarter. Ron, I'm curious, your share and by the way, it looks like by our math, your share of premium ILOs is over 10% this quarter for the first time. I'm curious on that 40% number you talked about. Do you have is there any evidence that are coming from monofocal? Is there any evidence that you're expanding the market?

Speaker 10

Because I'm looking at the market scope penetration numbers and it's been pretty flat now for a few years. So why wouldn't if you're 10%, why wouldn't we see all us being equal kind of a 400 basis point increase in premium IOL market if you're 10% and 40% are coming from monofocal?

Speaker 2

Well, one is, I haven't looked at those numbers. So I think that those numbers are likely directionally, but they're still going to be they may not fully capture our adoption in real time. But also, there's definitional questions. So that those surveys often look at premium IOLs versus what we would more define as premium cataract surgery. So it's possible that some procedures that are more broadly considered patient pay, but don't involve a premium IOL.

Speaker 2

Some of those may be converting to LAL. Again, I can't give specific reason without looking at the specific survey that you're referring to.

Speaker 10

Fair enough. It was yes, Shelley, I don't know if you wanted to add something. I was just looking at the data that's in the market scope, the newsletter.

Speaker 3

Yes. No, and I think Hume and I have had a number of conversations about survey data in particular and that's what but some of the basis of market scopes is as well and we consider them probably the most accurate information that we have access to. And I think that some of it's determined after the fact, right? And so the projections aren't necessarily and sometimes the after the fact numbers come around 3 months later, right, once everybody's reported and he's had a chance to talk to people. So we can't really comment on the overall market because we're not large enough yet, but we definitely know that we're building premium access and premium patients inside of our customers.

Speaker 3

And I think that that's very important to their success and their payback on the LDD.

Speaker 10

All right. I'll leave it there. Thanks for taking the question. Congrats again.

Speaker 9

Thank you. Thank you.

Operator

One moment for our next question, which is coming from Tom Diffein of Stifel. Your line is open.

Speaker 9

Great. Hey, everyone. Thanks for the questions and congrats on the really nice quarter. Maybe just to start on LAL utilization growth. I think year over year growth accelerated for the first time in, I believe, well over a year based on our models calculations.

Speaker 9

Ram or Shelly, can you talk about what specifically you're seeing that's driving this? And then maybe more importantly, do you believe there is sustainability in this potential inflection that you saw in 2Q? And when we're tying out our puddle kind of real time here, it seems like you expect in 3Q consistent year over year utilization growth. So maybe any comments on the sustainability would be very helpful.

Speaker 3

Yes. I think that I'll start with sustainability rather than the absolute numbers. But what we do see, particularly when we look at our cohorts, as we've talked about multiple times that our cohort is the one I look at is based upon year of install. And those cohorts continue to grow. And I think that's an important component as well.

Speaker 3

Sometimes people ask us what's max in a practice, we don't know the answer that and certainly these numbers are aggregated. And then of course the slope of the line in terms of adoption is higher for our newer customers. And if we think about it overall, that the most important thing we do with the LAL is continue to get adoption. Certainly, we have customers where we're probably less than 10% of their total volume because that's voice of customers. Others where we are approaching 100%.

Speaker 3

Nothing is absolutely 100%, but we're predominant in those practices. And our clinical people and our account managers, our LAL account managers are tasked with working with their individual practices. They each have assignments, practices, they look at their volume, they come in and retrain if they need to, new doctors are coming on, they do that. If they have a staff member that's been replaced, they make sure that they have all the digital tools that they need. And that's an important component of what we do is to be in front of the customer and make sure they understand the benefits as well as the fact that LAL plus came out, the fact that we have a new injector, the fact that we will be expanding the diopter for LAL plus So I think that those are all things that give them an opportunity to call and to make sure that we're fulfilling the needs of our customers.

Speaker 3

So I think that that's an important component. And while we do see variability, right, we were at 9.2% in the 2nd quarter of 23%, 8.7% in the 3rd, and that is not inconsistent with seasonality. And then up to 10.2 in the 4th quarter and then 10.1 in the first. And of course, 4th quarter is typically your strongest and we had just a really strong quarter in the second quarter. And we think that that continued growth might be variable quarter to quarter, but overall, the slope of the line is up and that's what we're working with.

Speaker 3

Our ultimate goal is to be 50% of the market and that's a long term goal, but our first goal is to increase our penetration in each one of our accounts.

Speaker 9

That's great color. Thanks, Shelly. And then my follow-up was just on international and specifically Europe. Ron, maybe to pivot to you. Can you discuss the key differences compared to the U.

Speaker 9

S. That we should be mindful of in terms of the end market and the opportunity. I guess I'm just curious what specifically gives you sort of the confidence that your success in the U. S. Can be replicated in Europe specifically?

Speaker 9

Thanks.

Speaker 2

Well, I think that as many of us have been involved with launches in Europe, there's a it's really not a single market. It's multiple markets, individual markets that each have to be addressed individually. And so that does take some time. We also have a new regulatory environment in Europe, which many of the companies or all the companies are dealing with now. And so that also has added a layer of complexity.

Speaker 2

But at the end of the day, clinical ophthalmology is the same across the entire country and across the globe, whether it's Europe or Asia. There's a broad commonality in what patients want and what and how physicians react to technology. So it's certainly a positive and it's been our experience that if you have success in the U. S. That that's a good harbinger for ultimate success outside the U.

Speaker 2

S. But because of these individual dynamics within regions, that can be that doesn't necessarily mean that that happens overnight.

Speaker 9

That's great. Thanks, Ron. Thanks, Shelly. Congrats again.

Speaker 3

Thank you.

Operator

I would now like to turn the call back to Ron for closing remarks.

Speaker 2

Well, thank you all for your time and attention today. We appreciate your interest in RX Sight and look forward to updating you on our progress in future quarters. Goodbye.

Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.

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Earnings Conference Call
RxSight Q2 2024
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