Why did RXST's Q3 2024 EPS miss expectations?

RxSight's Q3 2024 EPS missed expectations due to several key factors:

1. Revenue Growth: Despite missing EPS expectations, RxSight reported a robust increase in revenue, with total revenue reaching $35.31 million for the quarter. This growth was primarily driven by a 92% increase in Light Adjustable Lens (LAL) revenue and a 32% increase in Light Delivery Device (LDD) revenue, resulting from higher procedure volumes and expanded market presence.
2. Gross Profit Improvement: The company's gross profit margin improved to 69.5% in Q2 2024, up from 57.8% in the same quarter last year. This indicates efficient cost management and a stronger profitability trend, which could partially offset the impact of missing EPS expectations.
3. Operating Expenses Increase: RxSight's operating expenses increased by 27% to $32.6 million compared to the same quarter last year. This rise was primarily due to ongoing investments in growth, including expanding the LDD installed base and supporting higher LAL sales volumes. These increased expenses can contribute to a higher cost base, impacting net income and, consequently, EPS.
4. Negative Margin Impact: The company reported a negative net margin of 44.01% and a negative return on equity of 27.68%. Negative margins indicate that the company's revenue is not sufficient to cover its costs, which can lead to a higher loss and a lower EPS.
5. Comparison with Analyst Estimates: RxSight's revenue exceeded analysts' expectations, with a slight miss in EPS. While the company's revenue was $35.31 million, compared to the consensus estimate of $32.33 million, the EPS of -$0.16 for the quarter was slightly worse than the expected -$0.07, missing analysts' expectations by -$0.09. This slight miss, combined with the increased operating expenses, could have contributed to the overall EPS falling short of expectations.

In summary, while RxSight experienced significant revenue growth and improved gross profit margins, the higher operating expenses, negative margins, and slight miss in EPS due to increased costs and expenses resulted in the company's Q3 2024 EPS missing expectations.