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spk01: Good day, ladies and gentlemen, and welcome to the RxSite Incorporated first quarter 2022 earnings conference call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Philip Taylor. Sir, the floor is yours.
spk06: Thank you, Operator. Presenting today are RxSite President and Chief Executive Officer Ron Kurtz and Chief Financial Officer Shelley Toonan. Earlier today, RxSight released financial results for the three months ended March 31st, 2022. 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, May 5th, 2022 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 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, Dr. Ron Kurtz.
spk02: Good afternoon, and thank you all for joining us. RxSight delivered strong results in the first quarter of 2022 with revenue of $8.9 million, representing an increase of 157% versus the year-ago quarter and 6% versus the seasonably strong fourth quarter of 2021. Our performance reflects continued robust demand for the light delivery device and accelerating utilization of our light-adjustable lens. Given this performance, we are raising our 2022 full-year revenue guidance to a range of $41.5 million to $45.5 million, which implies an 84 to 101 percent growth rate versus 2021. During the quarter, we focused primarily on three growth strategies. First, building a broad installed base of light delivery devices, or LDDs, to establish a durable foundation of our Razor razor blade commercial model. Second, driving adoption of our unique light adjustable lens, or LAL, the first and only premium IOL that individually customizes vision after cataract surgery. And third, growing the body of clinical evidence that further validates our system's reliably superior performance and helps to increase doctor awareness, confidence, and peer-to-peer endorsements. Let's start with our progress building the installed base. In the first quarter, we added 40 new LDDs to the network of clinical sites offering postoperative LAL treatments. As a result, our installed base rose to 246 units, up 134% versus the year-ago quarter, and 19% versus the fourth quarter of 2021. LDD placements are, of course, a leading indicator of future LAL sales, and we work closely with new sites to train doctors and staff to ensure they are proficient providers who can begin confidently offering the LAL to patients as soon as possible. The strength in new LDD placements reflects, in part, the increasing productivity of our expanded LDD sales force. We now have 18 sales professionals, which represents a threefold increase since our July 2021 IPO. Importantly, our team is comprised of experienced ophthalmic sales professionals who already have productive, long-standing relationships with doctors in their regions, including many of the 3,000 U.S. cataract surgeons who perform 70% to 80% of premium IOL procedures. I'll now turn to our progress-driving adoption of the LAL, our unique premium IOL that is customized via in-office light treatments administered by our LDD beginning two to three weeks after cataract surgery. The LDD induces precise changes to the lens focusing power, providing LASIK-like refractive correction that is specific to the patient's individual needs and is not associated with increased halos, glare, starbursts, or loss of contrast sensitivity. In our FDA clinical trials, 70% of patients achieved 20-20 vision without glasses, compared to roughly 40% in similar FDA trials of other premium IOLs. Our more recent Phase IV data has seen that number increase to approximately 80%. This outstanding clinical performance is helping to fuel LAL adoption. During the first quarter of 2022, doctors implanted 4,166 new LALs, an increase of 166% versus the year-ago quarter and 41% versus the fourth quarter of 2021. We believe the sharp rise in procedures reflects an increase in the number of doctors embracing the RxSight system and recommending it to a greater proportion of their patients. Supporting this conversion process is our field support team of clinical trainers and field service engineers, as well as our recently established 18-person LAL account management team, which has been ramping up in recent months and is charged with engaging doctors and staff within our Excite accounts on patient awareness and education programs, development of efficient patient flow processes, LAL outcomes, and other initiatives designed to achieve successful and growing LAL utilization. Doctor feedback and implanting trends also suggest that our new LAL ActiveShield technology, which provides an extra layer of UV protection on the surface of the lens, is driving procedure growth. We introduced ActiveShield last September, and all LALs now include this technology. For doctors and patients, ActiveShield provides redundant protection from ambient UV light, reducing dependence on patient compliance with UV protective glasses. Compelling real-world clinical data is another powerful growth driver, and as I mentioned in the fourth quarter call, we are now collaborating with more than 80 RxSight practices to collect and share a wealth of useful clinical data stored on practice LDDs. We are the only cataract company that can readily build and maintain a large-scale, real-time clinical database, which will be a valuable asset as we work to penetrate and expand the premium IOL market. At the recent American Society of Cataract and Refractive Surgery meeting, multiple doctor presentations highlighted the ability of our system to deliver superior results. Dr. Kerry Solomon presented early results from a multicenter phase four data collection of patients who received bilateral implantation of the LAL with ActiveShield. In the initial readout of 102 eyes from 51 bilateral LAL patients, Refractive accuracy was at a level typically only seen in LASIK, the standard for refractive procedures, with 92.2% of LALIs within one-half diopter of sphere and 94.1% within one-half diopter of cylinder. These refractive results produced 20-20 distance visual acuity without glasses in 82.4% of eyes, an astounding percentage for cataract surgery in which this number typically hovers around 40%. A smaller study of 45 LAIs presented by Dr. Netanikpour demonstrated similar results with 75% of patients achieving 20-20 visual acuity and 100% 20-25 without glasses. In both studies, approximately 75% of patients elected to customize both eyes for optimal binocular vision across a range of distances, an option many cataract patients seek to address presbyopia. For both the doctor and patient, our system is particularly well-suited for success using this blended vision approach for at least two reasons. First, the LAL is uniquely effective at reducing refractive error, including astigmatism, which improves blended vision performance. Second, the LAL allows patients to test drive their vision with both eyes before and between light treatments and to make fine adjustments in one or both eyes as if they were being fitted for glasses or contact lenses. These and a host of other presentations and panel discussions during the annual meeting helped to boost awareness and enthusiasm around our technology. As a result, we had a very productive ASCRS. Activity at our booth was brisk, with RxSight sales professionals busy discussing and demonstrating our technology to potential new customers. I'll sum up by saying that RxSight believes that every cataract patient deserves the highest quality vision, and we're focused every day on making that happen. Our technology is unlike any other IOL on the market today, and with our customers, we are working to establish a new standard that meets the exacting and progressively higher expectations of premium cataract patients. Real-world data continues to validate our system's ability to achieve superior visual outcomes across a wide range of patient needs and without compromises, offering doctors a valuable new tool to grow and strengthen their practices. Our team possesses deep experience in the ophthalmic private pay market, having led development and launch of major refractive technologies. We continue to utilize this knowledge and expertise to communicate the significant advantages of our technology and drive adoption. While we're still in the early days of adoption, and challenged by the same macro headwinds affecting other companies, the positive momentum we're seeing in LDD placements and LAL procedures indicates to us that we're off to a solid start with tremendous opportunity ahead. With that, I'll turn the call over to Shelly for an overview of our first quarter 2022 financial results and full year guidance.
spk00: Thank you, Ron. Good afternoon, everyone. As Ron noted, total revenue in the first quarter was $8.9 million, increasing 157% compared to the first quarter of 2021 and 6% compared to the fourth quarter of 2021. By product line, the 40 LDD sales in the first quarter of 2022 generated revenue of $4.6 million, This compares to 13 LDD unit sales for $1.8 million in revenue in the first quarter of 2021, representing a 208% unit increase and 149% growth in revenue. First quarter 2022 placements were particularly strong in a quarter that is usually seasonally weaker due in part to the fact that four customers purchased multiple units. Two new accounts purchase two LDDs each for two separate clinical offices, and two existing accounts each purchase additional LDDs for their other locations for the convenience of patients as they expand their LAL volumes. Most importantly, these multiple LDD sales illustrate the growing level of practice commitments as customers and their patients experience superior visual results with the LAL. We offered preferred LDD pricing to these accounts purchasing multiple units, which contributed to the sequential dip in the first quarter 2022 LDD ASP to approximately $114,000 from $118,000. Compared to the fourth quarter of 2021, when we sold 45 LDDs for 5.3 million revenue, our first quarter 2022 LDD unit sales declined 11% and revenue declined 14%. As noted earlier, our fourth quarter is typically the strongest for capital equipment purchases, so the sequential decline was expected. Also, as expected, in this early stage of our commercialization, LDDs continue to dominate sales mix, representing 51% of first quarter 2022 revenue compared to 53% in the first quarter of 2021. We sold 4,166 LALs in the first quarter of 2022, generating $4.1 million in revenue. This compares to 1,567 LAL unit sales for $1.5 million of revenue in the first quarter of 2021, representing year-over-year growth of 166% for units and 168% for revenue. In the fourth quarter of 2021, we sold 2,959 LALs for $3 million in revenue, representing quarterly sequential growth of 41% for units and 42% for revenue in the first quarter of 2022. As Ron discussed, we believe multiple factors are driving strong LAL sales growth, including expansion of our LDD sales force and install base, The added benefits doctors and patients derive from our Active Shield LAL technology and favorable real-world clinical data. We believe COVID had less of an impact than in previous quarters with minimal interruptions to our site practices surgery schedules, which are typically booked one to three months in advance. There were early indications in the quarter that our expanded LDD Salesforce and newly established LAL sales team are beginning to influence faster LAL starts among new LDD accounts, defined as customers purchasing new LDDs in the fourth quarter of 2021 and first quarter of 2022. In addition, several accounts installed in the last six months are now selecting the LAL for a significant portion of their premium cases and now rank among our highest quarterly procedure customers. First quarter profit was $3.7 million or 42% of revenue compared to $1.1 million or 32% of revenue in the first quarter of 2021 and $2.9 million or 34% of revenue in the fourth quarter of 2021. The sequential increase in gross profit is primarily due to mix as the LAL, our higher margin product, represented 46% of revenue in the first quarter of 2022 as compared to 34% in the fourth quarter of 2021. Selling, general, and administrative expenses in the first quarter of 2022 were 13.6 million, up 143% compared to 5.6 million in the year-ago quarter, and up 17% compared to the 11.6 million in the fourth quarter of 2021. The quarter-over-quarter increase is due primarily to increased headcount in sales and marketing, increased costs to operate as a public company, and an increase in stock-based compensation. The prior quarter's sequential rise is related primarily to increased headcount in sales and marketing. Research and development expenses for the first quarter of 2022 were $6.7 million, up 1.1% compared to $6.6 million in the year-ago quarter, and up 14% compared to $5.9 million in the fourth quarter of 2021. The prior quarter sequential increase is primarily due to higher consumable materials and testing and prototype expense. Note that our R&D costs can vary quarterly depending upon the stage of development of our products and timing of clinical studies. We reported a net loss in the first quarter of 2022 of $17.6 million, or a loss of $0.64 per basic and diluted shares using weighted average shares outstanding of $27.4 million. In the first quarter of 2021, our net loss was $6.8 million, or a loss of $1.70 per basic and diluted shares using weighted average shares outstanding of $4 million. I would also like to highlight the non-GAAP disclosure in the press release for the non-cash stock-based compensation expense and the change in the expiration of warrants, as it provides investors with useful comparative information. Stock-based compensation in the first quarter of 2022 was $2.6 million, and there was no expiration of warrants in the quarter, resulting in a non-GAAP loss of $14.9 million, or a loss of $0.54 per basic and diluted share. Moving to the balance sheet, we ended the first quarter of 2022 with $143.8 million in cash, cash equivalents, and short-term investments. Long-term debt was $39.9 million. On May 3rd, we amended our loan and security agreement with Oxford Finance to extend the draw period for the remaining 20 million draws that expired in 2021 and early 2022. Under the amendment, we now have two options for 10 million draws each in the second and third quarters of 2023. The amendment also extends the interest only period from December 1st, 2023 to April 1st, 2025. Although we do not anticipate drawing on the loan, we believe the amended agreement is prudent and in the best interest of shareholders providing added financial flexibility as we continue to grow the company. As Ron indicated, we increased our 2022 revenue guidance to a range of $41.5 million to $45.5 million, which implies year-over-year growth of 84% to 101%. We expect the usual seasonality patterns in 2022 with the second and fourth quarters generally the strongest for capital equipment, which is our LDD, and for softer LAL procedure volumes in the third quarter as doctors and patients take time off during the summer. We are not changing our 2022 guidance outlook related to gross margins or operating expenses. To reiterate, we expect gross margin in the range of 35 to 36% range. While the first quarter margin was 42%, we expect higher LDD material costs later in the year as the material ordered for the second half of 2022 continues to increase due to supply chain shortages. While we've been able to procure the necessary materials to manufacture the LDD and meet growing customer demand, we have faced increased supply chain headwinds and challenges exacerbated by the COVID-related shutdowns in China and the war in Ukraine. Our operations team has navigated this situation successfully thus far, and we are keeping a close eye on supplier channels, taking steps to minimize disruptions wherever possible. Moving on, we expect operating expenses in the $86 million to $90 million range. While R&D spending will rise in 2022 when compared to 2021, our largest increases will be in SG&A. As we implemented our planned headcount increases in our sales and marketing organization, meet the growing demand for customer participation in Phase 4 clinical studies using data captured in LDD units, and absorb the full year costs associated with our public company status. We maintain our estimate that non-cash stock-based compensation will be approximately $12 million to $13 million for 2022 as compared to $7.6 million in 2021. Now, I will turn the call back to Ron for closing remarks.
spk02: Thank you, Shelly. To recap, we're very pleased with our strong start to 2022. Solid revenue growth driven by an expanding install base and rising procedure volumes confirms that an increasing number of doctors and patients are selecting our premium cataract solution for the significant advantages it provides. We are confident in our team's ability to execute our growth strategy in 2022 and beyond by continuing to focus on our core strengths, exceptional visual outcomes across a range of patient types and preferences, the positive and interactive patient experience that results in high satisfaction rates and drives new patient referrals, and a convincing value proposition that benefits both premium cataract practices and their patients. And now, operator, please open the call for questions.
spk01: Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press star 1 on your phone at this time. We ask that while posing your question, you please pick up your handset if listening on a speakerphone to provide optimum sound quality. Please hold while we poll for questions. Thank you. Your first question is coming from Robbie Marcus of JP Morgan. Robbie, please ask your question.
spk05: Hi, everyone. This is actually Rohan for Robbie. Thank you so much for taking the question, and congratulations on a nice quarter. I just want to dive a bit deeper into guidance. And I was wondering if you could give us some more color on the cadence of placement throughout the year and how you expect utilization and mix to trend. Also, are you assuming any kind of further COVID variability or supply chain inflationary pressures within the guidance range? Obviously, it's unchanged. But if so, what steps are you taking to mitigate these pressures? Thank you.
spk00: Thank you. I'll go ahead and start as well. Our guidance is very solid guidance for growth. It's further underscored by today's revision to the guidance by increasing it. The usual seasonality factors will still prevail. Q1 was stronger than we would normally expect, as I mentioned, by customers buying multiple units. And again, we continue to see the cadence of LDDs probably being strongest in the second and fourth quarter. That's very typically expected. what happens in capital equipment, and that's what we also saw last year. As we think about the question about LAL volumes, again, they were very encouraging. We had a very heavy percentage of LDDs as a percent of the total, but we expect that we won't be as high on LDDs. It was about 60% of the total revenue last year. This year we still expect it to be over 50, but somewhere in between the 50 and 60 as LAL revenue continues to grow. And then in terms of supply chain, we have managed that well overall. We continue to manage it. The price increases that we expect in the LDD are baked already into our gross margin guidance. I think we have pretty good visibility on that. But we continue to talk about supply chain, not in terms of whether we can get products, but the timing of when it arrives during the year. And so I think that that's very important. We've been very proactive with this supply chain issue and working very closely with our vendors. So I think I answered all your questions, or did I miss something, Ron?
spk02: Just maybe going to interest rates, the effective interest rates. You know, obviously interest rates going up is a factor, but it's a relatively small factor in the decision of practices to purchase the LDD, which is really based on an ROI analysis, and that continues to be very, very strong. And then I think you also asked about the effects of COVID and, you know, Shelly mentioned, you know, we think the effects in the last quarter were much less significant, you know, while you know, there are always concerns about how COVID can affect things in the future. You know, because cataract surgery is performed in ASCs, which is not, you know, away from hospitals for the vast majority of cases, and, you know, ophthalmic practices really have largely figured out how to deal with at least the type of COVID outbreaks that we've had. We're not anticipating a big COVID impact as of now.
spk05: Great. Thank you so much.
spk01: Thank you. Thank you. Your next question is coming from Ryan Zimmerman of BTIG. Ryan, please ask your question.
spk03: Yeah, thank you. Congrats, Ron and Shelley, on a great start to the year. I want to ask a couple questions, if I may, about the sales force. And it seems like it's ramping really well. You're filling out that sales force, as you had said. How do you think about the productivity of the sales force today and the capacity that they have in their respective markets over time? I mean, Are we at a point where, you know, you need to consider additional sales heads? And that would, thoroughly, but again, you know, where's the capacity for them from a productivity standpoint?
spk02: Thank you, Ryan. So, you know, as you mentioned, we've grown the sales force really over the last, you And these folks are coming with a great deal of experience, both in ophthalmology and in their local market. But they do need to learn our technology and how to position it with practices. And that takes a certain amount of time. It varies based on the individual, but I think Six to nine months is kind of a typical range that we would expect people to get fully productive. So we're still in that range since we've been hiring people relatively recently. We haven't really looked at expanding the force beyond what we have. We do have the 18 LDD sales team as well as a matched group of 18 LAL sales professionals, and we will likely continue that for a while before making any other decisions. which would be based on whether there was an opportunity for further growth.
spk03: Understood. I appreciate that, Ron. And if I may ask another question, I think back to the IPO, I think you had outlined that maybe there was 1,400 to 1,600 or so kind of premium cataract physicians. If I heard you correctly tonight, you called out 3,000. And so that would seem to be maybe a more expansive customer base than you had initially thought for the LDD and subsequently the LAL. And is that what you're trying to indicate here, that there's more interest beyond maybe a subset of the cataract physician market and how you just think about the broader customer base?
spk00: Yeah, I think that, you know, The data continues to get updated quite often. Right now, with most recent data we got from MarketScope, they show just over 9,000 overall cataract surgeons in the US and closer to 3,000 doing the highest volume. Of course, we could argue about what highest volume is necessarily. Our focus we think is on the top 1,400 to 1,600, but we also think there are growth opportunities among people who are not doing as many procedures because it's so much easier for them to do and allows surgeons who are not doing a lot of premium to enter the market. So we do think probably that's expanding. I think that we're all trying to determine you know, about how many accounts does that mean? What is the, you know, overall, you know, number of LDDs that we would have in the United States over time? Because often there are more than one doctors in a clinical practice. And then, of course, you often get other doctors who are not doing LAL converting. So we think that probably that number is in excess of 1,000, but, you know, it could change as well in terms of practices. that support somewhere between that 1,400 and 3,000, but we do think the target doctors are a little bigger than we thought, say, nine to 12 months ago based on the data we've seen. Would you add anything to that, Ron?
spk02: Yeah, no, other than, you know, if we think that it's somewhere in the 3,000 range and, you know, we probably have just scratched the surface of that with, you know, maybe 10% penetration to date, so we're still in the early stages.
spk03: Right. All right. I appreciate that. And again, nice quarter. Thank you.
spk01: Thank you, Ryan. Thank you very much. Your next question is coming from Danielle Antalfi of SVB Securities. Danielle, the floor is yours.
spk04: Hey, good afternoon, guys. This is Ryan on for Danielle today. Thanks so much for taking our questions. So you discussed your promising results presented and touched on our experience at ASCRF. I was wondering if you could please talk a little bit more specifically about the physician reception at the event to the LDD and how it's been more broadly in the market. And then I had one quick follow-up.
spk02: Well, specifically at the meeting, you know, I would say it was very, very positive. We had a pre-meeting event, which was extremely well attended, so there was a lot of pre-meeting interest. The meeting itself had roughly 15 different presentations that either were specifically about LAL or involved LAL, the light adjustable lens. So there was a lot of interest that brought a lot of activity to our booth. We felt and were told by others that our booth was, if not the busiest, one of the busiest at the show. And there was just, you know, broad interest. Many physicians who, surprisingly enough, had not had much exposure to the LAL made their way to the booth and were getting educated from our team there. So I would say it was a very positive meeting for us.
spk04: Great. Happy to hear that. Thanks. And then one more from me. Have you guys seen any sort of material impact on the customer's ability or willingness to make large-scale capital equipment purchases given these ongoing inflationary impacts and pressures that we've seen on health care systems and physician office budgets?
spk02: It's a good question. I think it's important to remember when you're thinking about capital purchases by especially large hospitals that are sometimes in the millions of dollars that Our purchases are being made by practices, so they're generally where the physician, if they're not the decision maker, they're certainly a very significant influencer, and the scale of the investment is approximately $125,000. So, that's a much smaller amount, and with the additional revenue that the LDD brings in, that can be, you know, that ROI turns out to be, you know, anywhere from six to 18 months, typically, depending on the volume and pricing of that particular practice. Obviously, we're watching that, but at least with respect to the first quarter, that hasn't been a major impact.
spk00: Can I add something, Ron? The other thing for our customers' practices, while they may have some inflationary pressure inside of the practice for wages, the standard cataract procedure reimbursement continues to go down, so it's harder and harder for doctors to either make money or break even. And so they're really reliant on procedures that our patient pays, such as ours. And so there's more and more interest in the LAL and premium cataract surgery overall because it offsets some of the losses and in fact increases the profitability. The other thing is that patients are older. They're typically in 65, 70, 70 plus range. And so they're less impacted by the short-term inflationary pressures, at least emotionally, than, say, younger customers in their 30s and 40s considering LASIK. So we think those kind of offset the overall tone in the marketplace about inflation.
spk04: Awesome. Thank you both.
spk00: Thank you.
spk01: Thank you. Our next question is coming from Larry Beagleson of Wells Fargo. Larry, please pose your question.
spk08: Hi, this is Charles. I'm for Larry. Um, I wanted to dig a little bit more into, uh, you, you mentioned this quarter, you saw, um, several accounts buying multiple LDDs. Um, just wanted to best understand, can you kind of explain the dynamic here? Is that just, um, they just have multiple physicians interested, uh, and, um, I just want to try to better understand. If you have 246 install base there, does that mean you have exactly 246 physicians that are doing these LEL procedures, or is there a different dynamic there to be aware of?
spk00: So I'll start. Maybe Ron can talk about physicians overall. The reason we mentioned it on the call today is we had a greater concentration or bigger number of customers who bought. on multiple LDDs in the quarter. And it really comes down to this for these practices. We even had two practices that bought two at the same time. Very often a high volume surgeon and their partners will have multiple offices in a city, but they could be an hour driving distance from each other. And so as they either start their practice like these two, they'll start with both offices Or as they expand, they'll add an LDD to make it more convenient for their patients. And so that's what we've seen. We have seen that before, but not at the level that we saw in the first quarter.
spk02: And as far as your question regarding the ratio of LDDs to LDLs, surgeons. It's not one-to-one. Generally, there are more surgeons, and we've certainly trained more surgeons, but it varies quite a bit. And within a practice, there might be one doctor who's the primary premium IOL doctor, There might be others who are lower volume. Obviously, we look at once we're in the practice and once the practice has adopted the LDD, the rest of the staff has been onboarded, then that's a great time for us to go back to the other doctors who maybe they haven't adopted premiums because they're not LASIK surgeons. And so they haven't felt comfortable, you know, with the ability, with their inability to fix results themselves. This provides them an opportunity to get into the premium space and again address the revenue deficits that Shelly referred to earlier that are coming on in the conventional space.
spk08: Okay. That's helpful. And then one just quick follow-up. So then just thinking the implications going forward, you mentioned this quarter was greater than normal amount buying multiple. Is that something you expect becoming more normal in future quarters? I'm just trying to think about ASP implications of that.
spk00: Well, we've seen this happen in previous quarters. It's just that it wasn't as heavy as it was in the first quarter. We think that's a little unusual. And we'll just have to see what the cadence is going forward.
spk08: Okay. Thanks, guys.
spk01: Thank you very much. Your next question is coming from David Saxon of the Needham Company. David, over to you.
spk07: Yeah. Hi, Ron and Shelley. Congrats on the quarter and thanks for taking the questions. Maybe just wanted to start on utilization. I mean, a number jumps out to me, if my model is right at least, it looks like 20 LALs per LVD. So just would love to hear what you're, you know, where you're seeing that strength. Is it mature accounts continuing to increase their utilization or is it, you know, the ramping of the LAL sales team driving adoption? And then, I mean, if you're willing to say, what's the utilization look like at the higher volume group of customers?
spk00: I'll start on that. Yes, your model does work correctly. You know, we went from about 5.8 LALs per LDD per month in the second and third quarters of last year up to 6.1, and this quarter it was quite strong at 6.8. And I think that You know, it is an important metric in part because the street can calculate it. And, you know, it's something you have visibility to. We don't run the business quite like that. We run it on a surgeon to surgeon and practice to practice basis to help them increase their volume. But we do think that in this quarter we saw something a little different. And it's really an N of one right now, but it's going in the right direction. What we did see is the accounts that got established, that we sold to in the fourth quarter and got going, as well as in the first quarter, they started their cases sooner and they did more cases immediately. And we believe this really has to do with the expectation that the LDD salesperson and then the LAL salesperson reiterates when they come into the account with our clinical applications team. You know, it is our overall goal to continue to increase procedures, whether they come from, you know, new customers ramping quickly or as well as our existing customers and adding doctors. But we don't manage the business to that number. But yes, of course, that would have to be part of what we're doing in order to increase our procedures. Our first line of attack, though, to increasing procedures is increasing the number of LDDs we sell each quarter. Would you add anything to that, Lauren?
spk02: You know, just, you know, you've already said it, but just to reiterate that, you know, there's a large range of practices where the amount of cataract surgery a practice is doing, how much of that is premium, and that all plays into that number. So it's not just the, you know, it's not a pure representation of the adoption of the LAL.
spk07: Okay. Yeah, that's super helpful. And then maybe just a question on gross margin. I mean, if I'm hearing you correctly, inflation starts to impact the P&L more meaningfully in the second half. So should we be thinking about the third quarter gross margin kind of being the trough and then you get some sort of balance as, you know, LALs or procedures kind of rebound into the seasonally strong fourth quarter?
spk00: Yeah, I think that that's part of it. You know, the number one thing for our overall gross margin is the percent of LALs and LAL revenue as compared to LDD. And so that's the number one driver. And of course, we would never hold back LDD sales to boost margin because that's what we need long term. But you would expect in the quarters where we have the highest LDD sales, that would be where we might have a little bit of depression on the margin. And the reason in particular that we mention this, again, is while we have these costs baked into our overall guidance, we didn't want anybody to think that that 42% was sustainable as we go forward, just because we are going to have higher material costs in the second half of the year.
spk07: Great. Thanks and congrats on the start to the year.
spk00: Thank you so much.
spk01: Okay, there will be no further questions in the queue. Would you like to hand back for closing?
spk02: Yes. Thank you, operator. Thank you all for your time and attention today and for your continuing interest in RxSight. I wish you the best for the rest of the day.
spk01: Thank you. Thank you, ladies and gentlemen. This does conclude today's conference call. You may now disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.
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