Executive Summary / Key Takeaways

• RxSight's unique Light Adjustable Lens (LAL) system, enabling post-operative vision customization, is a significant technological differentiator driving adoption and market share gains in the premium cataract surgery segment.
• Despite a Q1 2025 top-line miss attributed to a weakened premium IOL market, competitive product launches, and negative consumer sentiment, the company continues to expand its Light Delivery Device (LDD) installed base, a key indicator of future LAL sales potential.
• Management has revised full-year 2025 guidance downwards, reflecting the impact of recent market dynamics, but maintains expectations for continued revenue growth (14-25% YoY) and stable gross margins (71-73%), while adjusting operating expenses.
• The company's strategy focuses on leveraging its clinical data, ongoing product innovation (LAL+, expanded power ranges, asphericity customization), and expanding commercial reach (including new business models and international markets) to overcome near-term challenges and drive long-term market penetration.
• Key factors for investors to monitor include the pace of recovery in the premium IOL market, the effectiveness of strategic responses to competitive pressures and macroeconomic sensitivity, execution of the international expansion strategy, and continued progress towards profitability and positive cash flow.

Reshaping Premium Cataract Surgery with Adjustable Technology

RxSight, Inc. is carving out a distinct niche in the competitive ophthalmic medical device market, centered on its proprietary RxSight Light Adjustable Lens (LAL) system. This system, comprising the LAL and the Light Delivery Device (LDD), represents a fundamental shift in premium cataract surgery by enabling doctors to customize and optimize a patient's vision after the lens has been implanted. This post-operative adjustability stands in stark contrast to traditional premium intraocular lenses (IOLs) offered by larger competitors like Alcon (ALC), Johnson & Johnson (JNJ), and Bausch + Lomb (BLCO), which require surgeons to rely solely on pre-operative measurements and predictions, often leading to compromises or the need for subsequent procedures if the refractive outcome is not ideal.

The LAL itself is crafted from a unique photosensitive material that changes shape when exposed to specific patterns of ultraviolet (UV) light delivered by the LDD. This allows for precise adjustments based on the patient's actual post-surgical refraction and visual needs, a process that can be iterated until the desired outcome is achieved. The tangible benefits of this technology are compelling and, according to company data, quantifiable. A recently completed post-approval study demonstrated that eyes receiving an LAL were 14 times more likely to achieve an outstanding refractive outcome compared to those with a monofocal IOL. Furthermore, clinical data supports that over 90% of patients achieve 20/20 or better distance vision and J2 or better near vision without glasses after LAL implantation and adjustments. This level of precision and customization is a core competitive moat for RxSight, offering a superior value proposition to both patients seeking optimal vision and doctors aiming for predictable, high-quality results.

The company operates on a "razor and razor blade" model, primarily in the United States, where it focuses on placing LDD capital equipment (the "razor") in ophthalmic practices, which then drives recurring sales of the higher-margin LALs (the "blades") for each procedure. Since beginning commercialization in 2019 and scaling its U.S. team in Q3 2021, RxSight has built an installed base of 1,044 LDD units as of March 31, 2025, and has seen approximately 223,000 LALs implanted since inception. This installed base is critical, as it represents the infrastructure for future LAL procedure growth.

Performance Reflecting Market Dynamics and Strategic Response

RxSight's financial performance in recent periods highlights both the underlying strength of its technology and the impact of external market forces. Full-year 2024 saw robust growth, with revenue increasing 57% to $139.9 million, driven by a 78% increase in LAL revenue and a 24% increase in LDD revenue. This growth contributed to a significant expansion in gross margin, reaching 70.7% for the full year, up from 60.4% in 2023. The improvement in gross margin is primarily attributed to a favorable product mix, with LALs accounting for a larger percentage of total sales (71% in Q4 2024), and improvements in manufacturing costs, particularly for the LDD, realized over time as production volume increases.

However, the start of 2025 presented challenges. Preliminary Q1 2025 revenue came in at $37.9 million, a 28% increase year-over-year but a sequential decline of 6% from Q4 2024. This performance led to a revision of the company's full-year 2025 guidance. Management attributed the Q1 miss to a confluence of factors: a weakened overall premium IOL market, unusual sequential launches of new premium IOLs by major competitors (creating market distraction and trialing incentives), and abrupt changes in consumer sentiment in late Q1, potentially linked to negative wealth effects from stock market declines, leading some patients to trade down from premium procedures. This resulted in the first year-over-year drop in same-store LAL sales (LALs per LDD per month) from Q4 2024 to Q1 2025, a metric that had shown strong year-over-year increases throughout most of 2024.

Despite these headwinds, LDD sales in Q1 2025 (73 units) were still up 11% year-over-year, suggesting that practices continue to see the long-term value in investing in the LDD platform as a means to drive profitable private-pay procedures that can counteract declining Medicare reimbursements. The company's revised 2025 guidance now projects revenue between $160 million and $175 million, implying 14% to 25% year-over-year growth, a reduction from the initial 32% to 41% growth forecast. Gross margin guidance remains unchanged at 71% to 73%, indicating confidence in the underlying cost structure and expected product mix. Operating expenses are now guided between $150 million and $160 million, a reduction from the prior range, reflecting efforts to align spending with revenue growth while still allowing for increased investment in customer-facing activities to drive adoption. The company continues to operate at a net loss ($8.19 million in Q1 2025) and negative operating cash flow ($8.83 million used in Q1 2025).

with an accumulated deficit of $630.3 million as of March 31, 2025. However, its liquidity position remains strong, with $229.3 million in cash, cash equivalents, and short-term investments, which management believes is sufficient to fund operations for at least the next 12 months.

Competitive Landscape and Strategic Positioning

The premium IOL market is intensely competitive, dominated by large, well-capitalized players like Alcon, Johnson & Johnson, and Bausch + Lomb. These competitors offer a range of non-adjustable premium IOLs, including multifocal, extended depth of focus (EDOF), and toric lenses. While these lenses aim to reduce spectacle dependence, they rely on pre-operative measurements and inherent optical designs that can lead to patient dissatisfaction due to residual refractive error or visual disturbances like glare and halos.

RxSight's adjustable technology provides a significant competitive advantage by addressing the inherent uncertainty of pre-operative measurements and the limitations of fixed optical designs. The ability to fine-tune the outcome post-operatively allows RxSight to potentially deliver superior, more predictable visual results, leading to higher patient satisfaction (reported at 97% by RxSight) and increased practice revenue. While precise, directly comparable market share figures for all niche competitors are not publicly detailed, RxSight's growth trajectory suggests it is gaining ground. Management estimates that adjustable premium IOLs accounted for nearly half of the overall growth in the U.S. premium IOL market in 2024, and that approximately three-quarters of LAL cases come from converting patients who would have otherwise received a standard monofocal or toric IOL, thereby expanding the overall premium market.

However, RxSight faces challenges from the scale and resources of its larger competitors, who can outspend on R&D, marketing, and distribution. Recent sequential product launches by major competitors, while not directly competitive in terms of adjustable technology, can distract the market and incentivize surgeons to trial new lenses, temporarily impacting RxSight's adoption momentum, as seen in Q1 2025.

RxSight's strategic response involves leveraging its technological edge and focusing on areas where it can differentiate. This includes:

• Continued Innovation: Investing in R&D to enhance the LAL platform. Recent developments include the LAL+ (offering improved near vision), FDA approval for an expanded spherical power range for LAL+ (-2 to +30 diopters total range, broadest among astigmatism-correcting IOLs), and FDA approval for LDD functionality to customize asphericity (scheduled H2 2025), seen as a step towards higher customization levels. These innovations provide new selling points and opportunities for engagement with both new and existing customers.
• Commercial Expansion & Education: Expanding the sales and marketing team to increase LDD placements and drive LAL utilization within the existing base. This includes refining clinical education and practice adoption programs and leveraging clinical data (like the post-approval study results) to demonstrate the benefits.
• New Business Models: Supporting the acceleration of new customer business models, such as centralized third-party light treatment options, which may lower the barrier to entry for some practices.
• International Growth: Pursuing regulatory approvals and market entry in key international markets (Europe, Asia) to replicate the U.S. success, leveraging the experience gained in North America. European regulatory approval for the LDD and LAL has been obtained, with a focus in 2025 on building clinical expertise there while pursuing LAL+ approval.

Outlook and Risks

RxSight's revised 2025 guidance reflects a more cautious near-term outlook due to the Q1 headwinds. Management anticipates economic factors will continue to weigh more heavily on LAL procedures (tied to consumer spending) than on LDD sales (tied to practice investment in profitable procedures). The second quarter of 2025 is viewed as a critical period to assess how quickly these macroeconomic and competitive pressures subside.

Despite the revised guidance, the underlying growth story remains intact. The company believes it is still in the early stages of penetrating the U.S. market, with a long runway for LDD placements among the approximately 10,000 U.S. cataract surgeons and significant potential to increase LAL utilization within its existing installed base. The goal of becoming 50% or greater of the total premium IOL market, first in the U.S. and then globally, underscores the perceived long-term opportunity.

However, investors must consider several risks. Market acceptance of the LAL system, particularly the requirement for post-operative light treatments and UV protective glasses, could face resistance. Competition from larger players with established market share and resources is intense. Regulatory hurdles, including obtaining and maintaining approvals and navigating potential changes in requirements (like the transition from QSR to QSMR), pose ongoing risks. Reliance on third-party suppliers, especially single-source providers, makes the company vulnerable to supply chain disruptions and price fluctuations, exacerbated by current inflationary pressures and global lead times. Macroeconomic conditions and changes in consumer sentiment directly impact demand for premium procedures. The company's history of losses and negative cash flow means it remains dependent on its existing capital resources and the ability to generate sufficient revenue to reach profitability, although current liquidity is deemed sufficient for the next 12 months. Changes in healthcare reimbursement policies and fraud and abuse laws also present compliance and financial risks.

Conclusion

RxSight stands at a pivotal point, possessing a truly differentiated technology in the Light Adjustable Lens system that addresses a significant unmet need for precision and customization in premium cataract surgery. While the company demonstrated strong growth in 2024, the start of 2025 has highlighted its sensitivity to broader market headwinds, competitive dynamics, and consumer behavior, leading to a necessary recalibration of near-term expectations. The revised guidance reflects these challenges but still points to continued growth and stable margins, underpinned by the fundamental value proposition of adjustable vision.

The core investment thesis hinges on RxSight's ability to leverage its technological lead and expanding installed base to drive increased LAL adoption, both within existing accounts and by attracting new customers through strategic commercial efforts, ongoing innovation, and expansion into new markets. The long-term opportunity to capture a significant share of the premium IOL market remains compelling. Investors should closely monitor the company's execution against its strategic priorities, particularly the pace of LAL utilization growth, the success of new product introductions, progress in international markets, and the impact of its efforts to support new business models, as these factors will be critical in determining whether RxSight can overcome near-term market pressures and realize its full potential in reshaping the future of premium cataract care.