Q4 2025 IRIDEX Corp Earnings Call

March 26, 2026

Speaker #2: All lines have been placed on mute to prevent any background noise. After the speakers are marked, there will be a question-and-answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad.

Speaker #2: If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Trip Taylor, Investor Relations.

Speaker #2: Please go ahead. Thank you, and thank you all for participating in today's call. Joining me from the company are Patrick Mercer, IRIDEX's Chief Executive Officer; and Romeo Dizon, the company's Chief Financial Officer.

Trip Taylor: Thank you. Thank you all for participating in today's call. Joining me from the company are Patrick Mercer, IRIDEX's Chief Executive Officer, and Romeo Dizon, the company's Chief Financial Officer. Earlier today, IRIDEX released financial results for the quarter ended January 3, 2026. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. 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, and sales trends in the markets in which we operate.

Trip Taylor: Thank you. Thank you all for participating in today's call. Joining me from the company are Patrick Mercer, IRIDEX's Chief Executive Officer, and Romeo Dizon, the company's Chief Financial Officer. Earlier today, IRIDEX released financial results for the quarter ended 3 January 2026. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Speaker #2: Earlier today, IRIDEX released financial results for the quarter ended January 3, 2026. A copy of the press release is available on the company's website.

Speaker #2: Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Speaker #2: 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, and the markets in which we operate.

Trip Taylor: 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, and sales trends in the markets in which we operate. All forward-looking statements are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements.

Speaker #2: 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.

Trip 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, 26 March 2026. With that, I'll turn the call over to Patrick.

Speaker #2: 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.

Trip Taylor: 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, 26 March 2026. With that, I'll turn the call over to Patrick.

Speaker #2: 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 #2: This conference call contains time-sensitive information and is accurate only as of the live broadcast today, March 26, 2026. And with that, I'll turn the call over to Patrick.

Speaker #3: Thank you, Trip. Good afternoon, everyone, and thank you for joining us. Today, I am proud to share our fourth quarter and full-year results, which represent a successful year and a positive transformation for IRIDEX.

Patrick Mercer: Thank you, Tripp. Good afternoon, everyone, and thank you for joining us. Today, I am proud to share our Q4 and full year results, which represent a successful year and a positive transformation for IRIDEX. 2025, we achieved our goals to streamline our operations, reduce costs, and put IRIDEX on a path to sustainable profitability. For the full year 2025, we grew revenue by 8% and reduced operating expenses by 22% compared to the prior year. This leverage helped deliver positive adjusted EBITDA for the first time in the company's recent history. Further, we closed out the year by generating positive cash flow from operations in Q4. I believe it has been made clear that we have done the work to create a new financial profile capable of generating positive cash flow from operations in 2026 and beyond.

Speaker #3: 2025, we achieved our goals to streamline our operations, reduce costs, and put IRIDEX on a path to sustainable profitability. For the full year 2025, we grew revenue by 8% and reduced operating expenses by 22% compared to the prior year.

Speaker #3: In this leverage, helped deliver positive adjusted EBITDA for the first time in the company's recent history. Further, we closed out the year by generating positive cash flow from operations in the fourth quarter.

Speaker #3: I believe it has been made clear that we have done the work to create a new financial profile capable of generating positive cash flow from operations in 2026 and beyond.

Speaker #3: For the full year, revenue was $52.7 million, representing 8% growth year over year versus 2024. Notably, we saw growth across every major product category.

Patrick Mercer: For the full year, revenue was $52.7 million, representing 8% growth year-over-year versus 2024. Notably, we saw growth across every major product category, Cyclo G6, medical retina, surgical retina, as well as across both our US and international businesses. Q4 growth was even stronger. The 16% increase marked the strongest quarterly growth rate of the year. I want to take a moment to highlight some of the important contributors to our strong Q4 performance. On the cost side, we are continuing to right-size the business to be more in line with revenues. We have continued to make meaningful progress with the relocation of certain general and administrative functions out of California. We expect this initiative alone to generate approximately $165,000 in quarterly savings beginning in Q1 2026.

Speaker #3: Cyclo G6, medical retina, surgical retina, as well as across both our US and international businesses. Fourth quarter growth was even stronger. The 16% increase marked the strongest quarterly growth rate of the year.

Speaker #3: I want to take a moment to highlight some of the important contributors to our strong Q4 performance. On the cost side, we are continuing to right-size the business to be more in line with revenues.

Speaker #3: We have continued to make meaningful progress with the relocation of certain general and administrative functions out of California. We expect this initiative alone to generate approximately $165,000 in quarterly savings beginning in Q1 2026.

Speaker #3: We also plan to relocate our headquarters later in 2026, which will further reduce our fixed cost base by approximately $600,000 on an annualized basis.

Patrick Mercer: We also plan to relocate our headquarters later in 2026, which will further reduce our fixed cost base by approximately $600,000 on an annualized basis. As part of our continuing efforts to reduce our cost structure, we are in active discussions with contract manufacturers as part of a multi-year initiative to transition production away from our Mountain View facilities and toward lower cost third-party manufacturing. We expect to begin meaningful transfers in 2026, which will incrementally lower our cost of goods as the year progresses. Full implementation is expected to be completed in 2027 and will provide a further meaningful reduction to our cost of goods. This initiative is expected to be a significant driver of gross margin improvement over the coming years. Turning now to take a closer look at our commercial results for Q4, beginning with our glaucoma business.

Speaker #3: Also, as part of our continuing efforts to reduce our cost structure, we are an active discussion with contract manufacturers as part of a multi-year initiative to transition production away from our Mountain View facilities and toward lower costs third-party manufacturing.

Speaker #3: We expect to begin meaningful transfers in 2026, which will incrementally lower our cost of goods as the year progresses. Full implementation is expected to be completed in 2027 and will prove a further meaningful reduction to our cost of goods.

Speaker #3: This initiative is expected to be a significant driver of gross margin improvement over the coming years. Turning now to take a closer look at our commercial results, for the fourth quarter, beginning with our glaucoma business.

Speaker #3: In the United States, our strategy remains centered on leveraging our substantial installed base of Cyclo G6 systems and driving higher procedural utilization. Medicare LCDs introduced last year continue to create drivers for G6 adoption earlier in the continuum of care for mild to moderate-stage patients.

Patrick Mercer: In the United States, our strategy remains centered on leveraging our substantial installed base of Cyclo G6 systems and driving higher procedural utilization. Medicare LCDs introduced last year continue to create drivers for G6 adoption earlier in the continuum of care for mild to moderate stage patients. Our team is focused on educating our physician users on this opportunity, including highlighting our robust clinical data, supporting the IOP lowering efficacy of the procedure, and updated sweep speed procedural technique. Using MedScout, our relatively new sales enablement software platform, we are identifying accounts in the mid-range of utilization to engage with clinicians and reiterate the benefits of our repeatable incisionless procedure. In an extension of this effort, we are also now targeting high-volume MIGS surgeons who, based on their case volumes, have the potential to adopt a procedure at meaningful utilization levels.

Speaker #3: Our team is focused on educating our physician users on this opportunity, including highlighting our robust clinical data supporting the IOP-lowering efficacy of the procedure and updated SweepSpeed procedural technique.

Speaker #3: Using MedScout, our relatively new sales enablement software platform, we are identifying accounts in the mid-range of utilization to engage with clinicians and reiterate the benefits of our repeatable incisionless procedure.

Speaker #3: In an extension of this effort, we are also now targeting high-volume MIG surgeons who, based on their case volumes, have the potential to adopt the procedure at meaningful utilization levels.

Speaker #3: Pricing tailwinds based on the enhanced value proposition of our procedure also contributed positively to Q4 glaucoma revenue. Physician relocations drove a number of system sales in the quarter as the new practice locations acquired their own dedicated G6 systems.

Patrick Mercer: Pricing tailwinds based on the enhanced value proposition of our procedure also contributed positively to Q4 glaucoma revenue. Physician relocations drove a number of system sales in the quarter as the new practice locations acquired their own dedicated G6 systems. With a growing installed base, higher ASPs, and increasingly effective commercial targeting through MedScout, we are well-positioned to drive meaningful G6 growth throughout 2026. In total, in the fourth quarter, we sold 15,900 probes versus 13,300 in the prior year period and 44 G6 systems versus 47 in Q4 2024. For the full year 2025, we sold 57,800 Cyclo G6 probes compared to 55,400 in the prior year, and 133 G6 systems compared to 125 in 2024. International glaucoma was also strong across multiple geographies.

Speaker #3: With a growing installed base, higher ASPs and increasingly effective commercial targeting through MedScout we are well positioned to drive meaningful G6 growth throughout 2026.

Speaker #3: In total, in the fourth quarter, we sold 15,900 probes versus 13,300 in the prior year period, and 44 G6 systems versus 47 in Q4 2024.

Speaker #3: For the full year 2025, we sold 57,800 Cyclo G6 probes, compared to 55,400 in the prior year, and 133 G6 systems, compared to 125 in 2024.

Speaker #3: International glaucoma was also strong across multiple geographies. In Europe, Middle East, and Africa, glaucoma probe sales grew for the third consecutive quarter, supported by fulfillment of several GPI orders a meaningful milestone for the region.

Patrick Mercer: In Europe, Middle East, and Africa, glaucoma probe sales grew for the third consecutive quarter, supported by fulfillment of several GPO orders, a meaningful milestone for the region. It is important to note that the conflict in Iran is impacting sales in the Middle East materially to date. In DACH, G6 probe sales remain stable with existing customers, and we believe our DACH utilization is well-positioned to absorb incremental volume as we work through distributor transitions in the region. In Asia, the region continued to experience volatile and operational challenges. Despite continued demand, shifting macroeconomic conditions continued to impact our commercial activity. The evolving tariff uncertainty with China continues to challenge sales and forecasting. In Japan, current headwinds continue to weigh on near-term results. Our partnership with Topcon remains active, and we are monitoring the macro environment closely and expect conditions to improve over time.

Speaker #3: It is important to note that the conflict in Iran is impacting sales in the Middle East materially today. In GMBH, G6 probe sales remain stable with existing customers and we believe our GMBH utilization is well positioned to absorb incremental volume as we work through distributor transitions in the region.

Speaker #3: In Asia, the region continued to experience volatile and operational challenges. Despite continued demand, shifting microeconomic conditions continued to impact our commercial activity. The evolving tariff uncertainty with China continues to challenge sales and forecasting.

Speaker #3: In Japan, current headwinds continue to weigh on near-term results. Our partnership with Topcon remains active and we are monitoring the macroenvironment closely and expect conditions to improve over time.

Speaker #3: In Latin American Canada, the region showed steady utilization in G6 probes, reflecting solid adoption of our technology in Canada and across key markets. Now turning to our retina portfolio, our top priorities continue to be capitalizing on the ongoing upgrade cycle driving Pascal adoption both domestically and internationally.

Patrick Mercer: In Latin America and Canada, the region showed steady utilization in G6 probes, reflecting solid adoption of our technology in Canada and across key markets. Now turning to our retina portfolio. Our top priorities continue to be capitalizing on the ongoing upgrade cycle, driving PASCAL adoption both domestically and internationally, and seeking additional regulatory approvals for our next generation retina platforms to capitalize on our global distribution network. In the United States, PASCAL is firmly established as our flagship system, and we are seeing a consistent trend of existing PASCAL customers upgrading to our newer platforms. Additionally, newly graduating ophthalmologists are choosing IRIDEX PASCAL systems, in part due to our efforts to ensure PASCAL is the preferred system used in university and training programs. Medical and surgical retina revenue performed well. Surgical retina was a particular standout, exceeding the plan for the quarter.

Speaker #3: Additional regulatory approvals for our next-generation retina platforms to capitalize on our global distribution network. In the United States, Pascal is firmly established as our flagship system, and we are seeing a consistent trend of existing Pascal customers upgrading to our newer platforms.

Speaker #3: Additionally, newly graduating ophthalmologists are choosing IRIDEX Pascal systems in part due to our efforts to ensure Pascal is the preferred system used in university and training programs.

Speaker #3: Medical and surgical retina revenue performed well. Surgical retina was a particular standout, exceeding the plan for the quarter. EndoProbe sales held steady throughout Q4, demonstrating consistent performance.

Patrick Mercer: EndoProbe sales held steady throughout Q4, demonstrating consistent performance. Turning to international retina. In Europe, Middle East, and Africa, the region continued to perform in line with expectations. PASCAL's performance in the Middle East and Africa was somewhat softer in Q4, following the fulfillment of several large orders in Q3. We're also making progress in expanding our ENT business in the UK, with notable increases in ENT probes and IQ 532 XP systems. Italy remains stable and we continue to manage distributor quality and service in that market. Middle East sales of retina products are also being materially impacted by the conflict in Iran. In Germany, capital equipment sales faced a slowdown, in part due to purchase order delays. However, we completed our first IQ 532 XP sale in Germany, which we believe represents a promising new model for expanding our business.

Speaker #3: Turning to international retina, in Europe, Middle East, and Africa, the region continued to perform in line with expectations. Pascal's performance in the Middle East and Africa was somewhat softer in Q4, following the fulfillment of several large orders in Q3.

Speaker #3: We're also making progress in expanding our ENT business in the UK with notable increases in ENT probes and IQ532 XP systems. Italy remains stable and we continue to manage distributor quality and service in that market.

Speaker #3: Middle East sales of retina products are also being materially impacted by the conflict in Iran. In GMBH, capital equipment sales faced a slowdown in part due to purchase order delays.

Speaker #3: However, we completed our first IQ532-XP sales in Germany, which we believe represents a promising new model for expanding our business. Our GmbH team has secured Pascal synthesis orders and continues to build a pipeline for placements with newer models, pending MDR certification.

Patrick Mercer: Our GmbH team has secured PASCAL Synthesis orders and continues to build a pipeline for placements with newer models, pending MDR certification. In Asia, our retina business was affected by the same macro dynamics impacting glaucoma across the region, including the China tariff situation and currency pressures in Japan. Despite these headwinds, underlying demand for our retina products across Asia remains solid, and we believe the region represents meaningful upside and operational uncertainty is clarified. In Latin America and Canada, the region continues to stabilize, supported by consistent PASCAL sales, driven by renewed distribution engagement in Chile and Colombia. Representative of our comprehensive commercial efforts, it is important to call out that clinician interest in our glaucoma and retinal laser platforms was very apparent at the American Academy of Ophthalmology annual meeting, where our booth location saw substantial foot traffic.

Speaker #3: In Asia, our retina business was affected by the same macrodynamics impacting glaucoma across the region, including the China tariff situation and currency pressures in Japan.

Speaker #3: Despite these headwinds, underlying demand for our retina products across Asia remains solid. And we believe the region represents meaningful upside and operational uncertainty is clarified.

Speaker #3: In Latin America and Canada, the region continues to stabilize, supported by consistent Pascal sales driven by renewed distribution engagement in Chile and Colombia. Representative of our comprehensive commercial efforts, it is important to call out that clinician interest in our glaucoma and retinal laser platforms was very apparent at the American Academy of Ophthalmology annual meeting, where our booth location saw substantial foot traffic.

Speaker #3: We are pleased to see the growing attention to our industry-leading technology and have come out of the meeting with a large number of high-quality leads.

Patrick Mercer: We are pleased to see the growing attention to our industry-leading technology and have come out of the meeting with a large number of high-quality leads. More importantly, on the execution front, our sales team did an exceptional job converting those leads into orders. We posted $1 million in business stemming directly from that meeting. We expect to continue to execute on our strategic initiatives and extend our commercial momentum with our glaucoma and retina platforms to drive revenue growth in 2026. For the year, revenue is expected to range from $51 to 53 million. This guidance contemplates no sales in the Middle East. When adjusted to exclude Middle East revenue in 2025, our guidance represents 2026 growth of 1% to 5%. Now I'll hand the call over to Romeo to discuss our financial results.

Speaker #3: More importantly, on the execution front, our sales team did an exceptional job converting those leads into orders. With close to 1 million in business stemming directly from that meeting.

Speaker #3: We expect to continue to execute on our strategic initiatives and extend our commercial momentum with our glaucoma and retina platforms to drive revenue growth in 2026.

Speaker #3: For the year, revenue is expected to range from $51 million to $53 million. This guidance contemplates no sales in the Middle East. When adjusted to exclude Middle East revenue in 2025, our guidance represents 2026 growth of 1 to 5 percent.

Speaker #3: Now I'll hand the call over to Romeo to discuss our financial results. Thank you, Patrick. Good afternoon, everyone. Thank you for joining us today.

Romeo Dizon: Thank you, Patrick. Good afternoon, everyone. Thank you for joining us today. Before I review the financial results for the quarter, please note that the fiscal year 2025 was a 53-week year, with Q4 spanning 14 weeks compared to 13 weeks in the prior year period. As we noted in our press release and in Patrick's comments, our total revenues for Q4 2025 were $14.7 million, representing a 16% year-over-year increase compared to $12.7 million in Q4 2024. Growth was driven primarily by higher retina sales, including PASCAL sales and glaucoma probe sales. Retina product revenue increased 22% in Q4 2025 to $8.9 million compared to Q4 2024, driven primarily by the higher PASCAL system sales, medical and surgical retina system sales.

Speaker #3: Before I review the financial results for the quarter, please note that the fiscal year 2025 was a 53-week year with the fourth quarter spanning 14 weeks compared to 13 weeks in the prior year period.

Speaker #3: As we noted in our press release, and in Patrick's comments, our total revenues for the fourth quarter of 2025 were $14.7 million, representing a 16% year-over-year increase compared to $12.7 million in the fourth quarter of 2024.

Speaker #3: Growth was driven primarily by higher retina sales, including Pascal sales and glaucoma probe sales. Retina product revenue increased 22% in the fourth quarter of 2025 to $8.9 million compared to the fourth quarter of 2024, driven primarily by the higher Pascal system sales—medical and surgical retina system sales.

Speaker #3: Total product revenue from the cycle of G6 glaucoma product family was $3.8 million, representing growth of 15% year-over-year, driven primarily by higher probe sales.

Romeo Dizon: Total product revenue from the Cyclo G6 glaucoma product family was $3.8 million, representing growth of 15% year over year, driven primarily by higher probe sales. Other revenues decreased $0.1 million to $2.0 million in Q4 2025, compared to $2.1 million in Q4 2024. Gross profit in Q4 2025 was $5.5 million or a gross margin of 37%, a decrease of $0.1 million compared to $5.6 million or a gross margin of 44% in Q4 2024.

Speaker #3: Other revenues decreased $0.1 million to $2.0 million in the fourth quarter of 2025, compared to $2.1 million in the fourth quarter of 2024. Gross profit in the fourth quarter of 2025 was $5.5 million, or a gross margin of 37%.

Speaker #3: A decrease of $0.1 million compared to $5.6 million, or a gross margin of 44% in the fourth quarter of 2024. The decline was primarily due to an increase in overall manufacturing costs, including increased product costs associated with tariff developments throughout the year.

Romeo Dizon: The decline was primarily due to an increase in overall manufacturing costs, including increased product costs associated with tariff developments throughout the year and lower capitalization of manufacturing overhead as our inventory levels declined. Operating expenses were $5.5 million in Q4 2025, a decrease of $0.6 million or 10% compared to $6.1 million in Q4 2024 due to expense reduction measures taken in late 2024. Net loss for Q4 2025 was $0.2 million or $0.01 per share, compared to a net loss of $0.8 million or $0.05 per share in the same period of the prior year. Net loss for Q4 2025 included a provision for income tax of $0.1 million and interest expense of $0.1 million.

Speaker #3: And lower capitalization of manufacturing overhead as our inventory levels declined. Operating expenses were $5.5 million in the fourth quarter of 2025, a decrease of $0.6 million, or 10%, compared to $6.1 million in the fourth quarter of 2024 due to expense reduction measures taken in late 2024.

Speaker #3: Net loss for the fourth quarter of 2025 was $0.2 million, or $0.01 per share, compared to a net loss of $0.8 million, or $0.05 per share, in the same period of the prior year.

Speaker #3: Net loss for the fourth quarter of 2025 included a provision for income tax of 0.1 million and interest expense of 0.1 million. Non-GAAP adjusted EBITDA for the fourth quarter of 2025 was $817,000 an improvement of 0.2 million compared to non-GAAP adjusted EBITDA of $611,000 for the fourth quarter of 2024.

Romeo Dizon: Non-GAAP adjusted EBITDA for Q4 2025 was $817,000, an improvement of $0.2 million compared to non-GAAP adjusted EBITDA of $611,000 for Q4 2024. The improvement is driven primarily by the expense reduction measures implemented in late 2024. Cash and cash equivalents totaled $6.0 million at the end of Q4 2025, an increase of $0.4 million compared to $5.6 million at the end of Q3 2025. In 2025, cash use was $2.1 million, an improvement of 71% compared to 2024. We are very pleased with our reduction in cash usage and expect cash use to continue or improve from these levels.

Speaker #3: The improvement is driven primarily by the expense reduction measures implemented in late 2024. Cash and cash equivalents totaled $6.0 million at the end of the fourth quarter 2025, an increase of $0.4 million compared to $5.6 million at the end of the third quarter of 2025.

Speaker #3: In 2025, cash use was $2.1 million, an improvement of 71% compared to 2024. We are very pleased with our reduction in cash usage and expect cash use to continue or improve from these levels.

Speaker #3: While gross margins is a key driver to improving our financial profile, we experienced a decline in the fourth quarter of 2025 mainly due to an increase in overall manufacturing costs including increased product costs associated with the tariff developments throughout the year and lower capitalization of manufacturing overhead as our inventory levels declined.

Romeo Dizon: While gross margins is a key driver to improving our financial profile, we experienced a decline in Q4 2025, mainly due to an increase in overall manufacturing costs, including increased product costs associated with tariff developments throughout the year, and lower capitalization of manufacturing overhead as our inventory levels declined. For the full year 2025, our gross margins also declined due to inventory write-downs, coupled with the reasons for the decline in Q4 2025. We expect gross margins to improve as we progress through the manufacturing transition to third-party contract manufacturers in 2026 and 2027. Operating expenses continued their favorable trend in Q4 2025, reflecting the sustained impact of the cost reduction initiatives implemented beginning in Q4 2024. For the full year 2025, operating expenses were reduced 22% year over year.

Speaker #3: For the full year 2025, our gross margins also declined due to inventory write-downs, coupled with the reasons for the decline in the fourth quarter.

Speaker #3: We expect gross margins to improve as we progress through the manufacturing transition to third-party contract manufacturers in 2026 and 2027. Operating expenses continued their favorable trend in the fourth quarter.

Speaker #3: Reflecting the sustained impact of the cost reduction initiatives implemented beginning in Q4 2024, for the full year 2025, operating expenses were reduced 22% year-over-year.

Speaker #3: The relocation of certain G&A functions out of California, commencing in the first quarter of 2026, is expected to generate approximately $165,000 in quarterly savings beginning in Q1 2026.

Romeo Dizon: The relocation of certain G&A functions out of California, commencing in Q1 2026, is expected to generate approximately $165,000 in quarterly savings beginning in Q1 2026. We are very pleased to report that we achieved positive adjusted EBITDA for the full year of 2025, consistent with the commitment we made at the outset of the year. In Q4 2025, we achieved positive cash flow, another key milestone. Cash and cash equivalents at the end of Q4 reflect our meaningfully reduced cash burn, and we expect to maintain this trajectory in 2026. As a reminder, in general, our cash usage is highest in Q1 of the fiscal year, resulting from payments of accrued compensation, and other accrued expenses and liabilities.

Speaker #3: We are very pleased to report that we achieved positive adjusted EBITDA for the full year 2025, consistent with the commitment we made at the outset of the year.

Speaker #3: In the fourth quarter of 2025, we achieved positive cash flow another key milestone. Cash and cash equivalents at the end of the fourth quarter reflect our meaningfully reduced cash burn and we expect to maintain this trajectory in 2026.

Speaker #3: As a reminder, in general, our cash usage is highest in the first quarter of the fiscal year, resulting from payments of accrued compensation and other accrued expenses and liabilities.

Speaker #3: For the remaining quarters of the year, we expect to generate cash, and four-quarterly cash generations to improve sequentially as we sell through inventory and collect receivables on increased revenues.

Romeo Dizon: For the remaining quarters of the year, we expect to generate cash and for quarterly cash generations to improve sequentially as we sell through inventory and collect receivables on increased revenues. Cumulatively, this will result in positive cash flow for the fiscal year 2026. As Patrick mentioned, we are initiating our 2026 guidance. We expect to generate revenues of between $51 and $53 million. As a result of the market disruption from the ongoing conflict in the Middle East, this guidance does not include revenue from that region. On a pro forma basis, adjusted to exclude the Middle East revenue in 2025, guidance represents 2026 growth of 1% to 5% compared to 2025. We also want to reiterate the seasonality we experienced in our business.

Speaker #3: Cumulatively, this will result in positive cash flow for the fiscal year 2026. As Patrick mentioned, we are initiating our 2026 guidance. We expect to generate revenues of between $51 and $53 million as a result of the market disruption from the ongoing conflict in the Middle East.

Speaker #3: This guidance does not include revenue from that region. On a pro forma basis, adjusted to exclude the Middle East revenue in 2025, guidance represents 2026 growth of 1 to 5 percent compared to 2025.

Speaker #3: We also want to reiterate the seasonality we experienced in our business. The first quarter, on average, represents 22% of our annual revenue and is the lowest quarterly total revenue for the year.

Romeo Dizon: The Q1 on average represents 22% of our annual revenue and is the lowest quarterly total revenue for the year. From a total dollar perspective, the Q2 and Q4 are seasonally stronger than the Q1, with the Q4 being the strongest quarter of the year, and the Q3 is generally a sequential decline from the Q2. We are providing expectations for our adjusted operating expenses, which exclude depreciation, amortization, and stock compensation, to be in the range of $19 to 19.5 million. With that, I will turn the call back to Patrick.

Speaker #3: From the total dollar perspective, the second and fourth quarters are seasonally stronger than the first quarter, with the fourth quarter being the strongest quarter of the year.

Speaker #3: And the third quarter is generally a sequential decline from the second quarter. We have provided the expectations for our adjusted operating expenses, which exclude depreciation and amortization and stock compensation, to be in the range of $19 million to $19.5 million.

Speaker #3: And with that, I will turn the call back to Patrick.

Speaker #2: Thank you, Romeo. As I reflect on the past year, I am proud of what the IRIDEX team has accomplished. When we began this transformation in Q4 2024, we set out to grow revenue, reduce operating expenses, improve our financial profile, and position the business for sustainable profitability. We are proud to say that we have delivered on all four.

Patrick Mercer: Thank you, Romeo. As I reflect on the past year, I am proud of what the IRIDEX team has accomplished. When we began this transformation in Q4 2024, when we set out to grow revenue, reduce operating expenses, improve our financial profile, and position the business for sustainable profitability, we are proud to say that we have delivered on all four. Looking to 2026, our priorities are clear. On the growth side, we are focused on expanding our G6 user base, targeting high volume MIGS surgeons using MedScout intelligence, while continuing to drive utilization among our existing installed base. For Retina, we are pursuing international regulatory approvals to unlock new geographies and accelerating our Pascal installed base replacement cycle domestically. On the cost side, we will continue our transition to contract manufacturing, minimize production at our headquarters, and advance our facility relocation.

Speaker #2: Looking to 2026, our priorities are clear. On the growth side, we are focused on expanding our G6 user base, targeting high-volume MIG surgeons using MetScout intelligence.

Speaker #2: While continuing to drive utilization among our existing installed base, for Retina, we are pursuing international regulatory approvals to unlock new geographies and accelerating our Pascal installed base replacement cycle domestically.

Speaker #2: On the cost side, we will continue our transition to contract manufacturing, minimize production at our headquarters, and advance our facility relocation. We thank you for your continued support of IRIDEX and look forward to updating you on our progress next quarter.

Patrick Mercer: We thank you for your continued support of IRIDEX and look forward to updating you on our progress next quarter. Thank you.

Speaker #2: Thank you.

Operator: As a reminder, if you'd like to ask a question, press star one on your telephone keypad. Your first question comes from the line of Scott Henry from Alliance Global Partners. Your line is live.

Speaker #1: As a reminder, if you'd like to ask a question, press star one on your telephone keypad. Your first question comes from the line of Scott Henry from Alliance Global.

Speaker #1: Your line is live.

Speaker #3: Thank you. And good afternoon. Just a couple questions. First, when thinking about your 2026 guidance, how large is the Middle East in terms of revenues?

Scott Henry: Thank you and good afternoon. Just a couple questions. First, when thinking about your 2026 guidance, you know, how large is the Middle East in terms of revenues? You know, what percent of the revenue base?

Speaker #3: What percent of the revenue base?

Patrick Mercer: It's 5% of our total revenue base. 10% OUS. Hi, Scott. Patrick Mercer.

Speaker #2: It's 5% of our total revenue base. 10% OUS. Hi, Scott. Patrick Mercer.

Scott Henry: Hi, Patrick. Thank you. You know, larger than typical for that geography. Looking at Q4 also, I noticed the other was sequentially kind of down from Q3. Is that just typical variability or any trends going on in the other segment?

Speaker #3: Hi, Patrick. Thank you. So, larger than typical for that geography. Looking at Q4 also, I noticed the other was sequentially kind of down from Q3.

Speaker #3: Is that just typical variability, or are there any trends going on in the other segment?

Patrick Mercer: Say that again, Scott. When you say other segment, what do you mean?

Speaker #2: Say that again, Scott. When you say 'other segment,' what do you mean?

Speaker #3: It was down sequentially from Q3. Not big numbers, but when we model it going forward, are there any trends there, or is that just kind of noise?

Scott Henry: It was down sequentially from Q3. Not big numbers, but, you know, when we model it going forward, are there any trends there or is that just kind of noise?

Speaker #2: In the other expense, you mean?

Patrick Mercer: In the other expense, you mean?

Speaker #3: No, the other revenue line. It's about $2 million. It was, I think, $2.2 million last quarter, $2.2 million before. I mean, not big numbers.

Scott Henry: No, the other revenue line. It's about $2 million. It was, I think, $2.2 million last quarter, $2.2 million before. I mean, not big numbers.

Patrick Mercer: Yeah. Scott, this is Romeo. Yeah, that's just basically dependent on the service product lines. I mean, we've got one month, we'll just get a bunch of service to provide, and others, there's just, you know, it's pretty flat. It's staying around within that same level, ± $100,000.

Romeo Dizon: Yeah. Scott, this is Romeo. Yeah, that's just basically dependent on the service product lines. I mean, we've got one month, we'll just get a bunch of service to provide, and others, there's just, you know, it's pretty flat. It's staying around within that same level, ± $100,000.

Speaker #2: Yeah, this is Romeo. Yeah, this is basically dependent on the service product lines that are not really—I mean, we've got one month where we'll just get a bunch of service to provide, and others, it's pretty flat.

Speaker #2: It's staying around within that same level, plus or minus $100,000.

Speaker #3: Okay, fair enough. And then, when I was looking at G6—we don't have, I'll get the specific breakouts—but just based on the general statements.

Scott Henry: Okay, fair enough. When I was looking at G6, we don't have... I'll get the specific breakouts, but just based on the general statements, it looks like pricing was down a little bit from the past couple quarters relative to the system sold in the probe utilization. Is that fair in... Is that a trend or just, you know, quarterly noise?

Speaker #3: It looks like pricing was down a little bit from the past couple of quarters, relative to the systems sold and the probe utilization. Is that fair, and is that a trend or just quarterly noise?

Speaker #2: No, if anything, you're looking at consolidated numbers. That must have been the OUS driving that down, because in OUS and in the US, we've actually increased the ASPs on the probes.

Patrick Mercer: No, if anything, that you're looking at consolidated numbers, that must have been the OUS driving that down. Because in OUS and in the US, we've actually increased the ASPs on the probes. The volume as well has picked up and has continued to pick up as of this quarter. Yeah, we've increased the ASPs last year and this year on both the probes and the systems for global-

Speaker #2: And the volume as well has picked up and has continued to pick up as of this quarter. Yeah, we've increased the ASPs last year and this year on both the probes and the systems for growth.

Scott Henry: In the US.

Speaker #3: For in the US?

Patrick Mercer: In the US.

Speaker #2: In the US.

Speaker #3: Okay. I guess I'll just take a look at that when the K is filed as well. Final question: when you look at the Retina segment and, I guess, a little bit the G6 segment, how do you think of organic growth rates?

Scott Henry: Okay. I guess I'll just take a look at that when the K is filed as well. Final question: when you look at the Retina segment, and I guess a little bit the G6 segment, you know, how do you think of organic growth rates, you know, particularly on the Retina segment, you know, how should we think of kind of a steady state or organic growth rate for that segment?

Speaker #3: Particularly on the Retina segment, how should we think of kind of a steady-state or organic growth rate for that segment?

David Bruce: Scott, I guess, you know, when we were talking back 4, 5 years ago, we always expected the retina to decrease by 1% to 2%. Well, after I left, the company has acquired or merged with Topcon, and we've acquired the PASCAL systems. I think in my own mind, both in terms of the size of that distribution model plus the product itself, PASCAL, which is really becoming our product flagship in the US, has just really contributed to a small growth in our product, retina product business the last couple years.

Patrick Mercer: Scott, I guess, you know, when we were talking back 4, 5 years ago, we always expected the retina to decrease by 1% to 2%. Well, after I left, the company has acquired or merged with Topcon, and we've acquired the PASCAL systems. I think in my own mind, both in terms of the size of that distribution model plus the product itself, PASCAL, which is really becoming our product flagship in the US, has just really contributed to a small growth in our product, retina product business the last couple years.

Speaker #2: Scott, I guess when we were talking back four or five years ago, we always expected the Retina to decrease like 1% to 2%.

Speaker #2: Well, after I left, the company has acquired or merged with a top company and we've acquired the Pascal Systems. So I think in my own mind, both in terms of the size of that distribution model plus the product itself, Pascal, which is really becoming our product flagship in the US, has just really contributed to either grow a small growth in our product Retina product business the last couple years.

Scott Henry: Okay. I mean, it sounds like you're, if I think about the category growing at about 4%, do you still think you're gaining share in the retina segment, to put it differently?

Speaker #3: Okay. So, I mean, it sounds like you're—if I think about the category growing at about 4%, do you still think you're gaining share in the Retina segment? To put it differently,

David Bruce: Absolutely. We you know, with our PASCAL, we have a lot of momentum moving forward with that product. It's faster than the competition. It's serviced in the field, and it's doing really well. As we get more MDR approvals globally, we're gonna see that pick up. It's already taken off in the US, and as we get more approvals, it will definitely pick up. We expect to see that increase.

Patrick Mercer: Absolutely. We you know, with our PASCAL, we have a lot of momentum moving forward with that product. It's faster than the competition. It's serviced in the field, and it's doing really well. As we get more MDR approvals globally, we're gonna see that pick up. It's already taken off in the US, and as we get more approvals, it will definitely pick up. We expect to see that increase.

Speaker #2: Absolutely. With our Pascal, we have a lot of momentum moving forward with that product. It's faster than the competition. It has its service in the field.

Speaker #2: And it's doing really well. And as we get more MDR approvals, globally, we're going to see that pick up. It's already taken off in the US.

Speaker #2: And as we get more approvals, it will definitely pick up. We expect to see that increase.

Speaker #3: Okay, great. Thank you for taking the questions.

Scott Henry: Okay, great. Thank you for taking the questions.

Speaker #2: Thanks, Scott.

Patrick Mercer: Thanks, Scott.

Operator: There are no further questions. I'd like to turn the call over to Patrick Mercer for closing remarks.

Speaker #1: There are no further questions. I'd like to turn the call over to Frank Mercer for closing remarks.

Speaker #2: Great. I appreciate everyone's time. We'll continue to update you in the future on our business and appreciate the questions. Thank you.

Patrick Mercer: Great. I appreciate everyone's time. We'll continue to update you in the future on our business and appreciate the questions. Thank you.

Operator: That concludes today's meeting. You may now disconnect.

Q4 2025 IRIDEX Corp Earnings Call

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