IRIDEX Corporation (IRIX) Q2 2024 Earnings Call Transcript

IRIDEX Corporation ( NASDAQ: IRIX) Q2 2024 Incomes Teleconference August 8, 2024 5:00 PM ET

Business Individuals

Philip Taylor– Financier Relations
David Bruce– President
Fuad Ahmad– Interim Chief Financial Officer

Teleconference Individuals

Tom Stephan– Stifel

Operator

Excellent day, and thank you for waiting. At this time I wish to invite everybody to IRIDEX Second Quarter 2024 Incomes Teleconference. All lines have actually been put on mute to avoid any background sound. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you.

I would now like to turn the conference over to Philip Taylor, Financier Relations. Please proceed.

Philip Taylor

Thank you and thank you all for taking part in today’s call. Joining me from the business are David Bruce, President; and Fuad Ahmad, Interim Chief Financial Officer. Earlier today, IRIDEX launched monetary outcomes for the quarter ended June 29, 2024. A copy of journalism release is readily available on the business’s site. Before we start, I wish to advise you that management will make declarations throughout this call that consist of positive declarations within the significance of federal securities laws, which are made pursuant to the safe harbor arrangements of the Personal Securities Lawsuits Reform Act of 1995. Any declarations made throughout this call that are not declarations of historic truths, consisting of, however not restricted to, declarations worrying our tactical objectives and concerns, item advancement matters, sales patterns and the marketplaces in which we run.

All positive declarations are based upon our existing price quotes and numerous presumptions. These declarations include material threats and unpredictabilities that might trigger real outcomes or occasions to materially vary from those expected or indicated by these positive declarations. Appropriately, you must not put dependence on these declarations. For a conversation of the threats and unpredictabilities associated with our service, please see our latest Kind 10-K and Kind 10-Q filings with the SEC. IRIDEX disclaims any intent or responsibility, other than as needed by law, to upgrade or modify any monetary forecasts or positive declarations, whether due to the fact that of brand-new info, future occasions or otherwise. This teleconference consists of time delicate info and is precise just since the live broadcast today, August 08, 2024.

And with that, I’ll turn the call over to Dave.

David Bruce

Excellent afternoon and thank you all for joining us today. On the call I’ll begin by discussing our current service development, including our 2nd quarter 2024 efficiency then I will offer updates on our tactical evaluation procedure and color around our current funding. Following that, Fuad will offer information on the 2nd quarter financials and we will open the call to concerns. Throughout the business’s 30 plus year history, we have actually preserved a deep dedication to enhancing treatments for clients with sight-threatening eye conditions through technical developments such as the intro of the 577 nanometer laser, our trademarked tissue-sparing MicroPulse innovation and non-incisional laser treatment for glaucoma. We have actually developed a credibility for driving scientific evidence for laser treatment systems utilized by retina experts and we continue to be the leading service provider of non-incisional transscleral laser treatment in the glaucoma market.

Now, let’s evaluation 2nd quarter highlights and current service development made. 2nd quarter 2024 income was $12.6 million, representing consecutive development of 7% from the very first quarter of 2024. In general, our outcomes show healing of capital devices in the retina service and healing of probe sales in the glaucoma service. In glaucoma, removal of the unpredictability relating to U.S. Medicare compensation from late 2023 is driving stabilization for MicroPulse TLT treatments in the U.S. and we’re starting to gain from a firmer capital devices environment.

We saw a noteworthy strength in our retina service section from the sale of PASCAL scanning laser systems, growing double digits year-over-year. In addition, we closed on some prolonged cycle devices purchases, however in basic cycles stay extended. We continue to anticipate our separated functions and scientific proof supporting IRIDEX innovation, plus our upcoming launch of our brand-new IRIDEX 532 and 577 single area laser platforms to sustain our leading market position. In glaucoma, the Cyclo G6 item household income was $3.3 million, representing consecutive development from the very first quarter, mainly driven by 12% boost in Cyclo G6 probe sales.

Compared to the 2nd quarter of 2023, glaucoma income was down $0.3 million due generally to softness in system sales. System sales have actually been affected by the continuous capital buying restraints and some procedural compensation unpredictability. We offered 15,100 G6 probes driven by increased awareness of compensation stability in the U.S. and a strong healing globally. Probe orders were a little down compared to the previous year duration, however that was before the numerous Medicare administrators produced compensation worry about their issuances and after that withdrawals of protection restricting LCDs. While we’re motivated to see enhancement sequentially in our glaucoma laser system sales, we currently have a strong U.S. set up base and we’re putting a higher focus on driving probe usage, which drives penetration into the big moderate phase client chance and produces much better gross margins.

In our retina section, item income was $7.3 million, representing consecutive development of 8% from the very first quarter and development of 6% from the previous year duration. We saw strength in PASCAL scanning laser systems and closings on prolonged cycle devices purchases arising from the enhancements in rates of interest and currency exchange rate macro environment. Altering subjects as you understand, IRIDEX is actively participated in a tactical evaluation procedure. The business is pursuing a deal or series of deals that will benefit its shareholders. Conversations connecting to our numerous line of product are continuous, and the procedures stay vibrant. At this time, we are unable to share particular updates relating to possible deals, however we stay dedicated to pursuing all choices to unlock worth for our shareholders, and our objective is to reach a deal this .

To support the tactical evaluation procedure, in Might, the Board of Directors promoted our Chief Operating Officer, Patrick Mercer, to President. Patrick now holds both positions and has actually presumed wider obligation in driving our functional execution, expense decreases and sensible possession management. I continue in my function as President and member of the Board, with increased concentrate on the tactical options procedure, sales development and capital management.

Previously today, we revealed a personal positioning funding of a senior convertible note with Lind Partners for net earnings of $3.4 million and the alternative to provide a 2nd note for an extra earnings of $1.5 million. The funding enhances our balance sheet and protects running runway for the business to pursue both our tactical procedure and more service development healing. Numerous advantages make this funding beneficial for the business: versatile and low risk-adjusted expense of capital with optionality for reduced early prepayment in case of a deal and decreased dilution in case of conversion at a share cost premium.

To conclude, handling our capital and costs wisely is a leading concern, and we anticipate to continue making development enhancing our operating capital. We have actually structured and moneyed the business to offer proper liquidity runway in business to accomplish success with our tactical procedure and continue our development healing to benefit IRIDEX shareholders.

With that, I will turn the call over to Fuad.

Fuad Ahmad

Thank you, Dave. Excellent afternoon, everybody, and thank you for joining us today. I wish to start by evaluating our monetary efficiency for the 2nd quarter ended June 29, 2024.

Overall income in the 2nd quarter of financial 2024 was $12.6 million, representing consecutive development of 7% from the very first quarter of 2024 and approximately flat compared to $12.9 million in the very same duration of the previous year. As Dave discussed, these outcomes show a healing pattern in our services.

Now on to the item level information. Overall income from Cyclo G6 item household in the 2nd quarter was $3.3 million, a boost of $0.4 million versus the very first quarter of 2024. This is driven mainly by a healing in probe sales. This is likewise a reduction of around $0.3 million versus the 2nd quarter of 2023 due to the continuing softness in system sales affected by continuous capital purchase headwinds. We offered 15,100 Cyclo G6 probes in the 2nd quarter, representing a consecutive boost of 14% compared to the very first quarter of 2024. This was driven by strong healing in O-U.S. and by a supported glaucoma treatment compensation environment in the U.S.

In general, probe sales recuperated towards historic service patterns compared to 15,500 offered in the 2nd quarter of 2023. We offered 28 Cyclo G6 systems in the quarter compared to 22 in the very first quarter and 41 in the previous year duration. As formerly discussed, the year-over-year decrease was mainly due to the continuous capital purchase headwinds, although conditions enhanced a little in the 2nd quarter, which resulted in the consecutive enhancement.

Our retina section income in the 2nd quarter of 2024 was $7.3 million, up 8% compared to the very first quarter of 2024 and up 6% compared to the previous year duration. The 2nd quarter development compared to both durations was mainly driven by reinforcing system sales globally and conversions from the extended purchase cycles experienced in the previous quarters.

Other income, that includes royalties, services and other tradition items, reduced to $2 million in the 2nd quarter of 2024 compared to $2.3 million in the 2nd quarter of 2023. The decrease was credited to decreased royalty income from ended patent licensing, service income and particular other income.

Gross earnings for the 2nd quarter of 2024 was $5.1 million compared to $5.4 million in the previous year duration. Our general gross margin was 40.7% compared to 41.7% in the 2nd quarter of 2023. The decrease in gross margin was because of a shift in item mix and a decrease of high-margin royalty income.

Business expenses in the 2nd quarter of 2024 were $7.8 million, a reduction of $0.5 million compared to $8.3 million in the very same duration in 2015. The decline in operating costs was an outcome of continuing expense decrease efforts and would have been higher without the addition of G&An expenditures associated with the business’s tactical procedure not sustained in the previous year.

Our bottom line in the 2nd quarter of 2024 was $2.7 million or $0.16 per share compared to a bottom line of $2.8 million or $0.17 per share for the very same duration in 2023.

Now on to our money position and capital. Money and money equivalents amounted to $4.1 million since June 29, 2024. The net money decrease in the quarter was $1.3 million. Keep in mind that the money balance since June 29 did not consist of $3.4 countless net earnings from the convertible note offering that was revealed and closed today. The earnings from the offering will be utilized mainly to enhance our working capital. For that reason, we anticipate net money use in the 3rd quarter to be a little greater than in the 2nd quarter as this extra liquidity will be utilized to enhance our working capital position, enhance our supply chain relationships and handle short-term money irregularity.

In summary, we have actually enhanced our balance sheet and continue making significant development in reducing operating expense. We stay concentrated on business’s future development and making considerable development in the tactical evaluation to open investor worth by reaching a deal this .

Dave and I would now like to open the call for concerns. Operator?

Question-and-Answer Session

Operator

Thank you. We will now start the question-and-answer session [Operator Instructions] We have a concern originates from the line of Tom Stephan with Stifel. Your line is open.

Tom Stephan

Great. Can you hear me, all right?

David Bruce

Yes. Hi, Tom.

Tom Stephan

Terrific. Very first concern for me is simply on G6. Dave, can you discuss your view on the competitive landscape? Simply as it associates with G6, as we look ahead long-lasting, unlimited is acquiring traction, I believe, in the moderate to extreme client population. Alcon purchased BELKIN. I believe that gadget might be introducing in the U.S. quickly. Then we certainly have iDose. I think can G6 hold its own long-lasting in this, I ‘d state, quickly, growing competitive environment?

David Bruce

Yes, thanks for the concern, Tom. Yes, I believe, the distinct element of a nonincisional treatment it’s repeatable, does not prevent other treatments is going to continue to remain in a classification of its own because moderate-stage client. And among the crucial chances, and we’re seeing more use in this location, for instance, is post cataract with or without a MIGS treatment, 2 or 3 years out, pressures begin to increase once again and something requires to be done.

And the concern ends up being, do you go to extra incisional treatments? Or do you purchase some nonincisional runway, as we call it, through a treatment or a series of treatments with MicroPulse TLT, for instance, that brings pressures under control and extends that runway before you need to begin consuming area both realty? And a great deal of these are one and done. So, we believe that originality continues to continue.

The BELKIN system is actually in the early-stage client. It’s generally an automated SLT-style treatment. Therefore we do not actually see that as competitors in the more moderate-stage client where they have actually gone through SLT currently. They have actually experienced one or several drops and have actually sort of lacked that capability to manage pressures.

Tom Stephan

Got it. That’s excellent color. Thanks Dave.

And after that my 2nd concern is simply on the tactical evaluation procedure. I think that’s gone on for perhaps near to a year now. Dave, are you able to discuss what the restricting elements have been or a few of the crucial difficulties, simply when you take a look at business? And after that I think you stated you’re focusing on getting an offer done by the end of the . Exists anything that notifies that timing? Is that balance sheet related? So, two-parter there, simply on difficulties and restricting elements and after that timing. Thanks.

David Bruce

Yes, sure. Yes so, we revealed completion of August in 2015. So, we had actually considered and started the procedure, employed a lender, began assembling discussions and connecting, the procedure that takes place in those times.

I will offer you my own viewpoints. I believe in 2015 was a quite tough M&A environment in the micro-cap area in specific. Things have actually begun to enhance this year. We have actually had discussions. Previously this year we did discuss among our calls that we anticipated a deal to happen quickly, which deal turned not to happen.

So, that’s the danger of sort of providing a diagnosis on what will come and when. We are still targeting something in this fiscal year. And as you understand, the procedure is long up until statement. You have discussions with individuals. You go through diligence procedures and settlement of purchase contracts and shift contracts and all those examples to get to a signature, which’s when you reveal.

So, it can take a very long time to perform on these things. And after that there’s that duration of conversations throughout a variety of celebrations. It takes a while. And we’re not attempting to always hurry through the procedure. At the very same time, we keep repeating, we are major about discovering value-enhancing deals. And I’m comfy we’re at the phase of conversations where we believe it’s a reasonable target to get something this .

Tom Stephan

Got it. Thanks Dave.

Operator

There are no more concerns at this time. Mr. David Bruce, I turn the call back over to you.

David Bruce

Thank you, operator. Thank you all for signing up with the call. We had a strong efficiency this quarter, and we eagerly anticipate structure on that and reporting in quarters to come. Thank you all.

Operator

This concludes today’s teleconference. You might now detach.