Q1 2021 IRIDEX Corp Earnings Call
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Good day, and thank you for standing by and welcome to the Q1 2021 Iridex earnings conference call and the time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session. That's a good question day in this session you will need to press star one on your telephone if you acquire.
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I would now like to hand, the conference over Chesapeake and today I'm Jacobi Investor Relations. Please go ahead.
Thank you and thank you all for participating in today's call. Joining me are day, Bruce Chief Executive Officer, and bought Ahmad interim Chief Financial Officer.
Year to date, you're like Iridex released financial results for the quarter ended April three 2021 day.
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 and private Securities Litigation Reform Act from 1995.
Any statements made during this call and Theyre not the statements of historical fact, including but not limited to statements concerning our strategic goals and priorities product development matters sales trends and the markets and what your free.
All forward looking statements are based upon our current estimates and various assumptions.
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 these risks and uncertainties associated with our business and you see our most recent form 10-K and form 10-Q filings with the SEC.
Iridex disclaims any intention or obligation, except as required by law to update or revise any financial protection and so forward looking statements, whether because of new information future events or otherwise.
This conference call contains time sensitive information and that's accurate only as of the live broadcast today May 11, and 2021 and with that I'll turn the call over to Dave.
Good afternoon, and thank you all for joining us.
Our first quarter was marked by strong top line performance continued operational execution and substantial progress across our strategic initiatives.
On today's call I'll cover the highlights of our first quarter 2021 results. How we're focused today and how we will execute for our longer term market opportunity.
So I will cover our financial results and guidance for the fiscal year and then we'll open the call for questions.
Iridex had a strong start to 2021 and.
Cheating a multiyear record for first quarter total revenue.
Revenue and the first quarter was 12.0 million a 33% year over year increase.
This improvement was the result of a number of factors.
First we maintained strong momentum and our glaucoma product family with record International <unk> probe sales and a significant rebound and console sales.
Second our retina business also rebounded strongly with sales up 61% from the prior year to $6 7 million.
This included a contribution of about $1 1 million from Pascal products acquired as part of our collaboration agreement with top car.
Third we believe our sales and marketing programs are having effect building awareness and demonstrating the many benefits of our non incision and glaucoma therapy and short creating sales traction.
Overall, we were very pleased to see demand for iridex products increasing.
And our glaucoma and retina markets.
And in the U S and internationally.
Despite continued impacts from COVID-19 restrictions around the world during that first quarter.
Yeah.
I'm encouraged by the multiple growth catalysts, we have on the horizon, including improved sales infrastructure broader distribution capabilities.
A pipeline of enhanced products.
Expanded key opinion leader support and industry awareness and importantly, we have a significantly strengthened balance sheet and place to support strategic initiatives designed to leverage these catalysts.
We added $19 5 billion and funds from top Concorporate and as part of the strategic collaboration we closed in March and.
And combined with continued strong cash management, we ended the quarter with a cash position of 28 million or cash.
And just usage and the quarter was approximately 600000 from operations and 500000 from nonrecurring payments associated with the top gun transaction.
This was despite already.
And having begun our investments and sales and marketing programs designed to accelerate growth, which I'll explain in a minute.
Turning now to focus on the glaucoma business, our cyclo <unk> product family revenue was three 3 million and increase of 15% year over year.
During the first quarter, we sold 13006 hundred cyclo <unk> probes, a 4% year over year increase despite lingering COVID-19 impacts, which you should recall, where particularly widespread early in the quarter when countries such as Germany re imposed lockdowns.
The sales strength was broad based as volumes from Japan were strong and Asia Pacific Europe, Middle East Africa, and Latin America, all recovered meaningfully driving international glaucoma probe sales higher by 18% year over year and setting a new quarterly record for international probe volumes.
And the U S probe sales were slightly below Q1.
2020, which we attribute to a combination of relative strength last year as customers bought inventory pre locked down.
And this year's restrictive environment and the first half of the first quarter. When you ex COVID-19 cases were peaking.
Overall, the growth, we've seen and glaucoma probe sales is encouraging and many levels and importantly, it signals a strategic shift to emphasize higher physician utilization is showing results while in parallel highlighting growing customer support for the enhancements and a revised probe which was launched last year.
Yeah.
Moving to our cycle of G. Six.
Glaucoma laser systems, we sold 64 units and the first quarter of 2021 compared to 38 and the prior year.
This increase is a rebound from the understandable hesitancy on capital purchases last year.
And as we entered the pandemic.
We now see business opening toward more normal operation.
Turning to retina.
We saw related product revenue grow nearly 61% year over year, including a 16% contribution from sales of Pascal products acquired from top com.
The surge in revenue can be attributed to a return from deferred purchases relating to COVID-19, but also to our renewed commitment to our retina product line as you can see we're enjoying a return on those investments as the business landscape improves.
As we announced earlier and the first quarter, we entered into a strategic collaboration with top Concorporate <unk> $430 million revenue eye care Division.
As part of this collaboration.
GAAP Com purchased exclusive dispute distribution rights and Asia Pacific and key EMEA markets for Iridex, retina, and glaucoma products, which accounted for approximately 60% of our international revenues.
In addition, Iridex acquired top guns, Pascal laser product line, adding it to our micro pulse and textile retina scanning laser platform.
And top gun purchase 10% of Iridex common shares.
The total deal net of $19 5 million and new funds to Iridex.
We saw immediate results from and collaboration including a 10% revenue contribution to our top line from sales of Pascal products, We acquired under the agreement and began and selling in the last three weeks of the quarter following its closing.
In April we began notifying our affected international distributors of our transition to top guns distribution network and we are actively working in these regions to transition and.
New distributors, while minimizing any potential mid year disruption to sales volumes.
We have high confidence and the potential for this collaboration and look forward to updating you on our progress and results as we work through the integration.
Next I'd like to take a few minutes to talk about where we are focused now and highlight some of the investments for growth that we're making and our sales organization.
Late last year, we assess the timing was right to expand our sales team and invest and further clinical and market development efforts to accelerate sales, particularly in glaucoma products.
As the revenue.
And the first quarter, we executed the following first we split and expanded U S sales team going from 12 hybrid territories, selling both glaucoma and retina products to 12 dedicated glaucoma territories and six dedicated retina territories.
Shifting some internal staffing and hired to fill the remaining new physicians.
Training activities are essentially complete and we expect the new members will soon be ramping up their contributions.
We began increasing our investments in clinical evidence and closer key opinion leader relationships that can improve confidence and adoption of our non institutional transfer of laser therapy products.
And finally, we budgeted for the anticipated return of in person trade meetings and local clinical events that will require greater investment, but we expect to pay off downstream.
And of note we.
We are exhibiting live at the Hawaiian eye and retina meeting first significant non virtual event since February of 2020.
This is the first meeting and which we showcase the Pascal laser and our new <unk> laser.
Both the reception and attendance at the meeting have been good.
Later this year, we plan to attend and expanding schedule of live domestic and international events, including the American Society of cataract and refractive surgery meeting in July and Las Vegas, The American Society of retina specialists and our.
Tober and San Antonio.
O'neill.
The European Society of cataract, and refractive surgery and Amsterdam during October and.
And the American Academy of Ophthalmology meeting in New Orleans and November.
As we entered the second quarter and look towards the remainder of the year. Our company is emerging from the pandemic and our strong position.
We're optimistic we can overcome the obvious challenges from continued pockets of COVID-19 resurgence and international regions.
A shift in parts of our international distribution network.
And how quickly our sales and marketing investments can generate results.
We have made significant progress throughout the past year, despite extraordinary circumstances.
And our focus continues to be on capitalizing on our opportunities for growth and increase and the long term shareholder value and a iridex.
With that I'd like to turn the call over to Floyd.
Thank you, Dave and good afternoon, everyone.
I'll now go over our financial performance for the first quarter of fiscal 'twenty one.
Starting with revenue.
Total revenue for the first quarter and fiscal 'twenty, one was 12 million up 33% from $9 million and the first quarter of last year and down only slightly sequentially.
Revenue from glaucoma product family and the first quarter and fiscal 'twenty, one with $3 3 million up 15% compared to compared to the first quarter of fiscal 'twenty.
We sold 13600 <unk> probes in the quarter up 4% from the same period last year and essentially flat sequentially.
We saw particularly strong year over year growth outside of U S. Despite COVID-19 related headwinds worldwide.
We sold 64 cycle and do you think systems and the first quarter of fiscal 'twenty, one compared to <unk>.
38, and the prior year period, and 57, and the fourth quarter of fiscal 'twenty.
We believe the increase and system sales were flat and assumption of customer appetite for investments and capital equipment that can be <unk> probe utilization.
Moreover, one indicator of the underlying trends and Brian glaucoma business as demonstrated by the relatively small sequential quarterly decline and glaucoma revenue compared to historical fourth quarter to first quarter decline.
Our retina product revenue improved significantly and the first quarter of fiscal 'twenty, one posting a 61% increase compare.
Period last year.
Although our results for the first quarter and fiscal 'twenty. One include revenue from our acquisition of Pascal product line from top com.
Even adjusting for Pascal revenue year over year growth was approximately 35%.
Other revenue, which includes royalties services and other legacy products were approximately $2 million and the first quarter of fiscal 'twenty, one and flat compared to the prior year period.
Gross margin and the first quarter of fiscal 'twenty, one declined 210 basis points to 41, 3% compared to the first quarter of fiscal 'twenty.
Gross margin decline is primarily attributable to a greater portion of the revenue coming from our retina wholesale business, including <unk>.
Pascal product line, which runs at a lower margin however.
Overall average selling prices that product across our product lines remained relatively flat year over year and sequentially.
Operating expenses for the first quarter of fiscal 'twenty, one or $6 8 million compared to $5 6 million and the same period of prior year and 22% increase.
The increase was due primarily to additional expenses from the acquisition of the Pascal business and certain nonrecurring top gun transaction and integration expenses.
Net loss and the first quarter of fiscal 'twenty, one was $2 million or a net loss of <unk> 14 per share up from $1 7 million or a net loss of <unk> 12 per share from last year.
Cash usage and the first quarter was $1 1 million, including approximately 500000 of nonrecurring top comm transaction payments.
We ended the first quarter of fiscal 'twenty, one with cash and cash equivalents of $28 million up from $11 6 million from the end of fiscal 'twenty.
The increase in cash as a result, and proceeds from the Topco and transaction offset by the cash burn in the period.
Turning to our outlook for the remainder of the year.
As the world's low the emerge from the pandemic we are.
Becoming increasingly confident in our ability to forecast.
We also feel it is important for us to share our longer term view of the business and our shareholders and investors even in these somewhat uncertain times.
And therefore, we will resume our prior practice of providing full year guidance.
With that said.
And our guidance for fiscal 'twenty, one is as follows.
We expect total revenue for fiscal 'twenty, one to be between 48 million to $51 million.
<unk> probe sales are expected to range from 56200, 59000 and site low do you think glaucoma laser system sales are expected to range from 250 units.
275 units.
With that Dave and I would like to turn the call over to the operator.
More questions.
Operator.
Thank you as a reminder to ask a question you and need to press star one on your telephone.
I'll, let Joe your question press the pound key please standby will be compile the Q&A roster.
Our first question comes from Jon Block with Stifel. Your line is now open.
Hey, guys. This is Tom Stefan on for John and Thanks for the questions and maybe start off on guidance G. Six expectations for the year, but just a bit light of where we were particularly and probe. So Dave maybe you can just talk to that a bit and how we should think about maybe the progression of.
The year I mean, it sounds like international is very strong and U S. Maybe came back and the second half of <unk>. So any color there would be helpful.
Sure Tom So.
Yes international rebound and it had been.
Declines in prior quarters and it rebounded and so this is a.
It's a quarter over quarter kind of thing right, it's not a steady.
March and Theres some volatility involved so they were down.
For a couple of quarters sequentially and then.
Just had a strong comeback and.
And with almost <unk>.
The flip side in the U S. It had been quite strong and third and fourth quarter and.
And just was just slightly behind and now and we really do think that a lot of that was as I mentioned and the comments.
The relative strength of the first quarter last year and the first half of the first quarter. This year.
Bill had pretty significant restrictions and a lot of geographies around the U S. As COVID-19 cases were peaking so we just think its part of the bouncing around from quarter to quarter.
In terms of the longer term it's.
It's difficult to.
To forecast.
And as I think you.
You've seen and others where.
The transitions occur where the.
Surge returns and we're very comfortable that we're driving adoption. We're encouraged to see new systems placements that indicate customers new customers wanted to adopt the technology. The trick is and the rate at which that comes along and and so were.
We're still a bit conservative, possibly on how that develops through the course of the year, whether there is some impact mid year as we transition.
Some of the distributors internationally and.
And how that unfolds in the course of this year 21 is clearly going to have some transition elements to it.
Overlaying the underlying fundamental strength. So we're very encouraged in general and just looking out quarter over quarter to try to be.
Practical and.
And the actual events that occur.
Great all helpful color.
And stick with guidance and then maybe go back to <unk> of debt, but.
Can you do some implied math with the revenue guidance, we're getting to roughly $15 million <unk>.
<unk> number for the year and then nearly 35 mill for retina, another yet <unk> retina and other revenue of $8 seven mill give or take annualized already gets you to that $35 million number we're calculating but you haven't really ex.
<unk> the full contribution from Pascal for the new lasers rolling out in that <unk> number so kind of a long winded ensure there, but how are we thinking about this the right way.
And can you just maybe talk to the pushes and pulls for for retina and other.
Yes, so retina also experienced some surge.
Internationally similar to the experience of glaucoma probes. So there's that component overlaid and the first quarter and then there's also the potential transition as existing distributors potentially sell their remaining inventory top con comes up to speed acquiring inventory.
And adapting.
Sales and distribution and those areas and.
And we're certainly allowing for for some.
Flat areas as that transition occurs.
We haven't seen the full impact of the Pascal sales and.
And a quarter, yet, but we but we did bring some inventory into the quarter that we were able to sell so the the impact and the quarter was relatively strong for the short portion of the quarter.
That we were booking revenue from.
Pascal product line.
Got it that makes sense.
Maybe last one from me just on going back to <unk> six and.
Utilization there you know.
And the change and the <unk> selling approach has been in place for I think close to two years now.
And the second Gen probe.
<unk> also been out there for I think well over a year now so Dave.
Maybe you can talk to this just around are you seeing the mix of utilization increase.
Sort of downstream in the mild to moderate glaucoma population or.
Has it still largely stayed consistent in the more advanced patient pool.
We're clearly strongest in the more advanced.
Patient pool segment.
Our efforts are focused on.
And making clinicians comfortable with more moderate stage patients and making the decision to treat free and decisional and I think that segment is growing but I think it takes time and.
<unk> experience and then they wanted to have a chance to see the durability. So.
And.
Patients for a couple of quarters and see.
See how long we're really getting the results. We're confident the results are there, but we're also cognizant that.
They need to have that experience as well so it's a fits and unfolding story I think that shift is still largely.
Big opportunity for Us and Thats one of the things we're focused on part of the reason why we've expanded our direct sales force and the U S.
To really deliver that message more strongly and have engaged a broader set of key opinion leaders to help.
Support that message so that it's coming from the clinical community rather than coming from Iridex and I think those are all things, we'll see pay off during 2021.
That's great.
Thats It from me thanks, guys.
Okay.
And next question comes from Scott Henry with Roth Capital. Your line is now open.
Thank you and good afternoon, certainly busy times free these day.
Hey, Scott.
A couple questions.
Retina and excluding Pascal.
Has it been a very strong and Q4 and in Q1 of 2021.
How do you think about retina kind of ex Pascal.
In Q2 versus Q1 sequentially.
Well, we are we're very encouraged that retina has rebounded for iridex we.
We made some specific investments and the area to improve the product line.
Focus some sales and marketing efforts, there and I think as were.
And the world try to emerge from COVID-19 pandemic, where experience a return to order volumes internationally and domestically and we're winning a good share of that business. So we're we're quite encouraged by that and.
And we are cognizant that it's possible, there's a bit of a rebound effect going on and the short term.
Since there were a lot of deferred orders and.
And so we're optimistic that that position and the market continues our new strength continues.
But it's difficult to.
Predict the same kind of surge of total business to last through the entire year. So that's the challenge and forecasting we feel like we have better visibility and we have a stronger position and the marketplace.
But there's still going to be ebbs and flows through the rest of the year.
Okay.
Yeah, I'm just trying to look at it from.
A full year perspective, and and get a sense of.
How this trajectory should play through and would you expect second quarter revenues to be higher than the first quarter and.
And you are getting a benefit from a full <unk>.
Top con quarter, and there as well just trying to get a sense and and along that line. So would you expect system sold to tick up and <unk> from.
From first quarter.
I guess with the understanding and I would expect the second half to be stronger than the first half and given COVID-19 and other and and all of your marketing effort.
Well, we're not forecasting and the second quarter, where given our full year guidance number.
Historically, the first quarter has been a dip compared to the fourth quarter.
With a small.
A rebound into the second quarter, that's kind of the historical seasonality that.
That we see in the mix of business and.
And.
Short of advising on that at this point and the quarter were.
We're giving full year guidance, but like I said.
One of the earlier questions I do think our strength in Sterling.
Segments has increased and our product offerings are more competitive and so we're comfortable with the guidance that we've given.
Okay Fair enough and then.
And then shifting over to the expense items.
And I believe operating expenses were about $6 8 million and and first quarter.
What portion of the quarter was top Khan in there and and are there how much how many one time.
Spencers would we kind of think about and deal related and that first quarter.
Okay.
Yes, So let me answer that so in Q1, we had approximately $600000 of one time expenses transaction related and integration related just of nonrecurring so those will.
Not.
Come up again and the subsequent quarters.
However, I think and also recognize that Q1 only had one month.
Top con or the Pascal business acquisition expenses.
And so those will continue at full clip quarterly rate. So I think if you're looking at opex.
Quarter over quarter.
You should expect.
A slight increase over Q1.
And one time expenses.
And trading off but they're really.
You take over the full burden of the Pascal business going forward and.
And so that is that and then finally, we are going to see a pickup in sales and marketing expense, Dave already pointed out.
And his prepared remarks, and we're already seeing resumption of activities and trade shows and.
And our sales folks will and travelling against the deal is going to be uptick in sales.
Sales and marketing expense, so you should see a slight uptick from that.
Plus the full.
And a full quarter of the Pascal business so ex.
Pat.
Opex to be.
Slightly above.
They're slightly above where we were in Q1.
Okay. Thank you that's helpful. And then I don't think the 10-Q's out yet and.
And there are a lot of moving levers.
Where would you expect shares to be in real time right now.
Approximately 15 five is.
As the quarter and number and we expect that to kind of.
Change very minimally volume going forward.
Okay.
Great and then Dave.
Dave I think you said that the pricing on on the glaucoma side, what was pricing stable.
Kind of backing it out right now until we get the 10-Q.
But I just wanted to get a sense of of how pricing was relative to Q4.
Actually it's and both on the systems side.
As well as on the probe side on the glaucoma, it's been fairly day.
<unk> throughout.
'twenty and into 'twenty.
'twenty, one we haven't seen any degradation.
Either internationally or.
Or U S in terms of Asps.
Asps and there hasnt been any pricing and pricing pressure that we've experienced.
Okay, great. Thank you for taking the question.
Thanks Scott.
Thank you I'm not showing any further questions at this time I would now like to turn the call back over to David Pitts for closing remarks.
Thank you operator, and thank you all for joining the call free.
And your support and look forward to reporting on our progress and the future.
This concludes today's conference call. Thank you for participating you may now disconnect.
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