RXST - NASDAQ

Good day and thank you for standing by. Welcome to the RxSight Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the call over to your speaker, Oliver Moravcevic. Please go ahead.

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 financial results for the three months ended June 30, 2024. A copy of the press release is available on the company's website. Before we begin, I would like to inform you that the comments and responses to questions during today's call reflect management's views as of today, August 5, 2024, 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 as we disclaim any obligation to update or revise these forward-looking statements, except as may be required by law. 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 will turn the call over to our President and Chief Executive Officer, Dr. Ron Kurtz. Ron?

Good afternoon. And thank you for joining us. In a moment, Shelley will provide details on our Q2 results, which set new benchmarks for LAL and LDD sales, as well as for overall revenue. While we congratulate and thank both our clinical practice partners and our RxSight team members for these accomplishments, we also believe they support our long-term thesis that the unique ability to adjust our intraocular lens postoperatively elevates premium cataract surgery, enhancing precision, quality, and customization, and leading more patients to select a high-value premium procedure to achieve top-level clinical outcomes. For ophthalmic practices that have experienced persistent reductions in Medicare reimbursements, the LAL premium procedure provides a critical patient pay growth opportunity that is relatively resistant to fluctuations in the economy, unlike procedures such as LASIK that target a younger demographic. Following Shelley's review of our financial performance and guidance, I'll discuss how underlying trends and our continued focus on executions make us confident about our RxSight's near, mid, and long-term opportunity.

Thank you, Ron. Good afternoon, everyone. RxSight generated second quarter 2024 revenue of $34.9 million, up 68% compared to $20.8 million in the year-ago quarter, and up 18% compared to $29.5 million in the first quarter of 2024. During the quarter, we sold 24,214 LALs and generated $23.8 million in LAL revenue, up 92%, and 20% compared to the same year-ago quarter and the first quarter of this year, respectively. In Q2 of this year, LAL revenue represented 68% of total revenue, an increase from 60% in the year-ago period and from 67% in the first quarter of 2024. We sold 78 LDDs in the second quarter, up 16% compared to 67 units in the year-ago period, and up 18% compared to 66 units in the first quarter of this year. During the period, LDD sales generated revenue of $10.2 million, up 32% versus the second quarter of 2023, and up 17% compared to the first quarter of 2024. As of June 30, 2024, our LDD installed base stood at 810 units, up 55% and 11% versus the year-ago period and the first quarter of 2024, respectively. Gross margin in the second quarter of 2024 was 69.5% compared to 57.8% in the same year-ago quarter and 70.1% in the first quarter of 2024. The year-over-year increase reflects the shift in product mix, with a higher margin LAL revenue advancing to 68% of the total, as well as increased margins on our LDD. The sequential change of about 0.5% and within our guidance of annual gross margin of 68% to 70% is due to a slightly lower average selling price for LDD in the second quarter of just over $130,500 compared to an ASP of $132,000 in the first quarter of 2024. ASPs can vary slightly depending on customer mix, with $130,000 continuing to reflect ASP stability following the 10% LDD price increase we took in the third quarter of 2023. SG&A expenses in the second quarter of 2024 were $24.3 million, representing an increase of $6.1 million, or 33% versus $18.2 million in the year-ago quarter. This year-over-year change was due primarily to an increase in personnel costs and a higher stock-based compensation expense. On a sequential basis, SG&A expenses increased $1 million, or 4%, due to primarily higher stock-based compensation expense and higher personnel costs. During the second quarter of this year, R&D expenses rose 12% to $8.3 million, compared to $7.4 million in the second quarter of 2023. This year-over-year change was primarily attributable to increased facilities costs and increased stock-based compensation. Compared to the first quarter of 2024 R&D expenses in the second quarter increased by $300,000 or 3%, primarily driven by an increase in stock-based compensation. Our GAAP net loss in the second quarter of 2024 was $6.1 million, or a loss of $0.16 per basic and diluted share, using weighted average shares of 38.5 million shares. This compares to a GAAP net loss of $13.9 million, or $0.40 per share, on a basic and diluted basis in the second quarter of 2023. Moving to the balance sheet, we ended the second quarter of 2024 with cash, cash equivalents, and short-term investments of $233.3 million, compared to $125.4 million on March 31, 2024. The change in cash balance includes $107.5 million net of fees and expenses from our May Confidentially Marketed Public Offering, or CMPO. Turning now to guidance. Based on our strong second quarter of 2024 performance, we are increasing our revenue, operating expense, and non-cash expense guidance as follows. Full year 2024 revenue is now projected to be between $139 million and $140 million, an increase from our previous guidance of $132 million to $137 million. This represents year-over-year growth of 56% to 57%. The revised revenue guidance reflects an increase of $11 million at the low end of the range and $5 million at the high end of the range, compared to our initial 2024 guidance set in January. For the remainder of the year, we continue to anticipate sequential quarterly growth with a nominal increase in Q3, factoring in both a very strong second quarter and typical seasonality in the third quarter, due to summer vacations taken by both patients and doctors. Operating expenses are projected to increase to between $135 million and $136 million, up from our previous guidance of $126 million to $130 million, or $7.5 million at the midpoint of guidance, and representing an increase of 30% to 31% over 2023. The guidance increase is primarily due to higher non-cash stock-based compensation expense, with the remainder of the increase related to continuing investment in sales and marketing and research and development. The non-cash stock-based compensation expenses are now expected to be between $29 million and $30 million, up from our previous guidance of $22 million to $25 million, representing an increase of $5 million at the top and $7 million at the bottom end of the range. The increase is due to stock options and restricted stock units, or RSUs, granted at higher per share prices to-date. As discussed last quarter, operating expense guidance includes continued efforts to leverage our commercial momentum, grow our educational programs, develop our product pipeline, and expand internationally as regulatory approvals are obtained. Finally, please note that our gross margin guidance range remains unchanged at 68% to 70%, which at the midpoint remains 300 basis points higher than our initial 2024 guidance set in January. Our combined revenue and gross margin increases since our initial guidance in January of 2024, excluding the increase in operating expenses, which are largely non-cash, contribute an additional $7.5 million to $11 million to operating income. With that, I'll turn the call back to Ron.

Thank you, Shelley. Our RxSight's strong Q2 performance, as well as our revised 2024 guidance, is based on our technology's ability to meet the clinical needs of patients and doctors, as well as the business needs of practices. While traditional cataract surgery with fixed intraocular lenses generally delivers good results, the unique ability to noninvasively modify the LAL after surgery, based on direct patient feedback, enables doctors to deliver a new level of precision and customization, thereby drawing more patients into the premium IOL category, which is the most significant opportunity for practices to offset long-term negative financial trends in their businesses. The aging of the population in the U.S. and other developed countries continues to put pressure on health care systems to reduce reimbursements to providers, particularly in eye care. Patient-paid procedures like LASIK that may offset some of these effects have proven to be inconsistent revenue replacements, as they appeal to a younger demographic whose decisions are easily deferred during downturns in the economy. In contrast, the expanding demographic of patients considering cataract surgery cannot easily defer the procedure indefinitely. Reduced vision interferes with daily activities, has been linked to an increased risk for falls, and recently was added as a modifiable risk factor for dementia. Driven by social, work, and lifestyle factors, this population has developed high expectations for vision without glasses, and is best positioned financially to consider a patient-pay premium IOL procedure. The potential for practices to convert more patients from their most commonly performed, but poorly reimbursed conventional cataract procedure to their highest revenue and highly profitable premium procedure is a major reason why these businesses have, and we believe will continue to invest in, LDD technology and infrastructure for most, if not all, of their locations that serve cataract patients. With a total installed base of just over 800 LDDs in the U.S. and Canada, we believe we are still in the early phase of penetration of these clinical sites. As practices acquire and become familiar with adjustable lens technology, our focus is on continued growth in LAL procedures by leveraging the expanded human and physical infrastructure for postoperative light treatments. We continue to see growth in monthly utilization across the installed base, with the most recent expansion to 11 LALs per LDD per month in the seasonally strong second quarter, up from 10.1 LALs per LDD per month in Q1 of this year. We believe the growing clinical awareness and experience that has driven this trend over the last several years has been accelerated by our strategic clinical and marketing teams. These experts help practices effectively integrate and utilize adjustable technology to improve patient outcomes and grow profitable practice revenue. Continued technology development is another key mechanism for growing adoption, with the LAL+ being the latest example. Now midway through its rollout in the U.S., we continue to receive positive feedback from patients and doctors who appreciate its rapid visual rehabilitation and optical quality, with a growing body of data now being presented at clinical conferences. The addition of LAL+ also continues to be a catalyst for LDD sales, as practices see another reason to add adjustability to their product offerings. As part of our ongoing commitment to innovation, we are pleased to announce FDA approval for an extension of the spherical refractive power range for LAL+, from minus 2 to plus 3 diopters, providing RxSight with the broadest spherical power range of any astigmatism correcting IOL in the U.S. When coupled with adjustability, this may be particularly useful in highly nearsighted eyes that also typically have less predictable outcomes after surgery. Commercial distribution of the expanded power range is anticipated toward the end of 2024. While our primary focus remains on fully developing the U.S. market, we continued to make progress towards expanding our international regulatory approvals in countries that have already adopted premium IOLs. Given that RxSight's adjustable IOL technology uniquely addresses globally relevant clinical and business needs, these markets can provide additional growth opportunities. Taken together, we believe we are very well positioned for sustained growth in the years to come and look forward to updating you on our continued progress. With that, I'll ask the operator to open the call for questions.

[Operator Instructions] Our first question will be coming from Ryan

Good morning or good afternoon, excuse me, other earning call. I want to ask about the updated guidance or range with the PMA supplement, Ron, for the LAL. I was reviewing the FDA data. Can you just talk about where that range was before and versus now, the minus 2 to plus 3 diopters and kind of what you size that opportunity to be as you think about expanded usage there?

So, the power range prior to this approval was plus 4 to plus 30 diopters, which was already a broad range. This, of course, broadens the low end of the range, which again would be likely most clinically relevant to eyes that are highly myopic or nearsighted prior to cataract surgery. So, it's difficult to know exactly how many of those patients are going to be candidates for this power range. But certainly, it's something that we've been asked by our customers about, and we're very pleased that we have this approval now.

Very nice. And maybe just switching gears to guidance a little bit. As you think about the magnitude of your beats coupled with the size of the guidance increase, it looks like you're building in a little bit more expectation, particularly in the third and fourth quarter, Shelley. One of the things that stood out this quarter, which you noted Ron, was the acceleration to 11 units per LDD per month, which really is a step-up versus the prior year comparable period from 1Q to 2Q’23. So, as you think about that increase in guidance, kind of what's underpinning those expectations, is that higher utilization from the installed base? Is there a pipeline, particularly within the LDD, kind of funnel that you look to and see? Just help us understand kind of what's behind that increase in guidance, particularly in the back half of the year. Thanks for taking the questions.

Thank you, Ryan. Yes, you are correct. In the second quarter of 2023, our usage was 9.2 LALs per LDD, and we accelerated that to 11 this quarter. We have seen continuous improvement in that number. Sometimes in the Q3 number, it goes down a little bit because you have a really large base, but it also means that you can increase the number of absolute number of LALs in each quarter. I think that that's one of the most important parts of our model. First, we need to sell an LDD. But second, we need to make our customers successful and their patients happy. Part of that is, one, adding procedures from new customers, having them accelerate a little bit more rapidly than we had customers do in ‘20, ‘21, ’22, and we started seeing that for customers installed in ‘23 and again in ‘24. So yes, LAL growth is, as you know when we've discussed before, an important component to increasing our revenue.

Thank you for taking the questions.

Thank you, Ryan.

Thank you. One moment for our next question. Our next question will be coming from Robbie Marcus of JPMorgan. Your line is open.

Great. Thanks for taking the questions. Congrats on a really nice quarter here.

Thank you, Rob.

Two for me. There have been a lot of investor concerns after some conflicting sell side research on sort of the health and the ability to grow on LDDs and LAL adoption. Clearly in the quarter, you had a great LDD number and as we just talked about LAL adoption. So really my question is, sort of, what are you seeing in the field? Ron, you talked about halfway. Who's buying LDDs today? Where are they placing them? Are centers on their second or third units yet? Are they getting LDDs at multiple locations if they have multiple offices? Just help us think about, sort of who's the incremental buyer here? Then, I have to imagine based on the increase in utilization that you are seeing. New users ramp up much quicker than you did, two, three years ago and you're still seeing improvements in utilization from existing users. So any kind of color or segment or trends you can talk about in new versus existing users there would be great. Thanks.

Thank you, Robbie. So maybe I'll take the first part and ask Shelly to talk a little bit about utilization trends. But, I'm not sure qualitatively that there's a large difference. We're still at the early phase of penetration of the market. So, we have – our new customers are similar to our previous customers that we continue to grow into the market. Why any one particular customer decides that this is the right time for them to adopt the LAL versus a previous time is really kind of idiosyncratic to that practice. We can certainly influence that with our sales team, and as I mentioned, the more we move the technology forward, the more it gives people a reason to adopt. We don't see in terms of, where they are putting the LDDs. As we've noted before, there's LDD within an office is not a capacity limitation due to throughput. So it would be highly unusual. I can't think of a case where an office would add, a practice would add an LDD to the same office. So they are almost always going to a new office that is serving, what in that practice's mind serves a different patient population for them. They are either geographically different or demographically different in their local environment. Whether that practice is a smaller practice with a couple of offices or larger practices with many offices, that's really what they are doing. They are adding the LDDs to new offices that can then offer that technology to a new patient population.

Thank you, Ron. As we move to LAL adoption, I think that, as you noted earlier, we have talked about adoption by different cohorts of install. And certainly those folks in ‘23 and ‘24 have accelerated faster. But the important thing with that number also is that we have continued to see all cohorts continue to grow. We think an important part of the component of newer customers getting going faster, obviously, is one, we have more references. So a friend or a colleague is likely to have said to them, just get going, do five, six, seven patients in your first week, because you are going to see the results from a larger end than just one patient. And that gives them confidence, as well as the fact that we continue to improve in our clinical training, in our account management training, in terms of teaching them how to sell the technology, as well as how to integrate practice flow for them. And those are all important in adoption. As Ron said, each time we add a feature function, even a software upgrade, it helps our customers continue to penetrate their market, and also gives a new customer another reason to buy. They're able to say, aha, I should be doing more of this now. Of course, what we've seen in the last three years, consistent in each of the customer surveys that we've had run in the fall, is 40% to 44% of LAL patients come from what would have been a monofocal patient, a patient that would not have gotten any premium. And then about another third, a little bit more than a third, come from torque lenses or astigmatism correction lenses, which they typically sell for less than half of the price of a PCIOL. So within a practice, they have more and more opportunity on the LAL front. Would you add anything Ron, no?

Shelley, maybe just to follow-up on that, what's your latest view on what percentage are coming from monofocal versus share conversion from premium IOL? It's one of the more attractive components of the story that you are actually expanding the market here. So just any color you could give and sort of the receptivity. Is it nationally, different pockets, anything you could give. Thanks a lot.

So, I will say that where the data comes from is the survey we've had run by a third party among our existing customers, and that's one of the questions they ask them, how much you charge for each? And what your conversion rate for each type of patient population? So the last time the survey was run was in the fall of 2023. We usually only run that annually, but the numbers have been very consistent and inching up a little bit. I think we started at 40% and last year was 44%. That really is information that comes directly from the practice. Other information might be anecdotal at this point in time. I don't know if you see anything when you are out visiting customers Ron or not.

I haven't seen anything that would make me suspect that that number has changed.

Okay.

Great. Thank you very much.

Thank you, Robbie.

One moment for our next question. Our next question will be coming from Steven Lichtman of Oppenheimer & Co. Incorporated. Your line is open.

Thank you. Good evening, everyone, and congratulations on the quarter. I wanted to start first with LAL+. It does seem to be another opportunity to go after new customers. Ron, you mentioned it being a door opener. Can you talk more about what you're seeing on that front and for those surgeons not yet customers, what they might see with LAL+ that would sort of pique their interest and convert over?

I would start by saying that, you know, LAL and LAL+ are both great quality lenses. They provide both the same degree of adjustability and are more similar than different, and that's why we price the lenses the same, so that we're not – we want the doctor to make the best choice for the patient. Feedback that we've received are things on the order of what you would expect from the optical design of the LAL+, which provides perhaps faster visual recovery, particularly for intermediate and tasks and near tasks. So, that feedback is consistent with the optical design, which slightly extends the depth of focus relative to the LAL.

So Ron, anecdotally, Eric Weinberg, who's our Chief Commercial Officer, says every sale when you have a new technology, which he's done multiple times, starts with a no and turns to a yes. So, you and he always say to us, every time we have a technological advance right, it gives the customer who's been saying no an opportunity to say yes. They do that without losing face. They can say, yeah well, I've been waiting for this, or this is the reason, and that's important to our LDD sales, as well as our LAL sales and existing practices.

Yes. And I think it also establishes a record that we've carried through at previous companies and now here at RxSight, that we have a long-term plan for the technology that will continue to grow the benefits to whoever acquires the technology. That's important, because this is a – we're entering into a long-term relationship with our customers.

Right. And then just secondly, you are getting SG&A leverage and you increased the non-stock-based comp, SG&A by less than a revenue increase, so continuing to get leverage. But just given the strength of the balance sheet, any thoughts to accelerating investment on the commercial side, or is that something in the near-term plans?

Yes. When we raised the money from the CMPO, and what we did say is that this gives us an opportunity to invest more in sales and marketing, and also in R&D to accelerate our internal projects, which can take quite a while. So, we had talked about specific things such as additional education for our customers, reaching more out to the optometrist community, and those efforts along with additional marketing, and not marketing to our customers, not DTC. So we had talked about that, and where you saw in the increase in OpEx, most of it was in stock-based compensation, but about $2 million in 2024 really relates to this additional ability to invest in the business, and what we said at that point in time is, while we'll always be careful with OpEx, it takes a while to get all these programs rolling. So, we would see more of the effect of these programs in 2025.

Got it. Thanks, Ron and Shelley.

Thank you.

Thank you, Steven.

Thank you. One moment for our next question, which will be coming from David Saxon of Needham & Company. Your line is open.

Great. Good afternoon, Ron and Shelley. Thanks for taking my questions. Maybe I'll start on the LDDs. Obviously, really strong placement number here in the second quarter. If I look to last year in the third quarter, LDD placements were essentially flat sequentially. I heard, Shelley, your comments around third quarter modest sequential growth. But for specifically for the LDD placements, should we be thinking about a similar sequential trend as we saw last year, so kind of flattish? Or is there any reason why seasonality would be more impactful this year and maybe cause LDD placement to dip sequentially?

Yeah, I think that we did guide specifically, that we would have a nominal increase in revenue in the third quarter and I think that's very typical with seasonality. We do see seasonality, both in capital equipment as well as in procedures. So, I would expect seasonality on the LDD front. And I think that if you go past, and we are very early, we always have the lot [ph] bigger and bigger numbers and that's an important component. And the overall growth story is still tremendously high growth, but wouldn't be as high as it was, say two years ago. So, I would suspect that we would have seasonality in LDDs while we're not providing specific guidance, and that our most powerful growth is likely to come from LALs, just because of the fact that we've added new customers, even though existing customers may have some effect from summer vacations, both for themselves as well as for their patients.

Okay, got it. Very clear, thanks for that, Shelley. Then I'll probably stick with you, Shelley. So, gross margin was down sequentially. It sounds like that was really just around LDD pricing. The first half gross margin is something like 69.8%, so really at the top of the guidance range. I mean, it sounds like LAL mix is going to increase sequentially in the third quarter and maybe even so in the fourth quarter. So, why not raise the gross margin guidance? Is there anything in the back half that would put pressure on gross margins or is it really just conservatism? Thanks so much.

I wouldn't call it exactly conservatism overall. I think that's a pretty narrow range for a company of our size. But I do think that other than mix, which while is the most important component of the gross margin, we also have things like period costs, right. We saw that in the fourth quarter of last year when people expected because of mix it would be a little higher, but you have certain things that customers don't pay for directly. What we see is at the end of the year, sometimes the ASCs order a little heavier, right, because they're not paying for that inventory. We're rolling out the balance of our ASCs with LAL+ in the third and fourth quarter, as well, primarily in the third quarter, our inventory is quite balanced and we're able to fulfill the ASCs, so that's really good news. And we're also rolling out alongside our existing injector, a disposable injector. I think Ron talked about that a couple of quarters ago as well. So we'll have some things like higher shipping costs, and those things can be one-time costs. Service can go up a little up and down in terms of the costs incurred in a quarter. So, I always try and leave room for some period costs, as well as mix.

Great. Thanks so much.

One moment for our next question. And our next question will be coming from Craig Bijou at Bank of America Securities. Your line is open.

Good afternoon. Thanks for taking the questions. I wanted to follow up on the LAL+ specifically. Ron, heard your comments on how it's driving LDD sales. I'm not sure if, with some of your commentary on utilization, if you talked about how LAL+ is impacting that. But I'm curious, I know you guys are agnostic given the price as to LAL or LAL+, but is it driving – is utilization higher because you're seeing more LAL+ use, or maybe just talk about how we should think about the mix from a doc perspective?

Well, I mean, we certainly hope that utilization grows because of LAL+. I mean, we wouldn't have introduced it if we didn't think that. But I don't know that it really makes any difference, what a doctor uses. We really just want them to use an adjustable lens, a light adjustable lens, whether that's an LAL original or an LAL+. Over – I think that, different doctors have different opinions, have different, different patient populations, and that will work itself out over time. But overall, we have continued very positive reviews, both from the LAL as well as from the LAL+.

Okay. Thanks Ron. And then maybe following up on some of the international comments that you've been making. I know you've talked about it increasingly over the last few quarters. So any perspective on timing or some of the markets that you may be targeting? I know, I think we've talked about Asia before, but any perspective on market and timing of potential approval?

Not in terms of market entry. Obviously, our focus right now is as you mentioned, approvals, and we're making progress. I would hope that we'll continue to be able to update you as the year progresses. But regulatory approvals are not an exact science, and so I'd like to give us a little bit more time as we continue to make progress.

Great. Thanks for taking the questions. Congrats on the quarter.

Thank you.

Thank you.

One moment for our next question. Our next question is coming from Larry Biegelsen of Wells Fargo. Your line is open.

Hey, guys. Thanks for taking the question and congrats on the quarter. Ron, I'm curious, your share, and by the way, it looks like it by our math, your share of premium IOLs is over 10% this quarter for the first time. I'm curious on that 40% number you talked about. Is there any evidence, that are coming from monofocal? Is there any evidence that you are expanding the market? Because I'm looking at the market scope, penetration numbers, and it's been pretty flat now for a few years. So why wouldn't, if you're 10%, why wouldn't we see all of this being equal, kind of a 400 basis point increase in premium IOL market, if your 10% and 40% are coming from monofocal?

Well, one is, I haven't looked at those numbers. So I think that those numbers are likely directionally, but they are still going to be – they may not fully capture our adoption in real time. But also, there's definitional questions. So that, those surveys often look at premium IOLs versus what we would more define as premium cataract surgery. So it's possible that some procedures that are, would more broadly considered patient pay, but don't involve premium IOL. Some of those may be converting to LAL. Again, I can't give specific reason without looking at the specific survey that you are referring to.

Fair enough. It was – Shelley, I don't know if you wanted to add something. I was just looking at the data that's in the market scope, the newsletter.

Yeah. No, and I think you and I have had a number of conversations about survey data in particular, and that's what – but some of the basis that market scopes says as well, and we consider them probably the most accurate information that we have access to. I think that some of it's determined after the fact, right. So the projections aren't necessarily, and sometimes the after the fact numbers come around three months later, right. Once everybody's reported and he's had a chance to talk to people. So we can't really comment on the overall market because we're not large enough yet, but we definitely know that we're building premium access and premium patients inside of our customers. I think that that's very important to their success and their payback on the LDD.

All right. I'll leave it there. Thanks for taking the question. Congrats again.

Thank you.

One moment for our next question, which is coming from Tom Stephan of Stifel. Your line is open.

Great. Hey, everyone. Thanks for the questions and congrats on a really nice quarter. Maybe just to start on LAL utilization growth, I think year-over-year growth accelerated for the first time in, I believe, well over a year based on our models calculations. Ron or Shelley, can you talk about what specifically you are seeing that's driving this? And then maybe more importantly, do you believe there is sustainability in this potential inflection that you saw in 2Q? When we're tying out our model kind of real time here, it seems like you are expecting 3Q a consistent year-over-year utilization growth. So, maybe any comments on the sustainability would be very helpful.

Yeah. I think that I'll start with sustainability rather than the absolute numbers. But what we do see, particularly when we look at our cohorts, as we've talked about multiple times, that our cohort is the one I look at is based upon year of install. And those cohorts continue to grow and I think that's an important component as well. Sometimes people ask us, what's the max in a practice? We don't know the answer to that, and certainly these numbers are aggregated. Then, of course, the slope of the line in terms of adoption is higher for our newer customers. And if we think about it overall, that the most important thing we do with the LAL is continue to get adoption. Certainly we have customers where we're probably less than 10% of their total volume, because that's voice of customers. Others where we are approaching 100%, nothing's absolutely 100%, but we're predominant in those practices. Our clinical people and our account managers, our LAL account managers are tasked with working with their individual practices. They each have assignments, practices. They look at their volume. They come in and retrain if they need to. If new doctors are coming on, they do that. If they have a staff member that's been replaced, they make sure that they have all the digital tools that they need. That's an important component of what we do is to be in front of the customer and make sure they understand the benefits, as well as the fact that LAL+ came out, the fact that we have a new injector, the fact that we will be expanding the diopter range for LAL+. So I think that those are all things that give them an opportunity to call and to make sure that we're fulfilling the needs of our customers. So, I think that that's an important component. While we do see variability, right, we were at 9.2 in the second quarter of ‘23, 8.7 in the third, and that is not inconsistent with seasonality, and then up to 10.2 in the fourth quarter and then 10.1 in the first. Of course, fourth quarter is typically your strongest. We had just a really strong quarter in the second quarter. We think that that continued growth might be, variable quarter-to-quarter, but overall the slope of the line is up and that's what we're working with. Our ultimate goal is to be 50% of the market, and that's a long-term goal. But our first goal is to increase our penetration in each one of our accounts.

That's great color. Thanks Shelley. Then my follow-up was just on international and specifically Europe. Ron, maybe to pivot to you, can you discuss the key differences compared to the U.S. that we should be mindful of in terms of the end market and the opportunity? I guess I'm just curious, what specifically gives you sort of the confidence that your success in the U.S. can be replicated in Europe specifically? Thanks.

Well, I think that, as many of us have been involved with launches in Europe, there's a – it's really not a single market, it’s multiple markets, individual markets that each have to be addressed individually, and so that does take some time. We also have a new regulatory environment in Europe, which many of the companies or all the companies are dealing with now. So that also has added a layer of complexity. But at the end of the day, clinical ophthalmology is the same across the entire country and across the globe, whether it's Europe or Asia. There's a broad commonality in what patients want and how physicians react to technology. So, it's certainly a positive, and it's been our experience that if you have success in the U.S., that that's a good harbinger for ultimate success outside the U.S. But because of these individual dynamics within regions, that can be, that doesn't necessarily mean that that happens overnight.

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

Thank you.

I would now like to turn the call back to Ron for closing remarks.

Well, thank you all for your time and attention today. We appreciate your interest in RxSight and look forward to updating you on our progress in future quarters. Goodbye.