Rxsight Inc

NASDAQ:RXST

Earnings Call Analysis

RxSight Q2 2024 Surges Driven by LAL Innovations

RxSight's Q2 2024 revenue soared 68% year-over-year to $34.9 million, fueled by a 92% rise in Light Adjustable Lens (LAL) sales, which made up 68% of total revenue. Gross margins expanded to 69.5%, reflecting a successful product mix shift. The company raised its full-year 2024 revenue guidance to $139-$140 million and expects operating expenses to increase to $135-$136 million due to higher stock-based compensation. CEO Ron Kurtz emphasized that their technology continues to significantly enhance premium cataract surgery, driving strong adoption and growth prospects.

Strong Revenue Growth Signals Market Demand

In the second quarter of 2024, RxSight showcased impressive financial performance, with revenues reaching $34.9 million. This represents a significant 68% increase from $20.8 million in the same period last year and an 18% rise from $29.5 million in Q1 2024. The company also noted that sales of its Light Adjustable Lens (LAL) were particularly notable, with 24,214 units sold, generating $23.8 million in revenue—up 92% year-over-year and 20% sequentially.

Shift in Product Mix Enhances Margins

An interesting trend in RxSight's financials is the increasing proportion of revenue coming from LAL sales, which accounted for 68% of total revenue, up from 60% a year ago. This change signifies a shift towards higher-margin products, with the gross margin for the quarter calculated at 69.5%, a remarkable rise from 57.8% in the prior year. Despite a minor sequential dip of 0.6%, this margin remains within the company’s ongoing guidance of 68% to 70% for the year.

Increased Guidance Reflects Optimism

Given the strong performance, RxSight has updated its full-year 2024 revenue guidance to between $139 million and $140 million, an increase from earlier estimates of $132 million to $137 million. This upward revision suggests a year-over-year revenue growth of 56% to 57%, and it includes a notable increase of $11 million on the lower end and $5 million at the higher end of the new range. The company anticipates continued sequential growth in the latter half of the year, though they caution about nominal increases due to seasonal factors.

Elevating Operational Investment

Operating expenses are projected to rise to a range of $135 million to $136 million, up from a previous range of $126 million to $130 million. This increase, attributed largely to non-cash stock-based compensation, represents a substantial year-over-year increase of 30% to 31%. To fuel this growth, RxSight has indicated plans to invest more in sales and marketing efforts as well as research and development, particularly following a successful capital raise.

Expanding Installed Base and Utilization Rates

As of June 30, 2024, RxSight's installed base of Light Delivery Devices (LDDs) reached 810 units, marking growth of 55% year-over-year. Monthly utilization rates per LDD have also increased, reaching 11 LAL treatments in Q2, compared to 10.1 in Q1. This indicates that practices are becoming more efficient with the use of LDDs, and it reflects positively on continued adoption of RxSight’s technology.

Regulatory Advances and Market Positioning

Noteworthy is the recent FDA approval that broadens the spherical refractive power range for LAL+ from minus 2 to plus 3 diopters. This enhancement provides RxSight with the broadest range available for an astigmatism-correcting IOL in the U.S. This could potentially open doors to more patients with complicated conditions, expanding market share and revenues even further as commercial distribution is expected by late 2024.

Long-term Strategic Vision

RxSight’s leadership reiterated a strong belief in the demand for adjustable lens technology, catalyzed by an aging population increasingly inclined to choose premium procedures in light of declining Medicare reimbursements. They highlight that even with potential economic fluctuations, there’s a growing base of patients unable to defer cataract surgeries, which supports a business model resilient in challenging environments.

Earnings Call Transcript 2024-Q2

[Operator]

Good day, and thank you for standing by. Welcome to the RxSight Second Quarter 2024 Earnings Conference Call. [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.

[Oliver Moravcevic, executive]

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 3-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 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?

[Ronald Kurtz, executive]

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 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 to 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 execution make us confident about RxSight's near, mid- and long-term opportunity.

[Shelley Thunen, executive]

Thank you, Ron, and 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 year -- 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 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% and 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 our 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 ASPs 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 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% and 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 cost 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 2024 performance, we are increasing our revenue, operating expense and noncash 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 noncash stock-based compensation expense with the remainder of the increase related to continued investment in sales and marketing and research and development. The noncash 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 from 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 a 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 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 noncash, contributed an additional $7.5 million to $11 million to operating income.

With that, I'll turn the call back to Ron.

[Ronald Kurtz, executive]

Thank you, Shelley. 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 non-invasively 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 pay 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 we'll continue to invest in LDD technology and infrastructure for most, if not all, of their locations that serve cataract patients. With the 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 LAL 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 adopt -- 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 near-sighted eyes that also typically have less predictable outcomes after surgery. Commercial distribution of the expanded power range is anticipated towards the end of 2024. While our primary focus remains on fully developing the U.S. market, we continue 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]

[Operator Instructions] Our first question will be coming from Ryan Zimmerman of BTIG.

[Ryan Zimmerman, analyst]

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 kind of where that range was before 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.

[Ronald Kurtz, executive]

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. And 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.

[Ryan Zimmerman, analyst]

Enough. And maybe just switching gears to guidance a little bit. As you think about the magnitude of your beat coupled with the size of the guidance increase, it looks like you're building in a little bit more expectation, particularly in third and fourth quarter, Shelley. And 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 c, just help us understand kind of what's behind that increase in guidance, particularly in the back half of the year.

[Shelley Thunen, executive]

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. And we have seen continuous improvement in that number. Sometimes in the Q3 number 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. And I think that, that's 1 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 -- and part of that is: one, adding procedures from new customers, having them accelerate a little bit more rapidly than we had customers during in 2021, '22. And and we started seeing that for customers installed in '23 and again in '24. So yes, LAL growth is, as you know, and we've discussed before, an important component to increasing our revenue.

[Operator]

Our next question will be coming from Robbie Marcus of JPMorgan.

[Robert Marcus, analyst]

Congrats on a really nice quarter here. 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? And 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 -- and then I have to imagine, based on the increase in utilization that you're seeing, new users ramp up much quicker than you did 2, 3 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.

[Ronald Kurtz, executive]

Thank you, Robbie. So maybe I'll take the first part and ask Shelley 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. And so we have -- our new customers are similar to our previous customers that we continue to grow into the market. And why any one particular customer decides that this is the right time for them to adopt the LAL versus the previous time is really kind of idiosyncratic to that practice. And 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're putting the LDDs. As we've noted before, there's -- LDD within an office is not a capacity limitation. So 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're almost always going to a new office that is serving what in that practices, mine serves a different patient population for them. They're either geographically different or demographically different in their local environment. And whether that practice is smaller practice with a couple of offices or larger practices with many offices. That's really what they're doing. They're adding the LDDs to new offices that can then offer that technology to a new patient population.

[Shelley Thunen, executive]

Thank you, Ron. As we move to LAL adoption, I think that, as you know [ 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. And 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 who's likely to have said to them just get going, do 5, 6, 7 patients in your first week because you're 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 also important in adoption. And as Ron said, each time we add a feature of bunch and even a software upgrade, it helps our customers continue to penetrate their market, and also gives a new customer another reason to buy. There are who will say, aha, I should be doing more of this now. And of course, what we've seen in the last 3-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 1/3, a little bit more than 1/3 come from toric lenses or stigmatizing correction lenses, which they typically sell for less than half of the price of a PC-IOL. So within our practice, they have more and more opportunity on the LAL front. Do I [indiscernible] anything?

[Robert Marcus, analyst]

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're actually expanding the market here. So just any color you could give and sort of the receptivity, is it nationally different pockets, anything you can [ add ].

[Shelley Thunen, executive]

So I will say that where the data comes from is the survey we had run by a third party among our existing customers. And that's one of the questions they ask them and how much you charge for each and what your conversion rate is 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% 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're out visiting customers, Ron or not?

[Ronald Kurtz, executive]

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

[Shelley Thunen, executive]

Okay.

[Operator]

Our next question will be coming from Steven Lichtman of Oppenheimer & Co.

[Steven Lichtman, analyst]

Congratulations on the quarter. I wanted to start first with LAL+, does seem to be another opportunity to go after new customers. And 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?

[Ronald Kurtz, executive]

I would start by saying that LAL and LAL+ were 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 lens is 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. And so -- that feedback is consistent with the optical design, which slightly extends the depth of focus relative to the LAL.

[Shelley Thunen, executive]

So anecdotally, Eric Weinberg, who's our Chief Commercial Officer, says every sale when you have a new technology, which you've done multiple times, starts with a no entrance to yes. And 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, and they do that without losing face. They can say, yes, well, I'll wait for this or this is the reason, and that's important to our LDD sales as well as our LAL sales in existing practices.

[Ronald Kurtz, executive]

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. And that's important because this is a -- we're entering into a long-term relationship with our customers.

[Steven Lichtman, analyst]

Great. And then just secondly, you're getting SG&A leverage and you increased the nonstock-based comp, SG&A by less than the 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 not something in the near-term plans?

[Shelley Thunen, executive]

Yes. When we raise 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. And 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. And so we had talked about that and where you saw in the increase in OpEx, most of it was in stock-based compensation of 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 well, we will always be careful with OpEx. It takes a while to get all these programs rolling. And so we would see more of the effect of these programs in 2025.

[Operator]

One moment for our next question. which will be coming from David Saxon of Needham & Company.

[David Saxon, analyst]

Ron and Shelley. 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 placements to dip sequentially.

[Shelley Thunen, executive]

Yes, 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. And so I would expect seasonality on the LDD front. And I think that if you go past [ or ] very early, we always have the lot bigger and bigger numbers, right? And that's an important component in the overall growth story, it's still tremendously high growth but wouldn't be as high as it was, say, 2 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.

[David Saxon, analyst]

Okay. Got it. Very clear. And 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 pressure on -- put pressure on gross margins? Or is it really just conservatism?

[Shelley Thunen, executive]

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 the mix, it would be a little higher. But you have certain things that customers don't pay for directly or [indiscernible]. And 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. And 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 onetime 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.

[Operator]

Our next question will be coming from Craig Bijou of Bank of America Securities.

[Craig Bijou, analyst]

Wanted to follow up on -- on the LAL+ specifically, and Ron heard your comments on how it's driving LDD sales -- and 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?

[Ronald Kurtz, executive]

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 in LAL original or LAL+ and over -- I think that different doctors have different opinions, have 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+.

[Craig Bijou, analyst]

Okay. 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?

[Ronald Kurtz, executive]

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.

[Craig Bijou, analyst]

Congrats on the quarter.

[Operator]

Our next question is coming from Larry Biegelsen of Wells Fargo.

[Larry Biegelsen, analyst]

Ron, I'm curious your share -- and by the way, it looks like, 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. Do you have -- is there any evidence that are coming from monofocal? Is there any evidence that you're 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 else being equal, kind of a 400 basis point increase in premium IOL market, if you're 10% and 40% are coming from monofocal.

[Ronald Kurtz, executive]

Well, 1 is -- I haven't looked at those numbers. So I think that those numbers are likely directionally, but they're 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 more broadly considered patient pay but don't involve a 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're referring to.

[Larry Biegelsen, analyst]

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.

[Shelley Thunen, executive]

Yes. 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 [ base is ] submarket scope is as well. And we consider them probably the most accurate information that we have access to. And I think that some of it is determined after the fact right? And so the projections aren't necessarily -- and sometimes the after-the-fact numbers come around 3 months later, right, once everybody has 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. And I think that that's very important to their success and their payback on the LDD.

[Operator]

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

[Thomas Stephan, analyst]

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 and I believe, well over a year based on our models, calculations. Ron or Shelley, can you talk about what specifically you're 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, we're tying out our [indiscernible] kind of real time here, it seems like you're expecting 3Q consistent year-over-year utilization growth. So maybe any comments on the sustainability would be very helpful.

[Shelley Thunen, executive]

Yes. 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 Europe install. And those cohorts continue to grow. And I think that's an important component as well. Sometimes people ask us what's max in a practice. We don't know the answer to that. And certainly, these numbers are aggregated.

And 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 is absolutely 100%, but we're predominantly in those practices. And 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. And 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. And 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. And of course, fourth quarter is typically your strongest. And we had just a really strong quarter in the second quarter. And 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 what -- that's a long-term goal, but our first goal is to increase our penetration in each one of our accounts.

[Thomas Stephan, analyst]

That's great color. And 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?

[Ronald Kurtz, executive]

Well, I think that as many of us who have been involved with launches in Europe, there's it'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. And 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 what -- 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.

[Operator]

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

[Ronald Kurtz, executive]

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.

[Operator]

This concludes today's conference call. Thank you for participating. You may now disconnect.