Earnings Call Transcript - RXST Q1 2026

Operator, Operator

Hello, everyone. Thank you for joining us, and welcome to the RxSight First Quarter 2026 Earnings Conference Call. Operator provided verbal instructions to participants. I will now hand the conference over to Oliver Moravcevic, VP, Investor Relations. Please go ahead.

Oliver Moravcevic, VP, Investor Relations

Thank you, operator. With me on the call today are RxSight President and Chief Executive Officer, Dr. Ron Kurtz; and Chief Financial Officer, Mark Wilterding. Earlier today, RxSight released financial results for the three months ended March 31, 2026. A copy of the press release is available on the company's website. Before we begin, I would like to remind you that the comments and responses to questions during today's call reflect management's views as of today and will include forward-looking and opinion statements, including predictions, estimates, plans and expectations. 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 the website or on 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. 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 Ron. Ron?

Dr. Ronald Kurtz, President and Chief Executive Officer

Good afternoon, everyone, and thank you for joining us today. Before Mark takes us through the Q1 numbers, I'd like to provide an overview of our commercial progress, starting with the Annual Meeting of the American Society of Cataract and Refractive Surgery held just a few weeks ago in Washington, D.C. As the largest U.S. meeting focused on refractive and premium cataract surgery, RxSight's light adjustable lens technology continued to be a key focus for doctors. Over 30 papers and posters were presented and numerous podium discussions highlighted the consistency, precision and versatility that the LAL brings to cataract surgeons and their patients. At the meeting, we also marked an important milestone, 300,000 LAL implants since commercialization in the U.S. In addition, we launched our I Trust It With My Own Eyes campaign, featuring ophthalmologists who have chosen the Light Adjustable Lens for their own eyes. These doctor-as-patient stories reinforce what our survey data already shows. Nearly 80% of ophthalmologists and optometrists say they would choose the LAL for themselves or a loved one, highlighting the level of confidence doctors have in the LAL's ability to deliver high-quality, customized binocular vision. Our experiences at ASCRS reinforce what we are seeing in real-world practices, namely that when doctors experience firsthand how they can predictably leverage postoperative adjustability to achieve such outcomes, it translates into greater confidence and drives the premium revenue that is critically important for the health of the practice, especially given recent reimbursement pressures. Entering the year, a key priority for our team was to continue to refine the customer reengagement programs launched in the second half of 2025 and to accelerate these efforts in 2026 and beyond. While we still have work to do, we're encouraged by the progress we have made so far this year. LAL volumes were consistent with prior year levels and utilization has now stabilized for the third consecutive quarter. More importantly, we're starting to see clear early signs that these efforts are working, particularly in practices where we've reengaged with physicians and staff through clinical outcome reviews, targeted IOL counseling training, refresher education and in-person workflow support. Internationally, we remain committed to take a measured and thoughtful approach to expansion with the goal of building a durable foundation for long-term growth outside the U.S. We are focused on establishing the optimal clinical, commercial and operational infrastructure in each market and on building relationships with leading surgeons who can help support adoption over time. As part of that effort, we were pleased to receive approval in New Zealand last month, which represents another step in expanding the global reach of the LAL system. While we expect international contributions to remain modest in the near term, the opportunity outside the U.S. is significant and will become a more meaningful driver of growth in 2027 and beyond. With that, I'll turn the call over to Mark, who will now go through our first quarter financials and guidance for the remainder of the year.

Mark Wilterding, Chief Financial Officer

Thanks, Ron. Q1 sales of $30.9 million declined 18%, reflecting a year-over-year step down in LDD unit volumes consistent with expectations. During the quarter, we sold 20 LDDs, which accounted for approximately $2 million of quarterly sales. We exited the quarter with an installed base of 1,154 LDD units. Q1 LAL unit volumes of 27,472 were in line with the year ago period and down 4% sequentially. This sequential decline was consistent with typical first quarter seasonality. LAL procedure volumes translated into Q1 sales of approximately $27 million, which represented 88% of total company sales in the first quarter. Higher LAL revenue mix contributed to a gross margin of 76.1% compared to 74.8% in the prior year period. First quarter 2026 SG&A expenses were $31.9 million, up 11% compared to the prior year period, driven by personnel-related expenses as we continue to prioritize investments in new hires and ongoing expansion of our global commercial and support teams. First quarter Research & Development expenses were $9.5 million, down 9% year-over-year. We reported a net loss in the first quarter of $15.9 million or $0.38 per basic and diluted share based on 41.3 million weighted average shares outstanding. Stock-based compensation was $7.9 million, resulting in an adjusted net loss of $7.9 million or $0.19 per share. Turning to 2026 guidance. We are reiterating our full year 2026 revenue guidance of $120 million to $135 million. Consistent with our February commentary, we anticipate that quarterly sales growth rates should improve throughout the year based on our assumption of improving fundamentals and easing year-over-year comparisons. As Ron discussed, we expect our international business to be a modest contributor to sales in 2026, primarily driven by early capital placements. We will continue to expand outside the U.S. in a measured and deliberate way to position the company for sustainable long-term growth. 2026 gross margin guidance of 70% to 72% also remains unchanged. As previously communicated, the anticipated step down from Q1 gross margin reflects the flow-through of higher cost inventory manufactured in 2025. Over time, we expect manufacturing absorption to improve as production levels normalize. We are forecasting 2026 operating expenses to be at the high end of our previous $150 million to $160 million range, reflecting accelerated investments in our global commercial organization. From a phasing perspective, we expect quarterly operating expenses to follow a pattern similar to 2025 with more pronounced spend in the first half of the year. Included in our costs, primarily in operating expenses, we continue to expect noncash stock-based compensation in the range of $30 million to $32 million. With that, I'll turn the call back to Ron.

Dr. Ronald Kurtz, President and Chief Executive Officer

Thank you, Mark. In summary, the core clinical value proposition of LAL remains strong and clearly differentiated in the premium IOL market with the ability to customize vision after surgery delivering superior patient outcomes and compelling economic benefits for practices. Despite the introduction of numerous me-too fixed IOLs, nothing we are seeing changes our conviction that adjustability represents the next meaningful step forward. When I look at where we are today, the business appears to be stabilizing and our customer engagement programs are beginning to show initial progress, giving us confidence to continue refining the model and expanding it globally in a measured way. At the same time, we're focusing on strengthening our team, improving execution and driving technical innovations that further simplify implementation while delivering best-in-class outcomes. We look forward to sharing additional details on these planned commercial introductions that can help reduce adoption friction for both clinicians and patients by streamlining the clinical workup for post-op adjustments, reducing the number of required LDD treatments and extending the range of correction. And with that, I'll ask the operator to open the call for questions.

Operator, Operator

Operator provided verbal instructions to participants. Our first question comes from Robert Marcus with JPMorgan.

Robert Marcus, Analyst, JPMorgan

It was good to see that you were able to kind of find footing and deliver a modest beat against consensus here. Maybe speak to what you're seeing in the field and how some of the elements of the turnaround are taking, how the reception is? And do you see any green shoots maybe into second quarter of continued improvement here? And then I have a quick follow-up.

Dr. Ronald Kurtz, President and Chief Executive Officer

Yes. Thank you, Robbie. So I would say that without commenting on Q2, which we're obviously in, the feedback that we're getting both from our customers and, just as importantly, from our team is very positive as we continue to roll out reengagement programs, as I described, around some very specific actions where we're able to review clinical outcomes and pearls that have been gained over the past several years as the technology has been rolled out across the U.S. And we now have confidence that continued refinement and expansion of those programs can result in further turnaround in terms of utilization with our customer base, which is quite large, as you know.

Robert Marcus, Analyst, JPMorgan

And as I look through the year, it implies basically modest sequential improvement. How do you feel about your ability to grow in 2027? And beyond some of the changes, what are you doing to really reinvigorate interest in LALs to return to a material growth rate to generate profitability again?

Mark Wilterding, Chief Financial Officer

Robbie, it's Mark. Thanks for the question. We said that our expectation is for growth rates to improve over the course of the year. And it's a reflection of both our belief that fundamentals will improve based on some of the things that Ron just talked through as well as easing comparisons. With respect to growth in 2027, we haven't, as you know, given guidance that far out. But we think of ourselves as a growth company. We invest for long-term sustainable growth, and that includes 2027 and beyond. Ron, anything else you'd add on that?

Dr. Ronald Kurtz, President and Chief Executive Officer

Yes. I think the things that we've commented on — continued technological innovation, which will continue to simplify implementation of the LAL, both in the U.S. and then increasingly outside the U.S. where we're starting to establish ourselves — will be growth drivers. I would also say that it's not that we've experienced a lack of interest in the LAL. I think there's still quite a bit of interest in the LAL, and we saw that, as I mentioned at the ASCRS meeting, where it continues to be a high area of interest in the medical community, but also at our booth with a lot of activity. So I think that it's about focusing that interest into growth through the programs that we've talked about.

Operator, Operator

Our next question comes from Ryan Zimmerman with BTIG.

Ryan Zimmerman, Analyst, BTIG

I want to follow-up on Robbie's question a little bit. I'm curious, and this is a tough question, but how much do you think the stabilization in your LAL adoption is a reflection of just the cataract market holding steady, particularly on the AT-IOL side, not deteriorating versus what we saw maybe a year ago relative to the efforts you're making in turning around commercial adoption. And I don't know if you can parse it out, but I'm hoping you could kind of take a swing at that.

Dr. Ronald Kurtz, President and Chief Executive Officer

Well, it's always, as you indicated in your question, hard to parse out what all the contributors are. I believe, based on the responses that we've gotten to date, that the actions that we're taking, all things being equal, are positive and are having an impact. Of course, it's always great when the market is working in your direction as well, and we certainly hope that to be the case. But under the things that we can control, we think that we're having a positive impact, and we'll continue to do so as we expand and refine these programs.

Robert Marcus, Analyst, JPMorgan

And just a follow-up, are you gating LDD sales at this point? I mean, is there interest from customers that you're holding off on when you think about LDD sales? Or is it just not prioritized amongst the sales force at this point?

Dr. Ronald Kurtz, President and Chief Executive Officer

I don't think that we are gating. I think that we are taking a more measured approach where we want customers to be fully ready to adopt the technology and to be successful with it. That is not to say we weren't doing that before, but the novelty of the LAL in those initial several years drove a faster pace. Now we're into a more gradual approach, but there is still a lot of strong interest, and we anticipate continuing to add LDDs, both outside the U.S. and in the U.S.

Operator, Operator

Our next question comes from David Saxon with Needham.

David Saxon, Analyst, Needham

Maybe one on guidance for Mark. I think last quarter, you talked about expectations for low single-digit LAL volume growth for the year. You came in above consensus here in the first quarter. So is low single digits a good way to think about 2026? Or could we be pushing mid-singles? And then kind of the second part of the question is, where does that get us in terms of fleshing out the higher cost inventory? Like at low single digits, does that get us through all of that inventory that's on the balance sheet?

Mark Wilterding, Chief Financial Officer

Yes. Thanks for the question. It was a little bit better than expected, but not to the degree where we felt like taking up guidance was warranted. So I think your assumption based on what we said in February is still accurate with respect to LAL growth being in that low single-digit range for the full year. Again, we expect growth rates to improve sequentially by quarter as we go through the year, as I mentioned earlier. But at this point in the year, it's always tricky given where we're at early to go out any further than that. So we think it's prudent to take a more conservative approach. With respect to the inventory, no change to our assumptions there either. You see it primarily in that gross margin guidance that we gave. We continue to believe that we'll finish the year in that 70% to 72% range. Q1, as expected and as communicated back in February, was not really impacted by some of those absorption issues, but we do expect them to show up in Q2 and for the remainder of this year. We're monitoring it closely. We haven't specified when that will lift and how that might look next year. When we are in a position to give longer-term guidance, we'll update that as well.

David Saxon, Analyst, Needham

And then the second question is just on the commercial pivot or reengagement strategy. Would love to understand what percent of accounts or territories you've gone out and actually implemented that. And then once you do that and get buy-in from the account, how should we think about the resulting utilization in the months or quarters to follow?

Dr. Ronald Kurtz, President and Chief Executive Officer

So I would say that we're still in the early innings of reaching through the installed base, which is, as you know, quite large — about 1,150 LDDs and roughly 2,500 surgeons. That effort will continue throughout the year and into 2027. In terms of results, the impact will be gradual because it has to extend through the installed base. But on an individual basis, we are certainly seeing the positive impact and feel that as we continue to refine the programs and how we implement them, that will accelerate.

Operator, Operator

Our next question comes from Larry Biegelsen with Wells Fargo.

Larry Biegelsen, Analyst, Wells Fargo

Ron, one domestic question, one international question. How are you thinking about increasing competition from premium IOLs? We know a few more coming this year. You have TECNIS PureSee from J&J. There's a BVI product. I think Rayner is coming out. How have you incorporated that into the guidance? And I had one follow-up.

Dr. Ronald Kurtz, President and Chief Executive Officer

Good question, Larry. Fundamentally, there's not a lot new in terms of these new product introductions. Having multiple players in the marketplace, even if they have undifferentiated product, means more voices and activity, so we're watching it. We feel strongly that the clinical outcomes achievable with adjustability are superior and ultimately will win out, though there can be transient impacts from these introductions. As for international, we've previously said where we've gotten approvals. That's the first step before commercial introduction and traction. We've had approvals and starts primarily in Asia with Korea and smaller markets such as Singapore. We recently received approval in Europe as well and have begun efforts there, with awareness starting to grow across larger countries in Europe. More recently, we've expanded into Australia and now New Zealand. These countries mirror where the premium IOL business has had the most success, and new product introductions often follow a similar pattern in those markets. For countries with longer regulatory cycles that are still important — Japan, China and India — we're working through those processes. I'll let Mark comment on the dollar figure.

Mark Wilterding, Chief Financial Officer

And just to be clear on quantifying international contribution, the team is driving hard and we have a great team in place, but it's not yet at a dollar level that we consider material enough to break out. When that changes, we'll be sure to provide an update.

Operator, Operator

Our next question comes from Stephanie Alasi with Bank of America.

Stephanie Alasi, Analyst, Bank of America

A competitor just reported recently and noted softness in the cataract market. Curious if that's something you're seeing in the market overall, and whether you see less of an impact given your premium offering. Any thoughts there? Also, the OpEx guide is pointing more towards the higher end of the range — what are the main areas of investment that are increasing, and how do you think about OpEx and time to benefit the top line?

Dr. Ronald Kurtz, President and Chief Executive Officer

I think the size of that competitor gives them a lot of visibility on the overall market, and their comments seemed more targeted to the non-premium segment of the market. They also noted continued growth in the premium segment, both in the U.S. and internationally, which is consistent with our long-term view given the clinical and economic benefits of premium IOL technology and specifically the LAL. We did see some softness in the overall cataract market a year ago as well. It is possible that macro factors are affecting certain patient subgroups, since patients sometimes face significant co-pays that could impact timing.

Mark Wilterding, Chief Financial Officer

On OpEx, we are focused on providing high levels of clinical training and field support both in the U.S. and abroad. Investments support new and existing customers, focused on penetrating accounts, customer support, education, sales and marketing, and advancing our R&D pipeline. Those are the primary avenues of investment that are driving OpEx toward the higher end of the range.

Operator, Operator

Our next question comes from Adam Maeder with Piper Sandler.

Kyle Winborne, Analyst, Piper Sandler (on for Adam Maeder)

First, could you remind us where the company sits today from a commercial headcount standpoint? It sounds like the plan is to maybe continue adding headcount. Should we kind of think about OpEx running at this pace for the foreseeable future while these efforts continue? And as a follow-up, you talked about innovation a little bit earlier. Anything you can double-click on there, and timing — should we think of any meaningful impact in 2027?

Dr. Ronald Kurtz, President and Chief Executive Officer

We have about 130 to 150 field-facing employees. That number has continued to grow with our installed base as well as with more recent initiatives. We'll make decisions about additional spending based on the success of our initiatives and other priorities in the business. On innovation, the areas I mentioned are benefits that we've been working on for some time. These efforts take time because we are a Class III device and must go through the PMA supplement process, which is underway. As we have visibility to commercialization, we will share more information and give visibility to both the investor community and to our customers. That suggests some of the commercial impact will be more pronounced in 2027 as new introductions become available.

Operator, Operator

Our next question comes from Xuyang Li with Jefferies.

Xuyang Li, Analyst, Jefferies

On the customer reengagement programs, can you share more about what you're doing with practices? What's resonating more with surgeons and their staff? What are the key issues that practices need your help solving?

Dr. Ronald Kurtz, President and Chief Executive Officer

It varies by practice, which is why our team is key in assessing and discussing with each practice the measures most likely to make them successful clinically and financially. It has to be a mutual benefit, and that's how it's being viewed and appreciated by our customers. Specific measures include leveraging our unique ability to track clinical results on virtually every patient and making that information readily available across the practice — optometrists, ophthalmologists and clinical staff — so everyone can see the quantitative impact of adjustability. That is motivating because no other IOL can provide that level of tracking except via a clinical study, which is typically impractical. Other efforts depend on the practice and can include workflow pearls gleaned from peer practices of similar size and demographics, how postoperative visits flow, division of labor, and how expectations are set and handled throughout the process. Those are clinical and practice skills that have evolved over the past five years, and now we are focused on disseminating that knowledge through direct interactions, peer-to-peer programs and digital media.

Xuyang Li, Analyst, Jefferies

On accounts that bought fewer LDDs in recent quarters versus prior periods that bought many more, do you see differences in utilization or adoption curves from prior cohorts?

Dr. Ronald Kurtz, President and Chief Executive Officer

It's a good question. It's a little early to draw conclusions because we're dealing with smaller cohorts. We're incorporating reengagement learnings into onboarding for these practices, and we expect to see benefits in that group as we progress through their onboarding and as the programs take effect.

Operator, Operator

Our next question comes from Tom Stephan with Stifel.

Thomas Stephan, Analyst, Stifel

What's the latest you're hearing around adjustable competition? Any incremental updates we should be aware of? Curious if you can touch on Perfect Lens, which I think is expanding in Europe. And then I have a follow-up.

Dr. Ronald Kurtz, President and Chief Executive Officer

I don't have any specific updates on competitive adjustable offerings. To my knowledge, there's nothing close to regulatory approval in the U.S. We know how high the bar is for that process, and we've continued to raise that bar. We also have a large installed base and a lot of accumulated clinical knowledge in the community. I don't want to be dismissive of competition, but people should be realistic about the likely time scale for any potential entrants.

Thomas Stephan, Analyst, Stifel

As you think about utilization curves, adoption interest and reengagement in the U.S., talk about your level of confidence today that LAL is a niche in the U.S. and, more importantly, can durably grow above market over time and continue to gain share long term?

Dr. Ronald Kurtz, President and Chief Executive Officer

We noted earlier that one large competitor emphasized the importance of the premium market and projected that it could grow materially over time. That aligns with our view that the premium segment will expand. The question is where that growth will come from. Multifocal and standard toric technologies have been around for many years, and growth must come from broader adoption of premium options. The LAL is unique because it's broadly applicable, preserves quality of vision, is flexible, and appeals to patients who want control and input in the process. Those characteristics play well for the LAL and should help drive growth in that larger premium segment over time.

Operator, Operator

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

Dr. Ronald Kurtz, President and Chief Executive Officer

Well, thank you all for your interest in RxSight. We certainly look forward to updating you on our progress in future quarters. Goodbye and good evening.

Operator, Operator

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