RxSight, Inc. 10-Q Summary
Business context and reporting period
RxSight is a commercial-stage medical technology company that develops, manufactures and sells light-adjustable intraocular lenses (LALs) and Light Delivery Devices (LDDs) used in cataract surgery. The company primarily serves the U.S. premium intraocular lens market and reported results for the quarter and six months ended June 30, 2023. The financial statements are unaudited and prepared under U.S. GAAP.
As of June 30, 2023, the company had 523 LDDs installed and surgeons had implanted more than 65,000 LALs since inception. It operated in one reportable segment.
Financial performance and liquidity
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Sales | $20.8 million | $11.4 million | $38.3 million | $20.3 million |
| Gross profit | $12.0 million | $4.8 million | $22.4 million | $8.5 million |
| Gross margin | 57.7% | 42.2% | 58.4% | 42.1% |
| Loss from operations | $(13.6) million | $(15.8) million | $(26.7) million | $(32.4) million |
| Net loss | $(13.8) million | $(16.7) million | $(27.0) million | $(34.3) million |
| Net loss per share | $(0.40) | $(0.61) | $(0.82) | $(1.25) |
| Operating cash flow | Not separately provided | Not separately provided | $(25.3) million | $(29.8) million |
- Q2 sales increased 83.2%, driven by 12,622 LALs sold and 67 LDDs sold, compared with 5,400 LALs and 49 LDDs in Q2 2022.
- Six-month sales increased 88.7%, primarily due to 13,579 additional LALs and 34 additional LDDs versus the prior-year period.
- Gross margin expanded substantially because of higher volume, operating leverage and a greater proportion of higher-margin LAL revenue. LDDs carry lower margins because of their significant manufacturing cost and are used to drive subsequent LAL procedures.
- Q2 SG&A increased 26.8% to $18.2 million, while research and development increased 19.5% to $7.4 million. Six-month stock-based compensation expense was $7.3 million, up from $5.6 million.
- Six-month investing cash flow was $(44.0) million, primarily reflecting net purchases of short-term investments and $2.6 million of capital expenditures.
- Cash, cash equivalents and short-term investments totaled $147.1 million at June 30, 2023, compared with $105.8 million at December 31, 2022. Cash and cash equivalents alone were $8.8 million.
- Total assets were $195.3 million and accumulated deficit was $573.0 million at June 30, 2023.
Material changes versus the prior comparable period
- Revenue growth accelerated from the expanding LDD installed base and greater LAL utilization. The installed base increased from 294 LDDs at June 30, 2022 to 523 at June 30, 2023.
- Gross margin improved by 15.5 percentage points in Q2 and 16.3 percentage points for the six-month period.
- Operating and net losses narrowed despite increased commercial, public-company and R&D spending.
- Interest and other income increased by $1.6 million in Q2 and $2.9 million for the six-month period because of higher interest rates and larger investment balances.
- The company completed a February public offering of 4.6 million shares for approximately $53.6 million of net proceeds and raised $30.5 million from ATM issuances during the first six months.
- On June 30, 2023, the company refinanced and repaid its prior $40.0 million term loan using ATM proceeds, a new $20.0 million Term A Loan and cash reserves. The new loan had a minimum interest rate of 11.5% and was scheduled to mature in June 2028.
- After quarter-end, on August 4, 2023, RxSight repaid the $20.0 million Term A Loan in full, including approximately $0.2 million of accrued interest and approximately $1.0 million of final payment and other fees. The company used $11.9 million of subsequent ATM proceeds and $9.3 million of cash reserves.
Guidance, outlook, risks and unusual items
- No specific revenue or earnings guidance was provided. Management expects continued investment in sales and marketing, research and development and clinical activities, and expects net losses and negative operating cash flow to continue in the near term.
- Management stated that existing cash, cash equivalents and short-term investments should fund operations for at least 12 months from the filing date. It does not currently anticipate needing additional capital or debt to reach operating profitability, but cautions that additional financing may become necessary.
- The company continues to face risks from limited operating history, market adoption, competition, reimbursement, product liability, regulatory approvals, intellectual property, and dependence on single- or sole-source suppliers.
- Supply-chain constraints, inflation, higher component costs and extended lead times remain material risks. The company is producing both its existing and lower-cost LDD designs, which management expects to pressure gross margin until the lower-cost device is introduced, targeted for the second half of 2023.
- The June 2023 refinancing generated a $0.4 million loss on extinguishment of debt and increased reported interest expense. The subsequent early repayment is expected to reduce anticipated interest expense by approximately $1.2 million for the remainder of 2023 and $2.3 million in 2024.
- There were no material legal proceedings or claims for which a loss was considered probable and reasonably estimable. A $0.3 million standby letter of credit supports an operating lease and expires September 30, 2024.
- Because non-affiliate market capitalization exceeded $700 million at the end of Q2, the company expects to become a large accelerated filer and cease being an emerging growth company and smaller reporting company effective December 31, 2023, increasing disclosure and compliance requirements.
- Management concluded that disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether LDD placements continue to translate into sustained LAL utilization and revenue growth.
- The durability of the 57.7% Q2 gross margin and the effect of producing two LDD designs and ongoing supply-chain costs.
- The pace at which operating losses and negative cash flow narrow relative to sales growth.
- Post-quarter-end cash balances after the $20.0 million debt repayment, associated fees and subsequent ATM proceeds.
- Remaining availability under the shelf registration and potential dilution from future ATM, equity or equity-linked financings.
- Progress toward regulatory and commercial introduction of the lower-cost LDD and expansion into international markets.
- Changes in reimbursement, premium-IOL adoption, competition, product liability exposure and regulatory requirements.
- The effect of losing emerging-growth-company and smaller-reporting-company status on compliance costs and reporting requirements.