Q4 2022 IRIDEX Corp Earnings Call

March 9, 2023

In addition last year, we increased our international commercial team to provide more expert resources in support of our distribution partners and customers.

And finally, we have great confidence, we have the right probe design and clinical proof of efficacious and very safe dosing guidance executed through user software supporting proper treatment protocols.

We believe we have a stable procedure ready to design and launch a larger scale multicenter prospective trial the.

The study will target demonstrating the safety and substantial effectiveness of micropump DLT for moderate stage glaucoma patients.

Active discussions on proper study design and protocols are underway with key opinion leaders once we determine the optimal protocols for the study we can begin to recruit participating centers, we're making this investment in 2023 and hope to begin enrolling patients in the study by year end.

We have high conviction in our ability to grow the glaucoma business over the long term.

We're excited to provide this.

Larger scale and ultimately capture a substantial role in the continuum of care for glaucoma sufferers.

Altogether as we look ahead to 2023, we expect to increase the growth rate of our glaucoma business, we expect probe revenue growth of 9% to 12% compared to 2022.

To sell 65.

267000 probes and grow the installed base by 225 to 250 glaucoma laser systems.

Now turning to our retina business.

For the fiscal year 2022 product revenue increased by 2% to $31 7 million compared to 2021, despite some softness in international markets, leading to a decrease of 11% in the fourth quarter compared to the prior year period.

On our last call, we announced we had received U S. FDA clearance for our new Pascal laser scanning platform.

We began shipments to U S customers in the fourth quarter and.

And we anticipate regulatory filings and approvals internationally throughout 2023.

The new Iridex Pascal platform offers the ultimate combination of our leading Pattings pattern scanning engine endpoint management technology pattern scanning laser trabeculoplasty, which is the glaucoma treatment for early stage patients.

And now with Iridex has proven micro pulse technology. It provides physicians with expanded treatment capabilities.

Integrated system with one half the footprint of the prior platform.

And today, we're pleased to announce that we received FDA clearance in February for a single spot platform consisting of the Iridex $5 32, Green laser any iridex $5 77.

Yellow laser will share more details as we launch them in the U S around mid year.

We believe both updated laser platforms can drive replacement cycles for the significant installed base of older equipment, reaching end of life.

The improvements we've made not only include technology updates that will produce clinical benefits, but also provide manufacturing efficiencies that will translate to pricing flexibility for share gains or improve margins.

Our investments over the last couple of years have resulted in material improvements to our retina business and is now operating from a significantly stronger competitive position in both product and sales channel potential.

Now I'd like to turn the call over to Floyd.

Good afternoon, everyone and thank you for joining us today.

I would like to begin by reviewing our financial performance for the fourth quarter and full year fiscal 2022.

Starting with revenue our total revenue for the fourth quarter was $15 2 million, which was in line with the fourth quarter of last year October revenue for 2022 increased by 6% to $57 million compared to $53 9 million in 2021.

Moving onto product revenues.

Overall revenue from the <unk> product family in the fourth quarter was $4 2 million up 9% compared to the same period in 2021.

We are pleased to report that we sold a quarterly record 16400, <unk> probes in the fourth quarter, an increase of 8% from the prior period, an increase of 20% quarter over quarter.

We sold 79 cycle would you say systems in the quarter compared to <unk> 90 in the prior period.

Total glaucoma product revenue for 2022 was $14 7 million up 5% from 2021.

Our retina product revenue in the fourth quarter was $8 1 million a decrease of 11% compared to the prior year period.

For the full year 2022, retina product revenue was $31 7 million up 2% compared to 2021.

Other revenue, which includes royalties services and other legacy products increased 26% to $2 9 million in the fourth quarter compared to the same period in 2021.

For the full year 2022, other revenue grew 20% to $10 6 million compared to $8 8 million in 2021 on higher service royalty talk on distribution and legacy product revenue.

Our gross profit for the fourth quarter of 2022 increased to $6 7 million up 11% for the same period last year.

Gross margin was 43, 9% compared to 39, 3% in the fourth quarter of 2021 on revenue mix that favored U S revenue.

Gross profit for the full year was.

$25 4 million up 11% from the prior year.

Gross margin was 44, 5% in 2022 compared to 42, 3% gross margin during the same period last year.

Operating expenses for the port quarter were $8 1 million compared to $8 4 million in the same period of the prior year total operating expenses for 2022 were $32 9 million compared to $30 4 million in 2021.

Our net loss in the fourth quarter was $1 1 million.

Or a net loss of seven cents per share compared to a net loss of $2 4 million or <unk> 15 per share for the same period in 2021.

For the full year, we recorded a net loss of $7 5 million or <unk> 47 per share compared to a net loss of $5 2 million or <unk> 34 per share in 2021.

Cash and cash equivalents as of December 31, 2022 totaled $13 9 million.

Cash used in the operations is down 900000 in the fourth quarter, while the total cost reduction in the quarter was only $2 million.

The cost reduction during the year.

$10 million included approximately $3 $5 million increase in inventory and the related pre orders to mitigate supply chain issues. However.

However, we expect such inventory to substantially unwind over the course of 2023.

Finally, I will now provide our guidance for the full year of fiscal 2023, we anticipate Frac logistics broke unit sales up 65000 to 67000, which represents a growth of 9% to 12% over the prior year.

We expect to expand the fact logistics systems installed base by 225 to 250 units.

Total revenue for the year is expected to be $57 million to $59 million.

Please note that the full year 2023 total revenue guidance represents a growth of approximately 3% to 6% after adjusting for an approximate $1 5 million reduction of other revenue and royalty income, resulting from the exploration of licensed patents.

Implicit in our guidance for fiscal 2023 is full recovery from any lingering COVID-19 related pressures, however, currency fluctuations inflation and supply chain may continue to represent headwinds, albeit manageable we.

We are confident in our ability to address those issues and continue to execute on our core strategy centered around increasing growth in our glaucoma treatment adoption and rolling out our new retina platform.

I will now turn the call over to the operator for any questions operator.

Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced.

To withdraw your question. Please press star one again.

Okay.

Our first question comes from Scott Henry with Roth Capital You May proceed.

Thank you and good afternoon, I just had a couple questions.

Largely on the modeling front first any thoughts on how we should expect the cadence of the year to go as far as revenues.

Our revenues any any guidance or should we expect the historical trend.

Hi, Scott how are you.

I think.

It's shaping up to be more of a typical as you know we're not linear we have typically see.

Strongest in the fourth quarter, some softness in the third quarter, maybe the second strongest is the second quarter.

Thats fair.

From where we sit today I don't see that changing dramatically.

Okay and then.

Hi.

Would should we expect the operating expenses to be similar in 2023 is in 2022 and also.

Would gross margins be similar or might we get.

A little bit of gross margin expansion, how should we think about that.

I think let me address the gross margin first.

I think we should see some margin.

Expansion of gross margin in 2012.

23% relative to 2022, I think 22 was still.

A period in which we were.

We have supply chain issues, and we're making payments in advance.

And sometimes paying a premium for some some parts I think that should subside.

In 2023, so we should expect some expansion.

We're not going to see the expansion.

We were hoping for in 'twenty two just given.

There is still some lingering supply chain issues that we have to deal with but but I think overall you should see the expansion also I think as you know a lot of our gross margin depends on both geographic mix as well as the product mix.

With the glaucoma, becoming bigger part of the business are increasingly being a part of the business, we should see naturally gross margins to expand.

From that as well.

So yes, I think the answer to your question simple answer is we should see some expansion in 'twenty three as far as the Opex.

For most part.

We expect R&D to G&A to kind of remain flat.

We do expect sales and marketing where our clinical spend is to grow I think we are going to be investing more.

More dollars into the clinical spend with a view towards growing the adoption rates and that's been our.

Our mantra for last couple of years and it is expected to continue.

Okay.

We're not backing about our NIM.

Okay, and the new Pascal product should that grow revenues for that line or is it more of a substitutive.

Extension.

I think theres two elements to that one is.

It's a more capable system in a smaller footprint and so a lot of institutions, who may not have bought it in the past because of the size.

Now could be attracted and it's got micro pulse capability as well, which had never had in the past. So I think that expands the pool, but I think as a new platform. It may be the catalyst for some older sites, we have a significant percentage of.

Pascal for systems in the installed base that are old and some even past the end of service date, meaning if they.

Wanted to send it in for repairs, we essentially we can't do it so.

That can potentially trigger somewhat of a replacement cycle and so we look for some modest growth because of that piece.

And.

I think internationally, we still remains to be seen because we have to rollout approvals was primarily a U S phenomenon for.

The early part and as a percentage for most of the year.

Year 2023.

Okay.

Dave as a follow up question on the last question.

I mean, it sounds like 2020 three's going.

Going to look a lot like 2022, a little bit more revenues, a little bit more expensive expenses kind of lose between a little more than $5 million in the year.

Pulling out stock comp.

Question is I mean, you're kind of at a fork in the road either you grow faster to get profitable or you cut expenses to get profitable.

And I mean, youre, not losing a lot of money, but you're still losing money so of.

Those two pathways I mean, it sounds like your idea is to invest in the clinic and try to get the topline growing faster, but I just wanted to give you an opportunity to perhaps.

You had some light on what direction you'd like to take the company.

Yes, we think that there is a very large growth opportunity in glaucoma.

We view the 'twenty two activities as is really rebuilding the foundation, there and proving out the elements that we believed were in place and I think by investing in.

The broader larger clinical study that we will prove that out further and create a real.

Adoption evidenced base that can can drive us from say early adapters or use it.

At the margin when when other things arent working into the mainstream and Thats just a very large opportunity. So we're focused on that big growth piece.

The decision to maintain the level of investment in sales and marketing.

And clinical is really driven by that we do see a tailwind from unwinding the inventory builds in prepaid.

Because we think the supply chain can can soften up and.

Get back toward normal in 2023.

We were up $3 5 million.

In cash usage of 22.

Cause of that and if we unwind that turns into a cash tailwind so.

Comparable usage of cash with the with the.

Tailwind of cash coming from the balance sheet puts us still with a substantial amount of cash and the runway to execute that growth trajectory.

Okay, great. Thank you for the color and thank you for taking the questions.

Thanks.

Thank you.

Our next question comes from Tom Stefan with Stifel. You May proceed.

Great Hey, guys. Thanks for the questions I'll start with the <unk> probe.

Growth guidance of 9% to 12%.

Dave can you just talk a bit about that.

The different dynamics at play between the U S and the U S.

<unk>, there's maybe been some volatility by just for 2023, how are you thinking about kind of growth between each region.

Hi, Tom Yes.

We we do anticipate I'll say continued volatility in the international space and so.

As much as we're focused on very specific activities to drive that growth and working with our distribution partners.

It can still.

Ebb and flow and we don't have direct contact to sell into customers and so we may be a little bit more conservative on how much we can grow internationally domestically, we are starting to see the impacts.

The impacts of renewed confidence I'll say or broader confidence given our treatment parameters as well as coupling that with with a suite management software methodology to assure that we intended techniques are actually follow through and you and I have talked about.

The challenges or opportunities to standardize that.

Treatment. So we think that we can be a little stronger in the U S compared to <unk> in terms of probe growth and as I commented, we are starting to see that follow through here at least first quarter to date.

We are encouraged that debt.

That we're going to accomplish that.

Got it Thats helpful.

David if I can push you a bit just looking at the model.

Ill leave it implies flat utilization year over year in 2023, and again <unk> was challenging in the 'twenty two as well so the comp isn't overly difficult on that front I guess big picture. What gives you confidence you can reaccelerate growth in the glaucoma business more broadly you gave the four key initiatives, which make.

Perfect sense, but I guess, what really gets us going again, and maybe whats the timing of when we'll start to see those signs trickle through in the numbers.

Yes, thanks for that I think we see.

As I mentioned, we see the signs that it's working in the sense that when when people select the right treatment parameters and then execute those that they are pleased with the results and they are substantial the study that I was referring to that was presented at least the early results.

<unk> at the American Glaucoma Society, 30% and 40% IOP reductions are at.

The top end of what.

Can be achieved with other technologies. So we're really pleased that we can do that with a non institutional procedure.

And get that durability, which.

When you get those higher IOP reductions in.

Three to six month period, it tends to carry on for durability. So we'll see what the particular study data demonstrates but we expect that to bear out and.

And as you get those kinds of results in the hands of users.

They tend to gain confidence and start to select a broader set of patients.

And that's what we're really focusing on for 2023.

Our sales reps are very.

<unk> focused on targets.

And taking those targets down that pathway of Rockford cases, and recognizing the results on a representative sample of their patients.

And as you look at the opportunity in this space.

There is there is just.

Dramatically large number of potential procedures, if we can achieve that adoption and the moderate stage <unk> patients.

I've talked about the analogy with esselte the early stage.

Laser glaucoma treatments.

It's been around for 20 years and is clinically mature and.

We've penetrated about 20% of the mild stage patients in the U S. So that's the opportunity we're pursuing and about 2 million moderate stage patients and it will take time, but if you have efficacy you have safety and you have a way to demonstrate to clinicians that they can achieve that in their hands. We're very.

Confident that that will we will drive adoption.

The challenge is what rate and.

To a certain extent that's part of the frustration, but at the same time.

Medical device adoption is.

As always.

Well considered I would say by the main <unk>.

Dream community and it takes a little bit longer, but when you get that critical mass the growth rates go up and we're not trying to predict where that critical mass point, an increasing growth rate occurs we do our guidance based on what we think we can execute through the team.

Given the current situation so.

I know that doesn't.

Identify exactly where that knee occurs and it really starts to accelerate but I think all the pieces are in place to get us there.

No that makes perfect sense, thanks for that Dave and then.

Just to pivot to retina for my last question.

It might be some unknowns around the <unk> asps by.

To reach the midpoint of your guidance I'm, arriving at roughly flat retina growth.

But you do have a lot of new products coming into the field. So.

What am I thinking about that growth.

Correctly, and then Dave can you just talk a bit about.

Kind of what headwinds might be suppressing.

Potential positive growth in the retina business. Thanks.

Yes, I mean, I think retina.

We anticipate the retina to grow.

But it's going to generally grow mid market somewhere around three two.

3% to 4% I think there is opportunity for <unk>.

Growth further is because of the rollout of new products.

And especially the Jan on the <unk>.

Ask outside as well as the rollout of new platform. So I think there is an opportunity there.

For growth in retina, as well, but I think for.

For us when you think about right now we think about the police preserving.

Market growth rate, which which is at least 3%.

It could be little higher no.

I think on the overall revenue I think one other things issue should be looking at is that we did.

As we mentioned in our.

The prepared remarks as well as in the earnings release itself.

We are we have about a million $5 of headwind.

On some royalty income due to some expiring patents.

That will happen over the course of the year I think.

Yes.

Marshall will manifest itself in the second half of next year, So you might.

You might want to.

Make a.

The adjustment to your model for that so so you have to subtract that it comes from other revenue.

If you look at the overall growth rate I think we are we're still.

Mid two.

The low to mid double digit for glaucoma and about 3% growth.

On the on the retina piece, so just kind of as you work through your models and then in terms of I think the last question. You asked is the headwinds I think it is.

Kind of uncertainty we had headwinds on that.

We're stronger dollar for most of fiscal 'twenty two.

Okay and that impacted the U S.

Sales not just for our retina, but also on the glaucoma side.

That's still.

Little bit of headwinds going into 'twenty three.

We will have to manage that so I think that that I see as the biggest.

Headwind.

For for the business not just the retina piece.

And I think we have been generally successful on the supply chain side.

It was safe to say that we haven't missed a lot of revenue due to shortages, but team has done a good job here, but that's still still Castillo Paul over.

Or the business, but I think for most part I think at this point I guess, the currency and some inflationary risks that we're all dealing with probably the biggest factor into 'twenty three.

Got it.

Very helpful. Thanks.

Thank you and this concludes the Q&A session I would now like to turn the call back over to Dave Bruce for any closing remarks.

Thank you operator.

Thank you all for joining us we're looking forward to.

Strong 2023 performance and reporting to you in upcoming quarterly results.

Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.

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Good day and thank you for standing by welcome to the fourth quarter 2022, Iridex earnings Conference call.

At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your telephone you will then hear an automated message advising your hand is raised to withdraw your question. Please press star one again, please be advised that today's conference.

Is being recorded I would now like to hand, the conference over to your speaker today, Tripp Baylor Investor Relations.

Thank you and thank you all for participating in today's call. Joining me are David Bruce Chief Executive Officer, and Florida, Mod interim Chief Financial Officer earlier today <unk> released financial results for the quarter ended December 31, 2022, a copy of the press release is available on the <unk>.

<unk> web site.

Before we begin I would 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 $19 95.

Any statements made during this call.

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 on the risks and uncertainties associated with our business. Please see our most recent Form 10-K and Form 10-Q filed with the SEC Iridex 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 March nine 2023, and with that I'll turn the call over to Dave.

Thank you chip good afternoon, and thank you all for joining us.

Today I'll provide updates on our recent business progress and discuss our 2023 outlook <unk> will provide details of the 2022 fourth quarter and full year financial results. Then we'll open the call for questions.

As we pre announced on January 10 for the full year 2022, we generated revenue in line with our guidance of $57 million.

Representing an increase of 6% compared to 2021.

Beyond the financial results 2022 was highly productive for Iridex.

We achieved regulatory clearance to market and sell the cycle <unk> six platform in China introduced suite management software for the cycle of <unk> six.

Maintaining a strong presence at glaucoma society meetings and published the two part expert consensus to raise awareness of the clinical benefits of micro pulse plc.

Despite a soft first half of the year from Covid and international challenges of dollar strength and inflation.

Activities meaningfully advanced <unk> adoption and <unk> pro growth in the second half of 2022.

And we continue to experience solid growth this quarter to date. Additionally.

Additionally, we received FDA clearance for the next generation Iridex Pascal scanning laser platform in November and are today announcing clearance of the Iridex $5 32, and $5 77 single spot laser platform received in February .

We've already begun the U S launch for Pascal and will begin a single spot platform launch at mid year.

Expect all of these achievements to build momentum for our business in 2023.

Turning to the fourth quarter revenue totaled $15 2 million in line with the prior year period, driven by growth from the cyclo <unk> product family U S retina sales and other revenue.

Offset by declines in some retina products internationally, we also reduced our cash used in operations by half to under $1 million in the quarter.

Looking closer at the glaucoma business psychology, six revenue increased by 9% year over year to $4 2 million.

In the quarter, we achieved record international <unk> probe unit sales and sold a worldwide total of 16400 probes representing growth of 8% compared to the fourth quarter of 2021.

<unk> systems sales decreased slightly compared to the prior fourth quarter, but results were at the midpoint of our overall annual guidance.

We see significant opportunities to increase <unk> probe volume and adoption by staying focused on four key initiatives first continue our advanced physician education.

Keying on proper dosing and broader patient selection criteria.

Second targeting comprehensive ophthalmologist, who see the most moderate stage <unk> patients.

And third adding users that surgery centers that already have <unk> systems and.

And fourth expanding clinical evidence supporting adoption of micro <unk> TLC.

The main components of our education strategy, our peer to peer discussions on dosing recommendations based on clinical study evidence and sharing updates on micropump PLT use on a broader patient population.

In particular earlier.

In the glaucoma treatment continuum.

At the Ags just completed in Austin, Texas, Dr. Sterile door arise presented is early results from a prospective randomized dose escalation study demonstrating 31% to 44% inter ocular pressure reductions.

With greater treatment efficacy, resulting from slower probe suite speeds, while still providing the same consistently excellent safety profile.

Becoming clear that the key to consistently high IOP reduction.

Proper sweep speeds and that this technique maintains the very benign safety profile.

To facilitate excellent treatment technique, we launched and promoted our suite management systems software upgrade.

This software helps guide users to select and execute proper sweep speeds during treatments. According to best practices developed by our clinical consensus panel.

It's working users are reporting this helps reduce variability of technique and helps them deliver more consistently strong results to meet their outcomes expectations.

The next component of our growth strategy is to increase awareness of the benefits of micro pulse DLT earlier in the glaucoma treatment continuum as an effective <unk> intervention.

About 50% of the 2022 Proctor cases supported by our field team, where <unk> patients treated by both glaucoma specialists and increasingly with targeted comprehensive ophthalmologist, who typically diagnose and treat patients with earlier stages of glaucoma.

This targeted cohort of clinicians and patients has the potential to meaningfully meaningfully.

<unk> penetration in the continuum of glaucoma care.

Internationally, we initiated the <unk> launch in China in the second half of last year, alongside our distribution partners with 15 key opinion leader pilot sites and approximately 120 patients.

While China's Covid policy Lockdowns in 2022 slowed the initial adoption ramp patient flow was increasing again and we believe this can drive growth in 2023.

In addition last year, we increased our international commercial team to provide more expert resources in support of our distribution partners and customers.

And finally, we have great confidence, we have the right probe design and clinical proof was efficacious and very safe dosing guidance executed through user software supporting proper treatment protocols.

We believe we have a stable procedure ready to design and launch a larger scale multicenter prospective trial the.

The study will target demonstrating the safety and substantial effectiveness of Microsoft's DLT for moderate stage glaucoma patients.

We have high conviction in our ability to grow the glaucoma business over the long term.

We're excited to provide this.

Larger scale and ultimately capture a substantial role in the continuum of care for glaucoma sufferers.

Altogether as we look ahead to 2023, we expect to increase the growth rate of our glaucoma business, we expect probe revenue growth of 9% to 12% compared to 2022.

To sell 65000 to 67000 probes and grow the installed base by 225 to 250 glaucoma laser systems.

Now turning to our retina business.

For the fiscal year 2022 product revenue increased by 2% to $31 7 million compared to 2021, despite some softness in the international markets, leading to a decrease of 11% in the fourth quarter compared to the prior year period.

On our last call, we announced we had received U S. FDA clearance for our new Pascal laser scanning platform.

We began shipments to U S customers in the fourth quarter and.

And we anticipate regulatory filings and approvals internationally throughout 2023.

And now with Iridex has proven micropump technology. It provides physicians with expanded treatment capabilities.

Integrated system with one half the footprint of the prior platform.

And today, we're pleased to announce that we received FDA clearance in February for a single spot platform consisting of the Iridex $5 32, Green laser any iridex $5 77.

Yellow laser will share more details as we launch them in the U S around mid year.

We believe both updated laser platforms can drive replacement cycles for the significant installed base of older equipment, reaching end of life.

Now I'd like to turn the call over to Hawaii.

Good afternoon, everyone and thank you for joining us today.

I would like to begin by reviewing our financial performance for the fourth quarter and full year fiscal 2022.

Moving onto product revenues.

Overall revenue from the <unk> product family in the fourth quarter was $4 2 million up 9% compared to the same period in 2021.

We are pleased to report that we sold a quarterly record 16400, <unk> probes in the fourth quarter, an increase of 8% from the prior period, an increase of 20% quarter over quarter.

We sold 79 cycle logistics systems in the quarter compared to 90 in the prior year period.

Total glaucoma product revenue for 2022 was $14 7 million up 5% from 2021.

Our retina product revenue in the fourth quarter was $8 1 million a decrease of 11% compared to the prior year period.

For the full year 2022, retina product revenue was $31 7 million up 2% compared to 2021.

Other revenue, which includes royalties services and other legacy products increased 26% to $2 9 million in the fourth quarter compared to the same period in 2021.

For the full year 2022, other revenue grew 20% to $10 6 million compared to $8 8 million in 2021, and higher service royalty top on distribution and legacy product revenue.

Okay.

Our gross profit for the fourth quarter of 2022 increased to $6 7 million up 11% for the same period last year.

Gross margin was 43, 9% compared to 39, 3% in the fourth quarter of 2021 on revenue mix that favored U S revenue.

Gross profit for the full year was.

$25 4 million up 11% from the prior year.

Gross margin was 44, 5% in 2022 compared to 42, 3% gross margin during the same period last year.

Operating expenses for the fourth quarter were $8 1 million compared to $8 4 million in the same period of the prior year total operating expenses for 2022 were $32 9 million compared to $30 4 million in 2021.

Our net loss in the fourth quarter was $1 1 million.

Net loss of seven cents per share compared to a net loss of two 4 million or <unk> 15 per share for the same period in 2021.

For the full year, we recorded a net loss of $7 5 million or <unk> 47 per share compared to a net loss of $5 2 million or <unk> 34 per share in 2021.

Cash and cash equivalents as of December 31, 2022 totaled $13 9 million.

Cash used in the operations is down 900000 in the fourth quarter, while the total cost reduction in the quarter was only $2 million.

The cost reductions during the year.

$10 million included approximately $3 $5 million increase in inventory and the related preorders to mitigate supply chain issues.

However, we expect such inventory to substantially unwind over the course of 2023.

Finally.

I will now provide our guidance for the full year of fiscal 2023.

We anticipate Frac logistics broad unit sales up 65000 to 67000, which represents a growth of 9% to 12% over the prior year.

We expect to expand the fact logistics systems installed base by 225 to 250 units.

Total revenue for the year is expected to be $57 million to $59 million.

We are confident in our ability to address those issues and continue to execute on our core strategy centered around increasing growth in our glaucoma curriculum adoption and rolling out our new retina platform.

I will now turn the call over to the operator for any questions operator.

Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced.

To withdraw your question. Please press star one again.

First question comes from Scott Henry with Roth Capital You May proceed.

Thank you and good afternoon, I just had a couple questions.

Largely on the modeling front first any thoughts on how we should expect the cadence of the year to go as far as revenues.

Our revenues any any guidance or should we expect the historical trend.

Hi, Scott how are you.

I think.

It's shaping up to be more of a typical as you know we're not linear we have typically see.

Strongest in the fourth quarter, some softness in the third quarter, maybe the second strongest is the second quarter.

Thats fair.

From where we sit today I don't see that changing dramatically.

Okay and then.

Hi.

Would should we expect the operating expenses to be similar in 2023 is in 2022 and also.

Would gross margins be similar or might we get.

A little bit of gross margin expansion, how should we think about that.

I think let me address the gross margin first.

I think we should see some margin ex <unk>.

<unk> of gross margin in 2012.

23% relative to 2022, I think 22 was still.

A period in which we were.

We have supply chain issues, and we're making payments in advance.

And sometimes paying a premium for some some parts I think that should subside.

In 2023, so we should expect some expansion.

We're not going to see the expansion.

We were hoping for in 'twenty two just given.

There is still some lingering supply chain issues that we have to deal with but I think overall you should see the expansion also I think as you know a lot of our gross margin depends on both geographic mix as well as the product mix, though.

With the glaucoma, becoming bigger part of the business are increasingly bigger part of the business, we should see naturally gross margins to expand.

From that as well.

So yes, I think the answer to your question simple answer is we should see some expansion in 'twenty three as far as the Opex.

For most part.

We expect R&D to G&A to kind of remain flat.

We do expect sales and marketing where our clinical spend is to grow I think we are going to be investing more.

More dollars into the clinical spend with a view towards growing the adoption rates and that's been our.

Mantra for last couple of years and it is expected to continue.

Okay.

We're not backing about Nick.

Okay, and the new Pascal product should that grow revenues for that line or is it more of a substitutive.

Extension.

I think theres two elements to that one is it.

It's a more capable system in a smaller footprint and so a lot of institutions, who may not have bought it in the past because of the size.

Pascal for systems in the installed base that are old and some even past the end of service date, meaning if they wanted to send it in for repairs, we essentially we can't do it so.

That can potentially trigger.

And what of a replacement cycle and so we look for some modest growth because of that piece.

<unk>.

I think internationally, we still remains to be seen because we have to rollout approvals was primarily a U S phenomenon for.

The early part and as a percentage for most of the year.

Year 2023.

Okay.

Dave as a follow up question on the last question.

I mean, it sounds like 2020 three's going.

Going to look a lot like 2022, a little bit more revenues, a little bit more expensive expenses kind of lose between a little more than $5 million in the year.

Pulling out stock comp.

Question is I mean, you're kind of at a fork in the road either you grow faster to get profitable or you cut expenses to get profitable.

And I mean, you are not losing a lot of money, but you're still losing money so of.