RxSight, Inc. 10-Q Summary
Business context and reporting period
RxSight is a commercial-stage medical technology company developing and selling light-adjustable intraocular lenses (LALs), Light Delivery Devices (LDDs), and related accessories and services for cataract surgery. The company markets primarily in the United States; its products are also approved in Europe and Mexico but were not being actively marketed there. This filing covers the three months ended March 31, 2022, compared with the three months ended March 31, 2021.
As of March 31, 2022, the company reported an installed base of 246 LDDs, compared with 105 at March 31, 2021, and more than 20,000 cumulative surgeries using the RxSight system.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Sales | $8.9 million | $3.5 million | +156.6% |
| Gross profit | $3.8 million | $1.1 million | +236.1% |
| Gross margin | 42.1% | 32.1% | +10.0 percentage points |
| Operating expenses | $20.3 million | $12.3 million | +66.0% |
| Loss from operations | $(16.6) million | $(11.1) million | Loss increased |
| Net loss | $(17.6) million | $(6.8) million | Loss increased |
| Operating cash flow | $(15.0) million | $(10.3) million | Cash use increased |
Revenue consisted of $4.6 million from LDDs and training, $4.1 million from LALs, and $0.3 million from service warranties and accessories. LDDs sold increased to 40 from 13, while LALs sold increased to 4,166 from 1,567.
At March 31, 2022, cash and cash equivalents were $24.1 million and short-term investments were $119.7 million, for total cash, cash equivalents and short-term investments of $143.8 million, down from $159.3 million at December 31, 2021. Total assets were $177.1 million and stockholders’ equity was $123.2 million. The accumulated deficit was $496.9 million.
Term loan debt was $39.9 million net of issuance costs, with a stated cash interest rate of 9.25%. Scheduled principal payments were $1.7 million in 2023, $20.9 million in 2024, and $17.4 million in 2025. The company was in compliance with its debt covenants at March 31, 2022.
Material changes versus the prior comparable period
- Sales increased $5.5 million, primarily from 2,599 additional LALs sold and 27 additional LDDs sold, supported by increased practice adoption and the larger installed base.
- Gross margin improved to 42.1% from 32.1%, primarily due to improved operating leverage.
- Selling, general and administrative expense increased $8.0 million to $13.6 million. Drivers included expanded commercial personnel, higher commissions and benefits, increased stock-based compensation, post-market studies, customer acquisition costs, travel, and public-company expenses.
- Research and development expense was substantially stable at $6.7 million, with higher clinical study costs.
- Operating cash use increased by $4.7 million to $15.0 million, reflecting the larger net loss and continued commercial and development investment.
- Q1 2021 included a $5.0 million non-cash gain from expiration of a warrant; no comparable gain was recorded in Q1 2022.
- Stock-based compensation increased to $2.6 million from $1.2 million.
Guidance, outlook, commentary, and risks
The filing does not provide formal revenue or earnings guidance. Management expects substantial net losses and negative operating cash flow for at least the next several years while it expands sales, marketing, research and development, clinical activities, and public-company infrastructure. Management stated that existing capital resources were expected to fund operations for at least 12 months from the issuance of the financial statements, but indicated that additional financing will likely be required over the longer term.
On May 3, 2022, after quarter-end, the company amended its Oxford Finance facility to a $60.0 million credit facility, of which $40.0 million was funded. The amendment permits up to two additional $10.0 million tranches subject to conditions including revenue milestones, extends maturity to February 1, 2027, and includes a performance-to-plan covenant. Interest is the greater of 9.25% or one-month Term SOFR plus 9.09%; an additional 5% applies during an event of default. The facility is secured by substantially all personal property other than intellectual property and contains restrictive covenants.
Key operating risks include limited commercialization history, dependence on physician and patient adoption, competition from larger medical-device companies, reimbursement uncertainty for premium IOL procedures, regulatory and clinical-trial requirements, product-liability exposure, reliance on single- or sole-source suppliers, inflation and supply-chain constraints, COVID-19 impacts on elective surgeries, and the need for future financing. The company also expects to continue producing its more costly current LDD through 2022 because of supply-chain constraints, which may pressure gross margin.
The company reported no material legal proceedings for which a loss was considered probable and reasonably estimable. It maintained a $0.3 million standby letter of credit supporting an operating lease. A sublease entered into April 4, 2022 is expected to generate base rent receivable of $11,410 per month beginning June 1, 2022.
Important facts for investors to verify
- Whether LDD installations and LAL utilization continue to grow sufficiently to offset rising SG&A, R&D, interest, and public-company costs.
- The cash-burn trajectory and the timing and terms of any required equity or debt financing.
- Compliance with the amended term-loan performance covenant and the conditions for accessing the additional $20.0 million of potential borrowing.
- The effect of supply-chain constraints, the delayed lower-cost LDD, inflation, and component availability on gross margin and production capacity.
- Reimbursement and patient out-of-pocket economics for premium LAL procedures, including any changes in Medicare or private-payor policies.
- Regulatory, clinical, product-liability, recall, and post-market surveillance developments affecting the RxSight system.
- The filing’s cover-page representation regarding Exchange Act filing compliance, which is marked “No” for having filed all required reports during the preceding 12 months.