Q4 2024 IRIDEX Corp Earnings Call
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Speaker Change: Hello and welcome to the fourth quarter, 2024, Ernie's conference call. At this time, all lines have been placed on mute to prevent any background noise. I would
Trip Taylor: Thank you, and thank you all for participating in today's call. Joining me from the company are Patrick Mercer, here at Access Chief Executive Officer and Romeo DeZon, the company's Chief Financial Officer.
Speaker Change: Earlier today, Eredex released financial results for the quarter and in December 28th, 2024.
Speaker Change: A copy of the press release is available on the company's website.
Speaker Change: Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meeting of federal security laws, which are made pursuant to the Safe Harbor provisions of the Private Security Litigation Reform Act of 1995.
Speaker Change: 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.
Speaker Change: All forward-looking statements are based upon current estimates in 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 undue reliance on these statements.
Speaker Change: For a discussion of the risks and uncertainties associated with our business, please see the most recent form 10K and form 10Q filings with the FEC.
Speaker Change: Your next disclaims any intention or obligation except is 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 us a live broadcast today March 27th, 2025. In with that, I'll turn the call over to Patrick.
Patrick Mercer: Good afternoon and thank you all for joining us. I'll start today's call by commenting on the three key things that have the potential to improve our business performance in 2025 versus recent years.
Patrick Mercer: Next, Romeo will walk us through the fourth quarter financial results, and then I'll come back to provide some information on our upcoming Q1 pre-announcement.
Patrick Mercer: Today's call will not include a question and answer session, but there will be more information in a special call forthcoming in a few weeks.
Patrick Mercer: Both of which related to the ongoing strategic review process, which has been underway for over a year.
Patrick Mercer: First it was believed that my leadership could help accelerate progress towards transaction and second the board felt.
Patrick Mercer: It was the best person to implement a cost reduction program due to the unexpectedly lengthy duration of the strategic review process.
Patrick Mercer: Late last year, when we held our earnings call relating to the third quarter of 2024, we updated on several things.
Patrick Mercer: This included progress in executing on the cost reduction plan and information relating to the Companys attending the annual Aio Ophthalmic conference in October that.
Patrick Mercer: At the meeting we participated in numerous meetings with physicians and the industry peers.
Patrick Mercer: Those meetings, we received encouraging feedback and the response to the LCD, which took effect in November.
Now that was likely to increase interest in and use of our laser based and non <unk> glaucoma treatments at Ao Iridex leadership also met with several parties that expressed a strong desire to pursue a transaction with iridex and the intention to move quickly.
All of this was reported at our November 2024 third quarter call.
Patrick Mercer: Meetings and expressions of interest continued and heated up during the holidays and into 2025.
Patrick Mercer: As we called out in our press release earlier today companies in our ophthalmology sector are unusually active and there is regular news of both transactions and prospective transactions involving a significant number of our peer companies.
Patrick Mercer: There can be little doubt that our strategic review was well timed relating to all the activity that we have seen and heard about over the last year.
Patrick Mercer: That said progress toward our closing on in announcing a transaction involving iridex was repeatedly interrupted delayed uneven undone by circumstances created by some of the transactions.
Patrick Mercer: Had been completed and news relating to others transactions, which may occur in the near future.
Patrick Mercer: These past and present activities provide important context for the strategic investment by novel innovations that we announced last week.
Patrick Mercer: There are no smiths articulated that the investment was strategic in nature and not just a cash infusion by a passive investor.
Patrick Mercer: The successful implementation of our cost reduction program is stabilize the business.
Patrick Mercer: Positioning us to generate positive cash flow from operations.
Patrick Mercer: The novel investment strengthens our balance sheet.
Patrick Mercer: Giving us a much more solid foundation to participate as a leading global player within both the retina and glaucoma market segments.
Patrick Mercer: Next.
Patrick Mercer: Novel innovations despite our efforts it seems that many people have overlooked at the investment was done at a price of $2 per share on a common stock equivalent basis.
Patrick Mercer: The deal was done at a significant premium to the public market pricing of our stock both before and after the novel investments.
Patrick Mercer: This premium pricing reflects the strategic nature of the investment and novels appreciation of the intrinsic value.
Patrick Mercer: Iridex since existing business and the company's potential within a rapidly evolving global marketplace.
Patrick Mercer: <unk> has affiliations with a long term iridex business partner and distributor in Asia.
Patrick Mercer: <unk> was brought into the transaction by will Moore, a former Iridex CEO and newly appointed director of Iridex.
Patrick Mercer: Iridex has a long history.
Patrick Mercer: Well respected brand and a global network of Premier distribution partners.
Speaker Change: Mr. Moore recognize that Iridex has an opportunity to strengthen its own market position by taking steps to add complementary minnery products through its existing portfolio to increase its competitive position within a consolidating health care sector.
Speaker Change: Novel agreed with this vision and invested $10 million into Iridex with another $10 million available to support future product and growth initiatives.
Speaker Change: <unk> strategy will be discussed in depth during the special call. We will schedule in mid April prior to the Aas Crs meeting in Los Angeles.
Speaker Change: Turning back to my list of three important I guess for this call.
Speaker Change: First on the list is a successful execution of our cost reduction program during the fourth quarter of 2024.
Speaker Change: We acted quickly after I was appointed CEO in October 31 of last year.
Speaker Change: We brought costs in line with our current and anticipated baseline revenue.
Speaker Change: Severance expenses relating to cost cutting what we're mostly covered in the fourth quarter numbers.
Speaker Change: There will be some trends to action costs in the first quarter related to the novel investment.
Speaker Change: But those should be over for the time being.
Speaker Change: We expect to be adjusted EBITDA positive and cash flow positive for the year, while generating revenue in line with 2024.
Speaker Change: In 2025, we will focus on growing and improving our business a key initiatives I am excited to move forward with is modernizing our manufacturing process. This will decrease manufacturing costs and increased product supply capacity.
Speaker Change: I'm eager to be able to spend some time, turning our plans into actionable real world improvements.
Speaker Change: And equally important focus is ensuring we fully capitalize on the opportunities created by the LCD implemented in November 2024.
Speaker Change: Which has significantly altered the landscape for physicians by.
Speaker Change: By eliminating the use cases for MX devices.
Speaker Change: While we won't return to the aggressive spending patterns of recent years.
Speaker Change: That's not my approach.
Speaker Change: Believe the LCD itself offers far greater value in terms of driving opportunity for iridex.
Speaker Change: Market spin curve and we're starting to see utilization increase as a result.
Speaker Change: The third tailwind we have in 2025, it's leveraging the financial and strategic flexibility provided by the novel transaction to accomplish our business improvement and strategic goals.
Speaker Change: That transaction should be understood as a recommitment to extend Iridex is leadership in ophthalmology.
Speaker Change: Novel is an investment entity without any direct operations. So there isn't much to uncover through traditional research.
Speaker Change: However in April we will provide a deeper look into novel strategic intent behind this investment in Iridex.
Speaker Change: As we've discussed this isn't about shifting iridex to a new business model, but rather enhancing and intensifying our involvement in the ongoing consolidation and transaction opportunities within the markets, where iridex has always been active in an industry leader.
Speaker Change: I am going to turn the call over Romeo and asked him to walk us through Q4 results before I come back with some final remarks.
Romeo Dazon: Thank you Patrick good afternoon, everyone and thank you for joining us today.
Romeo Dazon: I would like to begin by reviewing our financial performance for the fourth quarter ended December 28 2024.
Romeo Dazon: <unk> delivered a solid fourth quarter and I am pleased to note that we returns year over year revenue growth for the quarter.
Romeo Dazon: Revenue for the three months ended December 28, 2024 was $12 7 million compared to $12 5 million during the same period of the prior year.
Romeo Dazon: On a sequential basis total revenue increased $1 1 million or 10% from $11 6 million reported in Q3 2024.
Romeo Dazon: We believe our solid fourth quarter results reflect an improving macroeconomic environment and we are seeing good sales momentum as we enter the beginning of 2025.
Romeo Dazon: Total product revenue from our cyclo <unk> glaucoma product family was $3 3 million, an increase of 9% versus the fourth quarter of 2023, driven primarily by a stabilization of probe sales is clarity on the glaucoma procedure reimbursement environment in the U S improves.
Romeo Dazon: We sold 13300, the psychology six probes.
Romeo Dazon: Baird to 12700 in the prior year quarter.
Romeo Dazon: And we sold 47 cycle of <unk> glaucoma laser systems in the fourth quarter of 2024 compared to 35 in the same quarter of the prior year.
Romeo Dazon: Product revenue was $7 3 million or a decrease of 3% compared to the prior year period.
Romeo Dazon: In the retina business deferrals capital purchases led to lower system sales internationally.
Romeo Dazon: This decrease however was partially offset by increased sales in the U S.
Romeo Dazon: Other revenue, which includes royalties services and other legacy products was $2 1 million in the fourth quarter of 2024 compared to the prior year period of 2.0 million, primarily driven by higher service revenue.
Romeo Dazon: Gross profit for the fourth quarter of 2024 was $5 6 million or a 44.0 gross margin an increase compared to $4 9 million or a $39 to gross margin in the same period of the prior year.
Romeo Dazon: I'm merely driven by geographic and product mix.
Romeo Dazon: Operating expenses were $6 1 million in the fourth quarter of 2024, a decline of $1 9 million compared to 8.0 million in the same period in the prior year.
Romeo Dazon: Decrease in operating expenses was a result of expense reduction measures implemented in the second half of 2024.
Romeo Dazon: Net loss for the fourth quarter of 2024 was zero point $8 million or <unk> <unk> per share compared to a net loss of $3.0 million or <unk> 18 per share in the same period of the prior year.
Romeo Dazon: I am pleased to report that for the first time in recent history, we have achieved positive adjusted EBITDA.
Romeo Dazon: Total adjusted EBITDA for the fourth quarter of 2024 was <unk> 4 million an improvement of $2 4 million compared to total adjusted EBITDA of negative 2.0 million for the comparable quarter of the prior year.
Romeo Dazon: Cash and cash equivalents totaled $2 4 million as of December 28, 2020 for cash.
Romeo Dazon: Cash balance does not include the closing of our strategic investment in the company, resulting in $10 million of gross proceeds along with an option by the investor to fund up to $10 million of additional proceeds for future growth initiatives announced on March 19 2025.
Patrick Mercer: And with that I will now turn the call back to Patrick.
Patrick Mercer: Thank you Romeo.
Speaker Change: Before concluding today's call.
Speaker Change: I want to reiterate and expand on the imported special topic in the press release.
Speaker Change: For many years Iridex has had the customer pre announcing its fourth quarter financial results.
Speaker Change: Reason for this is to allow the company to participate and talk freely at the Jpmorgan Healthcare conference in San Francisco.
Speaker Change: Which is held every year in mid January <unk>.
Speaker Change: Pre announcing <unk>.
Speaker Change: Also has the effect of opening the trading window for insiders.
Speaker Change: Otherwise you have to wait until the regular earnings call and SEC filings that occur many weeks later.
Speaker Change: We have decided that we will pre announce our first quarter 2025 results as soon as we are in position to do so in April.
Speaker Change: We will do this for two reasons.
Speaker Change: First our insider trading window has been closed for more than a year due to the longer than expected strategic process.
Speaker Change: No one inside the company has been permitted to buy stock even as the price drifted down.
Speaker Change: Second we share the view of our partner novel that our business is significantly undervalued.
Speaker Change: Daily market prices.
Speaker Change: Especially relative to the $2 per share common stock equivalent valuation.
Speaker Change: Our novel just made its $10 million investment in the company.
Speaker Change: This pre announcement will be a one time event.
Speaker Change: We are not creating a precedent and have no intention of indicating any other changes from our well established historic quarterly reporting practices.
Speaker Change: Thank you again for your time and attention. We hope you will join US again for the special call. We plan to conduct in mid April.
Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.
Speaker Change: Please wait the conference will begin shortly.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Sure.