RxSight, Inc. Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2021. Although the request references 2021 Q4, this filing is an annual report; it does not provide a complete standalone fourth-quarter income statement.
Business context
RxSight is a commercial-stage medical technology company developing and selling the RxSight Light Adjustable Lens system, consisting primarily of the Light Adjustable Lens (LAL), Light Delivery Device (LDD), and accessories. The system enables postoperative customization of vision following cataract surgery. The company began U.S. commercialization in 2019 and is focused primarily on U.S. adoption of its premium intraocular lens system.
- Installed LDD base increased to 206 practices at December 31, 2021, from 92 at December 31, 2020.
- Approximately 17,000 surgeries had been performed with the system since inception.
- 2021 quarterly LDD sales were 13, 25, 31 and 45; quarterly LAL sales were 1,567, 1,825, 1,977 and 2,959.
- The company had 221 full-time employees at year-end.
Financial performance and key metrics
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Revenue | $22.6 million | $14.7 million | Up 53.9% |
| LDD revenue | $13.8 million | $10.2 million | Up 35.6% |
| LAL revenue | $8.2 million | $4.3 million | Up 91.8% |
| Service, warranty and accessories revenue | $0.7 million | $0.3 million | Up 149.4% |
| Gross profit | $4.5 million | $1.7 million | Up 164.9% |
| Gross margin | 20.0% | 11.6% | Improved 8.4 points |
| Operating loss | $52.8 million | $35.4 million | Loss increased $17.4 million |
| Net loss | $48.7 million | Net income of $27.6 million | Prior year benefited from warrant revaluation |
| Cash used in operating activities | $44.7 million | $35.2 million | Use increased $9.5 million |
| Cash, cash equivalents and short-term investments | $159.3 million | $69.0 million | Up $90.3 million |
| Term loan, net | $39.8 million | $24.4 million | Up $15.4 million |
Cost of sales increased to $18.1 million, including a $2.4 million reserve for excess LAL inventory related to the introduction of an updated LAL incorporating ActivShield. Selling, general and administrative expense rose 116.2% to $32.8 million, primarily due to sales-force expansion, higher travel and trade-show spending, public-company costs, and increased headcount. Research and development expense increased 11.7% to $24.5 million.
2021 net loss was substantially operational. The 2020 net income included a $63.0 million gain from changes in the fair value of warrant liabilities and was reduced by $24.2 million of accretion to redeemable equity. In 2021, the company recorded $2.7 million of warrant fair-value income and a $5.0 million gain when the Series W warrant expired unexercised.
Liquidity, financing and debt
- The July 2021 IPO issued 8,248,549 shares at $16.00 per share and generated approximately $119.6 million of net proceeds in the financial statements; other filing sections refer to approximately $120.0 million.
- Cash, cash equivalents and short-term investments totaled $159.3 million at year-end, including $24.4 million of cash and $135.0 million of short-term investments.
- Net cash used in investing activities was $81.9 million, primarily reflecting $80.0 million of net purchases of short-term investments and $1.9 million of capital expenditures.
- The company had $40.0 million of gross term-loan borrowings, recorded net at $39.8 million. The loan matures October 1, 2025 and bears interest at a minimum stated rate of 9.25% under the described formula.
- The term loan is secured by substantially all assets other than intellectual property and contains financial and operating covenants. The company reported compliance with all covenants at December 31, 2021.
- Management expects existing liquidity to fund operations for at least 12 months after issuance of the financial statements, but expects continuing operating losses, negative operating cash flow, and likely longer-term financing needs.
Material changes versus the prior comparable period
- Revenue grew 53.9%, driven by 41 additional LDDs sold and 3,857 additional LALs sold.
- The installed base more than doubled, supporting the company’s intended capital-equipment-and-consumables model.
- Gross margin improved from 11.6% to 20.0%, but remained insufficient to cover operating expenses.
- Operating losses and operating cash usage increased as the company invested heavily in commercial infrastructure, research and development, and public-company capabilities.
- The company transitioned from private-company financing to public-company funding through the IPO, and preferred stock converted into common stock.
- The Series W strategic-partner warrant expired unexercised on March 31, 2021, eliminating the related redemption provisions and allowing temporary equity balances to be reclassified into permanent equity.
- Customer concentration improved: no customer represented more than 10% of 2021 revenue, compared with one customer representing approximately 27% in 2020.
Guidance, outlook, risks and unusual items
The filing does not provide formal revenue, earnings, margin or procedure guidance. Management expects to continue investing in sales personnel, clinical support, research and development, product enhancements, clinical studies and manufacturing efficiency. Longer-term priorities include increasing LAL utilization, expanding the LDD installed base, developing a lower-cost LDD, broadening indications, and selectively expanding internationally.
- COVID-19 continued to affect elective cataract procedures, customer activity, clinical programs, travel, manufacturing and supply-chain lead times.
- Supply risks include dependence on single- and sole-source suppliers, semiconductor and component shortages, higher freight and expedite costs, and inflationary pressures.
- Adoption depends on doctors’ willingness to purchase the approximately $120,000 LDD, train staff, schedule additional postoperative visits, and require patients to wear UV-protective eyewear for several weeks.
- The company faces substantially larger competitors, including Alcon, Johnson & Johnson Vision, Bausch + Lomb, Carl Zeiss Meditec, Hoya and BVI.
- The business has a limited commercialization history, recurring losses, negative operating cash flow, and an accumulated deficit of $479.3 million.
- Regulatory, reimbursement, product-liability, clinical, intellectual-property, cybersecurity, data-privacy and manufacturing-compliance risks could materially affect results.
- No material legal proceedings were reported, and the company reported no off-balance-sheet arrangements with a reasonably likely material effect.
- Management stated that disclosure controls were effective at the reasonable-assurance level; the company was not yet required to provide management’s report or auditor attestation on internal control over financial reporting.
Most important facts for investors to verify
- Whether rapid LDD placements convert into sustained LAL procedure utilization and recurring consumable revenue.
- Quarterly revenue, gross margin and cash burn trends after the year-end 2021 installed-base expansion.
- The timing of breakeven and the amount and timing of additional equity or debt financing required.
- Compliance with the term-loan Performance to Plan covenant beginning in 2022, including maturity and exit-fee exposure.
- The effect of the $2.4 million inventory reserve and the updated ActivShield LAL on future product mix and margins.
- Whether COVID-19, supply-chain constraints and inflation continue to restrict procedure volumes or increase manufacturing costs.
- Regulatory progress for the lower-cost LDD, additional indications and international commercialization.
- Potential dilution from outstanding options, restricted stock units, employee-plan shares and registration rights held by existing stockholders.