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Shelley Thunen

Thank you, Ron. I will briefly review the preliminary first quarter revenue results and updated guidance for the remainder of 2025 that were included in our pre-announcement press release. Consistent with the press release, our preliminary first quarter 2025 revenue was $37.9 million, up 28% compared to the year ago quarter and down sequentially 6% from our fourth quarter of 2024 revenue.
During the first quarter, we sold 73 LDDs, up 11% from the year ago period and down 12% from the fourth quarter of 2024. We ended the first quarter with an LDD installed base of 1,044 units, up 43% compared to the end of the first quarter of 2024 and 8% compared to the end of the fourth quarter of 2024. We also sold 27,579 LALs in the period, up 36% from the first quarter of 2024, and sequentially down 5% from the seasonally stronger fourth quarter of 2024.
Well, we will provide a full financial report on May 7, based on the preliminary revenue results and informed by the multiple dynamics just discussed by Ron, we are revising the guidance we provided in January as follows.
We are reducing revenue guidance from $185 million to $197 million to $160 million to 175 million. Thereby reducing implied growth compared to 2024 from the previous 32% to 41% range to 14% to 25%. We continue to believe that we will sell more LDDs in 2025 than in 2024, with economic headwinds likely having a greater impact on LAL procedures that are more directly tied to consumer decision making.
In contrast, as demonstrated by the relatively stable LDD sales in Q1, doctors and practices continue to invest in private pay procedures that deliver better outcomes for their patients and counteract ongoing reimbursement cuts and draw some more economically impacted private pay procedures such as LASIK.
Our gross margin guidance is unchanged at 71% to 73%, representing an implied increase of 30 basis points, 230 basis points compared to 2024. We also remain committed to aligning operating expenses with the pace of revenue growth, with a significant reduction in operating expense from the previous guidance of $165 million to $170 million to $150 million to $160 million, representing a change in the implied increase compared to 2024 from 22% to 25% to 10% to 18%.
Our revised operating guidance of $150 million to $160 million is higher as a percentage of revenue and gross margin than our previous guidance in January, taking into account the anticipated increase in one on one interactions with customers. Included in our costs, primarily in operating expense is non-cash stock-based compensation expense, which we now project to increase from the previous $22 million to $25 million to $27 million to $30 million.
This revision reflects higher than anticipated option grants issued in March 2025 to existing employees for performance, adjustment to market comps, and retention compared to our original guidance provided in early January 2025.
And with that, I'll turn the call back to Ron.

Ron Kurtz

Thank you, Shelley. With customer satisfaction at an all-time high of 97%, we believe that RxSight's adjustable technology will continue to reshape the premium cataract surgery market by offering the only IOL that allows patients to customize their vision after surgery. By delivering exceptional clinical outcomes in one of the most important markets in ophthalmology, we believe RxSight remains central to the growth story for both ophthalmic practices and the overall IOL industry.
While our large customer base now exposes us more to market-wide dynamics, we believe it also provides us with the opportunity to leverage our platform for sustained growth through targeted educational efforts and innovative product enhancements. In addition, we believe new clinical delivery channels offer alternative opportunities for growth in the US, while we continue to make progress towards commercialization in key markets outside of North America.
And with that, I'll ask our operator to open the call for questions.

Question and Answer Session

Operator

Thank you. We will now begin the question and answer session.(Operator instructions)
Ryan Zimmerman, BTIG.

Ryan Zimmerman

Okay, and thanks for taking our questions.

Ron Kurtz

Morning, Ryan.

Ryan Zimmerman

So let's start with the guidance, if we could. I appreciate your comments, Shelley, on guidance. But if we could talk a little bit about kind of the subcomponents or the underlying assumptions on guidance, particularly as it relates to productivity, you expect LDDs to grow, but maybe you could elaborate a little bit further on kind of how you're thinking about productivity of LALs per LDD going forward given the dynamics you laid out?

Shelley Thunen

Yes. Thank you very much, Ryan. I think the biggest driver, obviously, other than Q1 performance to our guidance is the fact that the typical significant increase that we see in March in terms of number of LAL procedures since we've been commercial, did not happen. And it was relatively flat to January and February. So I think our guidance really reflects the change in the number of LALs we expect to sell and offset in part by strong LDDs, that we expect to be higher than 2024.
In terms of the number of LALs per LDD, we certainly model that -- those increase over the year. And typically, what you see is kind of sequential growth up in Q2, down in Q3, up in Q4. I'm a little reluctant to say that the typical seasonality will be in place this year until we get through the second quarter and just see what the economic impacts are to the economy and how customers are selling to their clients and what we hear back from our ophthalmic customers about the responsive patients to a premium IOL procedure versus sticking with the monofocal.

Ryan Zimmerman

But Shelley, just to be clear, I mean the math would suggest declines on productivity through the year. And I just want to be clear, is that your assumption given the increase in LDDs.

Shelley Thunen

I think that other than absent perhaps the fourth quarter, that's going to be true on a much small larger LDD base relative to the number of LALs, but I'm not exactly predicting that. I think second quarter is probably the biggest risk quarter until we understand what is happening with the economy and how it's affecting our customers and weather impact, that's prolonged.

Ryan Zimmerman

Okay. And then the second question is just -- and this is arguably an impossible question, but I'm going to ask it anyway, Ron, which is as you think about the components of what led to the miss you kind of broke down some of it, meaning there was a weakened premium IOL market, there was new product launches. You also alluded to just broader macroeconomic dynamics and in the press release, I think some of your customers are newer and maybe taking longer to ramp.
And so I don't know if you can parse this out, Ron, but there's a lot of things kind of thrown in there. And I don't -- if you can prioritize kind of where you think the biggest drivers are in terms of the impact what's transient, what's not transient or maybe out of your control, such as the macroeconomic conditions, I think that would be helpful for everyone to understand.

Ron Kurtz

Yes. I would say that, as you described, there's been a confluence of factors that happened in Q1, particularly in the latter part of Q1. And I think that all of them are transitory, to some extent, the -- those product launches are something that are planned years in advance. It's unusual to have to let alone three sequential launches in the -- in a relatively short space. And while we're not directly expected by those.
They do cause a distraction in the marketplace as doctors are incentivized to trial new lenses. I think the obvious thing that changed in Q1 was the macro environment. And it's a -- that's a more complicated question. I certainly am hopeful that those -- that, that will also improve. But as we've seen from the events even from yesterday, there's going to be some additional changes.

Ryan Zimmerman

Thank you.

Operator

Young Li, Jefferies.

Young Li

All right, thanks for taking our questions. The first one, I'm wondering regarding utilization by cohort. When we do some checks, obviously, some surgeons can do a lot more than average. I wanted to get a better understanding if you look at the cohorts from earlier years, '21, '22, how does their utilization rate compare versus the average. Where do you see sort of like a natural ceiling or pain point before some of the practice management things you're going to put into place can help them further become more efficient.

Shelley Thunen

Thank you for the question, Young. We have always spoken about the fact that the cohorts of installed LDDs in '21 and prior '22 and '23 have been relatively the same and they kind of move in concert. And we saw that again in the first quarter. So where the number of LALs per LDD went down, it went down in all cohorts, and they're very tight in their distribution, and that continued to be true -- also as we look across our territories in the US, the change and the effect in March were consistent throughout the US. The 24 class of cohort of LDDs installed.
It's probably only relevant to look at those installed in the first and second quarter. And what we did see is that they're not growing quite as quickly as the 23 class did during comparable quarters, particularly in the first quarter.
So it doesn't have an outsized or even a major effect on the number of LALs per LDD because our installed base is so large. It is something that is a pain point, although small in terms of the total number, but we would like to see them be more confident, particularly in this economic environment.

Young Li

Okay. Got it. Very helpful. I guess to follow-up just regarding driving innovation and product enhancements. Now that we have a better understanding about where Alcon's programs at Bausch & Lomb also has announced a program, but they also had to deal with the recall.
It seems like, at least on the competitive front, there's a little bit more visibility. Can you maybe talk a little bit more about the product pipeline or new lenses coming out and what we should expect on that front?

Ron Kurtz

Yes. Thanks for the question, Young. We would agree with you, and I think we've been pretty consistent that -- we don't see anything on the horizon that is directly competitive to the LAL and we also believe that continued innovation has been an important driver for growing adoption over the past five years that we've been commercial. These have primarily been incremental enhancements that really allow us to get that next group of doctors and patients to adopt the technology. Examples of that have been ActivShield, LAL+.
In the fall, we introduced Low Diopter LAL, which are now beginning to be used in the field. And soon, we're going to be launching our first foray into the correction of higher order operations, and I mentioned that in our last earnings call. So I would expect continued such product enhancements to be steadily introduced.
And this enables our customers to leverage not only their investment in the capital equipment, but also the investment in their time and that of their employees learning the clinical skills associated with our technology. And then they can then apply that to more and more of their patient population.

Young Li

Thank you very much.

Operator

Rob Marcus, J.P. Morgan.

Robbie Marcus

Oh great, good morning. I wanted to -- Ryan -- take Ryan's question in a different way. Shelley and Ron you raised guidance in the second quarter of and then you were in line on third quarter and you were in line on fourth quarter. And it's the two first in-line quarters you had, I believe, since being public, really not I would imagine how you thought the second half of the year would turn out.
And if you look at Street models, it was on better LDD placement and missed both quarters LAL utilization. So from our point of view, we started seeing LAL utilization slowdown in the back half of the year. Then when you provided guidance for 2025, you actually guided a pretty good amount above the Street.
So clearly, you were seeing something that we weren't. And even just as latest last week, a competitor Alcon had an Analyst Day, and they didn't bring up any of the same market concerns that you had. So I guess the question is really now with a lot of hindsight did this start much earlier than you've acknowledged.
And is it really a market trend, even though we're not necessarily hearing all of those market trends called out by your peers, and we've all known and been publishing on those competitive launches for months now or is it just a utilization issue specifically to LAL and how do you discern between the two? Thanks.

Ron Kurtz

Maybe I'll start, Robbie. So I think the -- while our LAL procedural growth didn't meet some of the expectations that were out there. The LALs per LDD metric continued to be high through the year. And given our growth in installed base, that drove continued growth overall. And so I think that -- and we, in fact, if you look at the overall market and take out LAL growth, the overall market has -- was not growing and was negative.
And that was commented at the time, as I recall. The -- and that probably was -- because of our growth was probably led us to underappreciate the softening in the market as well as the impact of these competitive trialing incentives that others had also mentioned. So I think that led to a perhaps underestimate of those impacts and again, laid a foundation which when coupled with very significant disruption in consumer sentiment led to the effects in Q1.

Shelley Thunen

Yes. And to address your comment more specifically about the third and fourth quarters, you are correct. We beat and raised in the first half, both in the first quarter and the second quarter and raised guidance both times and then, of course, overexceeded in the second quarter. We raised guidance for the second half, and we met that increased guidance and, but we did not exceed it in the second half. And so I do think that Q3 definitely was affected by more vacations.
As we discussed Q4, I think that it was strong, but certainly not as strong as the Street expected. It was consistent with our raised guidance, but we weren't able to rise above that. And as Ron said, I think that we were less aware of market dynamics. And the rest of the market was shrinking. And certainly, we recall our competitors talking about that as well.
But it was really masked by our own performance. And so I think as we went through the second half, we didn't recognize the overall market dynamics and the shrinkage in the second half and as you know, since 2022 or so, the market has remained roughly at 18% to 19% of total IOL procedures, and that really was because of us. So I think that we look into 2024 with this -- 2025 with the same confidence that we had in 2024, up until the point that March LALs did not increase substantially as they typically do in that first quarter period.

Robbie Marcus

Thanks, Maybe a follow-up. Shelley, you -- you raised -- you lowered the guide on sales, ballpark $30-ish million for 2025 and OpEx about $10 million. There's still a big -- let's just say, current rates, there is really no crossover into free cash flow generation, at least not for a very long time, assuming trends change or hold. How are you thinking about time lines on cash flow breakeven, your cash needs and any possibility for a need for a race. Thanks.

Shelley Thunen

Okay. Yes. Thank you very much. And I think that that's a (inaudible) point you brought up. We're bringing down kind of in the middle of the range, guidance by $23 million and OpEx down by $10 million. So in our previous guidance, we were putting more money down to the bottom line.
Each and every quarter, except the first quarter typically, which is a heavier cash use quarter due to payment of prior year bonuses. But -- in this guidance, we are assuming that we need to put relative to our revenue, more resources into sales and marketing in particular, I think we need to be we're very active with our customers, which we have about 200 people that are customer facing.
We'll continue to add to those as we add customers and -- so I'm not expecting that we're dropping that gross margin increase to the bottom line in the OpEx guide as well. However, as you know, we have more than adequate cash to get to cash flow breakeven and profitability, but it does impact the timing of when we may meet cash flow breakeven as well as GAAP breakeven because, of course, we'll continue to have investments in inventory and accounts receivable as we grow.
And that is delivered on our part in terms of guidance. We want to make sure that during this period of time, we don't under resource, and we continue to stay close to our customers. Do you add anything to that, Ron?

Operator

Steve Lichtman, Oppenheimer.

Steven Lichtman

Thank you. Good morning. Just a follow up on that last point in terms of where the spend is going to be focused. During the prepared remarks, Ron, you also highlighted strongly supporting acceleration of new customer business models. Can you sort of -- can you double click on that a little bit, talk about what your efforts are going to be there?
Because I guess to the extent you can further streamline those efforts that could have an impact on the end customer price and therefore, potentially offset some of the macro headwinds. So maybe you could talk a little bit more about what you're doing -- what you're going to be doing specifically on those centralized business models.

Ron Kurtz

Yes. Again, these are third-party innovators who are seeing the opportunity with the LAL technology to make it potentially more approachable for some ophthalmic practices in -- across the country. And that's been going on actually for a number of years. And we've seen several individually successful efforts in this.
Our role in that is similarly supportive to what we do with our traditional practices, providing both marketing and training and clinical support, not only to the stand-alone light treatment center, but also to the individual doctors who make use of that and providing them with both the clinical and marketing materials and education that helps them offer it -- offer the LAL to more of their patients. So I think that it will be an expansion of those activities very similar, but directed in a slightly different way than what we have traditionally done.

Steven Lichtman

Okay. Got it. Just wondering on the recent recall announcement from one of your competitors. How are you thinking about that in terms of potential upside to your revised guidance? Or are you not factoring that in at this point? How are you thinking -- I know it's fresh, but how are you thinking about that?

Ron Kurtz

Yes, I would agree with you, Steve, that there's no way for us to know what the duration of that would be. I think it's largely not going to be as impactful on us as it would be for some of the other competitors. But certainly, anything that gives us an opportunity to let surgeons and patients see the benefits of the LAL approach to high-quality, customized vision, that's an opportunity that we're going to take.

Steven Lichtman

Just quickly, obviously, not the focus of this call, but you did mention the CE mark. I assume no revenues built in for this year at this point. But which countries are you going to be focusing on as you sort of build toward that for, I guess, in 2026?

Ron Kurtz

So as we've talked about in the past, in Europe, we'll focus on the major economies in Europe that already have strong premium IOL markets similar to the approach that we've taken in Asia. And so those are going to be the major markets that everyone is familiar with. And while we don't see significant revenue in 2025, we will start to grow our presence there. It takes time. And in Europe, it takes some things -- sometimes new product introductions take a little bit more time. So we certainly don't want to -- we're not going to be going slow.

Steven Lichtman

Okay, got it. Thanks, Ron.

Operator

David Saxon, Needham & Company.

David Saxon

Great. Yeah thanks. Good morning, Ron and Shelly thanks for taking my questions. So I wanted to maybe first ask on LDD. So on the market, if the premium IOL market volumes are softer, are you assuming in guidance that, that translates into softer LDD demand or longer sales cycles? Or kind of how does that market view inform how you think about LDD placements and kind of customers or prospective customers appetite for a capital purchase.

Shelley Thunen

Yes. Thank you. That's a good question. We did again say that we would expect more LDD sales in 2025 than we had in 2024. But the overall guidance does assume in our internal numbers that, that number is a bit lower.
And that would certainly be consistent with our guidance. As Ron had said earlier, practices still are struggling with profitability because of Medicare cuts, other reimbursements across other product lines. And as far as we know, premium IOLs are the only product where they can build Medicare for the minor amount that they provide as well as a direct cost to the consumer. It's a profitable procedure for them. And during these periods of time, LASIK drops precipitously. That just goes with the economy because that certainly can be put off and it's a younger population.
The population of roughly 65-plus year olds, of course, remain a bit more isolated. But certainly, turmoil and particularly in their assets, such as stocks can result in some delay or in different choices temporarily. We do think that this is temporary though.

David Saxon

Okay. Great. And then, Shelly, you mentioned profitability and obviously, that's a focus for docs and practices. So I guess, how are you thinking about pricing at this point? You've held pricing on the LAL side at least.
So does this change how you think about pricing and then in the -- I forgot if it was in the script or to a question, but you talked about how the 2024 class utilization was slower than prior cohorts at least in the first half of '24. So what does that mean in terms of like the cohorts you've penetrated so far? Or have you kind of fully penetrated the higher volume group or segment of ophthalmologists and now are we kind of in the average to lower volume practices? Thanks very much.

Ron Kurtz

Maybe I'll start. So with respect to the last question. I don't think that we've fully penetrated any group. There are a wide variety of practices that have not yet adopted our technology. We have about 1,000 LDDs. There are about 2,000 surgeons. There are 10,000 cataract surgeons out there with at least several to more thousands of practice product offices where cataract surgery is cataract surgery patients are seen. So I certainly don't believe that we're anywhere near a saturation point and even by a class of surgeon. And then the -- I'm sorry, the second -- the first question was.

David Saxon

Yes, just around pricing. I mean, LALs are kind of the highest, yes. So how are you thinking about that in terms of like trying to allow doctors to kind of protect some level of profits while the market volumes are kind of weaker. Thanks so much.

Ron Kurtz

Yes. So in terms of pricing, the cost of the LAL is a relatively small fraction of the price that doctors charge to their patients. So -- we believe that the value provided by the technology justifies its cost, which is somewhat higher than the highest level presbyopia correcting IOLs. We have kept pricing stable since our introduction into the market about five years ago. And part of the way that we've been able to do that is through efficiencies.
And we fully manufacture all the components of the technology in the US, specifically here in California. And so we're not going to be significantly impacted by tariffs. And I think that we'll try to maintain a good relationship between the value and the price that we charge to our customers.

David Saxon

Great, thank you.

Operator

Danielle Antalffy, UBS.

Danielle Antalffy

Hey, good morning guys, thanks so much for taking the question. My question is really just pretty straightforward, I think. I mean I guess I'm just a little concerned about whether -- or what gives you confidence that this hasn't been the last few years. You guys just got the low-hanging fruit here and you've now sort of penetrated what you are going to penetrate of the premium market.
So I appreciate all the commentary on the economy, macroeconomic environment affecting the premium market. But more if we're just looking at LAL penetration within the premium market. Rob, maybe you can talk about what gives you confidence that that's not what's happening here. Thanks so much.

Ron Kurtz

Well, I would say two things give me confidence. One is just my interactions with doctors and practices throughout the country, and the vast number of practices that not only haven't adopted our technology, but don't know too much about our technology. It's very clear that we're still at a relatively early phase of the market penetration for this technology.
And I would just point out that it would be a really amazing coincidence if we peaked out in the adoption curve, exactly when there has been a confluence of macroeconomic and market trends over a short period of time.
I just don't believe in those kinds of coincidences. So I'm confident that these are going to -- that these things will pass and that we'll continue to penetrate the market, which is the largest opportunity in -- certainly in inter segment ophthalmology.

Danielle Antalffy

Okay, thanks for that.

Operator

There are no further questions at this time. I would now like to turn the call back over to Ron Kurtz, CEO, for closing remarks. Please go ahead.

Ron Kurtz

Thank you, operator, and thank you all again for your interest in RxSight. We look forward to seeing some of you later this month in Los Angeles at the meeting of the American Society for cataract and refractive surgery as well as providing further updates at our regularly scheduled first quarter 2025 conference call in early May. Goodbye.