Q1 2024 IRIDEX Corp Earnings Call

Okay.

Operator: Good day, and thank you for standing by. Welcome to the Q1 2024 Aerodex Earnings Conference Call.

Iridex: Good day, and thank you for standing by and welcome to Q1 2020 for Iridex earnings Conference call.

Operator: 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 the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 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 Taylor, Investor Relations. Please go ahead.

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 the session you will need to press star one one on your telephone you will then hear an automated message advising your hand is raised to withdraw your question. Please press star one one again.

Please be advised that today's conference is being recorded.

Philip Taylor: Now like to hand, the conference over to your Speaker today trip Taylor Investor Relations. Please go ahead.

Philip Taylor: Thank you, and thank you all for participating in today's call. Joining me are David Bruce, Chief Executive Officer, and Fuad Ahmad, Interim Chief Financial Officer.

Speaker Change: 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.

Philip Taylor: Earlier today, IRIDEX released financial results for the quarter ended March 30, 2024. 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 are 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 1995. Such statements are 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.

Speaker Change: Earlier today Iridex released financial results for the quarter ended March 32020 for a copy of the press release is available on the company's website before we begin I'd like to remind you that management will make statements. During this call that include forward looking statements within the meaning of the federal Securities laws, which are made pursuant to the safe Harbor.

Speaker Change: Provisions of the private Securities Litigation Reform Act of $19 95.

Management: Any statements made during this call are 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.

Philip Taylor: 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. Here at X, this statement does not claim 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 14th, 2024. And with that, I'll turn the call over to Dave.

Management: 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.

Management: 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>.

Speaker Change: 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.

Management: This conference call contains time sensitive information and is accurate only as of the live broadcast today May 14, 2024, and with that I'll turn the call over to Dave.

David I. Bruce: Good afternoon, and thank you all for joining us today. I'll start by expanding on the strategic review discussion in the press. Iridex is actively engaged in a strategic review process, and the company is committed to pursuing a transaction or a series of transactions that will benefit our stockholders. Discussions are ongoing with multiple parties relating to both specific product lines and the entire company. The initial transaction we had referred to on our last call related to the sale of certain assets will not be going forward.

Dave: Good afternoon, and thank you all for joining us today.

Dave: I'll start by extending upon the strategic review discussion in the press release.

Management: Iridex has actively engaged in a strategic review process and the company is committed to pursuing a transaction or a series of transactions that will benefit our stockholders.

Management: Discussions are ongoing with multiple parties relating to both specific product lines or the entire company munis.

Management: The initial transaction, we had referred to on our last call related to the sale of certain assets will not be going forward. As a result of that process ending discussions with other parties are now moving to the floor. Obviously the process is dynamic and at this time there are no further updates on the status or timing of <unk>.

David I. Bruce: As a result of that process ending, discussions with other parties are now moving to the forefront. Obviously, the process is dynamic, and at this time, there are no further updates on the status or timing of potential transactions. As we've said before, we're committed to pursuing all available options to unlock value for our stockholders. Our retina business continues to enjoy a global leadership position in both market share and installed base for ophthalmic laser treatment systems used by retina specialists. Over IRIDEX's 30-year history, the company has developed products that have set the technical and clinical standards in our space.

Management: <unk> transactions.

Management: As we've said before we're committed to pursuing all available options to unlock value for our stockholders.

Management: Our retina business continues to enjoy a global leadership position in both market share and installed base.

Management: The laser treatment systems used by retina specialists over Iridex is 30 year history. The company has developed products that have set the technical and clinical standards in our space. We recently refreshed the portfolio with the launch of the new Pascal laser scanning platform with micro pulse capability and have followed that.

David I. Bruce: We recently refreshed the portfolio with the launch of the new Pascal laser scanning platform with micropulse capability and have followed that with the current rollout of our new single-spot platform. For glaucoma, we are the leading provider of non-incisional transcleral laser treatment. This began with the G-Probe cyclophotocoagulation treatment for late-stage glaucoma patients and has extended to include our micropulse transclerol laser therapy for moderate to advanced-stage glaucoma.

Management: With the current rollout of our new single spot platform.

Management: In glaucoma, we've been the leading provider of non decisional Trans scleral laser treatment.

Management: It began with the G probe cyclical photo coagulation treatment for late stage glaucoma patients and has extended to include our micro pulse translator laser therapy for moderate to advanced stage glaucoma patients since launching <unk>, we have driven adoption by developing clinical evidence in real world users.

David I. Bruce: Since launching MPTLT, we've driven adoption by developing clinical evidence and real-world user success to steadily expand our worldwide market presence to over 2,000 glaucoma laser consoles and delivered over 250,000 single-use probes. Notwithstanding the current market headwinds that are impacting many capital equipment companies, we remain focused on executing our business line growth strategies to drive further adoption and utilization of both our retina and glaucoma technology. Together, our product portfolio is globally established, with thousands of ophthalmic care providers around the world using our technology daily to treat their patients.

Management: <unk> to steadily expand our worldwide market presence to over 2000, glaucoma laser consoles and delivered over 250000 single use probes.

Management: Notwithstanding the current market headwinds that are impacting many capital equipment companies. We remain focused on executing our business line growth strategies to drive further adoption and utilization of both our retina and glaucoma technologies together our product portfolio is globally established with thousands of.

Management: Dominic care providers around the world.

Management: Using our technology daily to treat their patients. We believe this portfolio on body has significant value and we are pursuing strategies to realize this value for stockholders.

David I. Bruce: We believe this portfolio embodies significant value, and we're pursuing strategies to realize this value for stock. I'll turn now to a brief discussion of business developments in the first quarter. Total revenue was $11.8 million.

Management: I'll turn now to a brief discussion of business developments in the first quarter.

Speaker Change: Total revenue was $11 $8 million.

David I. Bruce: Well, we saw some of the market firming we had been expecting. Generally, longer sales cycles persisted into the first quarter, and we also experienced some end-of-quarter capital equipment purchase deferrals. So far, we're seeing additional firming in the second quarter, as well as indications that a good portion of the orders that have been queuing up are expected to shift during the quarter. However, solid growth from the sale of PASCAL scanning laser systems and G6 probes internationally was offset by the deferrals and resulting revenue declines of other providers.

Speaker Change: While we saw some of the market firming, we had been expecting generally longer sales cycles persisted into the first quarter and we also experienced some end of quarter capital equipment purchase deferrals.

Speaker Change: So far we're seeing additional firming in the second quarter as well as indications that a good portion of the orders that have been queuing up are expected to ship during the quarter.

Speaker Change: Solid growth from the sale of Pascal scanning laser systems and <unk> probes internationally was offset by the deferrals and resulting revenue declines of other products.

David I. Bruce: While the period of capital equipment softness has extended longer than we anticipated, Airdex's position in our markets remains strong based on the differentiated features and clinical evidence supporting our technology. Our refreshed retina portfolio, which includes the new Iridex 532 and 577 single spot laser platform, is generating customer interest that we expect to boost revenues in upcoming quarters. Plus, further recovery driven by stabilized reimbursement for glaucoma procedures supports improved G6 probe In glaucoma, Cyclo G6 revenue was $3.0 million in the first quarter of 2023.

Speaker Change: While the period of capital equipment softness has extended longer than we anticipated iridex is positioned in our markets remains strong based on the differentiated features and clinical evidence supporting our technology.

Speaker Change: Our refreshed retina portfolio, which includes the new Iridex $5 32, and $5 77 single spot laser platforms is generating customer interest that we expect to boost revenues in upcoming quarters.

Speaker Change: Further recovery driven by stabilized reimbursement for glaucoma procedures supports improved <unk> probe sales.

Speaker Change: In glaucoma cyclone <unk> revenue was $3 million compared to $3 7 million in the first quarter of 2023.

David I. Bruce: We sold 13,300 G6 probes, representing sequential growth over the fourth quarter but a decrease compared to the prior year, which, as you know, was before the MACs created reimbursement concerns with their issuances and then withdrawals of their LCDs. Generally, we experience some seasonality that usually results in Q1 coming in sequentially lower than Q4.

Speaker Change: We sold 13300, <unk> probes, representing sequential growth over the fourth quarter, but a decrease compared to the prior year.

Speaker Change: As you know was before the Max created reimbursement concerns with their issuances and then withdrawals of their LCD.

Speaker Change: Generally we experienced some seasonality that usually results in Q1 coming in sequentially lower than Q4.

David I. Bruce: U.S. probe sales are moving back toward their prior order rates, while G-6 system councils continue to be lighter, indicating there remains concern in the market over the possibility of another round of LCDs. While we acknowledge the concern, we believe EIRDC successfully defended its procedure reimbursement last year, and that it's therefore less likely that any new effort to restrict MIGs reimbursement will set back our well-established and proven non-incisional glaucom In our retina segment, product revenue was $6.8 million, a decrease of 6% compared to the first quarter of 2023.

Speaker Change: U S probe sales are moving back toward their prior order rates, while <unk> system consoles continue lighter, indicating there remains concern in the market over the possibility of another round of Ltvs.

Speaker Change: While we acknowledge the concern.

Speaker Change: We believe Iridex successfully defended its procedure reimbursement last year and Thats, therefore, less likely that any new effort to restrict makes reimbursement will set back on our well established and proven non institutional glaucoma laser procedures.

Speaker Change: In our retina segment product revenue was $6 8 million a decrease of 6% compared to the first quarter of 2023.

David I. Bruce: Overall, we saw strong growth in sales of PASCAL scanning laser systems worldwide, offset by the longer sales cycles and equipment purchase deferral. As I mentioned earlier, the recovery from these deferrals appears to be continuing here in the second quarter, and we're seeing firming of system orders. Plus, we're comfortable that we have a supply chain adequate to fulfill them. To conclude, we expect continued improvement in the environmental factors that have been negatively affecting the business over the past several quarters.

Speaker Change: Overall, we saw strong growth in sales of Pascal scanning laser systems worldwide offset by the longer sales cycles and equipment purchase deferrals.

Speaker Change: As I mentioned earlier the recovery from these deferrals appears to be continuing here in the second quarter and we're seeing firming of the system orders plus we're comfortable we have a supply chain adequate to fulfill them.

Speaker Change: To conclude we expect continued improvement in the environmental factors that have been negatively affecting the business over the past several quarters.

David I. Bruce: Receiving concerns around reimbursement should support recovering us glaucoma procedures and probe sales, and improving capital equipment trends, especially taking advantage of our opportunity with the new Pascal scanning and single spot systems, should support a growth trajectory in our retina. With that, I will turn the call over to Fuad.

Speaker Change: Receding concerns around reimbursement should support recovering U S glaucoma procedures and probe sales.

Speaker Change: An improving capital equipment trends, especially taking advantage of our opportunity with the new Pascal scanning and single spot systems should support a growth trajectory in our retina business.

Flood: With that I will turn the call over to flood.

Flood: Okay.

Fuad Ahmad: Thank you, Dave. Good afternoon, everyone. And thank you for joining us today.

David I. Bruce: Thank you David Good afternoon, everyone and thank you for joining us today I would like to begin by reviewing our financial performance for the first quarter ended March 32024.

Fuad Ahmad: I would like to begin by reviewing our financial performance for the first quarter ended March 30, 2024. Total revenue for the first quarter of fiscal 2024 was $11.8 million, down $1.9 million from the prior year period. The declines are primarily driven by the loss of royalty revenue and continued softness in the capital of corporate purchases, resulting in lower system sales, along with the lingering Medicare Reimbursement Uncertainty and a Strong Seasonality Impacting Echolocoma Procedures and System Sales.

David I. Bruce: Total revenue for the first quarter of fiscal 2024 was $11 8 million down $1 9 million from the prior year period the.

Flood: The declines are primarily driven by the loss of royalty revenue and continued softness in the capital equipment purchases, resulting in lower system sales along with the lingering.

Flood: Medicare reimbursement uncertainty in a strong is merely seasonality impacting our glaucoma procedures and system sales.

Fuad Ahmad: The product level total revenue from the Cyclo G6 product family in the first quarter was $3 million, down $3.7 million compared to the same period in 2020. However, we sold 13,300 Cyclo G6 probes in the first quarter, representing an increase.

Flood: The product level total revenue from psychology, six product family in the first quarter was $3 million down $3 7 million compared to the same periods in 2023.

Flood: We sold 13300 <unk> probes in the first quarter, representing an increase.

Fuad Ahmad: 4% sequentially from the fourth quarter of 2023, led by strength in international probe sales. However, the growth was offset by stronger seasonality and lingering reimbursement uncertainty that led to a decline of 10% compared to the first quarter of 2023. We also note that the first quarter of 2023 was also a particularly strong, comparable period for our glaucoma laser probes and systems.

Flood: Up 4% sequentially from the fourth quarter of 23% led by strength in the international probe sales.

Flood: The growth was offset by a stronger seasonality and lingering reimbursement uncertainty faced that led to a decline of 10% compared to the first quarter of 2023.

Flood: We also note that the first quarter of 2023 was also particularly strong comparable periods for our glaucoma laser probes and systems.

Fuad Ahmad: We sold 22 Cyclo G6 systems in the quarter compared to 35 in the fourth quarter and 61 in the prior year period. The decline was largely due to longer sales cycles and capital equipment purchase deferrals, as well as reimbursement concerns in the U.S. Our retina product revenue in Q1 was $6.8 million, a decrease of 6% compared to the prior year period. The decline was driven primarily by lower medical and surgical system sales, partially offset by higher Pascal system revenue.

Flood: We sold 22 stack logistics systems in the quarter compared to 35% in the fourth quarter and 61 in the prior year period.

Flood: The decline was largely due to the longer sales cycles and capital equipment purchase deferrals as well as the reimbursement concerns in the U S.

Flood: Our retina product revenue in Q1 was $6 8 million a decrease of 6% compared to the prior year period.

Flood: The decline was driven primarily by lower medical and surgical system sales.

Flood: The offset by higher passenger Pascal system revenue.

Fuad Ahmad: Other revenue, which includes royalties, services, and other legacy products, decreased to $2 million in the first quarter of 2024 from $2.8 million in the first quarter of 2023. The decline was driven by decreased royalties due to the expiration of licensed patents and lower service revenue. Gross profit for the first quarter of 2024 was $4.5 million compared to $5.9 million in the prior year period. Gross margin was 37.9% compared to 43.3% in the first quarter of 2023.

Flood: Other revenue, which includes royalties services and other legacy products decreased to $2 million in the first quarter from 2024 from $2 8 million in the first quarter of 'twenty three.

Speaker Change: The decline was driven by a decrease royalties due to exploration license patents and lower service revenue.

Flood: Gross profit for the first quarter of 2024 was $4 5 million compared to $5 9 million in the prior year period.

Flood: Gross margin was 37, 9% compared to 43, 3% in the first quarter of 2023.

Fuad Ahmad: The decline in gross margin was the result of lower overhead absorption on a smaller revenue base and a loss of royalty revenue. Operating expenses in the first quarter of 2024 were $7.8 million, a decrease compared to $8.3 million in the same period last year. The decrease in operating expenses was a result of planned cost reduction initiatives, partially offset by a $400,000 increase in expenses related to the strategic review process. Our net loss in the first quarter of 2024 was $3.5 million or $0.25 per share compared to a net loss of $2.1 million or $0.13 per share for the same period in 2023.

Flood: The decline in gross margin was a result of lower overhead absorption on a smaller revenue base and a loss of royalty revenue.

Flood: Operating expenses in the first quarter of 2024 were $7 8 million a decrease compared to $8 3 million in the same period last year. The decrease in operating expenses was a result.

Flood: Plant cost reduction cost reduction initiatives, partially offset by 400000 increase in expenses related to the strategic review process.

Flood: Our net loss in the first quarter was 20% in the first quarter of 2024 was $2 5 million or <unk> 25 per share compared to a net loss of $2 1 million or <unk> 13 per share for the same period in 2023.

Flood: Okay.

Fuad Ahmad: Now on to our cash position and cash flows. Cash and cash equivalents total $5.4 million as of March 30, 2024. The net cash reduction in the quarter was $1.6 million. The first quarter is typically higher quarterly cash usage given the timing of certain expenses, including annual compensation changes. We will continue to manage our capital prudently, including our decreased operating expenses and to support our strategic review and future operations. With that, David and I would like to turn the call over to the operator for questions. Operator?

Flood: Now on to our cash position and cash flows cash and cash equivalents totaled $5 4 million as of March 31 March 30, <unk> 2024.

Flood: Net cash reduction in the quarter was $1 6 million.

Flood: The first quarter is typically higher higher quarterly cash usage, given the timing of certain expenses, including annual compensation changes.

Flood: We will continue to manage our capital prudently, including our decreased.

Flood: Decreased operating expenses and to support our strategic review and future operations.

Flood: That David and I would like to turn the call over to the operator for questions operator.

Operator: Thank you. As a reminder, to ask a question, please press star 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A list. Our first question comes from the line of Thom Stephan from Stiefel.

Speaker Change: Thank you.

Speaker Change: As a reminder to ask a question. Please press star one to one on your telephone and wait for your name to be announced towards the draw. Your question. Please press star one one again.

Speaker Change: Please standby, while we compile the Q&A roster.

Speaker Change: Our first question comes from the line of Tom Stefan from Stifel.

Thomas M. Stephan: Great. Hey guys, thanks for the questions. I'll start off with the strategic review. Dave, maybe you can elaborate on what happened with the asset sale, which I guess is now off the table based on what you're willing to share. I guess I'm just curious how we should think about this in the context of other future potential transactions. Is it anything related to the M&A appetite? Any more color you'd be willing to share? Yeah. Hi Tom.

Speaker Change: Great Hey, guys. Thanks for the questions.

Speaker Change: Start off with the strategic review.

Speaker Change: Dave maybe if you can elaborate on what happened with the asset sale that I guess is now off the table with what youre willing to share I.

Speaker Change: I guess I'm just curious how we should think about this in the context of other.

Speaker Change: Future potential transactions is there anything related to M&A appetite.

Speaker Change: Any more color you'd be willing to share.

David I. Bruce: Yeah, hi Tom. Thanks for the question. We were in conversations and serious about reaching toward that agreement. Ultimately, the two parties didn't agree on the terms to complete that transaction. These things happen. Our focus on uncovering strategic value has not changed at all. We have other parties with which we're discussing, and we intend to focus on those.

Thomas M. Stephan: Yes, Hi, Tom Thanks for the question yes.

Speaker Change: As at the time, we commented on.

Speaker Change: On the last earnings call. We believe the terms were converging toward an agreement.

Speaker Change: <unk>.

Speaker Change: We were.

Speaker Change: In conversations and serious about reach.

Speaker Change: Reaching toward that agreement.

Speaker Change: Ultimately the two parties didn't agree on the terms to complete that transaction. These things happen as not changed at all our focus on uncovering strategic value and we have.

Speaker Change: Other parties with which we're discussing and we intend to focus on those now.

Speaker Change: Got it that's helpful and then shifting to.

David I. Bruce: And then, shifting to G6, the probes were a bit above us, and I think I'm arriving at flat utilization quarter over quarter, which is a nice stabilization. Dave, maybe you can elaborate a bit on the durability of the strength OUS. I believe that was the driver in the quarter and then how we should, I guess, be thinking about a potential rebound here in the US.

Speaker Change: G six the approach or a bit above us.

Speaker Change: I think I'm, arriving at flat utilization quarter over quarter, which is a nice stabilization, Dave maybe if you can elaborate a bit on the durability of the strength of U S. I believe that was the driver in the quarter and then how we should be thinking about a potential rebound here in the U S.

David I. Bruce: Yeah, so compared to the prior year, we had some strength in international, and compared to the prior quarter, we had strength in international. If you recall from our earnings announcement, we talked about a softness in inventory, replenishment, essentially a reduction in inventories by our international distributors across the board, which included pro. And so the strength versus the first quarter of 23 and the strength versus the fourth quarter, we think, reflects solid international demand and use of Pro.

Speaker Change: Yes, so compared to the prior year, we had some strength in international and compared to the prior quarter, we had strength in international if you recall from our earnings announcement, we've talked about.

Dave: Softness in inventory replenishment it was essentially a reduction in inventories by our international distributors across the board, which included probes and so the strength versus the first quarter of 'twenty, three and the strength versus the versus the fourth quarter. We think reflects solid international.

Dave: Demand in use of probes domestically.

David I. Bruce: Domestically, we did see some relative softness compared to the first quarter of 2023 on G6 probes. That was probably one of the last quarters before the initial LCD announcements occurred. And, as you know, the final announcement really came out during the fourth quarter. So we had some seasonal softness from the fourth quarter to the first quarter, reflecting typical seasonality. It was roughly in line with that typical seasonal reduction.

Dave: Domestically, we did see some relative softness compared to the first quarter of 2023 on <unk> probes.

Speaker Change: That was probably one of the last quarters before the initial LCD announcements occurred and as you know the.

Speaker Change: The final announcement really came out.

Speaker Change: During the fourth quarter.

Speaker Change: So we had some seasonal softness from fourth quarter to first quarter.

Speaker Change: Reflecting typical seasonality.

Speaker Change: Roughly in line with that typical seasonal reduction so we feel like the usage has supported our existing users continue to use but we are.

David I. Bruce: So we feel like the usage is supported, our existing users continue to use it, but we are seeing relatively slow movement, as reflected by system sales, toward new adoption. I think there are still some lingering concerns that the MACs will reintroduce. And while we don't discount that likelihood, we think our ability to defend, as you recall, when LCDs came out, we appealed and actually got a correction even before the effective date and the ultimate withdrawal of those, So we think our position on reimbursement this time around with LCDs will be strong, but customers at this point, and potential adopters are taking a wait-and-see edge.

Speaker Change: Seeing relatively slow movement.

Speaker Change: As reflected by system sales.

Speaker Change: <unk>.

Speaker Change: Towards new adoption I think there are still some lingering concerns that.

Speaker Change: The Max will reintroduce.

Speaker Change: And.

Speaker Change: While we we don't discount that likelihood.

Speaker Change: We think our ability to defend as you recall when.

Speaker Change: Ltd's came out we appealed and actually got a correction even before the effective date.

Speaker Change: And the ultimate withdrawal of those Ltvs. So we think our position on reimbursement at this time around with LCD will be strong, but I think.

Speaker Change: Customers at this point and potential adopters.

Speaker Change: Our.

Speaker Change: Taking a wait and see attitude.

David I. Bruce: Okay, got it. And your customers have kind of communicated that the LCD uncertainty is maybe what's holding them back from either purchasing a new system or using it.

Speaker Change: Okay got it and your customers have kind of communicated that the LCD uncertainty is maybe what's holding them back from either purchasing a new system or using it.

David I. Bruce: Well, you know, we have some regions where, in the prior round, those MACs did not have LCDs, and we're seeing purchases and adoption in some of those areas, and others less so. There's a significant focus by administrators on how many procedures are gonna be done, what's the doctor's commitment to using them, and a question around what's going to happen longer term. And I think, you know, that's just causing people not to rush to, [inaudible]

Speaker Change: Well, we we have some regions where.

Speaker Change: The prior round.

Speaker Change: Those Max did not have LCD, and we're seeing purchases and adoption in some of those areas.

Speaker Change: And and the others.

Speaker Change: Less strong.

Speaker Change: Significant focus by administrators.

Speaker Change: How many procedures are going to be done.

Speaker Change: What's the doctor's commitment to us.

Speaker Change: And.

Speaker Change: A question around.

Speaker Change: What's going to happen longer term and I think that's just causing people not to.

Speaker Change: Russ too.

Speaker Change: Purchase and wait and see how things unfold, obviously, we we have arguments in our favor that we.

Speaker Change: Convey in those situations.

Speaker Change: And are continuing to work to attempt to drive that business forward.

Thomas M. Stephan: Okay, great. And then just on the outlook for 2024, I don't believe you guided last quarter, just given there was a potential asset sale coming soon. But now that that's off the table, I guess it's the normal course of business. So can you help us with how we should be modeling the rest of the year in terms of revenue? Even directionally? Should we be up? Should we be flat? Any color on 2024 revenue guidance? You know,

Speaker Change: Okay, Great and then just on the outlook for 2024.

Speaker Change: I don't believe you guided last quarter, just given there was a potential asset sale coming soon but now that that's off the table I guess, it's normal course of business.

Speaker Change: So can you help us with how we should be modeling the rest of the year on revenue.

Speaker Change: Even directionally should we be up should we be flat.

Speaker Change: Any color on 2020 for revenue guidance now that we're sort of back to normal course of business.

David I. Bruce: Yeah, you know, we're still focused on executing on the strategic alternatives and having those discussions and, you know, seriously moving them forward at a rate that they can move. Unknown, potentially transacting, you know, incoming quarters.

Speaker Change: Yes.

Speaker Change: We're still focused on.

Speaker Change: <unk> on the strategic alternatives and having those discussions and see.

Speaker Change: Seriously moving them forward at a rate that they can they can move and.

David I. Bruce: And so, you know, we're still focused on that priority with, you know, a clear, additional focus on supporting and driving the business at hand. We do think there's recovery occurring. And, you know, I alluded to some strength.

Speaker Change: Potentially transacting in.

Speaker Change: Coming quarters, and so we're still focused on that priority with with.

Speaker Change: Clear.

Speaker Change: Additional focus on supporting and driving the business at hand.

Speaker Change: We do think theres recovery occurring in.

Speaker Change: I alluded to some strength.

David I. Bruce: Continued strengthening in the second quarter and an observation that systems are, orders are firming up. We still have, we're only halfway into the quarter, and a lot of capital equipment decisions get made late in the quarter. So, you know, there's still some variability baked in, even as we see enhanced recovery now. So, you know, if those trends continue, that will guide us toward reestablishing growth. And if reimbursement holds, I think that uncertainty will subside, and we can see, you know, further adoption and broader usage by existing customers on the glaucoma side. So I think the environment is setting us up for that growth. We're not forecasting, specifically, quarterly revenue or full year revenue at this stage, but I think that's what our trended anticipation is.

Speaker Change: Continued strengthening in the second quarter.

Speaker Change: An observation that systems are.

Speaker Change: Orders are firming up.

Speaker Change: We still have we're only halfway into the quarter and a lot of capital equipment decisions get made late in the quarter. So.

Speaker Change: There's still some variability baked in even as as we see.

Speaker Change: Enhanced.

Speaker Change: Covering now so if those trends continue that guide us toward reestablishing growth and if.

Speaker Change: Reimbursement holds I think that uncertainty.

Speaker Change: Sides and we can see.

Speaker Change: Further adoption and broader usage by existing customers on the glaucoma side. So I think the environment is setting us up for that growth, we're not forecasting spa.

Speaker Change: Specifically.

Speaker Change: Quarterly revenue or full year revenue at this stage, but I think thats.

Speaker Change: Our trended anticipation.

Thomas M. Stephan: Okay, got it. And then last one for me, kind of related to the balance sheet, Dave or Fuad, you know, how should we be thinking about the cash balance on a quarter to quarter basis for the remainder of 2024, just as we refine our models? And as a follow-up to that, accounts payable, I saw was up a pretty good clip quarter over quarter. Just wondering if there's anything to call out there. Thanks.

Speaker Change: Okay got it and then last one for me kind of a similar line of questions but.

Speaker Change: Related to the balance sheet.

Speaker Change: Dave or how should we be thinking about the cash balance on a quarter to quarter basis for the remainder of 2024, just as we refine our models and as a follow up to that accounts payable I saw was up a pretty good clip quarter over quarter. Just wondering if there's anything to call out there. Thanks.

Fuad Ahmad: Yeah, so let me, let me start and then Dave can chime in with any additional color. So, you know, last year, we spent, we used approximately $7 million in cash. And towards the middle of last year, we actually began the process of rationalizing costs and operating expenses, and you'll see a kind of full realization of those cost savings in fiscal 2024. So we expect our cash burn to be materially lower in 2024 than it was in 2023, based on the actions that we took last year.

Speaker Change: Yes, So let me.

Speaker Change: Let me start and then Dave can chime in with any additional color. So.

Speaker Change: Last year we.

Speaker Change: We spent we used approximately $7 million of cash and towards the middle of last year. We actually began the process of rationalizing cost operating <unk> operating expenses.

Speaker Change: And you'll see a kind of a full realization of those.

Speaker Change: Cost savings in fiscal 2024, so we expect our <unk>.

Speaker Change: Cash burn is going to be materially lower in 2020 forward than it was in 2023 based on.

Fuad Ahmad: And obviously, we continue to look at efficiencies in our model. And, you know, I expect that we'll continue to refine that throughout 2024. In terms of the, and so, that's where we are for 2024. In terms of the quarterly stuff, you know, Q1, we used approximately $1.6 million. It was typically, usually is a little higher cash burn for us at the beginning of the year for some of the investments we have to make at the beginning.

The actions that we took last year.

Speaker Change: And obviously, we continue to look at.

Speaker Change: Efficiencies in our in our model.

Speaker Change: Jim.

Jim: I expect that we will.

Jim: We will continue to refine that throughout.

Jim: Throughout 2024.

Speaker Change: Terms of the.

Speaker Change: And so that's where we are for 2024 in terms of.

Speaker Change: The quarterly stuff Q.

Speaker Change: Q1.

Speaker Change: We used approximately $1 6 million it was typically.

Speaker Change: It usually is a little higher cash burn for us at the beginning of the year for some of the.

Speaker Change: Investments, we have to make at the at the beginning we expect that.

Fuad Ahmad: We expect that, you know, in future periods, it should be more muted, you know, given as we convert inventory into cash and some of the other steps that we're taking. But I think it should be in that million and a million and a half to $2 million.

Speaker Change: In the future periods it should.

Speaker Change: It should be more muted.

Speaker Change: Given.

Given as we convert.

Speaker Change: Inventory into cash and.

Speaker Change: Some of the other steps that we're taking but I think it's it should be in that.

Speaker Change: $5 million to $10 million range.

David I. Bruce: Yeah, I'll just add specifically the boost in payables really is in response to some inventory increases that we had and, as well as we're experiencing, as I think many others are, push-outs on our receivables as well. So we're trying to balance our cash position by managing payables more in line with longer receivables, and then on top of that, we had a late-quarter shift in the mix of products So some products that we brought in to fulfill orders ended up not going out on orders, and others We scrambled around to generate systems and ship those toward the end of the quarter.

Speaker Change: Yes, I'll just add.

Speaker Change: Specifically the boost in payables.

Speaker Change: It really is in response to some <unk>.

Speaker Change: Inventory increases that we had.

Speaker Change: And as well as we are experiencing as I think many others are.

Speaker Change: Push outs on our receivables as well so we're trying to balance our cash position by managing payables more in line with longer receivables and then on top of that we had.

A late quarter shift of the mix of products. So some product that we brought in to fulfill orders ended up not going out on orders and others.

Speaker Change: We scrambled around to generate.

Speaker Change: Systems and ship those towards the end of the quarter so that.

David I. Bruce: So the combination of the inventory that we bought plus the last minute really caused our payables to be a fair amount larger than they had typically been running. I think, in contrast to the prior quarter, they were somewhat lower. And so it looks maybe like a bigger jump than, that is, would be smoothed out on a quarterly basis.

Speaker Change: The combination of the inventory that we bought plus.

Speaker Change: <unk> really.

Speaker Change: Caused our payables to be a fair amount larger than they had typically been running.

Speaker Change: In contrast to the prior quarter they were.

Speaker Change: Somewhat lower.

Speaker Change: And so it looks maybe like a bigger jump in.

Speaker Change: Then as.

Speaker Change: Would be smoothed out.

Speaker Change: Quarterly basis.

Thomas M. Stephan: All right, that's a helpful caller. Thanks for taking my question.

Speaker Change: Alright Thats helpful color, Thanks for taking my questions.

Speaker Change: And chip.

Operator: Thank you. At this time, I would now like to turn the conference back over to Dave Bruce for his closing remarks.

Speaker Change: Thank you at this time I would now like to turn the conference back over to Dave Bruce for closing remarks.

David I. Bruce: Thank you, operator, and thank you, everyone, for joining the call. We will remain focused on driving the business and pursuing the strategic process that we've committed to and look forward to updating you in the future.

David I. Bruce: Thank you operator.

Thank you everyone for joining the call.

Speaker Change: We will remain focused on driving the business and pursuing.

Speaker Change: Strategic process that we've committed to.

David I. Bruce: I look forward to updating you in future calls.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect. David Bruce, Unknown Executive, Philip Taylor, Unknown Executive, David Bruce, Unknown Executive, [inaudible] Unknown, and David Bruce. Thank you. Thank you.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect. David Bruce, Unknown Executive, Philip Taylor, Unknown Executive, Philip Taylor, Unknown Executive, [inaudible] ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? [inaudible] [inaudible] a story by a story by a story by a story by a story by a story by a story by a story by a story by a story by a story by a story by a story by a story by a story by Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music, Good day and thank you for standing by.

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

Speaker Change: [music].

Operator: Welcome to the Q1 2024 Aerodex 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 the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 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 Taylor, Investor Relations. Please go ahead.

Speaker Change: [music].

Philip Taylor: Thank you, and thank you all for participating in today's call. Joining me are David Bruce, Chief Executive Officer, and Fuad Ahmad, Interim Chief Financial Officer.

Philip Taylor: Earlier today, IRIDEX released financial results for the quarter ended March 30, 2024. 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 are 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 1995. Such statements are 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.

Speaker Change: [music].

Philip Taylor: 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. 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, May 14th, 2024. And with that, I'll turn the call over to Dave.

Speaker Change: Good day, and thank you for standing by and welcome to Q1 2020 for Iridex earnings Conference call.

Speaker Change: At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.

Speaker Change: To ask a question during the session you will need to press star one one on your telephone you will then hear an automated message advising your hand is raised to withdraw your question. Please press star one one again.

Speaker Change: Please be advised that today's conference is being recorded.

David I. Bruce: Good afternoon, and thank you all for joining us today. I'll start by expanding on the strategic review discussion in the press. Iridex is actively engaged in a strategic review process, and the company is committed to pursuing a transaction or a series of transactions that will benefit our stockholders. Discussions are ongoing with multiple parties relating to both specific product lines and the entire company. The initial transaction we had referred to on our last call related to the sale of certain assets will not be going forward.

I'd now like to hand, the conference over to your Speaker today trip Taylor Investor Relations. Please go ahead.

Philip Taylor: 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 March 32020 for a copy of the press release is available on the Companys.

Speaker Change: Website before we begin I'd like to remind you that management will make statements. During this call that include forward looking statements within the meaning of the federal Securities laws, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of $19 95.

Speaker Change: Any statements made during this call are 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.

Speaker Change: 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.

Speaker Change: 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.

Speaker Change: 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.

Speaker Change: This conference call contains time sensitive information and is accurate only as of the live broadcast today May 14, 2024, and with that I'll turn the call over to Dave.

David I. Bruce: As a result of that process ending, discussions with other parties are now moving to the forefront. Obviously, the process is dynamic, and at this time, there are no further updates on the status or timing of potential transactions. As we've said before, we're committed to pursuing all available options to unlock value for our stockholders. Our retina business continues to enjoy a global leadership position in both market share and installation base for ophthalmic laser treatment systems used by retina specialists.

David I. Bruce: Good afternoon, and thank you all for joining us today.

I'll start by extending upon the strategic review discussion in the press release.

David I. Bruce: Iridex has actively engaged in a strategic review process and the company is committed to pursuing a transaction or a series of transactions that will benefit our stockholders disc.

Speaker Change: Discussions are ongoing with multiple parties relating to both specific product lines or the entire company.

Speaker Change: The initial transaction, we had referred to on our last call related to the sale of certain assets will not be going forward. As a result of that process ending discussions with other parties are now moving to the floor. Obviously the process is dynamic and at this time there are no further updates on the status or timing of <unk>.

Speaker Change: <unk> transactions.

Speaker Change: As we've said before we're committed to pursuing all available options to unlock value for our stockholders.

Speaker Change: Our retina business continues to enjoy a global leadership position in both market share and installed base.

Speaker Change: <unk> laser treatment systems used by retina specialists over Iridex is 30 year history. The company has developed products that have set the technical and clinical standards.

David I. Bruce: Over IRIDEX's 30-year history, the company has developed products that have set the technical and clinical standards in our space. We recently refreshed our portfolio with the launch of the new Pascal laser scanning platform with micropulse capability and have followed that with the current rollout of our new single-spot platform. In glaucoma, we've been the leading provider of non-incisional transcleral laser treatment. This began with the G-Probe cyclophotocoagulation treatment for late-stage glaucoma patients and has extended to include our micropulse transglial laser therapy for moderate to advanced-stage glaucoma patients.

Speaker Change: Our space, we've recently refreshed the portfolio with the launch of the new Pascal laser scanning platform with micro pulse capability and have followed that with the current rollout of our new single spot platform.

Speaker Change: In glaucoma, we've been the leading provider of non <unk> laser treatment.

Speaker Change: This began with the G pro cyclical photo coagulation treatment for late stage glaucoma patients and has extended to include our micro pulse Transco laser therapy for moderate to advanced stage glaucoma patients since launching <unk>, we have driven adoption by developing clinical evidence in real world users.

David I. Bruce: Since launching MPTLT, we've driven adoption by developing clinical evidence and real-world user success, steadily expanding our worldwide market presence to over 2,000 glaucoma laser consoles and delivered over 250,000 single-use probes. Notwithstanding the current market headwinds that are impacting many capital equipment companies, we remain focused on executing our business line growth strategies to drive further adoption and utilization of both our retina and glaucoma technology. Together, our product portfolio is globally established, with thousands of ophthalmic care providers around the world using our technology daily to treat their patients.

Speaker Change: Excess to steadily expand our worldwide market presence to over 2000, glaucoma laser consoles and delivered over 250000 single use probes.

Speaker Change: Notwithstanding the current market headwinds that are impacting many capital equipment companies. We remain focused on executing our business line growth strategies to drive further adoption and utilization of both our retina and glaucoma technologies.

Speaker Change: Gather our product portfolio is globally established with thousands of ophthalmic care providers around the world using our technology daily to treat their patients. We believe this portfolio on body has significant value and we are pursuing strategies to realize this value for stockholders.

David I. Bruce: We believe this portfolio embodies significant value, and we're pursuing strategies to realize this value for stock. I'll turn now to a brief discussion of business developments in the first quarter. Total revenue was $11.8 million.

Speaker Change: I'll turn now to a brief discussion of business developments in the first quarter.

Speaker Change: Total revenue was $11 $8 million.

David I. Bruce: Well, we saw some of the market firming we had been expecting. Generally, longer sales cycles persisted into the first quarter, and we also experienced some end-of-quarter capital equipment purchase deferrals. So far, we're seeing additional firming in the second quarter, as well as indications that a good portion of the orders that have been queuing up are expected to shift during the quarter. Solid growth from the sale of Pascal scanning laser systems and G6 probes internationally was offset by the deferrals and resulting revenue declines of other, While the period of capital equipment softness has extended longer than we anticipated, Eridex's position in our markets remains strong based on the differentiated features and clinical evidence supporting our technology.

Speaker Change: While we saw some of the market firming, we had been expecting generally longer sales cycles persisted into the first quarter and we also experienced some end of quarter capital equipment purchase deferrals.

Speaker Change: So far we're seeing additional firming in the second quarter as well as indications that a good portion of the orders that have been queuing up are expected to ship during the quarter.

Speaker Change: Solid growth from the sale of Pascal scanning laser systems and <unk> probes internationally was offset by the deferrals and resulting revenue declines of other products.

Speaker Change: While the period of capital equipment softness has extended longer than we anticipated iridex is positioned in our markets remains strong based on the differentiated features and clinical evidence supporting our technology.

David I. Bruce: Our Refreshed Retina Portfolio, which includes the new Iridex 532 and 577 single-spot laser platform, is generating customer interest that we expect to boost revenues in the coming quarters. Plus, further recovery driven by stabilized reimbursement for glaucoma procedures supports improved G6 protein. In Glaucoma, Cyclo G6 revenue was $3.0 million compared to $3.7 million in the first quarter of 2023. We sold 13,300 G6 probes, representing sequential growth over the fourth quarter but a decrease compared to the prior year, which, as you know, was before the Macs created reimbursement concerns with their issuances and then withdrawals of their LCD. Generally, we experience some seasonality that usually results in Q1 coming in sequentially lower than Q4.

Speaker Change: Our refreshed retina portfolio, which includes the new <unk> $5 32, and $5 77 single spot laser platforms is generating customer interest that we expect to boost revenues in upcoming quarters.

Speaker Change: Plus further recovery driven by stabilized reimbursement for glaucoma procedures supports improved <unk> probe sales.

Speaker Change: In glaucoma Cyclo <unk> revenue was $3 1 million compared to $3 7 million in the first quarter of 2023.

Speaker Change: We sold 13300, <unk> probes, representing sequential growth over the fourth quarter, but a decrease compared to the prior year, which as.

Speaker Change: As you know was before the Max created reimbursement concerns with their issuances and then withdrawals of their ltvs.

Speaker Change: Generally we experienced some seasonality that usually results in Q1 coming in sequentially lower than Q4.

David I. Bruce: U.S. probe sales are moving back toward their prior order rates, while G-6 system councils continue to be lighter, indicating there remains concern in the market over the possibility of another round of LCDs. While we acknowledge the concern, we believe EIRDC successfully defended its procedure reimbursement last year, and that it's therefore less likely that any new effort to restrict MIGs reimbursement will set back our well-established and proven non-incisional glaucom In our retina segment, product revenue was $6.8 million, a decrease of 6% compared to the first quarter of 2023.

Speaker Change: U S probe sales are moving back toward their prior order rates, while <unk> system consoles continue lighter, indicating there remains concern in the market over the possibility of another round of Ltvs.

Speaker Change: While we acknowledge the concern.

Speaker Change: We believe Iridex successfully defended its procedure reimbursement last year and Thats, therefore, less likely that any new effort to restrict makes reimbursement will set back on our well established and proven non institutional glaucoma laser procedures.

Speaker Change: In our retina segment product revenue was $6 8 million a decrease of 6% compared to the first quarter of 2023.

David I. Bruce: Overall, we saw strong growth in sales of PASCAL scanning laser systems worldwide, offset by the longer sales cycles and equipment purchase deferral. As I mentioned earlier, the recovery from these deferrals appears to be continuing here in the second quarter, and we're seeing firming of system orders. Plus, we're comfortable that we have a supply chain adequate to fulfill them. To conclude, we expect continued improvement in the environmental factors that have been negatively affecting the business over the past several quarters.

Speaker Change: Overall, we saw strong growth in sales of Pascal scanning laser systems worldwide offset by the longer sales cycles and equipment purchase deferrals.

Speaker Change #100: As I mentioned earlier the recovery from these deferrals appears to be continuing here in the second quarter and we're seeing firming of the system orders plus we're comfortable we have a supply chain adequate to fulfill them.

Speaker Change #101: To conclude we expect continued improvement in the environmental factors that have been negatively affecting the business over the past several quarters.

David I. Bruce: Receiving concerns around reimbursement should support recovering us glaucoma procedures and probe sales, and improving capital equipment trends, especially taking advantage of our opportunity with the new Pascal scanning and single spot systems, should support a growth trajectory in our retina. With that, I will turn the call over to Fuad.

Speaker Change #101: Receding concerns around reimbursement should support recovering U S glaucoma procedures and probe sales.

Speaker Change #102: An improving capital equipment trends, especially taking advantage of our opportunity with the new Pascal scanning and single spot systems should support a growth trajectory in our retina business.

Speaker Change #103: With that I will turn the call over to <unk>.

Fuad Ahmad: Thank you, Dave. Good afternoon, everyone, and thank you for joining us today.

Speaker Change #103: Okay.

David: Thank you David Good afternoon, everyone and thank you for joining us today I would like to begin by reviewing our financial performance for the first quarter ended March 32020.

Fuad Ahmad: I would like to begin by reviewing our financial performance for the first quarter ended March 30, 2024. Total revenue for the first quarter of fiscal 2024 was $11.8 million, down $1.9 million from the prior year period. The declines are primarily driven by the loss of royalty revenue and continued softness in the capital of corporate purchases, resulting in lower system sales, along with the lingering Medicare Reimbursement Uncertainty and strong seasonality impacting echolocoma procedures and system sales.

Speaker Change #105: Total revenue for the first quarter of fiscal 2024 was $11 8 million down $1 9 million from the prior year period the.

Speaker Change #105: The declines are primarily driven by the loss of royalty revenue and continued softness in the capital equipment purchases, resulting in lower system sales along with the lingering.

Speaker Change #106: Medicare reimbursement uncertainty in a strong is merely seasonality impacting that glaucoma procedures and system sales.

Speaker Change #106: Okay.

Speaker Change #106: On the product level total revenue from cycle logistics product family in the first quarter was $3 million down $3 7 million compared to the same periods in 2023.

Fuad Ahmad: The product level total revenue from the Cyclo G6 product family in the first quarter was $3 million, down $3.7 million compared to the same period in 2023. We sold 13,300 Cyclo G6 probes in the first quarter, representing an increase of four percent sequentially from the fourth quarter of twenty three, led by strength in international probe sales. The growth was offset by stronger seasonality and a lingering reimbursement uncertainty phase that led to a decline of 10 percent compared to the first quarter of 2023. We also note that the first quarter of 2023 was also a particularly strong, comparable period for our glaucoma laser probes and systems.

Speaker Change #106: We sold 13300 <unk> probes in the first quarter, representing an increase.

Speaker Change #106: Up 4% sequentially from the fourth quarter of 'twenty three led by strength in the international probe sales.

Speaker Change #106: The growth was offset by a stronger seasonality and lingering reimbursement uncertainty that led to a decline of 10% compared to the first quarter of 2023.

Speaker Change #106: We also note that the first quarter of 2023 was also particularly strong comparable periods for our glaucoma laser probes and systems.

Fuad Ahmad: We sold 22 Cyclo G6 systems in the quarter compared to 35 in the fourth quarter and 61 in the prior year period. The decline was largely due to longer sales cycles and capital equipment purchase deferrals, as well as reimbursement concerns in the U.S. Our retina product revenue in Q1 was $6.8 million, a decrease of 6% compared to the prior year period. The decline was driven primarily by lower medical and surgical system sales, partially offset by higher Pascal system revenue.

Speaker Change #107: We sold 22 cycle logistics systems in the quarter compared to 35% in the fourth quarter and 61 in the prior year period.

Speaker Change #107: The decline was largely due to the longer sales cycles and capital equipment purchase deferrals as well as the reimbursement concerns in the U S.

Speaker Change #108: Our retina product revenue in Q1 was $6 8 million a decrease of 6% compared to the prior year period.

Speaker Change #108: The decline was driven primarily by lower medical and surgical system sales.

Speaker Change #108: The offset by higher pastor Pascal system revenue.

Fuad Ahmad: Other revenue, which includes royalties, services, and other legacy products, decreased to $2 million in the first quarter of 2024 from $2.8 million in the first quarter of 2023. The decline was driven by decreased royalties due to the expiration of licensed patents and lower service revenue. Gross profit for the first quarter of 2024 was $4.5 million compared to $5.9 million in the prior year period. Gross margin was 37.9% compared to 43.3% in the first quarter of 2023.

Speaker Change #109: Other revenue, which includes royalties services and other legacy products decreased to $2 million in the first quarter from 2024 from $2 8 million in the first quarter of 'twenty three.

Speaker Change #109: The decline was driven by a decrease royalties due to exploration license patents and lower service revenue.

Speaker Change #109: Gross profit for the first quarter of 2024 was $4 5 million compared to $5 9 million in the prior year period.

Speaker Change #109: Gross margin was 37, 9% compared to 43, 3% in the first quarter of 2023.

Fuad Ahmad: The decline in gross margin was the result of lower overhead absorption on a smaller revenue base and a loss of royalty revenue. Operating expenses in the first quarter of 2024 were $7.8 million, a decrease compared to $8.3 million in the same period last year. The decrease in operating expenses was a result of planned cost reduction initiatives, partially offset by a $400,000 increase in expenses related to the. Our net loss in the first quarter of 2024 was $3.5 million or $0.25 per share compared to a net loss of $2.1 million or $0.13 per share for the same period in 2023.

Speaker Change #110: The decline in gross margin was the result of lower overhead absorption on a smaller revenue base and a loss of royalty revenue.

Speaker Change #110: Operating expenses in the first quarter of 2024 were $7 8 million a decrease compared to $8 3 million in the same period last year. The decrease in operating expenses, but as a result the plan.

Glenn cost reduction.

Speaker Change #111: Cost reduction initiatives, partially offset by 400000.

Speaker Change #111: Increase in expenses related to the strategic review process.

Speaker Change #111: Our net loss in the first quarter was 20% in the first quarter of 2024 was $3 5 million or <unk> 25 per share compared to a net loss of $2 1 million or <unk> 13 per share for the same period in 2023.

Speaker Change #111: Okay.

Fuad Ahmad: Now onto our cash position and cash flows. Cash and cash equivalents total $5.4 million as of March 30, 2024. The net cash reduction in the quarter was $1.6 million. The first quarter is typically higher quarterly cash usage given the timing of certain expenses, including annual compensation changes. We will continue to manage our capital prudently, including our decreased operating expenses and to support our strategic review and future operations. With that, Dave and I would like to turn the call over to the operator for questions. Operator?

Speaker Change #112: Now on to our cash position and cash flows cash and cash equivalents totaled $5 4 million as of March 31 March 30, <unk> 2024.

Speaker Change #113: Net cash reduction in the quarter was $1 6 million.

Speaker Change #113: The first quarter is typically higher higher quarterly cash usage, given the timing of certain expenses, including annual compensation changes we.

We will continue to manage our capital prudently, including our decreased.

Speaker Change #114: Decreased operating expenses and to support our strategic review and future operations.

Speaker Change #115: 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, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A list. Our first question comes from the line of Thom Stephan from Stiefel.

Speaker Change #114: Operator.

Speaker Change #116: As a reminder to ask a question. Please press star one one on your telephone.

Speaker Change #117: And wait for your name to be announced toward the draw. Your question. Please press star one one again please.

Speaker Change #118: Please stand by while we compile the Q&A roster.

Speaker Change #118: Our first question comes from the line of Tom Steffen from Stifel.

Thomas M. Stephan: Great. Hey guys,

Speaker Change #119: Great Hey, guys. Thanks for the questions I'll start off with the strategic review.

Speaker Change #120: Dave maybe if you can elaborate on what happened with the asset sale that I guess is now off the table with what youre willing to share I guess I'm just curious how we should think about this in the context of other.

Speaker Change #120: Future potential transactions is there anything related to M&A appetite.

Speaker Change #120: More color you'd be willing to share.

David I. Bruce: Yeah, hi Tom. Thanks for the question. Yeah, as at the time we commented on the last earnings call, we believe the terms were converging toward an agreement, and we were in conversations and serious about reaching toward that agreement. Ultimately, the two parties didn't agree on the terms to complete that transaction. These things happen. It has not changed at all our focus on uncovering strategic value, and we have other parties with which we're discussing, and we intend to focus on those.

Thomas M. Stephan: Thanks for the questions. I'll start off with the strategic review. Dave, maybe you can elaborate on what happened with the asset sale that I guess is now off the table with what you're willing to share. I guess I'm just curious how we should think about this in the context of other future potential transactions. Is it anything related to the M&A appetite? Any more color you'd be willing to share? Yeah. Hi Tom. Thanks for the question.

David I. Bruce: Yes, Hi, Tom Thanks for the question yes.

Speaker Change #121: As at the time, we commented on.

On the last earnings call. We believe the terms were converging toward an agreement.

Speaker Change #121: <unk>.

Speaker Change #121: We were.

In conversations and serious about reaching toward debt agreement ultimately.

Speaker Change #122: Ultimately the two parties didn't agree on the terms to complete that transaction these things happen.

Speaker Change #123: It has not changed at all our focus on uncovering strategic value and we have.

Speaker Change #124: Other parties with which we're discussing and we intend to focus on those now.

Speaker Change #124: Got it that's helpful and then shifting to.

David I. Bruce: G6, the probes were a bit above us, and I think I'm arriving at flat utilization quarter over quarter, which is a nice stabilization. Dave, maybe if you could elaborate a bit on the durability of the strength OUS, I believe that was the driver in the quarter, and then how we should, I guess, be thinking about a potential rebound here in the US.

Speaker Change #125: G six approach or a bit above us.

Speaker Change #126: Thank him arriving at flat utilization quarter over quarter, which is a nice stabilization, Dave maybe if you can elaborate a bit on the durability of the strength of U S. I believe that was the driver in the quarter and then how we should be thinking about a potential rebound here in the U S.

David I. Bruce: Yeah, so compared to the prior year, we had some strength in international, and compared to the prior quarter, we had strength in international. If you recall from our earnings announcement, we talked about a softness in inventory replenishment or essentially a reduction in inventories by our international distributors across the board, which included pro. So the strength versus the first quarter.

Yes, so compared to the prior year, we had some strength in international and compared to the prior quarter, we had strength in international if you recall from our earnings announcement, we've talked about.

Speaker Change #126: Softness in inventory replenishment or essentially a reduction in inventories by our international distributors across the board, which included probes and so the strength versus the first quarter of 'twenty, three and the strength versus the versus the fourth quarter. We think reflects solid international.

David I. Bruce: 23, and the strength versus the fourth quarter, we think reflects solid international demand and use. Domestically, we did see some relative softness compared to the first quarter of 2023 on G6 probes. That was probably one of the last quarters before the initial LCD announcements occurred. And, as you know, the final announcement really came out during the fourth quarter. So we had some seasonal softness from the fourth quarter to the first quarter, reflecting typical seasonality.

Speaker Change #127: Demand in use of probes domestically.

Speaker Change #127: Domestically, we did see some relative softness compared to the first quarter of 2023 and <unk> probes.

Speaker Change #128: It was probably one of the last quarters before the initial LCD announcements occurred and as you know the final announcement really came out.

Speaker Change #128: During the fourth quarter.

Speaker Change #129: So we had.

Speaker Change #129: Some seasonal softness from fourth quarter to first quarter.

Speaker Change #129: Reflecting typical seasonality it was roughly in line with that typical seasonal reduction so we feel like the.

David I. Bruce: It was roughly in line with that typical seasonal reduction. So we feel like the usage is supported. Our existing users continue to use. But we are seeing relatively slow movement as as reflected by system sales. I think there are still some lingering concerns that the MACs will reintroduce, and while we don't discount that likelihood, we think our ability to defend, as you recall when, LCDs came out we appealed and actually got a correction even before the effective date and and the ultimate withdrawal of those So we think our position on reimbursement this time around with LCDs will be strong, but I, Customers at this point and potential adopters are taking a wait-and-see at it.

Speaker Change #130: Usage has supported our existing users continue to use but we are.

Speaker Change #131: Seeing relatively slow movement.

Speaker Change #131: As reflected by system sales.

Speaker Change #131: <unk>.

Speaker Change #132: Towards new adoption I think there are still some lingering concerns that.

Speaker Change #132: The Max will reintroduce.

Speaker Change #132: And.

Speaker Change #133: While we we don't discount that likelihood.

Speaker Change #133: We think our ability to defend as you recall when.

Speaker Change #133: Ltd's came out we appealed and actually got a correction even before the effective date.

Speaker Change #133: And the ultimate withdrawal of those Ltvs. So we think our position on reimbursement at this time around with Ltvs will be strong, but I think.

Speaker Change #134: Customers at this point and potential adopters.

<unk>.

Speaker Change #135: Taking a wait and see attitude.

David I. Bruce: Okay, got it. And have your customers kind of communicated that the LCD uncertainty is maybe what's holding them back from either purchasing a new system or using it?

Speaker Change #136: Okay got it and your customers have kind of communicated that the LCD uncertainty is maybe what's holding them back from either purchasing a new system or using it.

David I. Bruce: Well, you know, we have some regions where, in the prior round, those MACs did not have LCDs, and we're seeing purchases and adoption in some of those areas, and others less so. There's a significant focus by administrators on how many procedures are gonna be done, what's the doctor's commitment to using them, and a question around what's going to happen longer term. And I think, you know, that's just causing people not to rush to, [inaudible]

Speaker Change #137: Well, we we have some regions were.

Speaker Change #137: In the prior year around those.

Speaker Change #137: Those Max did not have LCD, and we're seeing purchases and adoption in some of those areas.

Speaker Change #138: And the others.

Less drop.

Speaker Change #139: Significant focus by administrators.

Speaker Change #140: How many procedures are going to be done.

Speaker Change #141: What's the doctor's commitment to us.

And.

Speaker Change #142: Question around.

Speaker Change #143: What's going to happen longer term and I think that's just causing people not to.

Speaker Change #143: Russ too.

Speaker Change #144: Purchase and wait and see how things unfold, obviously, we we have arguments in our favor that we.

Speaker Change #144: Convey in those situations.

Speaker Change #145: And are continuing to work to attempt to drive that business forward.

Thomas M. Stephan: Okay, great. And then just on the outlook for 2024, I don't believe you guided last quarter, just given there was a potential asset sale coming soon. But now that that's off the table, I guess it's just the normal course of business.

Speaker Change #146: Okay, Great and then just on the outlook for 2024.

I don't believe you guided last quarter, just given there was a potential asset sale coming soon but.

Speaker Change #146: Now that that's off the table I guess, it's normal course of business.

Thomas M. Stephan: So, can you help us with how we should be modeling the rest of the year on revenue? Even directionally, should we be up? Should we be flat? Any color on 2024 revenue guidance? You know, now that we're sort of back to the normal course of business.

Speaker Change #147: So can you help us with how we should be modeling the rest of the year on revenue.

Speaker Change #147: Even directionally should we be up should we be flat.

Speaker Change #147: Any color on 2020 for revenue guidance now that we're sort of back to normal course of business.

David I. Bruce: Yeah, you know, we're still focused on executing on the strategic alternatives and having those discussions and, you know, seriously moving them forward at a rate that they can move. Unknown, potentially transacting, you know, incoming quarters.

Speaker Change #147: Yes.

Speaker Change #148: We're still focused on executing.

Speaker Change #149: Executing on the strategic alternatives and having those discussions and.

Speaker Change #150: Seriously moving them forward at a rate that they can they can move and potentially.

Thomas M. Stephan: And so, you know, we're still focused on that priority with, you know, a clear additional focus on supporting and driving the business at hand. We do think there's a recovery occurring. And, you know, I alluded to some strength, continued strengthening in the second quarter and an observation that systems are, orders are firming up. We still have, we're only halfway into the quarter, and a lot of capital equipment decisions get made late in the quarter.

Speaker Change #150: Potentially transacting in.

Speaker Change #150: Coming quarters, and so we're still focused on that priority with with.

Speaker Change #150: Clear.

Speaker Change #150: Additional focus on supporting and driving the business at hand.

Speaker Change #151: We do think theres recovery occurring in.

Speaker Change #152: I alluded to some strength.

Speaker Change #152: Continued strengthening in the second quarter end.

Speaker Change #153: An observation that systems are.

Speaker Change #154: Orders are firming up.

Speaker Change #154: We still have we're only halfway into the quarter and a lot of capital equipment decisions get made late in the quarter. So.

Thomas M. Stephan: So, you know, there's still some variability baked in, even as we see enhanced, Unknown Executive, Philip Taylor, Unknown Executive, Philip Taylor, specifically, quarterly revenue or full-year revenue at this stage, but I think that's, That's our trended anticipation.

Speaker Change #154: There's still some variability baked in even as as we see.

Speaker Change #154: Enhanced.

Speaker Change #155: A recovery now so if those trends continue that guides us toward reestablishing growth and if.

Speaker Change #155: Reimbursement holds I think that uncertainty subsides, and we can see further adoption and broader usage by existing customers on the glaucoma side. So I think the environment is setting us up for that growth.

Speaker Change #156: At forecasting.

Speaker Change #156: Specifically.

Speaker Change #156: Quarterly revenue or full year revenue at this stage, but I think thats.

Speaker Change #157: Our trended anticipation.

Fuad Ahmad: Okay, got it. And then last one for me, kind of related to the balance sheet, Dave or Fuad, you know, how should we be thinking about the cash balance on a quarter to quarter basis for the remainder of 2024, just as we refine our models? And as a follow-up to that, accounts payable, I saw was up a pretty good clip quarter over quarter. Just wondering if there's anything to call out there. Thanks.

Speaker Change #158: Okay got it and then last one for me kind of a similar line of questions but.

Speaker Change #159: Related to the balance sheet.

Speaker Change #159: Dave or fraud, how should we be thinking about the cash balance.

David I. Bruce: Balance on a quarter to quarter basis for the remainder of 2024, just as we refine our models and as a follow up to that accounts payable I saw was up a pretty good clip quarter over quarter. Just wondering if there's anything to call out there. Thanks.

Fuad Ahmad: Yeah, so let me, let me start and then Dave can chime in with any additional color. So, you know, last year, we spent, we used approximately $7 million in cash. And towards the middle of last year, we actually began the process of rationalizing cost, operation, and operating expenses. And you'll see a kind of full realization of those cost savings in fiscal 2024. So we expect our cash burn is going to be materially lower in 2024 than it was in 2023, based on the actions that we took last year.

Speaker Change #160: Yes, So let me.

Speaker Change #161: Let me start and then Dave can chime in with any additional color. So.

Speaker Change #161: Last year we.

Speaker Change #162: We spent we used approximately $7 million of cash and towards the middle of last year. We actually began the process of rationalizing cost operating <unk> operating expenses.

Speaker Change #162: And you'll see a kind of a full realization of those cost savings in fiscal 2024, So we expect that.

Fuad Ahmad: And obviously, we continue to look at efficiencies in our model. And, you know, I expect we'll continue to refine that throughout 2024. In terms of, and so that's where we are for 2024. In terms of the quarterly stuff, you know, Q1, we used approximately $1.6 million. It was typically, usually is a little higher cash burn for us at the beginning of the year for some of the investments we have to make at the beginning.

Speaker Change #162: Cash burn is going to be materially lower in 2024 than it was in 2023 based on.

Speaker Change #162: The actions that we took last year and obviously, we continue to look at.

Speaker Change #163: Efficiencies in our model.

Speaker Change #163: I expect that we will.

Speaker Change #163: We'll continue to refine that throughout.

Speaker Change #163: Throughout 2024.

Speaker Change #163: In terms of.

Speaker Change #163: So that's where we are for 2020 in terms of.

Speaker Change #164: The quarterly stuff Q.

Speaker Change #164: Q1.

Speaker Change #165: We used approximately $1 6 million it was typically.

Speaker Change #166: It usually is a little higher cash burn for us at the beginning of the year for some of them.

Speaker Change #166: The investments we have to make at the at the beginning we expect that.

Fuad Ahmad: We expect that, you know, in future periods, it should be more muted, you know, given as we convert inventory into cash and some of the other steps that we're taking. But I think it should be in that million and a half to $2 million.

Speaker Change #166: In the future periods it should.

Speaker Change #166: It should be more muted.

Speaker Change #166: Given.

Speaker Change #166: Given as we convert.

Speaker Change #166: Inventory into cash.

Speaker Change #167: Some of the other steps that we're taking but I think it's it should be in that.

Speaker Change #168: $5 million to $10 million range.

David I. Bruce: Yeah, I'll just add specifically the boost in payables really is in response to some inventory increases that we had and, as well as we're experiencing, as I think many others are, push-outs on our receivables as well. So we're trying to balance our cash position by managing payables more in line with longer receivables, and then on top of that, we had a late-quarter shift in the mix of products So some products that we brought in to fulfill orders ended up not going out on orders, and others We scrambled around to generate systems and ship those toward the end of the quarter.

Speaker Change #169: Yes, I'll just add.

Speaker Change #170: Specifically the boost in payables.

Speaker Change #170: It really is in response to some <unk>.

Speaker Change #170: Inventory increases that we had.

Speaker Change #170: And as well as we are experiencing as I think many others are.

Speaker Change #170: Push outs on our receivables as well so we're trying to balance our cash position by managing payables more in line with longer receivables and then on top of that we had.

Speaker Change #170: Our late quarter shift of the mix of products. So some product that we brought in to fulfill orders ended up not going out on orders and others.

Speaker Change #171: We scrambled around to generate.

Speaker Change #171: Systems and ship those toward the end of the quarter so that.

David I. Bruce: So the combination of the inventory that we bought plus the last minute really caused our payables to be a fair amount larger than they had typically been running. I think, in contrast to the prior quarter, they were somewhat lower. And so it looks maybe like a bigger jump than, that is, would be smoothed out on a quarterly basis.

Speaker Change #171: The combination of the inventory that we bought plus the.

<unk> really.

Speaker Change #176: Caused our payables to be a fair amount larger than they had typically been running.

Speaker Change #171: In contrast to the prior quarter they were.

Speaker Change #172: Somewhat lower.

Speaker Change #173: And so it looks maybe like a bigger jump in.

Speaker Change #174: And as.

Speaker Change #175: Would be smoothed out.

Speaker Change #175: Quarterly basis.

Thomas M. Stephan: All right, that's a helpful caller. Thanks for taking my question.

Speaker Change #177: Alright Thats helpful color, Thanks for taking my questions.

Operator: Thank you. At this time, I would now like to turn the conference back over to Dave Bruce for his closing remarks.

Speaker Change #178: And chip.

Speaker Change #179: Thank you at this time I would now like to turn the conference back over to Dave Bruce for closing remarks.

David I. Bruce: Thank you, operator, and thank you everyone for joining the call. We will remain focused on driving the business and pursuing the strategic process that we've committed to and look forward to updating you on future calls.

David I. Bruce: Thank you operator.

David I. Bruce: Thank you everyone for joining the call.

David I. Bruce: We will remain focused on driving the business and pursuing the strategic process that we've committed to and look forward to updating you in future calls.

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

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