Story Stocks^®

Last night, RxSight (RXST -38%), a medical technology company which focuses on light adjustable lenses (LAL) and light delivery devices (LDD) used in cataract vision correction, issued Q2 revenue guidance, which was a good bit below analyst expectations. Q2 guidance shows a decline of 4% yr/yr to $33.6 mln, which would be its first decline in six quarters. RXST also lowered FY25 revenue guidance significantly to $120-130 mln from $160-175 mln. The new guidance represents an expected 7%-14% decline from FY24, sparking a very negative reaction from investors.

• What is shocking to investors is that this is the second quarter in a row that this has happened. On April 3, the company missed on Q1 revs and lowered full year revenue guidance. The stock gapped down then and is gapping down sharply again today. To have this happen two quarters in a row is spooking investors.
• The Q2 underperformance was caused by a sharp decline in LDD sales (down 49% yr/yr), along with softer-than-expected LAL procedures. While longer capital equipment acquisition cycles may have contributed to the drop in LDD sales, management feels the underlying cause is a slower ramp in LAL utilization. This trend was first observed in 2024, following a period of rapid growth in RXST's installed based. Investor concern now centers on whether growth has reached its peak and whether RXST can reignite LAL adoption.
• RXST feels that its return to growth will depend on its clinical partners highlighting the visual outcomes and customer success from LAL. RXST will implement a more proactive data-driven customer support model by analyzing utilization trends, adoption tiers, and clinical outcomes. The hope is to close the adoption gaps and enhance customer satisfaction; however, investors will be in wait-and-see mode before buying back into RXST.

Overall, the results this quarter show a slowdown in RXST's growth, driven by weaker LDD sales and softer LAL utilization. Investors are clearly spooked by having this happen in back-to-back quarters. Investors are going to want to see some stabilization before considering getting back into the stock. The company will report full Q2 results on August 7. Investors will keenly listen for Q3 guidance to see if RXST can show signs of stabilization.