IRIDEX Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
May 13, 2025

There are 4 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by. My name is Desiree, and I will be your conference operator today. At this time, I would like to welcome everyone to the First Quarter twenty twenty five IRIDEX Earnings Conference Call. All lines have been placed on mute to prevent any background noise. Thank you.

Operator

I would now like to turn the conference over to Trip Taylor of Investor Relations. You may begin.

Speaker 1

Thank you, and thank you all for participating in today's call. Joining me from the company are Patrick Mercer, IRIDEX's Chief Executive Officer and Romeo Dizon, the company's Chief Financial Officer. Earlier today, Euridex released financial results for the quarter ended 03/29/2025. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will make statements during this call that include forward looking statements within the meaning of the federal securities laws, which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Speaker 1

Any statements made during this call that are not statements of historical fact including but not limited to statements concerning our strategic goals and priorities, product development matters, sales trends, and the markets in which we operate. All forward looking statements are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward looking statements. Accordingly, you should not place reliance on these statements. For a discussion of risks and uncertainties associated with our business, please see the most recent Form 10 ks and Form 10 Q filings with the SEC.

Speaker 1

EarNex disclaims any intention or obligation except as required by law to update or revise any financial projections or forward looking statements whether because of new information, future events or otherwise. This conference call contains time sensitive information and is accurate only as of the live broadcast today, 05/13/2025. And with that, I'll turn the call over to Patrick.

Speaker 2

Good afternoon, everyone, and thank you for joining us. Today, I'm excited to highlight IRIDEX' improved financial condition, our first quarter business progress, and developments with our strategic plans in partnership with Novel Inspiration. Over the past months, we have worked very hard, and I'm extremely proud of how the team has transformed IRIDEX. For the past two quarters, we've grown revenues even while materially decreasing expenses compared to prior years. The result of these operating improvements is delivering our first two quarters of adjusted EBITDA positive results in recent history.

Speaker 2

Our improving profitability is a result of rightsizing our cost structure. In the fourth quarter, we initiated a number of cost reduction programs. The reduction of non essential spend across the business demonstrates the potential efficiency of our business model and positions IRIDEX for sustained success. To further bolster our financial health of the business, in March we strengthened our balance sheet with a $10,000,000 strategic investment from Novel Inspiration. This capital represents Novel's confidence in IRIDEX's business prospects and our ability to extend our leadership position in providing innovative and versatile laser based medical systems for the treatment of glaucoma and retinal disease.

Speaker 2

These accomplishments over the past two quarters represent significant progress, stabilizing and improving the outlook of the business. As a result, we remain on track to deliver cash flow breakeven and positive adjusted EBITDA results in 2025, as long as conditions remain as they are. Now taking a closer look at the first quarter where our results demonstrate our commitment to improving operations and advancing our path to profitability. On the top line, we generated revenue of $11,900,000 just above the first quarter of last year. Along with that, we again generated positive adjusted EBITDA of $400,000 representing an improvement of $2,900,000 compared to the prior year quarter.

Speaker 2

Revenue in the quarter was driven by an increase in our Cyclo G6 product family, revenue which grew 8% year over year and was offset by the slight declines in our retina product revenue. Let's take a look at our glaucoma probes performance for the first quarter of twenty twenty five. Overall, we are seeing very positive indicators in the business, and we're above plan in the quarter, which is a strong start to the year. We're making real progress towards our strategic goal of driving earlier and repeat utilization of MP3 CPC treatments on mild and moderate glaucoma patients. The four providers then transition to treatments using our G probes for progressing in later stage glaucoma.

Speaker 2

Our target for the year is to sell more MP3 units than G probes, and based on Q1 performance, we're definitely headed in the right direction. MP3 probe unit sales exceeded our expectations, thanks to a few key drivers. We are working hard to increase awareness and train surgeons on our new treatment settings, which is driving improved patient outcomes. We are also ensuring the glaucoma community is aware of the ongoing dose escalation study and its promising early results. Our focus on the clinical guidance has been essential to winning greater product adoption.

Speaker 2

We're also leveraging a new self support tool, MedScout, which has proven to be a valuable asset, delivering high impact provider level insights that are helping our teams execute effectively in the field. G probe unit sales have remained steady despite our recent price increase. That tells us there's still solid demand for the product. Now I'll discuss the retina side of the business. Pascal sales were slower in the beginning of the year as we optimized some technical settings, but this was offset by strong sales of our IQ family of products.

Speaker 2

Surgical retina sales exceeded our expectations, contributing significantly to the overall retina sales. It was a notable increase in our TX product sales as accounts increasingly seek cost effective solutions. This was the highest volume of TX cells since Q3 twenty twenty three, while SLX product sales remained steady. It was also a very strong quarter for Indoprost, which exceeded the forecast by $100,000 though the market for this product remains volatile. Shifting to OUS, in EMEA, the region remains our most stable revenue generator with strong growth potential in the glaucoma segment.

Speaker 2

Robust sales of PASCAL systems are further driving revenue expansion. In Asia, regulatory approvals for the IRDEX PASCAL system are fueling strong capital equipment sales, particularly in India and Japan. In China, medical retina cells are showing a healthy recovery, supported by continued growth in retina probe cells. Looking to Latin America, business is stabilizing with clear growth momentum, particularly following the approval of the IRDEX PASCAL systems across several key markets. In GmbH, sales experienced a slight decline primarily due to some unresolved service issues, which remains an area of active management focus.

Speaker 2

Now I'd like to touch on our partnership with Novel and our strategic priorities moving forward. Novel decided to invest in IRIDEX because of the significant value of our franchise and the potential to enhance that value by becoming a more active participant in the ongoing market reshuffling. Together, we are focused on innovation and long term value creation, and Novel is open to expanding our partnership as compelling opportunities become available. Our initial focus is to leverage our loyal base of global customers and stable revenue while improving operations create a self sustaining entity. Novel is aligned with our objective of creating long term shareholder value.

Speaker 2

Looking ahead, we are evaluating our strategy to optimize our gross margins, especially in light of the new tariff policies, and ensure an improved responsiveness to customers, especially those working with IRIDEX through an international distributor and searching for opportunities to drive revenue, which could include partnerships, distribution agreements or small acquisitions to expand our product portfolio and leverage our global customer base. Now I'll hand the call over to Romeo to discuss our financial.

Speaker 3

Thank you, Patrick. Good afternoon, everyone, and thank you for joining us today. I would like to begin by reviewing our financial performance for the first quarter ended 03/29/2025. As we noted in our press release and in Patrick's comments, our total revenues for the first quarter of twenty twenty five were $11,900,000 up marginally compared to $11,800,000 reported for the first quarter of twenty twenty four. Retina product revenue decreased 3% in the first quarter of twenty twenty five to $6,600,000 compared to the first quarter of twenty twenty four, driven primarily by lower PASCAL system sales, partially offset by higher medical and surgical retina system sales.

Speaker 3

Total product revenue from the Cyclo G6 glaucoma product family was $3,200,000 an increase of 200,000 or 8% year over year, primarily driven by higher probe sales. Other revenue increased $100,000 to $2,100,000 in the first quarter of twenty twenty five, compared to $2,000,000 in the first quarter of twenty twenty four, driven primarily by an increase in service and certain legacy product revenue. Switching attention to gross profit, expenses, and cash. Gross profit for Q1 twenty twenty five was $5,100,000 or a gross margin of 42.5%, an increase compared to 4,500,000 or a gross margin of 37.9% in Q1 twenty twenty four. The increase in gross margin was driven by favorable product mix and lower manufacturing expenses.

Speaker 3

Operating expenses were $5,300,000 in Q1 twenty twenty five, a substantial decrease of 2,500,000.0 compared to 7,800,000.0 in Q1 twenty twenty four. The decrease was due primarily to expense reduction measures taken in late twenty twenty four, driven by a reduction in workforce, resulting in lower headcount related expenses and lower discretionary spend. During the quarter, we settled a LIM note payable, which resulted in writing off the associated capitalized loan origination costs of approximately $1,500,000 Consequently, net loss was $1,700,000 or $0.10 per share for Q1 twenty twenty five, compared to a net loss of $3,500,000 or $0.21 per share in the same period as the prior year. Total adjusted EBITDA for Q1 twenty twenty five was $400,000 an improvement of $2,900,000 compared to adjusted EBITDA loss of $2,500,000 for Q1 twenty twenty four. The improvement is driven primarily by the expense reduction measures implemented in late twenty twenty four.

Speaker 3

On to the balance sheet. In March 2025, we had a cash infusion of $10,000,000 from Novel Inspiration, and current with the close of this investment, we settled the loan note payable and used a portion of the proceeds to liquidate the debt. We believe the convertible portion of the non gold investment represents a lower cost of capital and more favorable terms for the company. With that, cash and cash equivalents totaled 7,200,000.0 at the end of the first quarter of twenty twenty five. Before turning it back to Patrick, I will touch on the recent global trade policy contemplated by the U.

Speaker 3

S. Government. We want to highlight that we manufacture and source our products primarily within The United States, and as such, we expect minimal direct exposure to the most recently implemented tariff related policies. We will continue working on areas that we control, that is reducing operating expenses and generating additional efficiencies to improve our gross margins. And with that, I will now turn the call back to Patrick.

Speaker 2

Thank you, Romeo. As you can hear, we are extremely proud of our progress over the past two quarters, growing revenues and generating positive adjusted EBITDA. We have stabilized our business and improved our balance sheet. We will continue to focus on driving adoption of our differentiated glaucoma and retina technology platforms, enhancing our global customer relationships and improving operations to advance our path to profitability. There is a massive opportunity ahead for IRIDEX, and we believe we have the team and strategy in place to create adorable value for IRIDEX shareholders.

Speaker 2

Now I'd like to address some questions we have recently received from IRIDEX shareholders. Question number one. First, people are interested in hearing more about the impact if the tariffs remain in place, particularly with respect to the very hot tariffs that will remain in effect with respect to China. As indicated in our prepared remarks, IRIDEX products remain overwhelmingly sourced from and manufactured in The United States. Our products are assembled from raw materials and components sourced from suppliers operating in many parts of the world, but the final assembly is done in The US.

Speaker 2

This does not mean, however, that the bulk of the manufacturing work is done within our Mountain View Headquarters Building. All of our disposable products and a growing percentage of our hardware products are manufactured by third party OEMs, and these OEMs are primarily located within The United States. This is the explanation for why we have reported expecting minimal direct exposure to the most recent implemented tariff related policy. Many of our competitors who rely on imported fully manufactured products into The U. S.

Speaker 2

Are facing higher costs, longer lead times, and significant business uncertainty. This gives us a pricing and supply chain advantage, making our US made products more attractive to customers, seeking more stable pricing and reliable availability. On the impact of reciprocal high tariff rates imposed on The US, our shipments of products to China currently are not material. Second question is about our product extensions discussions relating to novel investment. Specifically, is IRIDEX looking to buy companies or distribute more products through our existing channels?

Speaker 2

IRIDEX has established long term relationships across a global customer base and become known as a leader in laser based medical equipment for ophthalmology. To leverage these relationships and generate increased sales, we are working with Novel to identify opportunities to expand our portfolio of products to offer these customers more products they need to treat their patients. We believe this is one of the most capital efficient ways to expand our revenue. This could include distribution agreements, partnerships, or smaller tuck in accretive acquisitions that are synergistic. Naval is supportive of this strategy, and we are actively working together on this initiative.

Speaker 2

The last question is about the change in our cash burn. Specifically, are we really done burning cash, and can we really adjust to operating at better than cash flow breakeven? The simple answer is yes. When I was named CEO in late twenty twenty four, that appointment came with the mandate from the Board of Directors that IRIDEX immediately take the steps necessary to end the cash burn. As our last two quarters results have shown, not only have we reduced our operating expenses, but have continued to remain disciplined and further reduce costs.

Speaker 2

From a cash flow perspective in Q1 twenty twenty five, net cash used in operating activities was $1,100,000 a decrease of $500,000 or 31% compared to Q1 twenty twenty four. We reduced our APEX 3214% versus Q1 twenty twenty four and Q4 twenty twenty four, respectively. While we have reduced our costs and expenses, we continually are looking for additional savings as we monitor expenses. We intend to continue running the business with this same level of financial discipline going forward. We're planning to achieve positive adjusted EBITDA and cash flow breakeven this year on revenue generation consistent with 2024.

Speaker 2

Thank you all for joining us.

Operator

This concludes today's conference call. Thank you all for joining, and you may now disconnect.

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Earnings Conference Call
IRIDEX Q1 2025
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