RxSight - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 revenue was $37.9M (+28% YoY, -6% QoQ), with gross margin 74.8% driven by lower LAL costs and favorable mix; GAAP EPS was -$0.20, adjusted EPS was -$0.03.
• The company cut FY2025 guidance on April 2 (revenue to $160–$175M, OpEx to $150–$160M, SBC to $27–$30M) and then reiterated this on May 7; prior FY2025 revenue guidance was $185–$197M and OpEx $165–$170M with SBC $22–$25M.
• Procedure volume headwinds stemmed from macro pressure and competitive trialing in premium IOLs, while LDD demand and installed base growth remained strong (installed base 1,044 at March 31).
• Near-term narrative shift: pre-announced miss and guidance reset were the stock-reaction catalysts; management expects stabilization in Q2 and stronger LAL recovery in H2 on clinical/marketing initiatives and software updates.

What Went Well and What Went Wrong

• What Went Well

  • Strong gross margin execution: 74.8% in Q1 2025, aided by lower LAL cost recognition, higher-volume builds in 2024, and mix shift toward LAL revenue (72% of total).
  • Installed base expansion: 73 LDDs sold in Q1; installed base reached 1,044 (+43% YoY) supporting future procedure capacity.
  • Product and regulatory momentum: ahead-of-schedule software update adding spherical aberration treatment and LDD monitoring; approvals in South Korea and EU LDD/LAL, with U.K. expected in Q2.
  • Quote: “We are ahead of schedule in launching a previously announced software update… opening the door for further improvements in clinical results compared to fixed IOL technology.” — Ron Kurtz.

• What Went Wrong

  • Volume headwinds: first top-line miss since Q3 2021; first YoY drop in LALs per LDD metric due to macro softness and competitive trialing.
  • Guidance reset: FY2025 revenue cut to $160–$175M and OpEx lowered to $150–$160M with higher SBC; signals weaker near-term LAL volumes and spend reprioritization.
  • Practice capacity and workflow: staffing challenges and desire for more clinical/marketing guidance hindered same-store growth; seasonally strong Q2 cautioned due to macro/trialing.

Transcript

Operator (participant)

Thank you for standing by. At this time, I would like to welcome everyone to the RxSight first quarter 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. I would now like to turn the conference over to Oliver Moravcevic, Vice President of Investor Relations. Please go ahead, sir.

Oliver Moravcevic (VP of Investor Relations)

Thank you, Operator. Presenting today are RxSight President and Chief Executive Officer Dr. Ron Kurtz and Chief Financial Officer Shelley Thunen. Earlier today, RxSight released its financial results for the three months ending March 31st, 2025, and reiterated its full-year guidance. A copy of the press release is available on the company's website. Before we begin, I would like to inform you that comments and responses to questions during today's call reflect management's view as of today, May 7, 2025, and will include forward-looking and opinion statements, including predictions, estimates, plans, expectations, and other information. Actual results may differ materially from those expressed or implied as a result of certain risks and uncertainties. These risks and uncertainties are more fully described in our press release issued today and in our filings with the Securities and Exchange Commission, or SEC.

Our SEC filings can be found on our website or the SEC's website. Investors are cautioned not to place undue reliance on forward-looking statements, and we disclaim any obligation to update or revise these forward-looking statements. 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 our President and Chief Executive Officer, Dr. Ron Kurtz. Ron?

Ron Kurtz (President and CEO)

Good afternoon, everyone, and thank you for joining us. As we discussed during our pre-announcement just over a month ago, the first quarter brought an unusual combination of macroeconomic headwinds and competitive disruptions that led to our first top-line miss since becoming a public company in Q3 2021. Although interest in our technology remains high, as evidenced by continued strong LDD demand, we experienced a first-time year-over-year drop in the LAL's per-LDD metric. I'd like to now share some of our recent analysis, which has helped us develop targeted programs focused on same-store procedure growth while also continuing to develop the broader opportunity via the addition of new customers and markets. Unsurprisingly, the vast majority of respondents to our customer survey conducted in early April cited negative macroeconomic headwinds as the key reason for reduced LAL procedure volumes in Q1.

These findings are consistent with preliminary reports from third-party data aggregators that also suggested reductions in overall cataract procedures and trade-downs to lower-priced premium procedures. Given that approximately 75% of LAL patients are drawn from candidates who would otherwise consider lower-cost options like monofocal or toric lenses, it's not surprising that LALs were also affected by temporary negative wealth effects and uncertainty. While macro trends worsened in early April, there were signs of improved stabilization later in the month, which were also observed in our procedure volumes. Competitive trialing was also commonly cited by customers, with many commenting that the major multifocal offerings were now essentially equivalent across manufacturers. Even though we expect these competitive pressures to persist over the next several months, we also believe they signal an opportunity for the LAL to offer a compelling alternative to what is rapidly becoming a plethora of undifferentiated multifocal offerings.

Finally, even though almost all practices expressed a desire to expand their LAL and LAL+ volumes, workload challenges and a desire for additional clinical and marketing guidance were also noted. To address this, we are refining our clinical education and marketing support to better meet existing practice and doctor requirements to drive procedure growth. As we invest in these efforts, we also remain focused on advancing innovation to drive greater clinical value and customer engagement. We are pleased to share that we are ahead of schedule in launching a previously announced software update that includes both a unique spherical aberration treatment option as well as new LDD procedure monitoring features, both of which support our enhanced clinical education and marketing efforts.

While the ability to customize spherical aberration and other so-called higher-order aberrations has been available in corneal refractive surgery for nearly two decades, this new LDD capability represents the first such application in cataract surgery, opening the door for further improvements in clinical results compared to fixed IOL technology. Although perhaps less groundbreaking, the additional LDD procedure monitoring features provide surgeons with new tools to ensure adherence to best clinical practices. Such upgrades enable us not only to reconnect with our customers and showcase new functionalities but also deepen relationships, identify growth opportunities within existing practices, and embed our technology more fully in their clinical workflows. Looking ahead, our product innovation pipeline remains robust. Recently, we secured approval for very low-diopter LAL powers that will now match those already available for LAL+.

We look forward to continuing to develop the LAL family of lenses along with continued software and LDD enhancements that broaden the patient populations that can benefit from customized visual outcomes. We believe these innovations are also key to enhancing productivity at new customer sites as surgeons and practices are more likely to recognize RxSight's adjustable technology as a significant long-term growth driver. By capturing these strategic placements promptly, RxSight ensures a strong foundation for sustained future growth while the practice sees faster revenue and practice appreciation. Though these placements have traditionally been to individual offices, we are also encouraged by the growing third-party light treatment service center business models that, though still modest contributors to our total procedures, have significant potential to expand access and utilization of our technology, ultimately benefiting more surgeons and patients.

On the international front, we recently received full regulatory approval for our LAL, LAL+, and LDD products in South Korea, a market we believe can become highly engaged with our technology. Additionally, following last month's announcement of EU LDD and LAL approvals, we now expect U.K. approval in the second quarter and have multiple additional international regulatory submissions in process. As always, the near-term focus remains on delivering excellent clinical outcomes, laying the groundwork for expanded commercialization both internationally and in the U.S. With that, I'll turn things over to Shelley to take us through the financial results for the quarter and reaffirm guidance.

Shelley Thunen (CFO)

Thank you, Ron. Good afternoon, everyone. Consistent with our April 2nd, 2025, pre-announcement, RxSight generated Q1 2025 revenue of $37.9 million, up 28% compared to the $29.5 million in the year-ago quarter and down 6% compared to $40.2 million in Q4 of 2024. During the quarter, we sold 27,579 LALs and generated $27.2 million in LAL revenue, up 37% compared to Q1 of 2024 and down 5% compared to Q4 of 2024. In Q1 of this year, LAL revenue represented 72% of total revenue, an increase from 67% and 71% in Q1 and Q4 of 2024, respectively. During Q1 of 2025, we sold 73 LDDs, up 11% compared to the 66 units in the year-ago quarter. On a sequential basis, our LDD units sold during Q1 were down 12% compared to the seasonally strong capital equipment Q4, with the sale of 83 LDDs.

During the quarter, LDD sales generated revenue of $9.4 million, up 8% compared to Q1 of 2024 and down 12% versus the strong Q4 of 2024. As of March 31st, 2025, our LDD installed base stood at 1,044 units, up 43% and 8% versus the Q1 and Q4 of 2024, respectively. Gross margin in the Q1 of 2025 was 74.8% compared to 70.1% and 71.6% in the Q1 and Q4 of 2024, respectively. The increased gross margin was primarily due to lower LAL costs and mix. Because we consign LAL inventory, we recognize the LAL cost of goods sold about nine months after we bill product. Throughout 2024, we ramped up production to stock LAL+ inventory at ASCs. Because most of the LAL cost is fixed overhead, the higher volume production benefited gross margin at the end of 2024 and the Q1 of 2025.

In addition, the shift in product mix benefited first quarter of 2025, with a higher margin LAL revenue advancing to 72% of revenue from 67% in Q1 of 2024 and 71% in Q4 of 2024. SG&A expenses in Q1 of 2025 were $28.6 million, representing an increase of $5.3 million, or 23%, versus $23.3 million in the year-ago quarter. This year-over-year increase was primarily due to an increase in personnel costs, expanded collection of registry data with the full rollout of LAL+ during 2024, and increased stock-based compensation expense. On a sequential basis, SG&A expenses increased 2%, primarily due to higher personnel costs. During Q1 of this year, R&D expenses rose 29% to $10.4 million compared to $8 million in Q1 of 2024. This year-over-year change primarily reflects an increase in salaries and stock-based compensation.

Compared to Q4 of 2024, R&D expenses in the Q1 rose by 13%, also primarily driven by increases in salaries and stock-based compensation. We reported a GAAP net loss in the Q1 of 2025 of $8.2 million, or a loss of $0.20 per basic and diluted share, using weighted average shares outstanding of 40.5 million shares. This compares to a GAAP net loss of $9.1 million, or $0.25 per share, on a basic and diluted basis in the Q1 of 2024. Note also that stock-based compensation in the Q1 of 2025 was $7.1 million, resulting in a non-GAAP loss of $1.1 million, or a loss of $0.03 per basic and diluted share. Please refer to the unaudited non-GAAP reconciliation and disclosure included in today's press release for more comparative information.

We ended the quarter of 2025 with cash, cash equivalents, and short-term investments of $229.3 million compared to $207.2 million on December 31st, 2024. Q1 cash use is generally high as our employees earn a portion of their compensation in performance-based bonuses, which are accrued during the year and paid in the first quarter of each year. Moving on to our 2025 outlook, we are reiterating our full year 2025 guidance for revenue, gross margin, and operating expenses that we provided on April 2nd as follows: revenue of $160 million-$175 million, implying year-over-year growth of 14%-25% and assuming recovery of LAL volumes in the second half of the year.

While the early signs of stabilization in April, along with our continued clinical and marketing efforts as described by Ron, are encouraging, we expect macroeconomic pressures and competitive trialings to persist through the second quarter, with stronger recovery in LAL procedure volume anticipated in the second half of 2025. Gross margin of 71%-73%, representing an implied increase of 30 basis points to 230 basis points compared to 2024. We are maintaining our gross margin guidance of 71%-73% despite gross margin of 74.8% reported in the first quarter. Because a significant portion of our LAL cost of goods sold is fixed, the anticipated benefit to gross margin from higher production LAL volume in 2025 will now be reduced given the revised revenue outlook. Operating expenses of $150 million-$160 million, representing an increase of 10%-18% over 2024.

As Ron already indicated, our spending will be centered on strengthening our clinical education and marketing programs to better support practice needs and drive higher LAL procedure adoption and continued investment in R&D. Note that the operating expense estimate includes non-cash stock-based compensation expenses between $27 million-$30 million. While our guidance includes targeted investments aimed to support and reinvigorate LAL procedure growth, we continue to be committed to carefully managing operating expenses. With $229.3 million in cash, cash equivalents, and short-term investments, we remain well-capitalized and our strong cash position supports our continued progress toward cash flow break-even. With that, I'll turn the call back to Ron.

Ron Kurtz (President and CEO)

Thank you, Shelley. We believe that the actions we have and will be taking position us to re-accelerate LAL growth, which has been mostly responsible for expanding the premium IOL category over the past several years. The ability of our differentiated technology to meet the needs of doctors and patients was on full display at the recent meeting of the American Society of Cataract and Refractive Surgery, which also provided us with a timely check-in with many of our current and future customers. Both in the scientific sessions and on the exhibitor floor, the more than 40 physician presentations and too numerous to count informal references to the Light Adjustable Lens strongly reaffirmed the distinct position our technology continues to hold within the premium IOL market and within cataract surgery more broadly.

While there were many highlights for the LAL and LAL+, we noted a study by Lee et al. that retrospectively compared visual outcomes of cataract surgery in over 150 patients implanted with either the LAL or LAL+ or a multifocal IOL at a large academic ophthalmology department. While about three times as many LAL and LAL+ patients had had previous corneal refractive surgery compared to the multifocal group, both binocular distance and near visual acuity without glasses was found to be statistically better with an adjustable lens, with more than twice the number of patients attaining 20/20 distance and J1 reading vision than with the fixed multifocal IOL.

When coupled with the growing body of data now being collected and experienced by numerous clinicians, these results and the overall excitement and engagement we observed at the meeting reinforce our conviction that the precision and customization afforded by postoperative adjustability are shaping both the present and future of premium cataract surgery. In closing, although the Q1 presented meaningful challenges that may persist in the near term, our confidence in RxSight's long-term growth trajectory remains unwavering. We believe the premium IOL market is undergoing a structural shift, with commoditized fixed IOLs competing in a relatively stagnant market, while our differentiated customized solution drives expanded premium volumes and, in turn, greater surgeon focus. As we move through 2025, our team remains highly focused on executing our plan, energized by the opportunity ahead, and committed to delivering lasting values for patients, surgeons, and shareholders alike.

With that, I'll ask the operator to open the call for questions.

Operator (participant)

Thank you. We will now begin the question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. We do request for today's session that you please limit to one question and one follow-up. Thank you. Your first question comes from the line of Ryan Zimmerman with BTIG. Your line is open.

Izzy McMahon (Equity Research Associate)

Hi, Ron and Shelley. This is Izzy on for Ryan. Thanks for taking the questions. I was hoping to start out discussing the pace and scale of your re-doubled commercial efforts. I was curious when we might start to see contributions from these start to pay off.

Ron Kurtz (President and CEO)

Yeah, I think, as we discussed, taking into account the macro environment and the competitive trialings, we expect those to be in the back half of the year that we would start to see impact from those.

Izzy McMahon (Equity Research Associate)

Understood. Thank you. As we think about the broader macro environment, I understand that the focus is still on the U.S., but I was curious how you're thinking about the pacing or the timing with which you want to expand internationally.

Ron Kurtz (President and CEO)

Yeah, I don't think that the macro environment impacts our pacing internationally, which obviously is initially focused on continued regulatory approvals and then initial market experience. We're starting from such a low base that we wouldn't expect to see significant impact from the macro environment, except for there may be special cases in certain markets that we'll stay attuned to.

Izzy McMahon (Equity Research Associate)

Understood. Thanks for taking the questions.

Operator (participant)

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

Young Li (Senior VP of Equity Research)

All right. Great. Thanks for taking our questions. I guess I wanted to ask a little bit about the comments you made on April. It sounded like early April trends were still pretty choppy and rough, but it got better later on. Can you maybe talk a little bit more about what you're seeing sort of in more recent periods?

Ron Kurtz (President and CEO)

Yeah, I do not think I would go too far beyond what we have already commented. I think that, obviously, April was, there were a lot of things going on at the macro level in April, but overall, those by the end had roughly stabilized. That was something that we also saw in our numbers. You want to add anything, Shelley? No.

Young Li (Senior VP of Equity Research)

All right. Great. That's very helpful. I guess I wanted to ask a little bit about the guidance. There's a lot of moving parts here with competitive trialing and Q2 dynamics versus second half. Is there any incremental colors you can provide just on the quarterly cadence for the rest of the year?

Shelley Thunen (CFO)

Yeah, we don't give quarterly guidance, just annual, and we don't break it out by LAL and LDD. I think what we have said is we would expect the number of LDDs that we sell during the year to continue to be higher than 2024. Typically, the second quarter is a very strong quarter for us seasonally. With everything going on with macroeconomics, trialing, and whatnot, what we are cautioning investors to keep in mind is the environment is so much different than it's been in past years, and that we expect the LAL volume mostly to increase in the second half of the year. That just represents a transition, hopefully, out of this kind of macroeconomic environment and the uncertainty around it as patients get more certain about how the economics are going to affect them personally.

That makes a difference, as well as the fact that we have to give time for some of the new marketing initiatives we're using to help our customers sell in this kind of environment. Also, we will have opportunities, as Ron said, to touch customers as we do our new software upgrade. It has some really nice features. It gives us an opportunity to come in and train and offer value to our customers as we do that. That always has some benefit to us. Would you add anything to that, Ron?

Ron Kurtz (President and CEO)

No. Thank you.

Young Li (Senior VP of Equity Research)

Thank you very much.

Operator (participant)

Your next question comes from the line of Patrick Wood with Morgan Stanley. Your line is open.

Patrick Wood (Managing Director)

Beautiful. Thanks, guys. Two quick ones. First, I'd love to dig in a little bit more on the workload challenges that you mentioned. Because I would have thought the premium IOL side dropping a little bit might have freed up a little bit of consultation time. What is it that's eating up the time for the customers so much that you're speaking to? What's kind of blowing up that time that's making things hard at the moment?

Ron Kurtz (President and CEO)

I just want to clarify, Patrick, you said the workload challenges, right?

Patrick Wood (Managing Director)

Yeah.

Ron Kurtz (President and CEO)

Yeah. I think that this is not necessarily something that's brand new. It's something that's been going on for a while, just staffing challenges in practices that we certainly picked up in our survey, and that's going to be a little bit practice-to-practice dependent. That was definitely one of the items that we saw in the responses to our survey. That is really what we were referring to.

Patrick Wood (Managing Director)

Gotcha. That is handy. And then just as a quick follow-up, for the H2 macro factors getting better, I mean, what was the sort of thought process in embedding that within the guide? Is it more that you can engage with the customers more so you can pull things around that side? Not to sound sort of provocative, but why would we expect that sort of 70-year-old cohort to feel much better about the world in the second half relative to the first? Thanks.

Ron Kurtz (President and CEO)

I don't know that we're necessarily expecting that they're going to feel that much better, but I do feel that there's some normalization that probably has already occurred to some extent. Remember, cataract surgery is something that patients generally can put off for a little bit of time, but ultimately, they're going to have to do something. One of the things that we try to emphasize and will continue to do so is that this is an investment that is for that person's rest of their life and that there's not many things other than vision that can have a direct impact on so many aspects of the quality of life. We anticipate that over time, that will become more apparent, even if we don't see a wholesale turnaround in the macro environment.

Patrick Wood (Managing Director)

I gotcha. Thanks, Ron. Thanks, guys.

Operator (participant)

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

Steve Lichtman (Managing Director and Senior Equity Research Analyst)

Thank you. Ron, you mentioned workflow and wanting to support your customers through education and other marketing initiatives. Can you talk a little bit more about sort of what that entails?

Ron Kurtz (President and CEO)

Yeah. Steve, what we've learned a lot over the last four and a half years of commercialization. To some extent, we've been able to disseminate that knowledge to our customers, but we still see gaps. We think that we can do an even better job of translating all the pearls that you learn when you develop, when there's a new technology, really a new clinical capability that hasn't existed before. There are many subtle things that are either clinical pearls or practice pearls that have to be first learned and then disseminated. We continue to collect those and are now taking the opportunity to more fully compile them in a format that our customers, who may not all have made use of them, can to be able to be applying those best practices.

Steve Lichtman (Managing Director and Senior Equity Research Analyst)

Got it. Got it. That's helpful. And then just as a follow-up, the strong gross margin for the year and understanding the cadence, Shelley, but for the year, as well as the balance sheet suggests you've got some flexibility on OpEx reinvestment. So any thought about adding more sort of feet on the street or anything else in terms of being even more aggressive, especially in light of sort of the competitive trialing environment?

Shelley Thunen (CFO)

No, I think it's a good question. We have right-sized the OpEx to the size of revenue, right, at the low end. I think one of the things that we did is we did not drop as much of the gross margin impact to the bottom line as we did in, as a percent, as we did in our initial guidance when we expected revenue to be higher. I think that if we can continue to make progress, particularly in the second half, that any kind of additional reinvestment would be in sales and marketing. I think that the R&D line is pretty fixed to where we're expecting right now. If we could put more into sales and marketing, we saw the benefit from that, we would as well.

I wouldn't expect us to put more money than we budgeted into the international side just because in the initial phases of international introduction, it's very focused on key opinion leaders.

Steve Lichtman (Managing Director and Senior Equity Research Analyst)

Makes sense. Thanks so much.

Operator (participant)

Your next question comes from the line of David Saxon with Needham & Company. Your line is open.

David Saxon (Managing Director)

Great. Good afternoon, Ron and Shelley. Thanks for taking my questions. Maybe I'll start with you, Shelley, on the P&L. So gross margin, almost 75%, obviously really strong. Can you quantify the benefit you saw from the volume leverage as a result from the LAL+ production last year? I guess, do you think some of that benefit might spill into the second quarter? And then just given kind of the back-half weighting of the year and the guidance, I guess, why wouldn't you see similar volume leverage for the full year, assuming that cadence plays out?

Shelley Thunen (CFO)

Yeah, I think that's a really good question. We'll see some spillover into the second quarter. I think the most important part of our guidance relative to the first quarter actual results is that we increased production a lot to stock the ASCs in 2024. Had we kept at our initial guidance with a higher revenue number, we probably would have produced to fulfill both orders as well as increases to new customers in their ASCs at probably a pretty comparable level. We're also reducing the production this year in 2025, and we started that at the end of the first quarter to recognize, one, we wouldn't sell as much during the year. Also, we went into the year, right, because you've got to have inventory with a little bit with an inventory consistent with our original guidance. We cut back for that as well.

I think that that will primarily be affected in the third and fourth quarters where you see the lower gross margins come between the 71%-73%.

David Saxon (Managing Director)

Okay. That's helpful. Thanks for that, Shelley. And then on international, congrats on South Korea. Looks like U.K.'s in the near term. So can you quantify the premium IOL volumes in those markets? I think the U.S. is around 1 million. Would love to hear what the combined South Korea, U.K., and you can throw Europe in there. And then I guess, how are you thinking about tariffs as you prepare to launch in those regions? Thanks so much.

Shelley Thunen (CFO)

Yeah, I don't have those numbers off the top of my head, but Oliver could certainly pull those. I would say typically in the OUS market that premium volume as a percent of total cataract surgery is closer to 10%, but higher in these specific countries. That would be a follow-up we'd need to do. I'd need to pull some reports to get that to you. The reason we think about these regions is really about their potential as much as anything else. Among the 20 countries or so that we think have potential value, number of good countries in Asia, Korea is certainly one of them as well, and Japan, China ultimately, and a few smaller countries within the EU, predominantly in Germany, which is very strong for premium.

It would be Spain, Italy, France, and then, of course, U.K. that are the most penetrated and where we'll start our penetration. I think that one of the things Ron always says to me, and I'll let him talk about that, particularly when he's in Asia, the ASCs and the doctor's offices are just superb, and they're very, very focused on quality. I think that's very important because that's what we offer to customers. Would you add anything about that, Ron, at all?

Ron Kurtz (President and CEO)

Yeah. I think that, again, ophthalmology is an international field. It's very similar across the developed world in Asia and Europe. Specifically, South Korea is a little bit smaller market than overall in cataracts than Canada, but there have been some ups and downs in the market due to changes in some of the reimbursement rules in the last several years. Overall, it's a very strong private-pay market in a number of fields. We think that there'll be a lot of interest in the LAL there. Similarly, Europe is a large market overall. Its total cataract market is somewhat larger than the U.S., but the premium market has been smaller, as Shelley mentioned. We'll take a targeted approach there.

David Saxon (Managing Director)

Okay. Great. Thanks so much. And then just on the tariff part of the question, will the LAL and LDDs be exempt, or is there some impact there? Thanks so much.

Shelley Thunen (CFO)

Yeah. We did have our tax accountants look at Canada because we're currently selling into Canada. Like very often, pharmaceuticals and medical devices are exempt. Now, of course, with the administration coming in and saying that pharmaceuticals coming in from China are going to be subject to taxes coming into the U.S., I don't know about other countries yet. Of course, it is a back-and-forth number whether any country would have a retaliatory tariff on med device and pharma. Where we're going so far, our products have been exempt from tariffs.

Ron Kurtz (President and CEO)

Of course, on the other side of the tariff equation, we produce everything in the U.S., and most of our suppliers are also in the U.S.

Shelley Thunen (CFO)

Yes. Thank you, Ron.

Operator (participant)

Your next question comes from the line of Adam Maeder with Piper Sandler. Your line is open.

Adam Maeder (Managing Director and Equity Research Analyst)

Hi. Good afternoon. Thank you for taking the questions. Two from me. Just one quick one on international, and just wondering if there's any update, Ron or Shelley, in terms of the commercial strategy for those geographies. Will you be going direct or partnering with the distributor? I had a follow-up. Thanks.

Ron Kurtz (President and CEO)

That's a market-by-market decision. Some markets, including South Korea, require a distributor, and so we do have one. The other markets where there's not, we'll make the decision whether we'll be direct or not. Currently, we use a distributor in Canada.

Adam Maeder (Managing Director and Equity Research Analyst)

Okay. That's helpful, Ron. Appreciate the color. For the follow-up, I'm admittedly newer to the story, but I just wanted to level set on the freestanding LDD treatment center initiative that you guys have. When did the initiative start? How far along are you in terms of number of sites or customers that use the option, volumes that come from those freestanding sites, and just how you think about some of those metrics trending going forward? Thank you for taking the questions.

Ron Kurtz (President and CEO)

Sure. Actually, the idea of treatment centers for offering LDD services, again, these are third parties. That idea has been around for several years, and there have been a few successful ones, more individually based in certain regions. I would say it has caught more as our market awareness has grown about the Light Adjustable Lens, then certainly there has been more interest amongst surgeons on figuring out how they can get access if they wanted to not necessarily purchase an LDD or offer the light treatment centers in their own clinics. There can be various reasons for that. Certainly, we have seen in other areas of ophthalmology, specifically LASIK, where center models have been successfully implemented. Currently, there are several efforts out there, and we are certainly working with them and see them as good partners.

It is still early in the rollout, but we do see there are some natural advantages for certain customers, and we see this as a promising area.

Adam Maeder (Managing Director and Equity Research Analyst)

Thank you.

Operator (participant)

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

Robbie Marcus (Senior Analyst)

Oh, great. Thanks for taking the questions. Two from me. First, Shelley, I just want to make sure I heard you right. I think you said second quarter will be below the low end of the range. Does that mean we're looking at something less than $38 million in sales in 2Q?

Shelley Thunen (CFO)

Oh, I didn't get that specific at all. I didn't give guidance on the second quarter. What I did say is that as we go through the year, I would expect second quarter to not be the type of quarter we've typically seen with a big uptick, and that most of the growth on the LAL side would happen in the second half. What Ron did say is that we saw encouraging signs as we exited April in terms of volume getting better. I'm just being cautionary on the second quarter, just given the macroeconomics and some market turmoil and giving us time for consumers to not necessarily—they haven't been harmed, but people tend to stand still until they know how something is going to affect them.

We think more of that will happen in the second half, and also that trialing will start to abate in the third quarter.

Robbie Marcus (Senior Analyst)

Great. I appreciate the clarification. Maybe just to continue on that thought, what makes you think that trialing will abate in third quarter and sales in the macro will pick up? Just simply, you have Bausch & Lomb who's re-entering the market after a pause. I imagine they'll sample for a while. Alcon's launching. Why wouldn't it continue for a long time? Given the lower guidance, do you think it's prudent to assume a stoppage in third quarter? Thanks.

Shelley Thunen (CFO)

Ron, why do not you start, and then I think I said to abate, but not absolute stoppage.

Ron Kurtz (President and CEO)

Yeah. I mean, I think we're in a—we've sort of exited an era when there was a single player that dominated the market. We now have multiple players in terms of fixed IOLs, particularly multifocal IOLs, that have very similar offerings. We anticipate that that'll return to what used to be the case where there was more competitive back and forth. Recall that three-quarters of our volume for LALs comes from non-multifocal IOL patients, patients who would have otherwise gotten a monofocal or a toric lens. We would, again, we're not ignoring that there will continue to be competition and that there is going to continue to be a more complicated macro environment.

We think that it won't be quite as dramatic as what we saw over the last six to nine months when we had that pretty dramatic change in what had been existing in the premium space.

Robbie Marcus (Senior Analyst)

Great. Thanks, Ron.

Operator (participant)

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

Larry Biegelsen (Senior Medical Device Equity Research Analyst)

Good afternoon. Thanks for taking the question. I think, Ron and Shelley, I think what a lot of people are trying to understand is how de-risk the updated guidance is. For my question, you did 28% growth in Q1. You talked about—and your Q4 call was in late February. March, it seems like it really deteriorated. You said April actually worsened before it stabilized. Are you willing to give us any color on how March and April were relative to, call it the guidance range or the midpoint of the Q2 to Q4 guidance, which is 17% or so implied? Any color on where March and April were relative to the updated guidance range? I had one follow-up.

Shelley Thunen (CFO)

Yeah. I'll start with March and then make commentary that you made about April. In March, what we saw is that typically March approaches or is at 45% of the total volume for the first quarter. You see that uptick in March as you lead into the seasonally strong second quarter. We did not see that in March. It was not any worse in January or February. It was certainly up a bit. It was more a third, a third, a third. That was kind of one of the things that was unexpected in the first quarter as well. Of course, a lot more turmoil economically and macroeconomically in that March time period. I did not say that April was worse. What we said is April, and maybe I misspoke, but we saw recovery in the second part of April toward the end of April.

It was better than March, right? We saw that more in the second half of April rather than in the entire quarter, right? I think that that was positive as well. In terms of our overall guidance, if I think about the low end of the guidance, and I am just going to provide two bookmarks, the low end of guidance, even though we are expecting more LDD sales, which I think is very positive, the way I thought about the low end of guidance when we gave it is that we would sell more LDDs, but the same store sales would remain relatively stagnant to the first quarter, which we have not seen that so far. That is good news. Most of the LAL increase in volume would come from newer customers, people who are installed in the second half of 2024 and installs in 2025.

That's kind of that end of the bookmark. As we go through to the high end of the guidance, what we hope to see is two things. One is that consumers get used to the turmoil, or maybe it even ends, and therefore they have more confidence in upgrading to a premium IOL rather than staying with the monofocal or even a toric. That is certainly a part of it, as well as the fact that the competitive pricing on the premiums in terms of trialing can't go on forever, right? That is one of our premises as well. We continue to see that in part because at some point in time, doctors will realize that, as Ron said, the multifocal IOLs are not all that different from each other.

The reason is they go less and less multifocality as they introduce new products. That cuts down on the glare and halo, but they are all moving in the same direction as well. Would you add anything to that on trialing, Ron?

Ron Kurtz (President and CEO)

No. Again, I think this is something that we've seen over the years in the field, and there is this waning that typically is in about the six-month time frame. That is within the time frame that we've discussed.

Larry Biegelsen (Senior Medical Device Equity Research Analyst)

All right. I'll leave it there. Guys, thanks so much for taking the question.

Shelley Thunen (CFO)

Yeah.

Ron Kurtz (President and CEO)

Thank you.

Operator (participant)

Your next question comes from the line of Craig Bijou with Bank of America. Your line is open.

Craig Bijou (Equity Research Analyst of Medical Devices and Supplies)

Good afternoon. Thanks for taking the questions. Just one from me. I appreciate the comments on the LDDs, and you still expect LDD growth or LDD placements to be above 24 in 2025. I wanted to get a sense for, have you heard or have you had discussions with some of the practices that are in your funnel thinking about purchasing an LDD? If they have any concerns on a softer premium IOL market and whether that could have some impact on the timing or maybe the deferral of purchasing an LDD until they see that pick up?

Ron Kurtz (President and CEO)

I guess the way I would answer that would be that while that's certainly a possible reaction, it's given that a large fraction of the LAL patients come from non-premium, if you wanted to grow your premium, not adopting the LAL would be the opposite of what you would want to do. We think there's a strong rationale to actually adopt the technology now and take the opportunity of perhaps a softer market to incorporate that into your practice.

Craig Bijou (Equity Research Analyst of Medical Devices and Supplies)

Okay. Thanks for taking the question.

Ron Kurtz (President and CEO)

Thank you.

Operator (participant)

Your next question comes from the line of Tom Stephan with Stifel. Your line is open.

Tom Stephan (VP of Healthcare Equity Research)

Great. Hi, everyone. Thanks for the questions. I'll start with a big picture question. I know there's obviously a lot of macro and competitive factors, but the main kind of investor concern we hear right now is if the U.S. could be, I guess, nearing or approaching some sort of saturation point. Ron or Shelley, your reaction to that or thoughts to that, maybe notably given, Shelley, I think you've said the class of 2024's adoption curve has been a little slower than prior classes. Maybe if you can talk about that.

Ron Kurtz (President and CEO)

I just want to make sure I understand the question, Tom. You're talking about reaching a ceiling for LAL?

Tom Stephan (VP of Healthcare Equity Research)

Correct. LAL either on a per-surgeon basis or adoption kind of within the context of the 10,000 cataract surgeons in the U.S. Either/or, kind of just big picture.

Ron Kurtz (President and CEO)

Yeah. Again, I just don't have—I don't see a good argument for that based on the overall penetration of the technology. We're currently sitting at maybe somewhere between 10% and 12%, where there are many, many surgeons, I would say even most, who are just getting familiar with the LAL and the potential. So while I understand the concern, I think that that's still something that is going to be in the later years. I think there are better ways that we can certainly address the market. We've talked about some of them. Some of those doctors are going to be better addressed through an open access model. And some of them will be more traditional methods. This is the best—premium IOLs are the best way for practices to resist the continued negative onslaught of reimbursement cuts that they're seeing in all other aspects of their practice.

The LAL has been the primary mechanism for growing premium overall. I still see that in play for a long time to come.

Tom Stephan (VP of Healthcare Equity Research)

That's helpful. Thanks, Ron. Appreciate that. Pivoting to the pipeline, I know you keep it pretty close to the vest, but I just want to ask what your view is on both a multifocal LAL and an accommodative LAL. I guess my question is, are these feasible technologies to begin with when considering, I guess, the base adjustability technology with LAL? Thanks for the questions.

Ron Kurtz (President and CEO)

I mean, again, I think that adjustability affords benefits for all types of IOLs. In my view, and I think I've said this before, I think that the precision and customization that adjustability enables is something that will become a, if not a requirement, a very strong preference for any time in the premium space where patients have the ability to upgrade for technology. In that context, and as we've already kind of done with LAL+ and some of our expansions into the different power ranges, we're developing a family of lenses. Where that takes us is going to be guided by surgeon input and financial opportunity. Certainly, multifocals have a strong place in the market, and accommodating IOLs have a strong interest in the market.

I think we've seen other efforts towards accommodating IOLs recognize that in order to have a practical accommodating IOL, you likely need to have an adjustable IOL first. I would say we have a long runway of product pipeline activity for this technology. I'm certainly beyond my career, and I think that all the things that you mentioned are certainly possible.

Tom Stephan (VP of Healthcare Equity Research)

That's great. Thanks, Ron. Thanks, Shelley.

Operator (participant)

Thank you. Your next question comes from the line of Angela Kumirai with UBS Group. Your line is open.

Angela Kumirai (Equity Research Associate)

Hi. Thank you for taking our question. I'm on for Danielle. My name is just a follow-up on Larry's question. You said historically March represents about 45% of the quarter's revenue, and that is usually a good proxy of the round to Q2, but that is not something that you saw this quarter. I was just wondering, appreciating your comment on signs of improving stability in April, what level of visibility do you have into customer case schedules? I just want to get a sense of your confidence in being able to reach your renewed guidance. I have one follow-up.

Ron Kurtz (President and CEO)

I just want to restate your question, Angela. You're asking how do we have visibility into April numbers? Is that what your question is?

Angela Kumirai (Equity Research Associate)

Yes. Q2 numbers.

Ron Kurtz (President and CEO)

Okay.

Shelley Thunen (CFO)

Okay. Obviously, because we consign inventory, it is reported to us when the implant is made into the patient. We see those usually within a few days of implant as they get reported to us. We do not have visibility into a particular doctor's schedule. We do not know what they have planned for the balance of the quarter, but we try and use some historical data, but we have stopped using it given our unique circumstances as well. As we said, the low end of the guidance assumes virtually no recovery in same-store sales. The higher end of the guidance obviously does. The only warning we have about second quarter is, while we saw improvement in April, we would expect most of the growth to get beyond the low end of the guidance would happen in the second half. Did I answer your question?

Angela Kumirai (Equity Research Associate)

Oh, yes.

That is helpful. My second follow-up is just also a follow-up on Pat's question on workload challenges. What types of practices are making these comments, and what are you doing to relieve capacity there? Because our charts have sometimes showed doctors looking at the post-operative adjustment as a barrier to do more LALs. Any color on the practice profile for those making workload challenge comments would be helpful for us.

Ron Kurtz (President and CEO)

I think that this is not a new observation that we've seen. Since we've introduced the technology, there have been kind of standard responses as people become first familiar and then start to consider adopting. Typically, the initial resistance is around piece of capital equipment and then change in practice pattern that the technology involves. These are not new, and we've developed over the last several years not only good explanations for how practices have adopted the technology successfully, but we have many, many examples of that that we can refer new and potential practices to to be able to see the benefits of making that commitment to this technology. I would say it's not significantly different than every other new paradigm that has come into ophthalmology, which there's these same objections are raised and then overcome.

Angela Kumirai (Equity Research Associate)

Amazing. Thanks, Ron, Shelley, Oliver. Thank you.

Ron Kurtz (President and CEO)

Thank you.

Operator (participant)

Thank you. Being no further questions at this time, I will turn the call back over to Ron Kurtz, CEO, for closing remarks.

Ron Kurtz (President and CEO)

Thank you all for your time and attention today. We appreciate your interest in RxSight, and we're looking forward to updating you on our progress in future quarters. Goodbye.

Shelley Thunen (CFO)

Thank you.

Operator (participant)

This concludes today's conference call. Thank you all for joining, and you may now disconnect.