RxSight, Inc. (NASDAQ:RXST) Q3 2022 Earnings Call Transcript

Ryan Zimmerman: Great. Congrats on the quarter guys. Very impressive. I’d love to just spend a moment on the short term first and then maybe talk about some of the other dynamics. But if you look at kind of the quarter over quarter growth that we’ve seen historically in the business, from the third to the fourth quarter, it’s been very strong just seasonally speaking. And so with the implied guidance, Shelley, I just would love to get your philosophy about your fourth quarter implied guide this quarter given kind of what you’ve done historically and remind us kind of the puts and takes on the fourth quarter that you’re considering as we think about the fourth quarter?

Shelley Thunen: Yes. It’s kind of interesting. I look back to the beginning of the year we guided from $40 million to $44 million on the top line and now we’re guiding $47 million to $48 million with somewhere in the range of 11% to 19% sequential over Q3. We think a lot of our blocking, tackling and the success that our doctors are having with their results and patients happiness is very important and was important to the third quarter volume. But it’s been a very surprising Q3. And the momentum and the strength in Q3 was pretty consistent throughout the quarter. And so I think part of it is, of course, one, we don’t want to get out over our skis and also do we pull some things in from fourth quarter, particularly on the LDD side.

And so I continue to look at that, because, frankly, I’ve called seasonality wrong. And so that’s part of my thought process, because it’s about the whole year and our momentum going into 2023. And I think that we have not been hit by COVID much in the last two quarters. And we’re just — while fourth quarter tends to be very, very strong, we think about the holidays. Is that going to be different than what we’ve had before? Usually, that doesn’t impact us much, but we continue to look at that as well. And we haven’t seen the flu season yet. And so, we’re hoping that doesn’t impact us in terms of scheduled surgeries as well. So that’s kind of the thought process. Overall, 11% to 19% is pretty broad at the end of the year, but we feel comfortable with that number.

Ryan Zimmerman: Okay. I appreciate that. And then the gross margins are doing really nicely just as the LAL scale. But I’d love to understand a little bit more about the gross margin expectations. If we strip out the LALs, do you still kind of expect the LDD margins kind of in that mid-30s range, maybe a little lower? And what’s the gating factor there for when that can actually start to improve? And should we still think about your LDDs kind of carrying forward that kind of margin profile into next year?

Shelley Thunen: Yes, I think that’s a really good question. As you know, because the supply chain constraints and inflation, our goal is always to sell capital in the 20% to 30% gross margin range, preferably a little higher, but not so high that we impede our sales. It has decreased and we’re well below the low end of that number right now with our current LDD. You pay to parts right now and then I think the — and during this period of time as we’ve increased our production on the LAL, we’ve brought you on the cost on that. So the effect of the LAL increasing as a percentage of revenue, those decreasing costs as we’ll offset the pressure that we’re getting from our existing LDD. But to get into the 20% to 30% range for our capital, we’ve spoken about our lower cost to manufacture LDD.