RxSight, Inc. Q3 FY2024 Earnings Call

Thank you for standing by. My name is Andrea, and I will be your conference operator today. At this time, I would like to welcome everyone to the RxSight Third Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. I would now like to turn the call over to Oliver Moravcevic, Vice President of Investor Relations. Thank you. Please go ahead.

Thank you, operator. Presenting today are RxSight President and Chief Executive Officer, Dr. Ron Kurtz; and Chief Financial Officer, Shelley Thunen. Earlier today, RxSight released financial results for the 3 months ended September 30, 2024. 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 views as of today, November 7, 2024, 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, and we disclaim any obligation to update or revise these forward-looking statements, except as it may be required by law. 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 will turn the call over to our President and Chief Executive Officer, Dr. Ron Kurtz. Ron?

Good afternoon, and thank you for joining us. We're pleased to report another successful quarter of building the infrastructure for patient-driven outcomes in premium cataract surgery with a Light Adjustable Lens. While Shelley will provide a detailed review of our third quarter financial results and our outlook for the remainder of the year, I'd like to highlight some of the broader themes that continued to play out during the quarter and reinforce our confidence in sustained momentum through year-end and beyond. In Q3, we experienced robust growth in our LDD installed base, surpassing typical seasonal expectations. This growth underscores the increasing recognition of the value that postoperative adjustability brings to ophthalmic practices and cataract surgery patients. I want to recognize the high-quality efforts of our commercial and operations teams that achieved this result as well as to thank our existing and new customers for showcasing the win-win clinical and practice benefits of the RxSight system. LAL sales were in line with seasonal trends as Q3 is typically impacted by doctor and patient travel schedules. Despite these seasonal headwinds and even hurricanes in the final weeks of the quarter, we believe our strong LAL sales underscore the value that patients and doctors place on being able to customize superior visual outcomes. We are also happy to report the full rollout of LAL+ in the U.S. and the recent approval of LAL+ in Canada. As presented at the American Academy of Ophthalmology meeting in October, the LAL+ delivers an average of 1.3 additional lines of distance-corrected near vision compared to the already excellent vision achieved with the standard LAL. This, combined with the ability to customize refraction in both eyes, a path taken by over 90% of LAL patients, leads to remarkable binocular visual outcomes, with more than 90% of patients achieving distance vision of 20/20 or better and near vision of J2 or better without glasses. While LAL+ has been positively received by both patients and doctors, the high-quality vision provided by the standard LAL continues to be particularly valued for patients with more complex ocular histories. As a result, we expect both the LAL and LAL+ to maintain their unique market positions with our in-house manufacturing capabilities providing the flexibility to adjust the production mix between the two lenses to meet demand. In Q4, we are also on track to release the recently approved low-diopter LAL+ powers, which will give our platform the broadest spherical power range of any astigmatism-correcting IOL from minus 2 to plus 30 diopters. Our commitment to innovation remains a core driving force at RxSight, and I want to recognize the tremendous efforts of our development and operations teams in continuously advancing our LAL and LDD technologies to deliver superior outcomes for patients. I also want to thank the doctors who adopted our technology and offered their input to our team, helping to direct us toward the most clinically relevant advances that maintain RxSight's position at the forefront of premium IOL innovation and growth. In the near term, our primary growth focus remains on expanding penetration within the North American market, where we are still in the early stages of reaching the broad population of cataract surgeons and patients. As we have discussed previously, we are also expanding our exposure to the optometric community who are key participants in patient diagnosis, counseling, and decision-making. We believe the LAL fits extremely well with the clinical mindset of most optometrists, who rely on similar refractive principles in their daily practice. For the same reason, optometrists play an increasingly important role in the care of LAL patients in concert with ophthalmologists and other eye care professionals. We plan to apply our North American experience to the significant opportunities for further expansion into the global premium IOL market and look forward to providing updates on our regulatory and commercial efforts in both Asia and Europe over the coming months.

Thank you, Ron, and good afternoon, everyone. RxSight generated third quarter 2024 revenue of $35.3 million, up 59% compared to $22.2 million in the year-ago quarter and up 1% compared to $34.9 million in the second quarter of 2024. During the quarter, we sold 24,554 LALs and generated $24.2 million in LAL revenue, up 79% and 2% compared to the same year-ago quarter and the second quarter of this year, respectively. This sequential performance reflects typical seasonality in cataract surgery volumes, which tend to dip in the third quarter as both doctors and patients often travel during the summer months. Additionally, in the third quarter, LAL revenue represented 69% of total revenue, an increase from 61% in the year-ago period and from 68% in the second quarter of 2024. We sold 78 LDDs in the third quarter, up 18% from the 66 units in the year-ago period, matching the 78 units sold in the second quarter that is typically stronger for capital equipment. During the period, LDD sales generated revenue of $10.1 million, up 28% versus the third quarter of 2023 and essentially the same as the second quarter of 2024. As of September 30, 2024, our LDD installed base stood at 888 units, representing an increase of 51% and 10% versus the year-ago period and the second quarter of 2024, respectively. Reflecting continued demand, our average selling price for the LDD remained stable at approximately $130,000. During the quarter, average monthly utilization, defined as the number of LALs implanted in the quarter divided by the LDD installed base in the previous quarter, was 10.1 LALs per LDD, up from 8.7 LALs per LDD in the same period last year. While LAL growth remained strong in the third quarter, average monthly utilization was lower than the 11 LALs per LDD seen in the second quarter, a period that was and is generally a seasonally strong quarter. The gross margin in the third quarter of 2024 was 71.4% compared to 61.9% in the same year-ago quarter and 69.5% in the second quarter of 2024. The year-over-year increase reflects the continued increase in the percentage of LALs as a percentage of sales, lower cost of sales for both the LDD and LAL, and sustained pricing stability. The sequential gross margin increase of 190 basis points reflects improvements in the cost for the LAL and the LDD. Recall that the LAL cost is predominantly overhead, so as production volume increases, the cost to manufacture declines, and it is realized 6 to 9 months later in cost of goods sold. SG&A expenses in the third quarter of 2024 were $25.6 million, representing an increase of $6.5 million or 34% versus $19.1 million in the year-ago quarter. This year-over-year change was due primarily to an increase in personnel costs, travel for sales and support teams, and higher stock-based compensation expense. On a sequential basis, SG&A expenses increased by $1.3 million or 5.4% due primarily to additional hires in sales and marketing and higher stock-based compensation expense. During the third quarter of this year, R&D expenses rose 24.5% to $8.8 million compared to $7.1 million in the third quarter of 2023. This year-over-year change was primarily attributed to increased facilities costs and increased stock-based compensation. Compared to the prior quarter, R&D expenses in the third quarter increased by $0.5 million or 6.6%, primarily due to new hires. Our GAAP net loss in the third quarter was $6.3 million or a loss of $0.16 per basic and diluted share using weighted average shares of 39.8 million shares. This compares to a GAAP net loss of $12.4 million or $0.35 per share on a basic and diluted basis in the third quarter of 2023. The stock-based compensation in the third quarter of 2024 was $6.6 million, resulting in a non-GAAP income of $214,000 or an income of $0.00 per basic and diluted share. Moving to the balance sheet, we ended the third quarter of 2024 with cash, cash equivalents, and short-term investments of $207.1 million compared to $233.3 million on June 30, 2024. The increase in cash, cash equivalents, and short-term investments is predominantly due to continued favorable accounts receivable collections and low cash use for inventories, limited capital equipment spending, and higher accrued expenses. Turning now to guidance, we are increasing our full-year revenue and gross profit guidance while reducing operating expenses and noncash expense guidance as follows: Full-year 2024 revenue is now projected to be approximately $140 million, at the top of the previously provided guidance range of $139 million to $140 million. Our revised guidance range implies year-over-year growth of approximately 57%. Gross margin is now expected to be in the range of 70% to 71%, up from our previous guidance of 68% to 70%. This increase primarily reflects the continued shift in the product mix with the majority of sales coming from the higher-margin LAL along with lower cost of manufacturing. Full-year 2024 operating expenses are now expected to be at the bottom of our previously provided guidance of $135 million to $136 million, representing a year-over-year increase at the low end of approximately 30% to 31%. Noncash expenses, which are primarily included in operating expenses, are now expected to be at the low end of our previous range of $29 million to $30 million. This revised annual guidance translates to fourth quarter 2024 revenue of approximately $40 million. Q4 gross margin is similar to that of the third quarter and fourth quarter 2024 operating expenses, at the low end of the $37 million to $38 million range.

Thank you, Shelley. Before we open the call for questions, I'd also like to briefly reflect on our recent participation at the American Academy of Ophthalmology Annual Meeting in Chicago, which was an outstanding event for both RxSight and the wider ophthalmic community. The RxSight booth drew significant attention from meeting attendees, featuring numerous talks by LAL surgeons and centered on the clinical advantages afforded by adjustability as well as operational efficiencies for practice integration and growth. These booth talks as well as multiple presentations in the scientific sessions reinforce the unique role LAL is playing in advancing the quality and adoption of premium cataract surgery, both of which are increasingly recognized as broad trends in the market. As others have noted, premium cataract surgery is now essential to the economic viability of most ophthalmic practices. The inherent limitations of nonadjustable premium IOLs require surgeons to thread a needle when it comes to patient selection, preoperative calculations, surgical technique, and management of common postoperative issues. By enabling patients to optimize their vision after surgery, adjustability delivers predictable high-quality results, driving scalable growth in high-margin patient pay revenue to mitigate progressive cuts in reimbursement that will continue to impact global ophthalmic business models for many years to come. With that, I'll ask the operator to open the call for questions.

And your first question comes from the line of Robbie Marcus with JPMorgan.

This is Lily on for Robbie. We've heard continued concerns about capital and your ability to grow LDD placements. Can you talk a bit more about what you're seeing on that side of the business? What does demand for capital look like? And what's been your ability to drive placements like, not just in new centers but also existing ones, so driving deeper penetration with a second or third LDD?

Thank you for the question. So I think our Q2 and Q3 results continue to show success in that effort, and it's really based on a number of factors. One, obviously, is the clinical results with the technology, but also the practice benefits and the relatively quick ROI that practices are able to realize with the RxSight system, typically on the order of about 6 months but it can be quite quicker than that. We do see practices who have already adopted the technology, adding LDD units to other offices where they see cataract patients. And that's really an internal calculation that they do based on their ability to increase the number of patients that they can offer the service to.

Got it. That's helpful. And then just as a follow-up, you talked about the impact of hurricanes at the tail end of the quarter. So how meaningful was that headwind? And are you able to quantify how big of an impact that was in the quarter and what you're factoring in for Q4 as well?

Thank you for the question. I think that's been asked a lot of everybody. First and foremost, our employees and our customers and their patients were safe, so that's important although some sustained some property damage. We did lose surgery days as ophthalmic practices closed and had some days off due to that. It's hard to quantify that effect. But definitely, we lost a few to maybe more than a few surgery days. And of course, some of those markets such as Florida are good markets for us.

Our next question comes from the line of Ryan Zimmerman with BTIG.

This is Izzy on for Ryan. So just to start out, Shelley, we've seen some pretty consistent pricing for both the LAL and the LDD over the past couple of quarters. And I was wondering what your confidence is in being able to maintain these pricing levels, particularly when it comes to the consumables.

Yes. On the LAL side, our retail is $1,000 and our ASP is just ever so slightly below that because some of our sales are into Canada and that's a distributor market. We don't get pushback on the LAL $1,000 per unit. And the reason is, of course, by then, the doctor has charged, on average, $4,500 per eye for that. And they're already convinced and have convinced the patient of the tremendous value they're going to get with the LAL. With capital equipment, our pricing has been consistent for a little bit over a year right now since we increased the price about 10% in the middle of the third quarter of 2023. I always say that capital tends to drift down a little bit. But you saw again this quarter that we had a tremendously strong LDD quarter despite the fact that it's usually seasonally down from the second quarter. And ASPs remain constant, which tells us that the demand is still there at the price that we're asking. So we feel good about our ASP for both products.

Got it. Very helpful. And I know we're not going to get guidance today, but I was just wondering if you guys have any early considerations that we should keep in mind as we start to think about 2025.

Yes. It's a little premature for us to give guidance as well. But as Ron said, as we look at the long-term impact of this product, right now, we're about 10% of the total premium IOL market and our goal is to grow 50%. And we have the tools. And the most important tool is clinical outcomes for patients. 90% or more of patients get 20/20 at distance, J2 at near and are generally free from glasses, which is what the patient and the doctor want for the patient. In addition, as Ron included earlier just a second ago, the payback is about 6 months. The price of roughly $130,000 for the LDD is not much more than they would pay for a piece of replacement equipment that does not generate revenue. And so I think that those are compelling patient-doctor practice trends that have continued since we first introduced the product. Would you add anything to that, Ron?

I might just add that because we're selling the LDD into the clinic, we may not be affected by some of the capital concerns that have been raised that affect mostly hospitals and ASCs. And this is a clinic-based decision and they're really basing that on the ROI that Shelley just outlined.

Your next question comes from the line of Larry Biegelsen with Wells Fargo.

It's Lei calling in for Larry. Just to start off, Shelley, I know you mentioned seasonality in Q3, but the seasonality seemed a bit more pronounced this year in both LDD and LAL versus prior years. Any thoughts around why that was the case? And I have a follow-up.

On the LDD side, we did not observe the typical seasonality, and in fact, we experienced the opposite. Usually, capital equipment sales decline from the second quarter to the third quarter, but this year, third quarter LDD sales reached 78, matching the second quarter figures. However, we did notice seasonal trends on the LAL side. Feedback from our customers, with whom we maintain close weekly contact, indicated that more doctors took extended vacations, often at the same time. Some traveled to the EU and stayed longer than usual. This seemed to contribute to the changes we observed. Additionally, as our business expands, we anticipate seeing more pronounced seasonal trends, both positive and negative. In the first half of the year, we experienced a more favorable seasonality than expected, prompting us to raise our guidance by approximately $8 million on the upper end. Consequently, it appears there was more seasonality in the third quarter, particularly for LALs, and much of that was driven by increased time-off among doctors.

Got it, that's helpful. I apologize for the error regarding LDD. My follow-up question concerns the gross margin. You increased the guidance for this year. From what you mentioned, you appear quite confident that pricing will remain relatively stable. It seems that your overhead costs and COGS have improved and that this has been sustainable for about a year now. Does this indicate that the gross margin we are currently observing is likely to remain stable or sustainable beyond 2024?

Yes, that's a really good question. I think it is. But as we go into future years, the biggest change in cost of sales is the mix. The LAL has quite a bit higher margin than the capital equipment LDD. And most of the progressive improvement in gross margin comes from mix. But in fact, both the LAL and the LDD costs have come down, LAL more gradually because that's related to overhead and you build product quite a bit ahead of the time that's actually sold. On the LDD side, of course, we had about a 10% price increase in the third quarter of last year as well as material cost savings as we introduced the reconfigured LDD in part to take out some costs.

Next question comes from the line of Craig Bijou with Bank of America.

I would like to begin by discussing utilization, specifically by practice. I realize this is a common question for you, and you've addressed it frequently over the past couple of years. Could you elaborate on the trends in utilization as your practices expand? Additionally, have you noticed any changes in these trends over the last few quarters?

At a macro basis, we have not, and you know, of course, I've talked about it before. What we've seen is that the passes by year of install, '21 and before '22 and then '23, which are now 'probably installed enough' is that they all end up at the same place in terms of volume. In the third quarter, we had seasonality, and the seasonality was the same across all three classes so there wasn't kind of an anomaly standing out. This was global across our practices as well. In terms of individual growth and practices as well, we do have about 150 people in the field. Most of them are clinical applications people, but they're also very important to adoption along with our LAL sales account managers. And that's their job from the LAL account manager perspective, one, to get the practice going, and ensuring that their doctors and the staff are trained adequately with our clinical applications people. But they also go back along with the clinical folks. And that's what they want to do is be able to look at each customer. And so our clinical and our salespeople have goals that they set each quarter in terms of accounts that they want to move forward that they think have more potential to grow. And as I've said, what we do see is the newer accounts, right, those that adopted in '23 and now the beginning of '24 tend to get to the same place, not the same apex as the rest of the accounts but get to the same place a bit quicker as well. Would you add anything to that, Ron?

No. I mean, again, we've spoken before about the different ways that the teams build adoption. Obviously, the clinical outcomes are the primary methodology, but they're always looking for ways to help practices be more efficient, to grow utilization within the practice by making other doctors that may be doing cataract surgery but may not have been the initial group that adopted the LAL aware of those clinical results so they can offer it to their patients. And that's just a day-to-day, practice-by-practice effort that is going on across the country.

I wanted to add one more thing to what Ron says. Ron also says R&D is the driver of revenue as we introduced continuous improvements to the product as well as new things just like the lower diopter range that we just got approval for. Each of those gives our account managers, salespeople an opportunity to go into the practice, educate them and give them an opportunity to learn more about the product. And so it gives our point of call a reason not just to go by and make ourselves known. And that's where we focus our calls as well as helping practices become more efficient.

Yes, absolutely. And we have the opportunity to do that in the fourth quarter with our lower-power diopter lenses. And that will appeal to a group of surgeons who may or may not have already adopted the LAL. And that's going to give them the exposure to the technology that hopefully spreads to other patients as well.

Yes. And I keep on saying we have 150 people in the field. Since the last time we had a call, it's about 165. We're continuing to add people into the field consistently.

Got it. That's very helpful. And if I can ask about Q4 and the implied guidance or the $40 million that you talked about, Shelley, it's a little bit lower on a sequential basis than what you've done in the past. So I guess a couple of things with that. How should we think about the impact, LALs versus LDDs, if there's a way to think about the mix of the revenue in Q4? And then are you baking in some impact from the hurricanes that might have kind of bled into Q4?

Those are both good questions. I think that when we think about guidance, of course, obviously, when you look at it sequentially, we continue to grow. So it's just natural that period-over-period, while we're implying about $5 million or 14% growth between the third and fourth quarter, that's a function of larger numbers. When we think about mix in the fourth quarter, as you know, we don't give specific guidance. But typically, the fourth quarter is very strong on procedures and also strong on capital. It typically is our strongest quarter, and obviously, we've guided it to be our strongest quarter. And I think that hopefully that at the end of the third quarter, of course, people had no time to recover and get back to their practices. And of course, then they were hit right away again at the beginning of the fourth quarter. But our employees are all safe. Our customers are safe. So what we're hoping is that if people get comfortable and come back in the fourth quarter, there's more time for that than there was in the third quarter when the hurricane happened right at the end of the quarter.

Your next question comes from the line of Young Li with Jefferies.

I guess to start, wanted to hear a little bit more about the global expansion color. We'll hear more in the coming months, I'm sure. But maybe if you can level set us on when we can potentially see some full U.S. approvals and which are some of the more important countries to focus on.

Yes, thank you for the question. As we've outlined before, the premium IOL market is about 80% OUS, and that's concentrated in about 20 individual markets. And they're the ones that you would expect in major countries in Europe and major countries in Asia. We've started our regulatory process in both Asia and Europe. And we anticipate updating folks as we get approvals in each of those markets really in the next several months.

Okay, great. Very helpful. I think early in the year at the ASCO conference, you guys had a panel and there were some PE representation there. Wanted to ask a little bit about how are sort of PE-owned practices doing versus sort of the more mom-and-pop shops. Are there noticeable differences in the way they run their business or utilization rates or growth trends?

There is considerable variability in both standalone practices and those managed by private equity. It's challenging to make broad generalizations about either group. Most private equity-run practices still operate at the individual site level, where physicians are responsible for clinical decisions. Our focus remains on the office, physician, and staff levels within those practices. The initial phase of any sales process, whether dealing with a standalone practice or a part of a larger private equity group, revolves around demonstrating value and having conversations with individual physicians at the office. The process shifts slightly once you move beyond that, as decision-making becomes more complicated for larger or private equity practices. However, there are advantages, as many of these practices have successfully implemented Light Adjustable Lenses and LDDs within their systems. They recognize that the RxSight system generates additional patient pay revenue and high-margin income, making it advantageous for them to expand profit margins through their other well-managed and efficient practices. The optimal way to achieve this is by increasing the utilization of premium intraocular lenses, particularly through the adoption of the Light Adjustable Lens.

Next question comes from the line of Thomas Stephan with Stifel.

Wanted to start with LAL trends, and I think guidance may imply Q4 utilization growth in maybe the high single-digit range, maybe upwards of 10%, somewhere around there. I mean, that's down from high teens to low 20s over the last number of quarters on a year-over-year basis. So Ron or Shelley, can you talk about, I guess, a bit why there would be kind of this much of a deceleration in the fourth quarter and some of the factors that may be at play?

So I want to understand a little bit better your question about deceleration. You're talking about the LALs, right, in just terms of absolute numbers and why perhaps we weren't growing as quickly as implied in the fourth quarter coming up versus, say, the fourth quarter a year ago. Is that what you're asking? I want to make sure I understand.

Yes, basically. When I'm tying out my numbers, hopefully, I'm not too far off here, I'm arriving at utilization growth on a year-over-year percent basis of 8%. But over the past 4, 5 quarters, it's been in the high teens to low 20s on a year-over-year basis percentage-wise. So I guess I'm asking why there would be a Q4 '24 deceleration. Sorry if that was unclear.

Yes, I don't think I've gotten specific enough in the guidance but pretty specific at almost approximately $40 million. It depends on the mix in your model as well. But over time, whether it's in this fourth quarter as we go into future years, our goal, obviously, is, number one, to grow the number of LALs in each practice and continue to penetrate them. And that translates to, over the long run and the short run, higher utilization on the LALs per LDD. And I think the implication is like all large numbers, the larger your base number is, the larger the denominator is. You're not going to get the same level of growth such as '21 to '22 and things like that. So I think it's more that than anything else. But we've seen really nice acceleration overall in the number of LALs per LDD. And of course, we always say that that's not how we run the business but certainly, it's a very valid measure.

Yes, so again, I think it's an important perspective, and I think it is valid because while we report the numbers, we believe that the overall anchored business is growing. There are just seasonal and cyclical factors that can influence the numbers, especially when your business is still emerging. So I think that the data that we're seeing out there indicates growth. We're focused on ensuring that those new physicians and staff are getting the right kind of training and support to help them become more comfortable with the overall concept of the product so that the utilization can continue to grow in a sustainable manner.

Got it, okay. That makes sense. And then my follow-up, more related to share. I guess as we think about long-term continued share gains for LAL in the U.S., you might be at 10% of premium today. We think long-term to maybe 20%, 30%, even higher if standard of care is achieved. I mean, the per-doctor share would assumedly have to be a bit higher. So I'd be curious if you could, I guess, just elaborate a bit on the, call it, longer-term trained surgeons where share may be stalling a bit. I assume there may be some out there. Can you just talk about, with those doctors, some of the main limiting factors or hurdles? And then importantly, how the company and your field reps are working toward removing these ceilings or barriers for those customers where share may be stalling at lower levels?

Sure. I'll start with that. There are various practices in place, but overall, we've seen a steady increase in utilization, which continues to rise. The trend is positive. We consistently examine individual practices to find ways to accelerate their growth, regardless of their current procedures. Growth often hinges on who is performing the procedures in the office. Typically, practices have multiple doctors, and it's usually one or a few who are the early adopters of the technology. As the practice learns to integrate the RxSight system and witnesses positive clinical outcomes, enthusiasm among the entire team tends to grow. However, there isn't a universal approach. It's our teams' daily responsibility to promote growth within these practices. Individual practices may experience fluctuations in their volumes, and there isn't a single type of practice. Thus, their overall cataract volumes and premium shares can vary as well. Nonetheless, we generally observe an upward trend in these numbers.

Yes. I mean, you see it in our LAL numbers. But I would also say this. As we think about customers, we focus on new customers. And what you see in the focus on new customers is that, when I look internally at our data by cohort, by year of install, the more recent installs get to the same place a little bit more quicker, right? And so that's where we work with the practice with our knowledge and their knowledge and, of course, the references we've gotten. And one of the easiest things we do with doctors is encourage them to do multiple cases in their first week, 4, 5 patients because they bring them back for their light treatments at the same time. And this reinforces the training that they get as well as the fact that they get to see the tremendous clinical results from the patients, not from a NaN of 1 but NaN of 5 or 6. And so that's one of the things that we do with our new customers. But we're just as focused on our existing customers. And as Ron said, sometimes they can have turnover. But just as importantly, as I mentioned earlier, we always have new things coming out for the practice. And that gives us another reason not just for maybe a practice that held off buying the LDD, but just as importantly, for a practice that we know that they can have some improved volume gives us a chance to go back in. And when we do that, we're not just talking about what's new. We're asking them what are their barriers and what can we do to help. And so I think that's what we do kind of day-to-day job. Ron, do you want to add something?

Yes. Just to echo on the importance of continued innovation. We obviously saw that this year with LAL+, adding that to the portfolio, certainly, we are able to go back to existing customers who may be using the LAL in some patients. And now the LAL+ gives them an opportunity to expand their use of the technology. I think we'll see that again with the low-diopter IOLs that are coming out this quarter. And this is going to be a continuing trend for many years to come. I believe we're still at the very early stage not only of the commercial introduction of this technology but also in the development cycle.

Next question comes from the line of Steve Lichtman with Oppenheimer.

Sorry, I've been jumping between calls, but I wanted to ask about the optometrist program. If you can sort of update us on learnings so far and what opportunities you're seeing as you really start to ramp that up.

Thank you, Steve. To summarize, there are approximately 50,000 optometrists in the U.S., whereas there are about 10,000 cataract surgeons. In many areas, optometrists serve as the primary providers of eye care. Therefore, educating the general optometric community about the Light Adjustable Lens and its advantages will ultimately aid when patients are referred for surgery in ophthalmic practices. It ensures that patients who return to their trusted optometrists have received some foundational information about the technology, even if those optometrists have not directly treated LAL patients. Additionally, within ophthalmic practices and their existing collaborations with optometrists, these professionals play a crucial role in LAL treatments since they are based on refraction, a core skill in optometry. Optometrists have applied their knowledge of refraction throughout their careers, with many nuances involved. They are essential in ensuring that patients achieve the optimal visual outcomes that both they and we desire. It is important to develop that knowledge base and clinical expertise, and we are observing progress in this area. There are now optometrists who have cared for thousands of LAL patients and have established educational programs for the optometric community. They are also speaking at optometric conferences, some of which we sponsor while others they initiate themselves. This approach helps disseminate information about LAL, encouraging optometrists to advocate for their patients' access to this technology when they enter ophthalmic practices.

Great. I also wanted to inquire about what you're noticing from your customers in the field regarding their ability to gain market share from practices in their area that do not offer LAL. The reason I ask is that, based on my estimates, you have around 1,500 surgeon customers. At this stage, those who don't have it are likely hearing about it. What observations do you have regarding the marketing efforts of your customers and how these efforts may be helping them capture market share, which in turn might attract the attention of those practices that do not offer LAL?

We are well aware of the practices in certain regions that do not have our technology. Our sales team is focusing on those practices. We believe that as more practices begin to offer LAL, it will lead to an increase in patient inquiries at the practices that currently do not offer it. This is an important part of our sales cycle as we work to increase the number of LDD systems in use. I'm not sure if that completely addresses your question, Steve.

Ron, I don't know if we've seen it yet but I think Steve is kind of asking about, do we have a halo effect yet? Remember, we saw that at like IntraLase. But in LASIK, people were advertising a lot, right, versus in cataract, that's not necessarily the case. It's more rare, right?

Yes. Patients are being referred, and typically there isn't much external advertising for cataract surgery. Unlike LASIK, where people wearing glasses usually see their optometrists and require marketing to encourage them to consider LASIK, cataract surgery patients are usually self-referred or directed by optometrists or other ophthalmologists due to their reduced vision from cataracts. The marketing happens internally. However, as more patients in the community receive the LAL and hopefully experience excellent results, this leads to word-of-mouth referrals to practices offering that technology.

Next question comes from the line of David Saxon with Needham.

I just have two, one on the customer base and then one on international. So my first question is just what you're seeing in terms of the number of active surgeons per LDD? And in general, how you think about kind of where the upper limit is on that metric?

Looking at the latest numbers from sales and marketing, it seems they have remained fairly stable. We're currently seeing around 1.5 or 1.6 physicians per LDD practice overall, compared to the previous figure of about 1.3. It’s important to remember that we are just beginning to tap into the potential of around 10,000 cataract surgeons. In certain markets, the practices tend to be larger due to factors such as regional characteristics and population sizes. For instance, Ron often highlights the differences between practice sizes in places like Dallas and Houston compared to New York City, where practices tend to be smaller.

Yes. Generally, coastal practices tend to be smaller due to a higher density of ophthalmologists. However, I want to emphasize that we shouldn’t view this metric in isolation, just as we consider the average LAL utilization metric, which I understand is important to you. From our angle, each practice operates independently, and there's significant variability in practice sizes, who performs cataract surgery, and who handles premium cataract surgery within those practices. Our goal is to ensure as many LALs are implanted as possible. In some cases, certain practices may direct more patients to one particular surgeon, while others may distribute them across multiple surgeons. Our approach works effectively with either model.

Okay, I understand. That's very clear. Regarding international expansion, Ron, it seems like you might receive some approvals soon, perhaps in a few months. When those approvals come in, how should we approach the timeline for investing in building the commercial team and subsequently selling and generating revenue? Additionally, how should we consider the distribution channels? Will you be utilizing distributors or establishing a direct sales force?

It will depend on the market. In Canada, we have engaged a distributor we previously worked with, and that has proven effective. Over time, we will make decisions on a market-by-market basis. Regulatory approval is crucial, followed by the same elements that supported our growth in the U.S., which include forming strong partnerships with local physician practices. These partnerships will serve as reference sites and assist us in tailoring processes and marketing materials to suit each specific region. We anticipate leveraging much of what we've developed in the U.S. over the last four years, although we expect some differences in individual markets, and we will learn as we begin our expansion into these areas.

There are no questions. I will now turn the call back over to Ron Kurtz for closing remarks.

Well, thank you. To summarize our report today, RxSight's robust LDD placements and sustained growth in LAL sales in Q3 are a testament to the power of adjustability and the significant value it provides to both patients and doctors. Based on our Q3 results, the positive signals from the AAO meeting and a traditionally strong Q4, we believe we are well positioned to successfully finish out 2024 and to build on our momentum globally in 2025. Thank you all for your interest in RxSight. We look forward to updating you on our progress in future quarters.

Thank you. Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.