Q1 2022 IRIDEX Corp Earnings Call
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Hello, Thank you for standing by and welcome to the Iridex first quarter 2022 earnings Conference call. At this time all participants are in a listen only mode. After the speaker presentation there'll be a question and answer session to ask a question. During the session you will need to press star one on your telephone please be advised that today's.
Conference maybe recorded if you require any further assistance please press star zero.
I would now like to hand, the conference over to Hunter Kabi. Please go ahead.
Thank you all for participating in today's call. Joining me are David Bruce Chief Executive Officer, and thought Ahmad interim Chief Financial Officer.
You're extending Iridex released financial results for the quarter ended April <unk> 2022, a copy of the press release is available on the company's website.
Before we begin I'd like to remind you that management 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 1095.
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 in 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 the risks and uncertainties associated with our business. Please see our most recent Form 10-K and Form 10-Q filings with the SEC for your guys 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 is accurate only as of byproduct live broadcast today May 12, 2022, and with that I'll turn the call over to Dave.
Good afternoon, and thank you all for joining us.
While it has only been a few months since our last call. The Iridex team has continued to make progress in expanding awareness and.
And gaining share in the market for our non seasonal approach to glaucoma and retinal disease treatments.
Record first quarter results reflected an encouraging start to the year. Despite the omicron related impact to our business seen early in the quarter, we were able to rebound in the later half to achieve year over year total revenue growth that set a new first quarter record.
Exceeding our prior record set in Q1 of 2021.
In short our momentum continues to be driven by consistent operational and commercial execution.
Despite the unique and varying challenges presented by the pandemic our team has delivered.
Increased cycled <unk> probe utilization through an improved sales process and dedicated commercial teams.
Augmented by our investments to support physicians with peer to peer training and increased clinical data.
As a result, our physician customers are experiencing improved outcomes and durability from our micro pulse PLT treatment further expanding confidence in the procedure.
And we expect that to drive broader utilization.
In addition, we've seen upside from the top client collaboration.
Which has improved our competitive position by delivering a more robust portfolio.
Our broader distribution network.
<unk> cash from the transaction for investment in our future growth.
In terms of our traction in the retina market, we've seen a turnaround from a slowly declining business to levels exceeding the overall market growth rate, specifically Pascal platform, New U S sales team and a new or U S distribution network have been key contributors.
Lastly, our focus on cash management, and well funded operating runway have delivered stability to invest in growth vehicles of product launches targeted clinical data and publications.
Physician training.
And recently inventory management to Derisk potential supply chain issues, such as carrying extra inventory and prepaying suppliers to secure commitments later in the year.
Okay.
Turning to some highlights from the past few months once again were pleased to see encouraging trends throughout the business and glaucoma. We continued to benefit from investments in clinical evidence developing kols proof statements and expanding our clinical physician to physician messaging around the benefits of our micro <unk> or.
Overall, the cycle <unk> product family achieved 6% revenue growth over first quarter of 2021.
Year over year cycle of G. Six probe sales increased 8%.
We are confident progress was made to drive utilization in the installed base. Despite a soft start to the quarter due to Covid limited access to ophthalmologists delayed procedures and customer staffing shortages.
The strength in the U S offset extended COVID-19 disruptions outside the U S.
The rebound we saw in the latter half of the quarter leaves us confident in our ability to achieve the guidance we provided.
Our fourth quarter conference call up 18% year over year probe growth for the full year 2022.
We're encouraged by the progress our team is seeing but also recognize that physician adoption isn't instantaneous.
To be fully confident in our TLC treatment for glaucoma, a physician needs to see consistency and effectiveness over multiple patients and track those outcomes over three to 12 months to confirm durability.
So it takes time, our current stage of penetration into the large opportunity in glaucoma requires these investments to provide physicians with the necessary study data clinical support and follow up training to gain confidence and adopt <unk> in their practice.
Physician engagement tells us, we're delivering desired support and clinically relevant materials.
To illustrate this progress in Q1, we trained 35 physicians and peer to peer programs, let's follow ups certification procedure support.
In addition interest in clinical information is strong as demonstrated by over 3600 views of the first <unk> clinical consensus panel webcast and 'twenty 200 views of the second.
In summary papers are submitted for publication in upcoming quarters.
Internationally, we conducted distributor training and the Middle East two sessions in Europe and have upcoming events in Singapore, and Japan to train and support our distribution partners around the world.
As we've highlighted in prior calls expanding clinical data for micro pulse DLT.
Specifically in terms of optimizing techniques that improved results that's been a key area for investment and key opinion leader support.
With over 2100, <unk> six site installations worldwide.
We believe the clinical community supports.
Non institutional runway for IOP control in glaucoma patients and it is increasingly recognizing the benefits of deferring the need for more invasive institutional surgeries.
We have a significant opportunity today to improve the current practice of DLT.
This is includes improved clarity of the key factors affecting outcomes.
Standardizing around recommended sweep speeds.
<unk> recently released suite management software that helps clinicians maintain desired sweet speeds.
And messaging from clinical opinion leaders communicating studies and techniques.
That demonstrated consistent results combining the right probe targeted dosing and accurate delivery.
Okay.
Turning to retina.
It is clear that last year marked a significant turning point and what had been a slowly declining business segment for Iridex as anticipated our investment in the Pascal line acquired from top Com is delivering revenue growth and scale efficiencies.
First quarter revenue grew 10% year over year.
Of which 29% came from sales of Pascal products.
Overall, our new portfolio and retina focused U S sales team are driving demand to continue the momentum we began in 2021.
We expect this growth to progress in 2022 and continue to outpace growth in the overall retina market.
In summary, we have an exciting opportunity ahead in 2022 to further capitalize on the momentum we gained in 2021.
We are executing on the plan, we laid out on our last call.
By continuing to drive clinical data supporting key TLC parameters and techniques, coupled with education programs from key opinion leaders.
And pure training peer to peer training to present, the durability and results from using best practices and TLC to drive physician utilization.
Delivering further data supporting the use of <unk> by comprehensive ophthalmologists.
<unk> treatment of more moderate stage glaucoma patients expanding.
Expanding the size and geographic reach of our U S sales team.
And internationally, we plan to expand into new markets, including anticipated regulatory clearance in China later this year as.
As well as additional bundled tender programs and collaborations with top com.
Lastly, we expect to introduce enhanced performance and cost reduced platform laser systems across our product line later in the year.
In order to achieve our goals for the year.
We set a plan to invest this year's increased gross profit, while still maintaining a secure capital position and multi year operating runway.
Additionally, we are closely monitoring and taking appropriate actions in our supply chain to mitigate potential future impacts to meet our customers' demands.
With that I'd like to turn the call over to <unk>.
Thank you Dave.
And good afternoon, everyone.
We'll review our financial performance for the first quarter of fiscal 2022, starting with revenue.
Total revenue for the first quarter was $13 4 million up 12% from $12 million in the first quarter of last year.
We sold 14700 site logistics problems in the quarter up 8% from the prior period and 56 cycle logistics systems in the quarter compared to <unk> 64 in the prior period.
This decline in system sales is consistent with the international softness seen in the first quarter.
Overall product revenue from <unk> product family was $3 5 million up 6% compared to the first quarter of 2021.
Our retina product revenue improved significantly in the first quarter to $7 3 million, an increase of 10% compared to the prior year period.
Note that the first quarter included $2 $1 million of Pascal revenue.
Other revenue, which includes royalties services and other legacy products increased 31% to $2 5 million in the first quarter of fiscal 2022 compared to the same period in 2021.
This substantial increase is a result of inclusion of Pascal service revenue and amortize revenue recognition from the sale of distribution rights to top client.
Gross profit of $6 million in the first quarter was up 21% from the same period last year.
Gross margin was 44, 6% compared to 41, 3% in the first quarter of 2021.
The increase in gross margin attributable to favorable product mix, continuing pricing discipline and inclusion of amortized revenue from the sale of distribution rights to top gun.
Operating expenses for the first quarter were $8 3 million compared to $6 8 million in the same period of prior year.
The increase was a result of increased R&D spend on planned investments in new product development and then <unk>.
R&D capability from the acquisition of the Pascal product line.
Additional planned investments in the sales organization as well as expanded marketing and clinical activities also contributed to higher operating expense in the period.
However, higher R&D and sales and marketing expense was partially offset by lower G&A expense in the period note that prior cost included approximately 600000 of onetime top comp transaction related expenses.
Net loss in the first quarter of 2022 was $2 4 million or net loss of <unk> 15 per share compared to a net loss of <unk> 14 per share for the same period in 2021.
We ended the quarter with cash and cash equivalent of $20 6 million, representing a net cash reduction of $3 2 million during the quarter.
In addition to our operating investments in sales marketing and product initiatives. We've also mitigated our exposure to potential supply chain risk by increasing inventory of long lead parts, and making prepayments to suppliers to ensure delivery commitments in the quarters to come.
These investments are on the balance sheet and increases of one 4 million inventory and 700000 prepaid expenses.
We believe these shifts in our current assets are essential part of the supply chain management strategy in the current environment.
In conclusion.
Reiterate our guidance for 2022.
We continue to expect total revenue for the fiscal year 2022 to be 57 million to $59 million.
<unk> probe unit sales are expected to range from 67 to 70000.
And cycle of GSA glaucoma laser system installed basis is expected to expand by 225 to 250 unit.
David I would like to turn the call over to the operator for questions operator.
Thank you.
Minder to ask a question you will need to press star one on your telephone.
Withdraw your question Christopher turnkey.
Yeah.
Our first question comes from Tom <unk> with Stifel. You May proceed with your question.
Great. Good afternoon, guys. Thanks for the questions.
David if I can start with top gun, maybe if you can just talk to the collaboration and kind of where we stand today relative to expectations, maybe if you can talk to areas.
Our eyes learnings.
Maybe you can also touch on.
Kind of the bundled tender program opportunities you've talked about.
Maybe some additional color there would be helpful.
Sure Hi, Tom.
So the top 10 dealers about a year old now.
Most of the distribution shifts occurred in say the first six months of that so through about the third quarter.
Last year and then the last shift was in Japan itself and that was completed probably into the first quarter of this year. So.
Fully transitioned to the top kind of distribution and generally went very smoothly.
There's still work to do in training the teams and working with those teams to sell and our.
Key product areas I think picking up the retina piece was more straightforward since they had been selling the <unk>.
<unk> product line already.
And adapting and selling glaucoma piece with disposable sales process involved there's probably an ongoing activity. So we're pleased with their engagement with us.
And continuing to try to drive those activities and be sure that they are.
Very successful.
With with that.
Adoption of that selling process and driving that big penetration opportunity for us.
For us together.
Got it that's helpful. So maybe just as a follow up there it sounds like.
<unk> kind of on the <unk> side, the top there's opportunities to improve.
Growth there.
Penetration and utilization that sounds like.
But it's hard to.
Allocate to the different potential categories being there have been some significant.
Shutdowns delays access limitations internationally compared to U S.
Covid and other things travel was restricted in and so it's hard to overlay that with.
The activities themselves.
But we're quite optimistic we don't see a cause for concern there we just.
Just being honest and addressing the ramp up of those activities.
We did see as we reported some international softness in the glaucoma side of the business, but we think most of that is attributable to the COVID-19 restrictions.
Makes sense.
And if I could move to China <unk> second you said approval potentially later this year and maybe if you can just discuss what the opportunity could mean.
If it's possible to size up Tam or just talk about tough comps presence there.
Any color there would be helpful.
Yes, China is a focus for top con in general and so they have a sizable team there.
They have to learn the glaucoma sales process.
We're actively working with them on rollout plans now to launch at key opinion leader sites and get a broad footprint started win.
On approval comes.
Approval is a very squishy thing in China in terms of timing you don't really get good visibility on that.
Most of the questions and all the process elements, we think have been completed and it is in the.
Governments hands to get that over the finish line.
Got it that's helpful. In terms of I'm, sorry, you asked about the size of the market opportunity. So obviously, China is one of the largest markets available in the world.
That said you have to start essentially from scratch and the plan would be to see the <unk>.
Key opinion leader sites in the Chinese marketplace bring them up to speed.
Our techniques get them to have some experience and be able to start presenting to the broader medical community in China. So it's a ramp up but it's.
It's a very large opportunity in terms of.
Population tiered by those with glaucoma and.
Able to receive.
Call It advanced care and in centers around China.
Got it makes sense.
If I can just pivot to R&D.
Sure.
If I'm thinking about kind of.
Long term R&D initiatives, maybe on the glaucoma side in particular kind of however, far down the road there may be or how close they may be is there any innovation you might be working on internally with <unk> six or <unk>, you can just give us a flavor of whether it's <unk>.
Product iterations, or maybe something bigger I guess for lack of a better term.
Okay.
Well, we haven't discussed R&D pipeline publicly to any any great detail. Obviously, there is some competitive reasons to keep those ideas close to divest, but if you think about the opportunity to deliver a dose of energy heat a tissue target.
<unk>.
One methodology, obviously as the sweeping method with a certain power setting that we use today.
There are other methods too.
Broaden the capability.
Of a device to take on more of that.
From the physician I'll say.
One analogy and I'm not telegraphing that this is something we're working on but if you look at refractive surgery in the case of Lasik. Those machines you program essentially you program, a prescription and the machine does the computation and delivers the the energy to the different areas necessary to achieve the ablation.
<unk> of corneal tissue and create a new curvature of that.
That cornea.
Not saying, we're going to go that far but there are opportunities to look at delivering our energy in a more standardized way and we're exploring a number of things in that area in.
In terms of the short term however.
We think the both the science and the technique around sweeping at a very consistent sweep speed and updating our systems to facilitate an accurate sweep speed and provide the feedback to the clinicians on the speeds that they are achieving.
Do it with an audible tone and they should be able to recognize the.
Partial progress points and be consistent in their sweeping of our sector.
And here at tone, consistent with that that location and they know their sweeping on speed that standardization seems to be very well received in the market as we rollout that software and I think it's.
It is helping greatly for people too.
Understand a targeted sweep speed and then accurately deliver that sweep speed.
That's great color and last one for me just on Opex.
You guys have done a great job.
Managing spend in <unk>.
I guess, what I'm thinking about just the balance between that Opex management.
And potential areas of increased investments to drive accelerating growth do you feel like there would be an opportunity.
To sort of step a little bit on the gas pedal on the investment side.
And if so kind of what would be the potential catalysts I know you talked about.
Potentially selectively expanding the sales force so im just curious David at a high level, how you're thinking about that balance again between opex management and sort of growth.
Thanks for your time sure sure spending more money can drive faster growth I think thats pretty established the broader footprint with sales reps is a step in that direction on our part.
Our investments and clinicians.
<unk> and.
The consensus Committee, where this group independently came to call. It a state of plc in terms of where should the.
What patients should be used on what is the technique.
About pre op post op and.
The market has been hungry for that kind of information. So we think thats, a very cost effective way to to send that information worldwide frankly.
And then the last place is in the promotional activities than we have.
Consistently conducted a stream of.
Webinar events targeting.
Specific kols, maybe a specific topic around say pre <unk> patients and those have typically been quite well attended.
Opportunity to broaden the spend in what I'd call online and direct advertising and.
We basically weigh those decisions.
Based on.
Driving the growth, but also being sure that we preserve the runway so we arent faced with.
Our capital endpoint and before us to raise when it may not be attractive timing and.
And we think that the plan that we have in place allows us to.
B.
Moderately aggressive in our marketing and sales efforts control, our burn and continue to have an extended runway and if we see other opportunities. It gives us a chance to incrementally invest in those opportunities.
I've heard from investors.
Net.
There is a new focus on cash on hand and.
Not not needing to go to the marketplace and the kind of environment that.
The public markets are seeing currently.
And with.
And in the quarter with over $20 million in cash gives us comfort that we've got the runway and we intend to keep a clear runway in front of us, particularly in a tougher capital environment.
Very helpful. Thanks again.
Thank you I'm not showing any further questions at this time I would now like to turn the call back over to David Bruce for any further remarks.
Thank you operator, and thank you all for attending the call.
We look forward to reporting good results next quarter as well thanks for your attention.
Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.
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