RxSight, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the RxSight Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star and then the number one on your telephone. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Philip Tripp-Taylor. Thank you. Please go ahead, sir.

Thank you, operator. Presenting today are RxSight President and Chief Executive Officer Ron Kurtz and Chief Financial Officer Shelley Toonan. Earlier today, RxSight released financial results for the three months ended June 30, 2021. 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 your questions during today's call reflect management's views as of today, September 9, 2021 only, and will include forward-looking statements 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 earlier today and in our filings with the Securities and Exchange Commission. Our SEC filings can be found on our website or on the SEC's website. Investors are cautioned not to place undue reliance on forward-looking statements. We will disclaim any obligation to update or revise these forward-looking statements. We will also discuss certain non-GAAP financial measures. Disclosures regarding these 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 website at rxsite.com on the investor calendar page of the news and events section on our investor relations page. With that, I will turn the call over to CEO Ron Kurtz.

Thank you, Tripp, and welcome everyone to RxSight's first earnings call as a publicly traded company. As you know, we completed our initial public offering at the end of July, and I'd like to begin by expressing our entire team's appreciation for the high level of investor participation that resulted in a total of approximately $120 million in net proceeds to support RxSight's ongoing collaboration with doctors, practices, and patients to optimize vision after cataract surgery. Our strong second quarter results demonstrate continued physician and patient adoption of our technology. In the second quarter, we generated $4.9 million in revenue, representing 41% growth compared to Q1 of this year. This revenue was driven by sales of 25 light delivery devices, or LDDs, and 1,825 light adjustable lenses, or LALs. With this progress, our installed base of LDDs grew to 130 practices that have completed over 8,000 LAL implants since U.S. commercial launch. Before I turn it over to Shelley Toonan to review the Q2 financial results in more detail, I'd like to provide an overview of the RxSight opportunity for those who are newer to our story. RxSight is focused on delivering optimal visual outcomes for patients after cataract surgery, which is the most common global surgical procedure across all surgical specialties. Annual cataract surgery volume, which typically exceeds 4 million procedures in the U.S., nearly 30 million globally, dominates surgical ophthalmology, accounting for several times the combined annual number of glaucoma, corneal refractive, and retinal surgeries. In cataract surgery, the eye's natural lens, which has become cloudy or less transparent with age, is removed and replaced with a clear plastic intraocular lens, or IOL. About 85% of the time, patients receive a conventional IOL that replaces the main spherical focusing power of the natural lens, primarily for distance vision. Conventional IOLs do not correct for astigmatism or presbyopia, which together affect nearly all cataract patients. And so nearly all patients implanted with a conventional IOL will need to use glasses after cataract surgery to achieve their best vision. In the U.S., where Medicare pays for the vast majority of cataract procedures, doctors receive a little over $500 for the actual surgical procedure, the preoperative visit, and all postoperative visits out to three months. while the reimbursement for the IOL is about $150. In contrast, for more than 15 years, patients have also been able to choose to pay out of pocket for a premium or advanced technology IOL that also corrects for astigmatism and or presbyopia and can reduce dependence on glasses after cataract surgery. These premium procedures now make up about 15% of the total cataract volume in the U.S. and about 10% globally. The out-of-pocket fee paid by patients is separate from the reimbursement received from Medicare or commercial payers and ranges from about $1,500 to $5,000 in the U.S., depending on the IOL used and local pricing. About two-thirds of this additional fee pays for increased work by the doctor or practice, and about a third is used to pay for increased cost of the premium IOL, which can range from about $400 to $1,100. Now, until the introduction of the RxSight light-adjustable lens, cataract patients considering a premium IOL have had to make decisions before surgery about their priorities for distance, intermediate, and near vision, as well as their willingness to accept tradeoffs between visual quality and range of vision. They also have had to depend entirely on their surgeon's ability to select the precise focusing power of the IOL that, once implanted, would produce their desired visual outcomes. These high-stakes decisions can lead to suboptimal results and bothersome visual symptoms such as glare, halo, and loss of contrast vision, which cannot be easily modified after surgery except with another surgical procedure such as LASIK. In comparison, the light-adjustable lens enables a premium process that provides much higher confidence for achieving optimal vision after cataract surgery, both for the patient and the doctor. Because the focusing power of the LAL can be modified non-invasively after implantation in the eye using RxSight's office-based light delivery device, or LDD, doctors can perform a standard refraction after surgery to specifically fit the LAL to the patient. The same process routinely used for prescribing glasses, contact lenses, and selecting LASIK targets. Not surprisingly, the overall precision and accuracy of the LAL procedure is also very similar to these other refractive corrections, allowing the LAL to deliver 20-20 distance vision without glasses at about twice the rate of competing premium IOLs. As reported by several of our customers, patients are able to leverage this precision as well as the LAL's broadened and elevated depth of focus to select visual corrections in both eyes that optimize both the range and quality of vision, with up to twice as many patients with 20-20 vision at all distances using both eyes compared to leading multifocal IOLs. Unlike these other premium IOLs, the LAL is not associated with loss of contrast vision or increased glare halo as compared to a conventional monofocal IOL. Using postoperative adjustability, we believe that doctors and practices adopting RxSight technology are able to confidently deliver optimal quality and range of vision to their patients and to expand their premium IOL business by converting a larger percentage of patients to higher revenue procedures. In a recent survey of RxSight practices, two-thirds of the patients receiving an LAL were converted from either conventional IOL procedures that provide no additional revenue or from non-adjustable stigmatism correcting IOLs that typically provide less than half the revenue of a light-adjustable lens procedure. The higher reported revenue from LAL procedures leads to a rapid payback period for the light delivery device, with higher ongoing revenue thereafter. We believe it is the combination of better visual outcomes and higher premium IOL revenue that defines the RxSight value proposition, attracting doctors and practices to offer this technology to their patients. To facilitate LAL adoption, we are focused on increasing our network of light delivery devices, as well as the number of doctors recommending and using the light adjustable lens in the relatively concentrated ophthalmic market. As previously announced, we are very excited that Steve Everly joined our excite last month as Vice President of U.S. Sales. He is working directly with Eric Weinberg, our Chief Commercial Officer, and the rest of our commercial team on executing our growth strategy. Today, they are continuing to expand our U.S. commercial team, including both the core team primarily focused on selling light delivery devices and a larger group mainly tasked with LAL procedural growth. Since the end of the first quarter of 2021, we've expanded our total commercial team from 55 to 76. This includes an increase in the LDD sales force from six to nine with planned further expansion to 12 by the end of the year, as well as an increased of our procedure focus team from 36 to 51 employees. In addition to these sales and marketing efforts, we continue to advance our product to improve patient outcomes and surgeon experience. We have introduced a number of important technology developments since our initial commercial launch, including increasing the range of astigmatism correction in IOL powers and reducing the number of required light treatments. Beginning in early Q3, we introduced a next-generation light-adjustable lens we call ActiveShield, which reduces the LAL sensitivity to UV light from the environment and therefore reduces the potential consequences of noncompliance with UV protective glasses used prior to the last light treatment, thereby addressing concerns over potential patient lapses that may have previously limited which patients were offered the LAL. ActiveShield also adds flexibility for the timing of postoperative light treatments that might otherwise have been more tightly scheduled so they could be completed more quickly. Given the importance of these improvements and customer excitement around them, our team was able to ramp production of the ActiveShield LALs and the necessary upgrade kits for the light delivery device so that we could rapidly roll out the updates. We're happy to announce today that all U.S. light delivery devices are fully upgraded for use with the Active Shield LAL, and the vast majority of ambulatory surgery centers have the Active Shield LALs available for use. Now, while we did meet with some customers in May at the Hawaii and I meeting, we've been able to have additional in-person conference opportunities in July, both at the ACOS and ASCRS meetings. Despite the pandemic, the ASCRS conference, which is traditionally the second largest ophthalmic meeting, was well attended, particularly at our booth on the exhibit floor, where we had over 15 talks by and for doctors, as well as 10 presentations at the meeting itself. It's noteworthy that this was our first opportunity to exhibit at a live meeting since our U.S. commercial launch, as all meetings were canceled after Q1 2020 due to COVID. We were also able to have our first in-person user group meeting with over 70 customers attending a highly interactive program. We are, of course, cognizant of the continuing pandemic, and though U.S. cataract procedures have steadily increased since the low point of Q2 2020, we are closely monitoring for potential impacts from the rise of the Delta and other COVID-19 variants. The vast majority of cataract procedures are performed in ambulatory surgery centers that remain open despite the rise in COVID-related hospitalizations. However, there may be more pronounced effects in some geographic regions, and it is possible that attendance at the American Academy of Ophthalmology meeting in New Orleans scheduled in early November may be affected by local COVID conditions as well as the effects of Hurricane Ida. With that, I'd like to turn it over to Shelly for details on the second quarter financial results.

Thank you, Ron. Good afternoon, everyone. In the second quarter of 2021, total revenue was $4.9 million, an increase of 41% compared to the prior quarter ended March 31, 2021, and an 81% increase compared to the second quarter of 2020. Looking at revenue by product, we sold 25 LDD systems in the second quarter of 2021, generating $3.0 million in revenue compared to 13 systems driving $1.8 million in LDD sales in the first quarter of 2021 and 15 systems driving $2 million in sales in the second quarter of 2020. As expected in our early stage, LDDs dominate revenue at 61% of our revenue in the second quarter of 2021 and 53% in the first quarter of this year. We sold 1,825 LALs in the second quarter of 2021 generating revenue of 1.8 million compared to 1,567 LALs driving 1.5 million in LAL sales in the first quarter of 2021 and 661 LALs generating 619,000 of LAL revenue in the second quarter of 2020. We should note that comparative LAL sales in the second quarter of 2020 were impacted by the shutdown of nearly all elective procedures in the U.S. in mid-March 2020. Second quarter gross loss was $800,000 compared to $1.1 million gross profit, or 32% of revenue, in the quarter ended March 31st. and $500,000 gross loss in the second quarter of 2020. The sequential decrease in gross profit was primarily due to a $1.7 million inventory reserve for the previous generation of LAL inventory due to the recent introduction of a new LAL, which includes our active shield technology that Ron just discussed. Had we not taken a reserve for the previous version of our LAL, our gross profit in the second quarter would have been $900,000, or 18% of revenue. In addition, two other factors affect our gross profit. First, our product mix between our low-margin capital equipment, like delivery device, and our higher-margin LAL significantly impacts our overall margin. In the first quarter of 2021, our LDD sales represented 53% of revenue, and in the second quarter, LDD sales represented 61% of revenue. Finally, the average selling price decreased as anticipated in the second quarter of 2021, including purchases by a corporate customer who is expanding their footprint to new centers and a new affiliated buying group. Selling, general, and administrative expenses for the three months ended June 30th were 6.5 million compared to 5.6 million for the three months ended March 31st and 3.2 million in the same period of the prior year. The increase in SG&A in the second quarter of 2021 compared to the second quarter of 2020 was primarily due to increased headcount in sales and marketing, and the increase in salaries in 2021 after temporary salary and bonus decreases starting the second quarter of 2020 due to COVID-19 cost reduction measures. Research and development expenses for the three months ended June 30, 2021, were $6.6 million, the same as three months ended March 31, 2021, and $5.1 million in the same period of the prior year. The increase in research and development expenses compared to the prior year period was primarily due to increase LAL transfers to research and development for testing. Our net loss in the second quarter was $13.5 million, or $3.28 per share and $3.53 per share, basic and diluted, respectively, attributed to common stock using a pre-IPO weighted average share count of 4.1 million and 4.2 million common shares, respectively, compared to a $17 million loss. or $4.66 per share for both basic and diluted per share loss attributable to common stock using a pre-IPO weighted average share count of 3.6 million shares in the second quarter of 2020. I would also like to note the non-GAAP disclosure in the press release for the non-cash stock-based compensation expense and the change in the fair value of warrants. as it provides investors with useful comparative information. Stock-based compensation in the second quarter of 2021 was $1.4 million, as compared to $1.1 million in the second quarter of 2020. Prior to our initial public offering, we had warrants outstanding, which are valued quarterly, resulting in non-cash expense or income, which are also included in our non-GAAP disclosure. Moving to the balance sheet, we ended the second quarter of 2021 with $61.7 million in cash, cash equivalents, and short-term investments. Long-term debt was $40 million. We are very pleased that in July we completed our initial public offering, which generated approximately $120 million of net proceeds. We are now well-positioned to expand our commercial infrastructure, advance and enhance next-generation products, and increase the body of clinical evidence to support broad adoption and utilization of the light adjustable lens technology. Now I will return the call to Ron for closing remarks.

Thank you, Shelly. Before we open up the line for questions, I'd also like to make note of our post-IPO press release announcing three new directors of our board, including Bob Palmisano, Robert Warner, and Julie Andrews, who now serve alongside Bill Link, Juliette Bacher, our chairman, Andy Corley, and myself. We're fortunate to be able to draw upon this group's highly relevant experience to guide our excite through this next phase as a public company focused on delivering an optimal premium IOL solution for patients and doctors, an exciting and rewarding work environment for our employees, and of course, a trusted and valued investment for shareholders. And now, operator, please open the call for questions.

Thank you, Ron. As a reminder, to ask a question, you will need to press star and then the number one on your telephone keypad. And to withdraw your question, just press the pound key. Please stand by while we compile the Q&A roster. Your first question comes from the line of Robbie Marcus from J.P. Morgan. Your line is open.

Oh, great. And first, congratulations on your first quarter public. Thank you, Robbie. You know, maybe to kick it off, you sort of touched on this, but I'd love to hear, you know, what are you seeing in the field in third quarter in terms of impact from Delta and COVID? You know, did you, are you seeing progression off of second quarter and, you know, anything you can add? maybe in relative to where the street sits for third quarter and fourth quarter sales, I think is what a lot of people are looking for. Thanks.

Great. Well, maybe I'll start a little bit and talk about, you know, what we're hearing about COVID. And then I'll turn it over to Shelly to talk more about the second part of your question. The, the, the, We've sort of been through this movie before. As you know, COVID has had its ups and downs, and we certainly experienced that in the latter part of 2020 and the first quarter of 2020. where that affected procedures and also maybe made doctors a little bit more hesitant to embark on a new endeavor. On the other hand, it also focuses their attention. on their business and how they can grow their business. And certainly with the cuts and continued cuts in Medicare reimbursement, premium IOL and the way and opportunity to grow premium IOLs is top of mind in practices. Other than that, really, we just have anecdotal information at this point. There obviously are parts of the country that are more affected or at different times have been more affected by COVID. Certainly right now in the southeast and the southwest, that seems to be an area where It's particularly where the rise in cases has been particularly severe. And those are areas where we have a high proportion of our customers.

Yeah, just to kind of conclude on Ron's remarks, I think that, you know, there's two components to the business, the LDD component, We saw that in the higher periods of COVID earlier, when doctors had to reduce the amount of patients they were seeing, they were more focused. They can make more money with the RxSight system. And so that's one of the messages we need to continue to bring home to potential customers is that they're not going to make it up on conventional volume. And this is an opportunity for them. So I think that's an area of weakness, but also an area of strength for us. And then of course, everybody can be impacted in terms of volume of the LALs. And as Ron alluded to, we're very strong in areas with a good installed base where there is an uptick in COVID, a little higher than the national average. So that's something we need to watch. And while we were able to roll out COVID, Our active shield that gives us an advantage where customers before we're trying to get their patients treated as quickly as possible before active shield in order to ensure that the patients did not get an inadvertent exposure to the sun to UV sunlight. Now they can schedule patients at a more leisurely pace. They don't want to, you know, push them off, but they can at a more leisurely pace, and that continues to give them flexibility in their business. So I think there's some upside-downside, and I think we're very microeconomic focused just because of the size of the company versus what a larger competitor would be. I hope that answered your question.

Yeah, maybe I appreciate that. Maybe to get a little more specific, You know, the street's looking at a little over five and a little over $7 million in third and fourth quarter and, you know, about 25, 28, 36, 38, 40 type of LDD placements in third and fourth quarter. You know, I didn't see you give guidance in the release around the call. Do you feel comfortable with those sales and LDD placement numbers as you sit here today?

No, we didn't give guidance, and that is a very good question. Robbie, not having given guidance, I think it's a little difficult for us to answer those questions as well. But what I will say is that we're very, very focused on LDD sales. And that is something we can impact more than we can LAL sales, and I think that's important for us because we've got two revenue streams in the business, not just one. So I hope that helps a little bit.

Yeah, maybe last one for me, and I appreciate that. You know, it's one quarter out of the IPO. I think everybody's just very focused on the model here and the trajectory coming out. I mean, do you feel comfortable with where street estimates sit at 21 million for 2021? I'll leave it there. Appreciate it.

Yeah. I think that while we're not giving guidance, I think it's implied.

Thank you.

Okay. Thank you, Robbie. Thank you. Your next question comes from the line of Clay DeMarcus from Bank of America. Your line is open.

Hey, good afternoon. I'll also offer my congratulations. I guess just to maybe build on Robbie's question a little, you know, in this current environment, are you seeing any sort of impediment towards making further LDD placements in the quarter? And just asking that, you know, given the last two quarters, you're in that 50 to 60% of revenues, you know, coming from the LDD. So just want to, you know, see anything qualitative. Are you seeing any sort of impacts of being able to go into ASCs or go about business development efforts?

Yeah, I would say that not currently. We're able to get into ASCs and, for the most part, get to see doctors. There are obviously still restrictions in place, but for the most part, the team has figured out how to leverage virtual meetings as well as in-person meetings. And we did have the two meetings in July, which were both good meetings for us, and we're hopeful that the academy meeting will move forward with good attendance as well, and that will be a strong meeting for us as well.

Yeah, if I could add just a little bit, Ron, I think two of the things that we leverage very much in our sales process you know, above and beyond the relationship the salesperson has with the doctor is physician references. Those are still very strong. And that's something easily done over the phone. So it's not impacted by COVID. And as well, you know, we've got more clinical data than we did before. And, you know, we have a nice ROI on the LDD. And we have that study that was done by Happy and Company not too long ago, and our salespeople are able to leverage for doctors using their unique pricing, showing them how they can make more money. So that hasn't changed. That's, again, something that they can do remotely as well as in person.

Okay. Thank you for that. Ron, a bigger picture question for you. Just as you think about the kind of catalyst over the next, 12 months, 18 months, you know, more upgrades come into the LAL, a next generation LDD, maybe reductions in the number of required follow-up appointments. You know, how would you frame those various catalysts for investors in terms of their potential impact to the commercial opportunity?

Yeah, I guess I would start with education about the benefits of the LAL technology. I think that's been something that, you know, obviously we've begun, but we've had a small, up to now we've had a small sales force and a small team doing that. We've expanded that team with some very high-quality, knowledgeable, experienced people who come from the industry, have a lot of experience, both clinical and business experience. And they're taking the benefits of the technology and the evidence that's been generated directly and consistently to a wider audience. And that is an effort that we're going to continue. We mentioned the growth of the sales team, and that's an important factor and catalyst for continued growth. You mentioned additional improvements to the technology. Obviously, we just introduced ActiveShield. That's really a platform for us. We're going to leverage that for additional improvements to the technology as well as labeling changes. to further reduce the requirements for glasses and the number of treatments. Those are in process, and we expect that they'll continue really over the next 12 to 24 months as we make additional submissions to the FDA. And then you also mentioned, you know, the LDD. We also had improvements to that in our most recent FDA supplement, which have been rolled out along with ActiveShield, and we're continuing to make improvements. improvements, particularly in manufacturability, so that we can maintain our margins over the long term. And that's going well, and we are planning to make those submissions to the FDA relatively quickly here, too, and that would be within that 12-month timeframe. And then finally, although it's not top of mind right now because of all of what's going on in the world, the potential for expansion internationally is definitely going to be a long-term growth driver. We already have approval in Europe, and we have the ability to expand there. Obviously, we've taken a pause there while we let COVID hopefully run its course and let those countries which have been probably more affected than the U.S. in terms of the impact on their cataract surgery volumes recover a bit, and then we would have the ability to expand there as well as in other wealthy nations around the world, and then ultimately into the large countries in Asia, which have longer regulatory cycles in the two-year timeframe, but which offer very attractive markets for us. Anything to add there, Shelley?

No. Okay.

Thank you both.

Thank you, Clay. Thank you. Your next question comes from the line of Richard Newiter from SVB Lyric. Your line is open.

Hi. Thanks for taking the questions. I wanted to start off on just the ActiveShield rollout. I was wondering if you could just give us a little bit better understanding of how ActiveShield will or is impacting the trajectory here. Is it more on the doctor side and the willingness for existing users to treat a broader array of patients that maybe they may have been worried about compliance. So higher utilization for existing accounts, or is it more that this is something that's going to get someone over the hump that might've been reluctant to purchase a system outright. And this is going to kind of drive accelerated uptake for new users, or is it more on the patient side? And to what extent has the, um, you know, has the glasses situation been a resistance point for patients? I'd love if you could just comment on those items for a second.

Yeah, so I'll start with the last item. We've been, you know, pleasantly surprised that really the use of postoperative glasses has not been reported as being a significant deterrent to patients. Patients typically wear protective glasses after cataract surgery, so this is not so different than what they normally do. And they understand that they have a special lens that's going to be able to be modified after surgery to be able to give them essentially exactly what they want, and the patients are willing to work within the confines of that technology. From the doctor's side, you know, I think both of the things that you mentioned, Richard, are correct. And we're certainly seeing some anecdotal reports of both, that our current users are really just ecstatic about having this upgrade to the technology. Even initial, you know, kind of amazement that we were able to make this change and A lot of kudos to our R&D and regulatory teams and our production teams for rolling that out. But they have reacted extremely positively. So we anticipate that, just as you said, this will open the door to more patients over time. being offered the LAL where perhaps before they were making a personality assessment in the office determining whether that patient was going to be compliant or not. But we also have heard that for potential new users or new customers who are acquiring the technology for the first time, that this is a big catalyst for them to adopt the technology, that having that potential concern was an impediment and having that largely prevented removed is a reason to move forward, and we're seeing that as well.

Got it. Thanks for that. You know, maybe, Richelle, just going back to, you know, it sounds like you're, you know, the implication or you've kind of implied that you're comfortable with the consensus revenue forecast. And then based on the comments that you provided around being a little more confident in the you know, your ability to get placements versus LAL utilization. Should we take that kind of, I don't know, implied comfort in the full year revenue as a sign that maybe, you know, you're incrementally more, you know, more heavily reliant on LDDs versus LAL to get there versus, you know, maybe a few months ago? Is that a fair assumption, putting the pieces together?

Well, I think that we always have been more reliant on LDD and that will definitely be true in a capital equipment business. You know, it takes a while to build your procedure business as well. And, you know, I think your models already reflect that. I think that, you know, we have less direct influence on the LAL sales and That would be the only comment I would make around that. If we're going to see any weakness from COVID, that's where we would see it. And, you know, our job is to try and, you know, give them reasons why they should not be concerned for our product as well as to continue selling the LDD. So we're trying to balance both sets of the business in whatever environment we're in.

Okay. So it sounds like, though, that generally speaking, you know, you're more or less comfortable with the kind of consensus thinking directionally, if I'm hearing you correctly.

I think you are, yes.

Okay. If I could, just one last one. You know, there are a couple of newer competitive launches in the premium IOL category, particularly from Alcon and Vividi. I guess the question here is just any – I'd love to hear your thoughts on how, if at all, that product is getting positioned in the marketplace, given that it's non-diffractive and that that seems to be kind of an area where your value proposition resonates, particularly kind of with blended vision, monovision. Just curious if the launch of that product has kind of changed the conversation at all or the decision matrix for – for doctors as they explore kind of the new alternatives out there. Thank you.

Yeah, I think that, you know, I would say more generally that if you look back at the premium IO well space, there has been a general trend towards less multifocality. And while the Vividi lenses and others in the EDOF classes may not be a diffractive multifocal, they are multifocal lenses. So they share the same profile in terms of patient symptoms. But the general movement has been towards less multifocality. So if you go back to the early multifocal lenses in the 2005 to 2010 timeframe. Those were more power and less intermediate, more near, more or less intermediate. And then you saw a progression towards less near, a little bit fewer side effects, and more focused on intermediate. The trifocals, the synergy and the panoptics have been kind of counter to that. And I think we're seeing a little bit with the additional introductions a movement back towards the original trend, which is patients don't like multifocality in general, and so less multifocality is better than more multifocality for a lot of people. But, of course, our response to that is no multifocality is the best response and preserve the quality of vision while still giving people a broad range of vision. And that's the unique attribute of our technology, being able to give people the highest quality distance vision but then also be able to take advantage of of both the broadened and the elevated depth of focus that the LAL has to provide a range of vision which can be titrated or customized in both eyes with the patient after surgery to provide a binocular solution, a solution with two eyes that gives better results than a multifocal solution with two eyes.

So, Ron, wouldn't you say, you know, one of the things that we say about industry is everybody uses the best tools they have available to them. And what doctors have done with multifocal toric and EVOF lenses is fit the patient to the best lens that they can, right? Whereas with us, we're doing exactly the opposite. Our lens fits the patient.

That's right. And so it's, you know, as Shelly mentioned, that has been the paradigm for the last 15 years is take what's available and try to predict what that patient is going to want after surgery. and also what they're going to need from a refractive standpoint. And that's just not an exact science. It hasn't been and it won't be. And that's where we represent a paradigm shift where we put in a lens that has high-quality vision, the ability to have a broad range of vision, but we titrate it to the patient after surgery.

Got it. Thank you very much.

Thank you. Your next question comes from the line of Lee Wong from Wells Fargo. Your line is open.

Hi, it's Leigh calling in for Larry. Thanks for taking my question. I know there's been a couple of questions asked already about the revenue and the consensus. I just want to make sure I'm hearing you clearly. You're comfortable with the current consensus number for 21. Do you feel the same about the cadence going to Q3, Q4, in terms of what's on the street number?

Yeah, I know I've been asked this question before, and so it's a little difficult since we haven't been given guidance, and I know you understand that. But I would say that the growth and cadence in our business is, you know, consistent with what we've seen before and consistent with what we would expect. We would continue to see, you know, we continue to expect that, you know, we would have a couple of, you know, variables, right, that as we get further and further penetrated, as we have more salespeople, that the number of LDD placements per quarter will continue to increase, as will the LALs due to the higher installed base. And so I think that that's our model and we'll continue to push on that particular model.

Got it. Thanks for clarifying that. And just if you can also comment around the ASP trend, how we should think about that just directionally in the next few quarters.

Yeah, you know, the ASP trend, obviously, on the LAL has been very consistent since, you know, introduction. It runs between, you know, $900 and $975 per LAL. You know, some volume discounting in there or list prices of $1,000. We anticipate that that will continue to be stable. And it's very similar to the pricing of the other premium multifocal and other premiums. premium IOLs. And so I think that's well established. Also, the value is very well established and it's passed on to the patient directly in higher pricing. So I think that's very stable. Very typical with capital equipment. The pricing, the ASP, tends to come down. It did come down between the first quarter and the second quarter. We expected that. That's not unexpected. I would expect maybe that, you know, we'll stabilize, you know, going forward, you know, not a lot of change, not as much change as we have between the first and second quarter. And that typically it would be another year or so before we would see any kind of inflection point again. And, you know, I think inflection is probably a too strong word. It's always gradual, right? And we are happy to have those gradual changes. particularly when we're able to get into loosely affiliated buying groups, new centers, and, you know, we hope to continue. Those are long-term sales, and they take longer to get. But, you know, we're certainly working on those.

Got it. That's very helpful. And then just lastly, can you comment on growth margin? I think you said that the growth margin for the quarter, excluding the active shield-related reserves, would have been closer to 18%. How do we think about that next few quarter? Obviously, the Q1 growth margin was in the 30%.

Yeah, it was. You know, Q1 had lower LDD sales in absolute terms, and it had higher ASPs. And, you know, I think for us, if the LDD sales are more dominant, of course, we're going to have a lower gross margin than if they, you know, let's say it was 50-50 in terms of revenue. And so I think that, you know, you know our longer term level, right, which is high margin, but I wouldn't expect too high margin in the short run. It's really affected by mix and the particular customers we get for LDDs.

Got it. Thank you so much.

Thank you. Thank you. And your next question comes from the line of Ryan Zimmerman from BTIG. Your line is open.

Great. Thanks for taking the questions. Congrats on the first quarter out the gate. And I won't ask about consensus. So we'll start there. I won't ask about that. But I will ask, Shelley, you did make a comment about LDDs in the quarter and about new customers. There's a new customer in a an affiliated buying group. And so I'm curious, I'm not expecting you to disclose that necessarily, but is that order, that multi-system order complete, or is there some that could carry in the third quarter? And what opportunity is there for maybe some of these larger unit deals as you kind of look at your pipeline of opportunities on the LDD side?

Yeah, I'm actually going to have Ron talk a little bit about buying groups before I make a specific comment relative to the quarter. You know, we don't think of, you know, a buying group or a larger corporate customer as having an end to their, the number of units that they'll buy, right? You know, typically they have multi-centers or opening multi-centers. And so we view it as a long-term relationship, not necessarily a per quarter relationship. Maybe they don't buy in every single quarter, but they would definitely buy over time. And I think those are important questions for customers for us. I will say these particular two groups are not PE groups. Those tend to make more centralized decisions, and they may start, you know, they're a longer-term sale. But I think these are all important customers that will continue buying from us.

Yeah, and the only thing that I would add is, as Shelley mentioned, you know, these customers who have, you know, multiple businesses sometimes across different states, they typically will – We'll take a measured pace to evaluation, so they'll incorporate that in one or two of their centers. We've already experienced that. And our job is to make those successful, as we think we're doing, and then move on to the next, as Shelley said, establish long-term relationships with these groups.

Understood. And maybe just a follow-up, somewhat tangential to Rich's question around the introduction of some of the new technologies. But as I think about the install base of Constellations and other FACO systems that are out there, again, a little tangential, but they're coming due over the next, call it, year or two, maybe longer. And I'm wondering how that opportunity serves your interest for LDD sales. Does it present an opportunity? Does it present a challenge as some of the FACO systems are, you know, being thought about for being replaced and so forth? I'd love to hear your thoughts on that, Ron.

Yeah, and, you know, these are just off the cuff, obviously. But, you know, the cataract surgery tools that you're mentioning, the FACO emulsification devices and other devices that are used in surgery, are bought by the ambulatory surgery centers. which, while some of those are partly owned or owned by physicians, they're mostly independent and they have their own budgets and their own buying cycles. We sell the light delivery device to, of course, the practices, typically in the offices, very few associated with ASCs. And so they're really separate customers. And so I don't see them as being competitive. They're really – but on the other hand, I don't necessarily see an opportunity, at least in our current situation, where, you know, we're really selling separately to the practices.

Understood. And then the last one for me – you know, appreciate the color on the sales force. And I'm wondering if you could just elaborate a little bit on the procedure focus team and, you know, kind of what impact, because it is a much bigger component than the LDD sales force, you know, what impact do you see within practices, you know, whether it's quantitatively or qualitatively, when you do put those people into a specific geography, you know, in terms of utilization and, you know, driving adoption of LAL usage, I'd love to understand your thoughts there.

Yeah, maybe I would step back a little bit. I mean, we were very proactive in establishing that team, and it's a highly qualified, clinically-oriented team, and they've been very successful in educating the whole practice on not only the attributes of the LAL, but also all the particulars around the procedures and both implantation as well as the light treatments. And that has been really their focus. This is, you know, if you think about this technology, this is a new technology. And that education, we have a whole group of people that we have to educate. And so that has been the primary focus of that team. as well as, you know, we've been adding LDDs at a pretty quick clip here, and so they have been having to catch up in maintaining that training, and they do it really well. We receive Almost 100% ratings as willingness to recommend with respect to our training and installations team. It's very highly regarded and well thought of and appreciated by our customers, not only initially but on an ongoing basis. Now, as that team matures and as our installed base matures, their focus also begins to move more towards utilization and really helping the practices identify patients who are going to be and expand the number of patients that are going to benefit from this technology. And We've, you know, fortunately, we have some of those people already on board. We're hiring more of those people. And, of course, our LDD sales force. also has that experience. We intentionally have hired a team that is both strong in capital equipment but also is very strong in premium IOL specifically and procedural growth. And that will be, again, over time as the install base increases and, you know, be very region specific, will become more and more of a focus for the team, already is.

All right. All right. That's it for me. Thanks for taking the questions.

Thank you, Brian.

Thank you.

Thank you. There are no other questions on cue. I will now turn the call back to Ron.

Great. Thank you. I just want to thank everyone for their time today and wish everyone a great rest of their day or evening. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.