Q1 2023 Iridex Corporation Earnings Call
Patient profile with significantly support increased <unk> adoption in utilization by a broad range of clinicians treating these patients.
As we look at the remainder of 2023, we expect to improve the growth rate of our glaucoma business and increase utilization.
We are reiterating our guidance and continue to expect to sell 65% to 67000 probes representing growth of 9% to 12% compared to 2022 and expect to grow the <unk> install base by 225 to 250 systems.
Turning to our retina business in the first quarter revenue performance was largely in line with our expectations on sales of $7 2 million.
Slight dip compared to the prior year with U S revenue growth offset by modest international weakness.
Internationally, our distributors are managing inventory more tightly which is introduce more quarter to quarter volatility.
As we've broadened promotion from the limited launch of our new Pascal platform customers are responding and we're seeing strong interest in the new platform <unk>.
Incorporating micro pulse technology in the integrated Pascal system with.
With half the footprint offers clinicians expanded treatment capabilities that can fit in nearly any size office.
While interest is solid we have seen signs of lengthening decision cycles.
The challenging macro environment, causing customers to be more methodical with their capital purchasing decisions.
Our plans are progressing to achieve additional international regulatory approvals throughout the year to expand the commercial launch globally.
FDA clearance for our other major platform with a single spot Iridex $5 32, laser and Iridex 577 laser.
Keeps us on track to commercially launch the platform.
Mid year in the U S and we look forward to sharing updates on that progress.
To summarize start of the year was productive for Iridex highlighted by 19% this quarter year over year growth of U S.
Glaucoma probe revenue and we continue to build the foundation for further <unk>.
<unk> market adoption and sustained long term cycle of <unk> growth.
It's hard work requires focused selling and clinical support activities increased marketing communication of our clinical benefits.
In the treatment paradigm.
And our investments in the larger scale multicenter prospective trial to further our clinical evidence base.
Looking ahead, we expect to increase our growth rates and remain confident our current cash balance is sufficient to execute our multi year growth initiatives.
On that note, we believe cash usage in the first quarter was a high watermark for the year and that reflected the quarterly cadence in 2023.
One will detail more specifics of cash management expectations later in the call.
Now I'd like to turn the call over to <unk> to cover the financial results.
Thank you Dave.
Good afternoon, everyone and thank you for joining us today I would like to begin by reviewing our financial performance for the first quarter of fiscal 2023.
Starting with revenue total revenue for the first quarter.
2023 was $13 $7 million, representing a growth of 2% compared to the first quarter of last year.
When was onto product revenues total revenue from the <unk> product family in the first quarter was $3 7 million up 4%.
Versus the same period in 2022, we sold 13800 cyclic <unk> probes in the first quarter, a decrease of 6% from the prior year period.
Note that this decline is driven by ordering volatility of our international distributors following a record fourth quarter.
We sold 61 cycle of <unk> systems in the quarter compared to 56 in the prior year period.
Our retina product revenue in the first quarter was $7 2 million a decline of 1% from the prior year period other.
Other revenues, which include royalties services and other legacy products increased 11% to $2 8 million in the first quarter of 2023 compared to the same period in 2022.
On substantially higher revenue from our other legacy products.
Our gross profit for the first quarter of $2023 $5 9 million relatively unchanged from the same period last year.
Gross margin was 43, 3% compared to 44, 6% in the first quarter of 2010 on slightly lower overhead absorption in the current period.
Operating expenses for the first quarter were $8 3 million flat compared to the same period last year.
Our net loss in the quarter up 21st quarter of 2023 was $2 1 million or a net loss of <unk> 13 per share compared to a net loss of.
$2 4 million or <unk> 15 per.
Our share for the same period in 2022.
Yeah.
We ended the quarter with cash and cash equivalents of $11 million, representing cash usage of $2 $9 million during the quarter.
The cash usage in the first quarter includes inventory purchase of purchases of approximately $1 million related to the rollout of our new product launches, including our newly launched <unk> product and certain nonrecurring capital expenditures.
As you May recall last year, we increased inventory by $4 million to proactively manage to tighter supply chain.
The boiling manufacturing interruptions.
This year, we plan to unwind a good portion of that inventory build into cash and onto the balance sheet.
Additionally, following the completion of our new retina product development cycle.
Cost efficiencies in the cost of goods from the introduction of the new products and certain cost reduction programs, we expect to meaningfully reduce our quarterly cash usage.
We believe the inventory reductions along with lower quarterly expenses should result in significantly lower cash usage through the second half of 2023.
But in terms of numbers, we expect these planned cost reductions to deliver $1 $5 million of savings in the second half of 'twenty, three, thereby reducing our cash usage from operations from an average of $1 3 million per quarter in 2022 to approximately 750000 per quarter in the second half of 2023.
Additionally, we also expect to release approximately $1 5 million of cash from the inventory reductions in the second half of fiscal 2023.
In conclusion, we reiterate our guidance for 2023, we continue to expect total revenue for fiscal 2023 to be $57 million to $59 million.
<unk> probe unit sales are expected to range from 65000 to 67000.
And cycle logistics glaucoma laser system installed base is expected to expand by 225 to 250 units.
With that David and I would like to turn the call over to the operator for questions operator.
Thank you as a reminder to ask a question you will need to press star one on your telephone if you have not already please standby, while we compile the Q&A roster.
Our first question comes from the line of Tom Stephens Stifel. Your question. Please Tom.
Great Hey, guys. Thanks for the questions I'll start with <unk> six system shipments.
Continuing to post solid numbers there Dave can you talk about maybe the types of accounts you are selling into their profiles and what utilization looks like in these more recent additions to the installed base.
Sure Tom.
The <unk>.
International sales are harder to specifically carragher categorizing in terms of those.
Those parameters because as you know we sell to distributors first.
Some sub distributors below them and then and customers.
But in general to characterize its new capacity in a center typically sold to surgery centers some hospitals, but.
Probably.
I would say, we're probably 80% surgery centers versus hospitals.
And it's new adoption in general we are not yet seeing a significant addition of second units at a.
At a site that has a unit utilization still.
And single <unk>.
Digits per month on average so the capacity requirement is.
<unk> be available is still quite high we do see.
For example in the United States.
Larger systems that May have a central primary office, and then satellite offices, either in suburbs or different parts of cities AD units to put the capacity in those locations.
And.
In general we're seeing the primary demand coming from.
New adopters of the technology.
And new sites, where it hasnt been available.
Just as an aside you know we're also focused on adding users at sites that have a laser system already and that's a piece of our growth. It doesn't show up in in systems placements, but can show up in utilization.
Yes.
Got it that's helpful and then if I can.
Stick with Gs six I wanted to ask about the probe growth guidance.
Great to see it left unchanged.
Your high level of confidence.
U S <unk> growth in the quarter I think you said was up only 7% year over year.
Oh U S clearly down a decent clip and I get that there is some volatility there but.
Within the context of your full year guidance of the.
The 9% to 12% growth.
Where does the U S stands in that versus the O U S.
I'm, just wondering how high above that range I'm, assuming the U S is.
Maybe how achievable that is given <unk> in the U S. Only grew 7% year over year.
Yes.
In our guidance.
Formulation, we anticipated that we would build that usage over the course of the year. So while it would have been nice to have had a higher number than the 7% growth in the U S.
We feel like we will build over the course of the year and so.
Yes.
There is some degree of backend loading to that that we build over the course of the year and we see significantly higher.
Usage in the in the later quarters International volatility is it's a little frustrating, but it is what it is it's a little harder to predict there are no core issues with usage or end customers in.
We feel like the.
The challenge there has been.
The varying levels of inventory at distributors and for example, one of our largest our largest distributor as their fiscal year end at the end of the first quarter. So most companies.
Included target minimizing inventories receivables maximizing cash and that can lead to the kind of.
The kind of volatility that we see.
The short answer is we think all of the elements that we're focusing on to drive adoption and growth are progressing and we.
We think we can hit those numbers.
Got it that's helpful. And then last one for me I wanted to ask just about competition.
Maybe Dave can you discuss your view on the competitive landscape in glaucoma.
Most notably the mixed space.
Now there is standalone Sterne.
They're on the market.
And drug delivery implants potentially coming.
So how are you thinking about the potential long I guess longer term impact on <unk> if any thanks.
Yes, we think.
Well first of all there are a lot of different companies selling a variety of MX devices.
From what we've seen and heard from our customers.
Vast majority remains in the concomitant with cataract procedure, where there is no new incision needed for the <unk> device.
We're not hearing an increase in standalone usage, we know that companies are out promoting it and in that sense, it's competitive because they're asking customers too.
Use their device in a patient where we.
We think we're more appropriate.
The difference between making an incision and not making an incision is significant both to the patients as well as to the physicians and we continue to hear a strong preference.
For the same safety and efficacy to end up with.
A non institutional approach so we're comfortable with that positioning.
The competitive.
Information.
<unk> flow.
In this space is intense there is a lot of companies they have on average more reps than us so.
So.
The number of reps.
Speaking about some type of a migs device versus the contacts from our group.
Is is quite large so that.
That's a challenge and we address that by focusing on our specific cohort of targets per territory, and taking them down their pathway and working with them through there.
Their process of gaining confidence in adopting the procedure.
And we think with those kinds of Tal.
Targeted execution and the increases that we should be able to achieve with those customers that leads us to the probe growth guidance that we see.
Settled on.
For the year.
Makes sense. Thanks.
Thank you.
Please standby for our next question.
Our next question comes from the line of Scott Henry of Roth Capital. Your question. Please.
Thank you and good afternoon guys.
Couple of questions.
I'll start with key sick.
Dave we've talked about this before but I think it's a good time to bring it up again.
Youre getting a good number of systems out there.
But to get to the kind of compounded growth rates of <unk>.
To get to double digits in high double digits.
We need to see probes per system that metric.
Has to go up because then you get the compounding of new systems plus the current systems are being utilized more.
Obviously it didn't go up in Q1, but some noise there and it looks like it's going to trend upward in the rest of the year, but how do you think of that probes.
Probe utilization per system.
And do you feel like you can you can get that going in a positive direction.
Lately, it's been kind of flat, which still growth, but not to the hyper levels that we've seen in the past.
Alright, so are our focus is on the.
The adoption by doctors across the appropriate patient base.
I commented a bit about how.
The initial ill say the initial application is a smaller group of patients in the later stages and then people gain confidence in the procedure of the safety profile and can expand toward more moderate stage, where there are many many more patients and then in combination.
Adding a higher cohort of.
Comprehensive ophthalmologists, who see most of those moderate stage patients.
Is the avenue to grow the average usage.
We also have seen I'll.
I will say some frustration from customers if theyre not.
Following the parameters and effectively conducting the procedure that they're not getting the outcomes of the durability safety profile has been excellent but.
If they're not getting the outcomes of the durability then they back away from usage and so those cross currents lead to a net lower usage rate and that's what we think we can combat we focus on those accounts, who may have declined and understand what may have driven that.
And we focus on our target accounts to grow and really drive that adoption.
In a broader set of patients than really the late stage well what else are we going to do with this patient.
And we think the combination of those two things will get us up into these higher growth rates, but it's a process. It takes time. It takes time for them to do enough patients and follow them for a period of time to gain confidence in outcomes and durability. So we.
We focus on that recognizing that.
It's not a step function.
<unk>.
And Thats.
That's going well in terms of the responsiveness of the customer base, but it takes time to build.
Okay. Thanks, Thank you for the color on that.
<unk> gears to retina.
When you think about that segment.
I guess two part question one how do you think about the long term growth I mean is that a 5% category grow or how do we think about that and then in the short term.
It might be a little slower with the economic environment and perhaps some challenges in capital equipment.
Do you see the short term a little tougher than the long term and.
Where is that long term.
Yes, we think long term the while the industry growth rate worldwide as some of the research.
Publications that look at that kind of thing they keep it in kind of the low single digits mid mid to low single digits. We think we can grow at that rate.
And potentially a little higher as we get our new platform proliferate it across the.
The worldwide market opportunity, we're in the U S with the platform and the Pascal scanning laser diodes.
To get the second platform into the U S.
Then second half of the year, we'll start.
<unk>, receiving some of the clearances on the Pascal platform to broaden that usage. So we think that there are opportunities to.
Grow maybe above market rate, but we're a substantial share and leader in that marketplace. So.
That's generally governed by the.
The overall growth of the marketplace.
And then in terms of the.
The short term economic well call it uncertainties.
Think we are seeing.
People be more deliberate in their process.
But what we are not seeing is people, saying, yes, we've changed our capital budgeting for the year and we're not going to buy as much as we had intended before that's not happened yet and.
We're just seeing the <unk>.
<unk>, the selling cycle extend and people being a bit more thorough in.
The deliberate in how they.
They do their purchasing and then internationally, we're seeing the distributors really try to.
Lean out on inventory and so that kind of puts a.
A bit of a dampener, you've got some inventory drawdown in the distributor base.
Along with.
They're they're.
<unk> sales to end customers, maybe being a little slower.
Okay.
Great and then you talked about that other line and about when we're going to get this kind of hit.
But the numbers look pretty good.
About as strong as it's ever been.
Should we expect that to rollover at some point or how do we think about that.
That's more of a.
The second half of the year phenomenon so.
You're referring to the reference we made in the guidance portion of.
Right.
Where we do have royalty income and that patent is expiring in the royalties.
We will go down.
And that will happen in and really more in the second half of this year, but we included that comment because the guidance is annual so we that's obviously going to be a component of the annual result.
And so.
That's the nature of that and then in the other category, we did see some strength there in our.
Other products, which are the.
There is a number of things that are either legacy.
We expect to subside over time or.
Some items that are discontinued and those types of those are the kinds of products that are in other in addition to the.
The royalties and the.
Deferred revenue recognition items. So we did see some strength in some of those products, which is quite encouraging and.
One of those products.
As a probe.
Actually used in glaucoma, and so we think that really offset some somewhat.
Significant.
The disappointment that we had in total units.
Oh U S glaucoma probes.
But in general that's.
Relatively stable external category to the glaucoma business.
So.
This happened to have a.
Positive.
Divergence on that one.
Maybe slightly offsetting the negative inventory shifts that were experienced in the first quarter.
Okay, Great final question.
G&A was a little high in the quarter.
Any trend there or any noise as we think about that.
Yes, no there was.
Certain one time legal expenses just on the corporate side proxy related stuff to get done and get ready for that and some IP related expenses.
You typically come in at the beginning of the year.
So.
First essentially that I don't expect that trend to continue I think we should be closer to $2 million.
Run rate on G&A going forward.
Okay, great. Thank you for taking the questions.
Thank you I would now like to turn the conference back to David Bruce for closing remarks, Sir.
Thank you operator, and thank you.
For the questions and thanks to everyone for participation in the call this quarter.
Thank you.
This concludes today's conference call. Thank you for participating you may now disconnect.
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Thank you for standing by and welcome to the Iridex first quarter 2023 earnings Conference call. At this time, all participants are in a listen only mode.
After the speaker presentation, there will be a question and answer session to ask a question. During the session you will need to press star one one on your telephone.
I would now like to hand, the call over to trip Taylor Investor Relations. Please go ahead.
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 Iridex released financial results for the quarter ended April one 2023, 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 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 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 the markets in which we operate all forward looking statements are based upon our current estimates and various assumptions.
These statements involve material risks and uncertainties that could cause actual results.
Or events to materially differ from those anticipated or implied by these forward looking statements. Accordingly, you should not place reliance on these statements for a discussion of the risks and uncertainties associated with our business. Please see our most recent Form 10-K and Form 10-Q filings with the SEC.
<unk> 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 May 11, 2023, and with that I'll turn the call over to Dave.
Thank you chip and good afternoon, and thanks for joining us today.
I'll provide updates on our business progress in slide will provide details on our first quarter financials, and we will open the call for questions.
In the first quarter of 2023, we generated $13 7 million in total revenue growth of 2% compared to the prior year period growth was driven by our cycle of <unk> glaucoma laser platform and offset by a slight decline in the retina sales.
And our glaucoma business cycled <unk> revenue increased by 4% year over year to $3 7 million and we continue to experience solid adoption of the <unk> technology worldwide with 61 systems were sold in the quarter compared to 56 in the first quarter of last year.
In the U S. We were pleased to have achieved a 19% increase in <unk> probe revenue driven by ASP increases and a 7% volume growth worldwide.
Worldwide glaucoma probe revenue grew by 6% despite a decline in units to 13800 probes in the quarter.
A 6% decrease from the prior year.
Quarterly international probe volumes remain volatile.
This first quarter dip following record high volumes in the fourth quarter.
Embedded in this volatility is a relatively flat multi quarter volume trends.
International opportunity for MPT LP, that's micro pulse <unk> laser therapy adoption.
Adoption is very large and we believe its safety and efficacy we will drive long term penetration.
We're focused on returning to solid growth internationally through our partners.
We saw the cycle <unk> rollout in China benefit from the Covid reopening with order activity increasing late in the first quarter.
Underlying demand in international markets remains strong as shown by continued strength of international system sales and we expect to return to probe growth through the rest of the year.
We continue to have confidence we will execute on the significant growth opportunity for <unk>, six and the moderate severity glaucoma patient.
And propelled <unk> utilization and adoption.
To focus on four key initiatives first is advancing physician education by increasing awareness of proper dosing and patient selection.
Second is identifying and targeting comprehensive ophthalmologists.
Most of the moderate stage <unk> patients.
Third adding users at surgery centers by capitalizing on those that already have <unk> systems.
And the final initiative is expanding clinical evidence to drive adoption of <unk>.
These initiatives are targeted to address the current barriers to greater adoption and growth.
User variability and technique and procedure protocols can lead to suboptimal results.
The perception that the technology and procedure have a limited role since micropump PLT originally evolved from the late stage treatment methodology of cyclo <unk> coagulation intended to reduce production of aqueous fluid there's still a perception.
At this is the appropriate patient profile.
To address these views we sponsored the clinical consensus panel and are educating the market on conclusions around dosing and applicable patient recommended by the group.
Another challenge we found is that surgeons natural inclination is to sweep to fast during procedures, which leads to under dosing and is counter to the best long lasting outcomes.
So we launched and continue to rollout our suite management software for <unk> systems to aid in proper and consistent technique that.
That can be reproduced across any user.
Surgeon feedback on the simplification and clinical outcomes generated using software are very positive.
We're confident improved sweep speed optimization will generate improved clinical outcomes and durability, ultimately leading to greater utilization of our procedures.
Additionally, we continue to focus on educating providers on the benefits of micropump technology use within a broader patient volume specifically as it pertains to <unk> moderate stage patients and post cataract surgery patients, who may or may not have had.
Comintern Migs device used to treat their intraocular pressures.
As happens with all treatments in this progressive disease, eventually pressures rise requiring additional treatment.
Micro pulse DLT durability, and repeatability enables avoidance or significant deferral of more aggressive higher risk surgical glaucoma interventions.
Another opportunity for further penetration in the market is to drive <unk> adoption by comprehensive ophthalmologist.
This group of providers, usually diagnose and treat patients with earlier stages of glaucoma.
We're five times more comprehensive ophthalmologist glaucoma specialists, and 10 times more moderate and advanced stage glaucoma patients.
This past week, we had a very productive conference at the American Society of cataract and refractive surgery meeting.
San Diego engaging with key opinion leaders customers and prospective customers.
We were encouraged by the many comprehensive ophthalmologist at our booth.
Wet lab training sessions, where we introduced an educated them on the benefits of the Iridex product portfolio.
The early clinical experience using appropriate treatment parameters guided by suite management software has given us confidence design and launch a larger scale multicenter prospective trial to prove the safety and substantial effectiveness of micro pulse DLT for moderate stage glaucoma patients.
For example, a recent single center prospective study with three arms of escalating dosing.
<unk> very strong early results of 31% to 44% indirectly a pressure reduction with.
Excellent safety in all three arms.
We're looking to build on these results to generate more substantial data that can validate through clinical value proposition.
We're conducting a series of meetings with our Kols guidance group to identify that preliminary study protocol identify appropriate research centers interested in participating our target is to begin enrolling patients in the study by year end and look forward to sharing the details of the study once formalized.
We believe a definitive multicenter study on the right targeted moderate stage patient profile with significantly support increased <unk> adoption in utilization by a broad range of clinicians treating these patients.
As we look at the remainder of 2023, we expect to improve the growth rate of our glaucoma business and increase utilization.
We are reiterating our guidance and continue to expect to sell 65% to 67000 probes representing growth of 9% to 12% compared to 2022 unexpected grow the <unk> install base by 225 to 250 systems.
Turning to our retina business in the first quarter revenue performance was largely in line with our expectations on sales of $7 2 million slight dip compared to the prior year with U S revenue growth offset by modest international weakness.
Internationally, our distributors are managing inventory more tightly which is introduce more quarter to quarter volatility.
As we've broadened promotion from the limited launch of our new Pascal platform customers are responding and we're seeing strong interest in the new platform <unk>.
Incorporating micro pulse technology in the integrated Pascal system with.
With half the footprint offers clinicians expanded treatment capabilities that can fit in nearly any size office.
While interest is solid we have seen signs of lengthening decision cycles.
The challenging macro environment, causing customers to be more amount of <unk> with their capital purchasing decisions.
Our plans are progressing to achieve additional international regulatory approvals throughout the year to expand the commercial launch globally.
FDA clearance for our other major platform with a single spot Iridex $5 32, laser and Iridex $5 77 laser.
<unk> keeps us on track to commercially launch the platform.
Mid year in the U S and we look forward to sharing updates on that progress.
To summarize <unk> started the year was productive for Iridex highlighted by 19% first quarter year over year growth of U S.
Oklahoma probe revenue and we continue to build the foundation for further.
Market adoption and sustained long term cycle of <unk> growth.
It's hard work requires focused selling and clinical support activities increased marketing communication of our clinical benefits and.
In the treatment paradigm.
And our investments in the largest scale multicenter prospective trial to further our clinical evidence base.
Looking ahead, we expect to increase our growth rates and remain confident our current cash balance is sufficient to execute our multi year growth initiatives.
On that note, we believe cash usage in the first quarter was the high watermark for the year and that reflected the quarterly cadence in 2023.
What will detail more specifics of cash management expectations later in the call.
Now I'd like to turn the call over to <unk> to cover the financial results.
Thank you Dave.
Good afternoon, everyone and thank you for joining us today I would like to begin by reviewing our financial performance for the first quarter of fiscal 2023.
Starting with revenue our total revenue for the first quarter.
2023 was $13 7 million, representing a growth of 2% compared to the first quarter of last year.
Ladies onto product revenues total revenue from the cyclo <unk> product family in the first quarter were $3 7 million up 4%.
Versus the same period in 2022, we sold 13800 <unk> probes in the first quarter, a decrease of 6% from the prior year period.
Note that this decline is driven by ordering volatility.
International distributors following a record fourth quarter.
We sold 61 cycle of <unk> systems in the quarter compared to 56 in the prior year period.
Our retina product revenue in the first quarter was $7 2 million a decline of 1% from the prior year period.
Other revenues, which includes royalties services and other legacy products increased 11% to $2 8 million in the first quarter of 2023 compared to the same period in 2022.
On substantially higher revenue from our other legacy products.
Our gross profit for the first quarter of $2023 $5 9 million relatively unchanged from the same period last year.
Gross margin was 43, 3% compared to 44, 6% in the first quarter of 2010 on slightly lower overhead absorption in the current period.
Operating expenses for the first quarter were $8 3 million flat compared to the same period last year.
Our net loss in the quarter up 21st quarter of 2023 was $2 1 million or a net loss of <unk> 13 per share compared to a net loss of <unk>.
$2 4 million or <unk> 15 per.
Share for the same period in 2022.
We ended the quarter with cash and cash equivalents of $11 million, representing cash usage of $2 $9 million during the quarter.
The cash usage in the first quarter includes inventory purchases purchases of approximately $1 million related to the rollout of our new product launches, including our newly launched <unk> product and certain nonrecurring capital expenditures.
As you May recall last year, we increased inventory by $4 million to proactively manage the tighter supply chain.
Avoiding manufacturing interruptions.
This year, we plan to unwind a good portion of that inventory build into cash and onto the balance sheet.
Additionally, following the completion of our new retina product development cycle.
Cost efficiencies in the cost of goods from the introduction of the new products and certain cost reduction programs, we expect to meaningfully reduce our quarterly cash usage we.
We believe the inventory reductions along with lower quarterly expenses should result in significantly lower cash usage through the second half of 2023.
But in terms of numbers, we expect these planned cost reductions to deliver $1 5 million of savings in the second half of 'twenty, three, thereby reducing our cash usage from operations from an average of $1 3 million per quarter in 2022 to approximately 750000 per quarter in the second half of 2023.
Additionally, we also expect to release approximately $1 5 million.
Cash from the inventory reductions in the second half of fiscal 2023.
In conclusion, we reiterate our guidance for 2023, we continue to expect total revenue for fiscal 2023 to be $57 million to $59 million.
<unk> unit sales are expected to range from 65000 to 67000.
And cycle logistics glaucoma laser system install base is expected to extend back 225 to 250 units.
With that Dave and I would like to turn the call over to the operator for questions operator.
Thank you as a reminder to ask a question you will need to press star one on your telephone if you have not already please standby, while we compile the Q&A roster.
Our first question comes from the line of Tom Stephens Stifel. Your question. Please Tom.
Great Hey, guys. Thanks for the questions I'll start with <unk> six system shipments continue.
Continue to post solid numbers there Dave can you talk about <unk>.
Maybe the types of accounts you are selling into.
Profiles and what utilization looks like in these more recent additions to the installed base.
Sure Tom.
The.
International sales are harder to specifically carragher categorize in terms of those.
Those parameters because as you know we sell to distributors first.
Sub distributors below them, and then end customers, but in general to characterize its new capacity.
<unk> Center typically sold to surgery centers, some hospitals, but.
Probably.
I'd say were probably 80% surgery centers versus hospitals.
And it's new adoption in general we are not yet seeing a significant.
<unk> second units at a.
At a site that has a unit utilization still.
And single.
Single digits per month on average so the capacity requirement as a capacity available is still quite high we do see.
For example in the United States.
Larger systems that May have a central primary office, and then satellite offices, either in suburbs or different parts of cities AD units to put the capacity in those locations.
And.
In general we're seeing the primary demand coming from.
New adopters of the technology.
And new sites, where it hasnt been available.
As an aside you know we're also focused on adding users at sites that have a laser system already.
That's a piece of our growth that doesn't show up in in systems placements, but can show up in utilization.
<unk>.
Got it that's helpful and then if I can.
Stick with Gs six I wanted to ask about the probe growth guidance.
Great to see it left unchanged.
Your high level of confidence by you.
<unk> growth in the quarter I think you said was up only 7% year over year and <unk> clearly down a decent clip and I get that there is some volatility there but.
Within the context of your full year guidance of the.
The 9% to 12% growth.
Where does the U S stands in that versus the O U S.
I'm, just wondering how high above that range I'm, assuming the U S is.
Maybe how achievable that is given <unk> in the U S. Only grew 7% year over year.
Yes, well in our guidance.
Formulation, we anticipated that we would build that usage over the course of the year. So.
It would've been nice to have.
A higher number than the 7% growth in the U S.
We feel like we will build over the course of the year and so.
There is some.
Sorry of backend loading to that that we build over the course of the year and we see significantly higher.
Usage in the in the later quarters International volatility is it's a little frustrating, but it is what it is is a little harder to predict.
There are no core issues with usage our end customers.
We feel like.
The challenge there has been.
The varying levels of inventory at distributors.
For example, one of our largest our largest distributor as their fiscal year end at the end of the first quarter. So most companies them included target minimizing inventories receivables maximizing cash and that can lead to kind of.
The kind of volatility that we see so.
The short answer is we think all of the elements that we're focusing on to drive adoption and growth are progressing and.
We think we can hit those numbers.
Got it that's helpful. And then last one from me I wanted to ask just about competition.
Maybe Dave can you discuss your view on the competitive landscape in glaucoma most.
Most notably the mixed space.
Now there is standalone stand.
Out there on the market.
And in drug delivery and play a potentially coming.
So how are you thinking about the potential long I guess longer term impact on <unk> if any.
Yes, we think.
Well first of all there are a lot of different companies selling a variety of migs devices.
From what we've seen and heard from our customers.
Vast majority remains in the concomitant with cataract procedure, where there is no new incision needed for the Migs device.
We're not hearing an increase in standalone usage, we know that companies are out promoting it and in that sense, it's competitive because they're asking customers too.
Use their device and a patient where we.
We think we're more appropriate.
Between making an incision and not making.
<unk> is significant both to the patients as well as to the physicians and we continue to hear a strong preference.
For the same safety and efficacy.
To end up with.
A non institutional approach so we're comfortable with that positioning.
But the competitive.
Information flow.
In this space is intense there is a lot of companies they have on average more reps than us so.
So.
The number of reps.
Speaking about some type of a migs device versus the contacts from our group.
Is is quite large so.
That's a challenge and we addressed that by focusing on our specific cohort of targets per territory, and taking them down their pathway and working with them through there.
Their process of gaining confidence in adopting the procedure.
We think with those kinds of tar.
<unk> targeted execution.
And the increases that we should be able to achieve with those customers that leads us to the probe growth guidance that we see.
Settled on.
For the year.
Makes sense. Thanks.
Thank you.
Please standby for our next question.
Our next question comes from the line of Scott Henry of Roth Capital. Your question. Please.
Thank you and good afternoon guys.
Couple of questions.
I'll start with key sick.
And Dave we have talked about this before but I think it's a good time to bring it up again.
Youre getting a good number of systems out there.
But to get to the kind of compounded growth rates of <unk>.
To get to double digits in high double digits.
We need to see probes per system that metric has to go up because then you get the compounding of new systems plus the current system are being utilized more.
Hi.
Obviously, you didn't go up in Q1, but some noise there and it looks like it's going to trend upward in the rest of the year, but how do you think of that probes.
<unk> probe utilization persist.
And do you feel like you can you can get that going in a positive direction lately, it's been kind of flat, which still growth, but not to the hyper levels that we've seen in the past.
Alright, so are our focus is on.
The adoption by doctors across the appropriate patient base.
I commented a bit about how.
The initial I'll say the initial application is a smaller group of patients in the later stages and then people gain confidence in the procedure of the safety profile and can expand toward more moderate stage, where there are many many more patients and then in combination.
Adding a higher cohort of.
Comprehensive ophthalmologists, who see most of those moderate stage patients.
Is the avenue to grow the average usage.
Is the avenue to grow the average usage.
We also have seen.
We also have seen.
Say, some frustration from customers if theyre not.
Following the parameters and effectively conducting the procedure that they're not getting the outcomes of the durability safety profile has been excellent but.
If they're not getting the outcomes of the durability then they back away from usage and so those cross currents lead to a net lower usage rate and that's what we think we can combat we focus on those.
<unk>, who may have declined and understand what may have driven that and we focus on our target accounts to grow and really drive that adoption.
In a broader set of patients than really the late stage.
What else are we going to do with this patient.
And we think the combination of those two things.
I'll get us up into these higher growth rates, but it's a process. It takes time it takes time for them to do enough patients and follow them for a period of time to gain confidence in outcomes and durability. So we focus on that recognizing that.
That's not a step function in.
And Thats.
That's going well in terms of the responsiveness of the customer base, but it takes time to build.
Okay. Thanks, Thank you for the color on that.
Shifting gears to retina.
When you think about that segment.
I guess two part question one how do you think about the long term growth I mean is that a 5% category grow or how do we think about that and then in the short term.
It might be a little slower with the economic environment and perhaps some challenges in capital equipment.
Do you see the short term a little tougher than the long term and where is that long term.
Yes, we think long term the while the industry growth rate worldwide as some of the research.
Publications that look at that kind of thing they keep it in kind of the low single digits.
Mid to low single digits, we think we can grow at that rate.
And potentially a little higher as we get our new platform proliferated across.
The worldwide market opportunity, we're in the U S with the platform and the Pascal scanning laser about to get the second platform into the U S.
And then second half of the year, we'll start.
Receiving some of the clearances Pascal platform to broaden that usage. So we think that there are opportunities to <unk>.
Grow maybe above market rate, but we're a substantial share and leader in that marketplace. So.
Generally governed by the.
The overall growth of the marketplace.
And then in terms of the.
The short term economic well call it uncertainties.
We are seeing.
People be more deliberate in their process.
Well, we are not seeing is people, saying, yes, we've changed our capital budgeting for the year and we're not going to buy as much as we had intended before that's not happened yet and.
We're just seeing the cycles, the selling cycle extend and people being a bit more thorough and deliberate.
Deliberate in how they.
They do their purchasing and then internationally, we are seeing the distributors really try to.
<unk> out on inventory and so that kind of puts.
A bit of a dampener, you've got some inventory drawdown in the distributor base.
Along with.
They're they're.
<unk> sales to end customers, maybe being a little slower.
Okay.
Great and then you talked about that other line and about we were going to get the kind of hit.
But the numbers look pretty good.
About as strong as it's ever been.
Should we expect that to rollover at some point or how do we think about that.
That's more of a.
The second half of the year phenomenon so.
You're referring to the reference we made in the guidance portion of.
Where we do have royalty income and that patent is expiring in the royalties.
We will go down.
And that will happen in and really more in the second half of this year, but we included that comment because the guidance is annual so that's obviously going to be a component of the annual result.
And so.
That's the nature of that and then in the other category, we did see some strength there in our.
Other products, which are the.
Theres a number of things that are either legacy.
We expect to subside over time or.
Some items that are discontinued and those types of those are the kinds of products that are in other in addition to the.
The royalties and the.
Deferred revenue recognition items. So we did see some strength in some of those products, which is quite encouraging and.
One of those products.
As a probe.
Actually used in glaucoma, and so we think that really offset some somewhat.
Significant.
The disappointment that we had in total units.
Oh U S glaucoma probes.
But in general Thats.
Relatively stable external category to the glaucoma business.
So.
This happened to have a.
Positive.
Divergence on that one.
Maybe slightly offsetting the negative in inventory shifts that were experienced in the first quarter.
Okay, Great final question.
Looks like G&A was a little high in the quarter.
Any trend there or any noise should we think about that.
Yes, no there was.
Certain one time legal expenses just on the corporate side proxy related stuff to get done and get ready for that and some IP related expenses.
You typically come in at the beginning of the year.
So.
First essentially that I don't expect that trend to continue I think we should be closer to $2 million.
Run rate on G&A going forward.
Okay, great. Thank you for taking the questions.
Thank you I would now like to turn the conference back to David Bruce for closing remarks, Sir.
Thank you operator, and thank you.
For the questions and thanks to everyone for participation in the call this quarter.
Thank you.
This concludes today's conference call. Thank you for participating you may now disconnect.