Thank you for waiting, and welcome to the RxSight conference call. All lines have been muted to eliminate background noise. Following the speakers' remarks, we will have a question-and-answer session. I would now like to hand the call over to Oliver Moravcevic, VP of Investor Relations. Please proceed.

Thank you, operator. Presenting today are RxSight President and Chief Executive Officer, Dr. Ron Kurtz; and Chief Financial Officer, Shelley Thunen. Yesterday evening, RxSight released preliminary revenue results for the three months ending March 31, 2025, and revised full year guidance. 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, April 3, 2025, 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 yesterday 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 may be required by law. During today's call, we will also discuss certain non-GAAP financial measures. I would also like to remind you that the preliminary results discussed on the call today are estimates and our complete unaudited financial results for the first quarter of 2025, which are subject to the review of our independent auditor, are expected to be announced on Wednesday, May 7, 2025. 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 morning, and thank you for joining us. I want to first recognize the entire RxSight team as well as our partners in clinical practice for all of their efforts to provide high-quality customized vision to patients undergoing cataract surgery. During today's call, we will be offering additional color on the factors that affected Q1 revenue and have led us to revise our 2025 guidance. We will also outline additional actions we are taking to reinvigorate our growth trajectory. Our preliminary analysis indicates that the top line miss in Q1 was due to several factors, including a weakened premium IOL market and unusual sequential launches of new premium IOLs that have extended from mid-2024 and into Q1 of 2025. These factors subsequently combined with abrupt changes in consumer sentiment that occurred later in Q1, resulting in our first year-over-year drop in same-store LAL sales, most commonly measured as LALs per LDD per month. During most of 2024, this metric saw strong year-over-year increases, which, along with new LDD placements, resulted in high year-over-year procedural growth rates. Since nearly half of LAL procedures come from patients who would have otherwise received a standard monofocal IOL, when volume from the LAL is excluded, the remaining premium IOL market would have likely seen declines beginning in mid-2024. Due to the older demographic and medical necessity associated with cataracts, premium IOL surgery has historically been less sensitive to macroeconomic trends. This is in contrast to other patient-paid procedures like LASIK that target younger individuals who can usually delay procedures indefinitely by continuing to wear their glasses or contact lenses. However, a softening of the overall premium IOL market in the second half of 2024 would be consistent with reports of a much more markedly depressed U.S. LASIK market during this period. While LALs per LDD per month also decelerated in Q4 2024, they remain near their earlier highs, leading us to underappreciate the likely downward trend in the overall premium market. This phenomenon likely also led us to underestimate the impact from sequential market launches of new premium IOLs by two major competitors in Q3 and Q4 of 2024. Historically, presbyopia-correcting IOL market share dynamics have been temporarily disrupted by incentives to surgeons trialing newly launched lenses. While typically transitory, the sequential product cycles continued to be a market distraction in Q1, which, when coupled with a soft overall premium market, likely provided less reserve for additional disruptions. Although small sequential declines in LALs per LDD per month were observed from Q4 to Q1 in both 2023 and 2024, we saw a much more pronounced decline from Q4 2024 to Q1 of 2025. While procedure volumes were consistent with our recent history in early and mid-Q1, lower procedure volumes extended through the month of March when they have historically ramped up. Given the widely reported and rapid changes in the macro environment, including significant declines in the S&P and NASDAQ during the latter part of the quarter, we believe that negative wealth effects may have impacted premium IOL procedure decision-making, leading to potential trade downs to lower-priced or non-premium alternatives. Though we believe these factors are also likely transitory, when coupled with a third sequential product cycle from our largest competitor, they justify a swift and strong response on our part. This starts with leveraging our dedicated commercial and clinical teams to execute refined clinical education and practice adoption programs for both existing and new customers, focusing on those that have experienced procedural declines or slower growth in the first quarter of 2025. We have also accumulated extensive clinical data and experience with both the LAL and LAL+ that we believe will help doctors better counsel patients on the durable benefits of high-quality customized vision that is uniquely enabled by RxSight's adjustable IOL platform. As an example, our recently completed post-approval study demonstrated that compared to eyes receiving a monofocal IOL, eyes with an LAL were 14 times more likely to have what is considered to be an outstanding refractive outcome. Further, our continued rollout of product enhancements provides our teams additional opportunities for meaningful interactions with our doctors and clinical practices to convey their important clinical and efficiency benefits. In addition to these efforts with our traditional customers, we also intend to strongly support the acceleration in new customer business models, including those that offer doctors and patients centralized third-party light treatment options that may further lower the threshold to adopt our technology. Though our focus remains on expanding adoption within the U.S. market, we are also pleased to report European regulatory approval for our LDD and LAL. While we are excited about the long-term commercial opportunity in the EU, our priority in 2025 will be to build a base of European clinical expertise and practice experience, while we also push ahead with approval of LAL+. We are simultaneously pursuing our regulatory approvals in Asia while gaining early clinical experience in Japan, Hong Kong, and South Korea. While we remain highly confident in our long-term opportunity to reshape the premium IOL market, we also acknowledge the need to reset our 2025 guidance due to the time that may be required for these efforts to have meaningful impact and for the headwinds discussed earlier to subside. For more on these changes, I'll now turn the call over to Shelley.

Thank you, Ron. I will briefly review the preliminary first quarter revenue results and updated guidance for the remainder of 2025 that were included in our pre-announcement press release. Consistent with the press release, our preliminary first quarter 2025 revenue was $37.9 million, up 28% compared to the year-ago quarter and down sequentially 6% from our fourth quarter 2024 revenue. During the first quarter, we sold 73 LDDs, up 11% from the year-ago period and down 12% from the fourth quarter of 2024. We ended the first quarter with an LDD installed base of 1,044 units, up 43% compared to the end of the first quarter of 2024 and 8% compared to the end of the fourth quarter of 2024. We also sold 27,579 LALs in the period, up 36% from the first quarter of 2024 and sequentially down 5% from the seasonally stronger fourth quarter of 2024. While we will provide a full financial report on May 7, based on the preliminary revenue results and informed by the multiple dynamics just discussed by Ron, we are revising the guidance we provided in January as follows: we are reducing revenue guidance from $185 million to $197 million to $160 million to $175 million, thereby reducing implied growth compared to 2024 from the previous 32% to 41% range to 14% to 25%. We continue to believe that we will sell more LDDs in 2025 than in 2024 with economic headwinds likely having a greater impact on LAL procedures that are more directly tied to consumer decision-making. In contrast, as demonstrated by the relatively stable LDD sales in Q1, doctors and practices continue to invest in private pay procedures that deliver better outcomes for their patients and counteract ongoing reimbursement cuts and drive similar economically impacted private pay procedures such as LASIK. Our gross margin guidance is unchanged at 71% to 73%, representing an implied increase of 30 basis points to 130 basis points compared to 2024. We also remain committed to aligning operating expenses with the pace of revenue growth with a significant reduction in operating expense from the previous guidance of $165 million to $170 million to $150 million to $160 million, representing a change in the implied increase compared to 2024 from 22% to 25% to 10% to 18%. Our revised operating guidance of $150 million to $160 million is higher as a percentage of revenue and gross margin than our previous guidance in January, taking into account the anticipated increase in one-on-one interactions with customers. Included in our costs, primarily in operating expense is noncash stock-based compensation expense which we now project to increase from the previous $22 million to $25 million to $27 million to $30 million. This revision reflects higher-than-anticipated option grants issued in March 2025 to existing employees for performance, adjustment to market comps, and retention compared to our original guidance provided in early January 2025. And with that, I'll turn the call back to Ron.

Thank you, Shelley. With customer satisfaction at an all-time high of 97%, we believe that RxSight's adjustable technology will continue to reshape the premium cataract surgery market by offering the only IOL that allows patients to customize their vision after surgery. By delivering exceptional clinical outcomes in one of the most important markets in ophthalmology, we believe RxSight remains central to the growth story for both ophthalmic practices and the overall IOL industry. While our large customer base now exposes us more to market-wide dynamics, we believe it also provides us with the opportunity to leverage our platform for sustained growth through targeted educational efforts and innovative product enhancements. In addition, we believe new clinical delivery channels offer alternative opportunities for growth in the U.S. while we continue to make progress towards commercialization in key markets outside of North America. And with that, I'll ask our operator to open the call for questions.

Your first question comes from the line of Ryan Zimmerman with BTIG.

So, let's start with the guidance, if we could. I appreciate your comments, Shelley, on guidance. But if we could talk a little bit about kind of the subcomponents or the underlying assumptions on guidance, particularly as it relates to productivity, you expect LDDs to grow, but maybe you could elaborate a little bit further on kind of how you're thinking about productivity of LALs per LDD going forward given the dynamics you laid out?

Yes. Thank you very much, Ryan. I think the biggest driver, obviously, other than Q1 performance to our guidance is the fact that the typical significant increase that we see in March in terms of number of LAL procedures since we've been commercial did not happen, and it was relatively flat to January and February. So I think our guidance really reflects the change in the number of LALs we expect to sell and offset in part by strong LDDs that we expect to be higher than 2024. In terms of the number of LALs per LDD, we certainly model that those increase over the year. And typically, what you see is kind of sequential growth up in Q2, down in Q3, up in Q4. I'm a little reluctant to say that the typical seasonality will be in place this year until we get through the second quarter and just see what the economic impacts are to the economy and how customers are selling to their clients and what we hear back from our ophthalmic customers about the response of patients to a premium IOL procedure versus sticking with a monofocal.

But Shelley, just to be clear, I mean, the math would suggest declines on productivity through the year. And I just want to be clear, is that your assumption given the increase in LDDs?

I think that other than absent perhaps the fourth quarter, that's going to be true on a much larger LDD base relative to the number of LALs, but I'm not exactly predicting that. I think second quarter is probably the biggest risk quarter until we understand what is happening with the economy and how it's affecting our customers and whether, in fact, that's prolonged.

Okay. The second question is challenging, but I'll ask it anyway, Ron. Considering the factors that contributed to the miss, you mentioned a weakened premium IOL market, new product launches, and broader macroeconomic dynamics. In the press release, it seems some of your customers are newer and may be taking longer to ramp up. If you could break this down, Ron, I would appreciate it. It would be helpful to understand what you believe are the biggest drivers of the impact, what is temporary, and what might be beyond your control, like macroeconomic conditions.

Yes, I would say that, as you mentioned, several factors came together in the first quarter, particularly towards the end. I believe all of them are somewhat temporary. The product launches are planned years ahead, and it's uncommon to have two or three launches happen in a short period. While we are not directly impacted by these, they can distract the market as doctors are motivated to try new lenses. The most significant change in the first quarter was the macro environment, which is a more complex issue. I am hopeful that it will improve, but as we've seen from recent events, there will be additional changes.

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

The first one, I'm wondering regarding utilization by cohort. When we do some checks, obviously, some surgeons can do a lot more than average. I wanted to get a better understanding if you look at the cohorts from earlier years, '21, '22, how does their utilization rate compare versus the average? Where do you see sort of like a natural ceiling or pain point before some of the practice management things you're going to put into place can help them further become more efficient?

Thank you for the question, Young. We have always spoken about the fact that the cohorts of installed LDDs in '21 and prior '22 and '23 have been relatively the same and they kind of move in concert. And we saw that again in the first quarter. So where the number of LALs per LDD went down, it went down in all cohorts, and they're very tight in their distribution. And that continued to be true. Also as we look across our territories in the U.S., the change and the effect in March were consistent throughout the U.S. The '24 class cohort of LDDs installed, it's probably only relevant to look at those installed in the first and second quarter. And what we did see is that they're not growing quite as quickly as the '23 class did during comparable quarters, particularly in the first quarter. So it doesn't have an outsized or even a major effect on the number of LALs per LDD because our installed base is so large. It is something that is a pain point, although small in terms of the total number, but we would like to see them be more confident, particularly in this economic environment.

Okay. Got it. Very helpful. I guess the follow-up is regarding driving innovation and product enhancements. now that we have a better understanding about where Alcon's program is at, Bausch + Lomb also has announced a program, but they also had to deal with the recall. It seems like at least on the competitive front, there's a little bit more visibility. Can you maybe talk a little bit more about the product pipeline or new lenses coming out and what we should expect on that front?

Yes. Thanks for the question, Young. We would agree with you, and I think we've been pretty consistent that we don't see anything on the horizon that is directly competitive to the LAL. And we also believe that continued innovation has been an important driver for growing adoption over the past five years that we've been commercial. These have primarily been incremental enhancements that really allow us to get that next group of doctors and patients to adopt the technology. Examples of that have been ActiveShield LAL+. In the fall, we introduced low diopter LALs, which are now beginning to be used in the field. And soon, we're going to be launching our first foray into the correction of higher-order aberrations, and I mentioned that on our last earnings call. So I would expect continued such product enhancements to be steadily introduced. And this enables our customers to leverage not only their investment in the capital equipment, but also the investment in their time and that of their employees, learning the clinical skills associated with our technology. And then they can then apply that to more and more of their patient population.

Your next question comes from the line of Robbie Marcus with JPMorgan.

I wanted to try and take Ryan's question in a different way. Shelley or Ron, you raised guidance in the second quarter of '24. And then you were in line on third quarter and you were in line on fourth quarter. And it's the two first in-line quarters you had. I believe since being public and really not I would imagine how you thought the second half of the year would turn out. And if you look at Street models, it was on better LDD placements and missed both quarters LAL utilization. So from our point of view, we started seeing LAL utilization slow down in the back half of the year. Then when you provided guidance for 2025, you actually guided a pretty good amount above the Street. So clearly, you were seeing something that we weren't. And even just as late as last week, competitor Alcon had an Analyst Day, and they didn't bring up any of the same market concerns that you had. So I guess the question is really now with a lot of hindsight, did this start much earlier than you've acknowledged? And is it really a market trend, even though we're not necessarily hearing all of those market trends called out by your peers, and we've all known and been publishing on those competitive launches for months now? Or is it just a utilization issue specifically to LALs? And how do you discern between the two?

Maybe I'll start, Robbie. While our LAL procedural growth didn't meet some of the expectations, the LALs per LDD metric remained high throughout the year. Given our growth in the installed base, we continued to see overall growth. If we examine the overall market excluding LAL growth, it was actually not growing and was negative, as was mentioned previously. This situation may have led us to underestimate the softening in the market and the impact of competitive trialing incentives mentioned by others. This ultimately laid a foundation that, combined with significant disruption in consumer sentiment, contributed to the effects we experienced in Q1.

Yes. To address your comment about the third and fourth quarters, you are correct. We outperformed and raised our guidance in the first half, both in the first and second quarters, and saw an increase in the second quarter. We raised our guidance for the second half and met that increased guidance, but we did not exceed it. I believe Q3 was definitely impacted by more vacations, as we discussed. Q4 was strong, but not as strong as the market had expected. It was consistent with our raised guidance, but we did not surpass it. As Ron mentioned, we were less aware of market dynamics, and the overall market was shrinking. Competitors also indicated this, but our performance masked it. Throughout the second half, we did not recognize the overall market dynamics and the shrinkage. Since around 2022, the market has remained around 18% to 19% of total IOL procedures, largely due to us. We look into 2024 and 2025 with the same confidence we had in 2024 until we noted that March LALs did not increase significantly as they typically do in the first quarter.

Maybe a follow-up. Shelley, you mentioned that you lowered the guidance on sales by around $30 million for 2025 and reduced operating expenses by about $10 million. Currently, there is no projection for free cash flow generation in the near term, at least not for a considerable time, unless there's a change in trends. How are you assessing the timelines for cash flow breakeven, your cash requirements, and any potential for additional funding?

Thank you for the insightful point you made. We are adjusting our guidance down by $23 million in the middle of the range and reducing OpEx by $10 million. Previously, we had been directing more funds to the bottom line each quarter, except for the first quarter, which typically sees higher cash usage due to the payment of prior year bonuses. In this guidance, we anticipate needing to allocate more resources to sales and marketing relative to our revenue. We are actively engaging with our customers, and we currently have about 200 customer-facing employees, which we will continue to increase as we gain more customers. I don't expect that we will reduce the gross margin increase reflected in the OpEx guidance. However, it is important to note that we have sufficient cash to reach cash flow breakeven and profitability, but this will affect the timing of achieving cash flow breakeven and GAAP breakeven, as we will continue to invest in inventory and accounts receivable while we grow. This approach is intentional, as we want to ensure we do not under-resource during this period and maintain our close relationship with customers. Ron, would you like to add anything?

No.

Your next question comes from the line of Steve Lichtman with Oppenheimer.

Just a follow-up on that last point regarding where the spending will be concentrated. During the prepared remarks, Ron, you emphasized the strong support for accelerating new customer business models. Could you elaborate on that a bit more and discuss your efforts in this area? Streamlining those efforts might impact end customer pricing and potentially mitigate some of the macro challenges. So, could you share more about what you plan to do specifically with those centralized business models?

Yes. Again, these are third-party innovators who are seeing the opportunity with the LAL technology to make it potentially more approachable for some ophthalmic practices across the country. And that's been going on actually for a number of years. And we've seen several individually successful efforts in this. Our role in that is similarly supportive to what we do with our traditional practices, providing both marketing and training and clinical support not only to the stand-alone light treatment center but also to the individual doctors who make use of that and providing them with both the clinical and marketing materials and education that helps them offer the LAL to more of their patients. So I think that it will be an expansion of those activities, very similar, but directed in a slightly different way than what we have traditionally done.

Okay, I understand. I’m curious about the recent recall announcement from one of your competitors. How are you considering that in relation to your revised guidance? Are you accounting for it at this stage? Although it's a recent development, what are your thoughts on it?

Yes, I would agree with you, Steve, that there's no way for us to know what the duration of that would be. I think it's largely not going to be as impactful on us as it would be for some of the other competitors. But certainly, anything that gives us an opportunity to let surgeons and patients see the benefits of the LAL approach to high-quality customized vision, that's an opportunity that we're going to take.

Got it. Just quickly, obviously, not the focus of this call, but you did mention the CE Mark. I assume no revenues built in for this year at this point, but which countries are you going to be focusing on as you sort of build toward that for, I guess, in 2026?

In Europe, we will concentrate on the major economies that already have strong premium IOL markets, similar to our strategy in Asia. These will be the well-known key markets. While we do not anticipate significant revenue in 2025, we will begin to establish our presence there. This process takes time, and new product introductions in Europe can require additional time. However, we are committed to moving forward actively.

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

So I wanted to maybe first ask on LDD. So on the market, if the premium IOL market volumes are softer, are you assuming in guidance that, that translates into softer LDD demand or longer sales cycles? Or kind of how does that market view inform how you think about LDD placements and kind of customers or prospective customers' appetite for the capital purchase?

Yes. Thank you. That's a good question. We did again say that we would expect more LDD sales in 2025 than we had in 2024. But the overall guidance does assume in our internal numbers that, that number is a bit lower. And that would certainly be consistent with our guidance. As Ron had said earlier, practices still are struggling with profitability because of Medicare cuts, other reimbursements across other product lines. And as far as we know, premium IOLs are the only product where they can bill Medicare for the minor amount that they provide as well as a direct cost to the consumer. It's a profitable procedure for them. And during these periods of time, LASIK drops precipitously. That just goes with the economy because that certainly can be put off and it's a younger population. The population of roughly 65-plus year olds, of course, remain a bit more isolated. But certainly, turmoil and particularly in their assets such as stocks can result in some delay or different choices temporarily. We do think that this is temporary, though.

Okay, great. Shelley, you mentioned profitability, which is clearly a focus for doctors and practices. How are you approaching pricing at this point? You've maintained pricing on the LAL side at least. Does this alter your pricing strategy? Also, I can't remember if it was in the script or in response to a question, but you mentioned that the utilization of the 2024 class is slower than previous cohorts, at least in the first half of '24. What does that indicate regarding the cohorts you've engaged with so far? Have you fully penetrated the higher volume group of ophthalmologists, or are we now targeting the average to lower volume practices?

I'll begin by addressing the last question. I believe we have not fully reached any specific group yet. There are many practices that have yet to implement our technology. We currently have around 1,000 LDDs and about 2,000 surgeons, while there are approximately 10,000 cataract surgeons overall, with many more thousands of offices treating cataract surgery patients. Therefore, I do not think we are close to reaching a saturation point, even within different classes of surgeons. Now, what was the first question again?

Yes. Just around pricing. I mean, LALs are kind of the highest, yes, so how are you thinking about that in terms of like trying to allow doctors to kind of protect some level of profits while the market volumes are kind of weaker.

Yes. So in terms of pricing, the cost of the LAL is a relatively small fraction of the price that doctors charge to their patients. So we believe that the value provided by the technology justifies its cost, which is somewhat higher than the highest-level presbyopia-correcting IOLs. We have kept pricing stable since our introduction into the market about 5 years ago. And part of the ways that we've been able to do that is through efficiencies. And we fully manufacture all the components of the technology in the U.S. specifically here in California. And so we're not going to be significantly impacted by tariffs. And I think that we'll try to maintain a good relationship between the value and the price that we charge to our customers.

Your last question comes from the line of Danielle Antalffy with UBS.

My question is pretty straightforward. I am a bit concerned about what gives you confidence that this isn't just a repeat of the last few years, where you've only tackled the easy opportunities and have now reached your limits in the premium market. I appreciate your comments on the economy and its influence on the premium market, but I want to focus on LAL's penetration in that market. Ron, could you share what reassures you that this isn't the case?

I have two main reasons for my confidence. First, my discussions with doctors and practices across the country reveal that many have not yet adopted our technology and are not very familiar with it. This indicates that we are still in the early stages of market penetration for this technology. Additionally, it would be quite a coincidence if we reached a peak in adoption exactly when various macroeconomic and market trends coincided. I don't believe in such coincidences. Therefore, I am confident that these challenges will pass and that we will continue to penetrate the market, which presents the largest opportunity in anterior segment ophthalmology.

There are no further questions at this time. I would now like to turn the call back over to Ron Kurtz, CEO, for closing remarks. Please go ahead.

Thank you, operator, and thank you all again for your interest in RxSight. We look forward to seeing some of you later this month in Los Angeles at the meeting of the American Society for Cataract and Refractive Surgery as well as providing further updates at our regularly scheduled first quarter 2025 conference call in early May. Goodbye.