Q2 2026 IRIDEX Corp Earnings Call

August 18, 2026

Speaker #1: On that day.

Speaker #2: Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q2 2026 IRIDEX earnings conference call.

Operator: Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q2 2026 IRIDEX earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. To ask a question, simply press star one on your telephone keypad. To withdraw your question, press star one again. It is now my pleasure to turn the call over to Trip Taylor, investor relations. Please go ahead.

Speaker #2: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. To ask a question, simply press star 1 on your telephone keypad.

Speaker #2: To withdraw your question, press star one again. It is now my pleasure to turn the call over to Trip Taylor, Investor Relations. Please go ahead.

Speaker #1: Thank you, operator, and thank you all for joining us this afternoon. With me on today's call are Patrick Mercer, IRIDEX's Chief Executive Officer, and Romeo Dizon, the company's Chief Financial Officer.

Trip Taylor: Thank you, operator, and thank you all for joining us this afternoon. With me on today's call are Patrick Mercer, IRIDEX's Chief Executive Officer, and Romeo Dizon, the company's Chief Financial Officer. Earlier today, IRIDEX issued a press release detailing our financial results for the quarter ended 4 July 2026, which is posted to the investor section of our 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, sales trends in the markets in which we operate.

Speaker #1: Earlier today, IRIDEX issued a press release detailing our financial results for the quarter ended July 4, 2026, which is posted to the investor section of our website.

Speaker #1: 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 #1: 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, are forward-looking statements. All forward-looking statements are based upon our current estimates and various assumptions.

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 the 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, 18 August 2026. With that, I'll pass the call to Patrick.

Speaker #1: 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 #1: Accordingly, you should not place reliance on these statements. For a discussion of the risks and uncertainties associated with our business, please see the most recent Form 10-K and Form 10-Q filings with the SEC.

Speaker #1: 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 #1: This conference call contains time-sensitive information and is accurate only as of the live broadcast today, August 18, 2026. With that, I'll pass the call to Patrick.

Speaker #3: Good afternoon, everyone, and thank you for joining us for our second quarter call. If there is one message I want to leave you with today, it is that IRIDEX has reached an important inflection point in its financial profile.

Patrick Mercer: Good afternoon, everyone, and thank you for joining us for our Q2 call. If there is one message I want to leave you with today, it is that IRIDEX has reached an important inflection point in its financial profile. We generated positive cash flow in the Q2, demonstrating the meaningful progress we have made over the past two years to fundamentally transform our cost structure, strengthen working capital management, and create a more disciplined and sustainable business. As part of our activity to further improve the efficiency of the business, this month, we began the process of relocating our headquarters. This is a long-anticipated cost-cutting step and an important part of our broader effort to optimize our cost structure, improve operational efficiency, and align our infrastructure with the business we are building for the future.

Speaker #3: We generated positive cash flow in the second quarter, demonstrating the meaningful progress we have made over the past two years to fundamentally transform our cost structure, strengthen working capital management, and create a more disciplined and sustainable business.

Speaker #3: As part of our activity to further improve the efficiency of the business, this month we began the process of relocating our headquarters. This is a long-anticipated cost-cutting step and an important part of our broader effort to optimize our cost structure, improve operational efficiency, and align our infrastructure with the business we are building for the future.

Speaker #3: The headquarters move will require a new registration process and managing global registration blackout periods. In order to secure our international supply chain and protect top-line distributor revenue streams through the transition, we are in the process of building safety stock inventory to maintain supply continuity.

Patrick Mercer: The headquarters move will require a new registration process and managing global registration blackout periods. In order to secure our international supply chain and protect top-line distributor revenue streams through the transition, we are in the process of building safety stock inventory to maintain supply continuity. This project is being implemented in a careful coordination with our vendors and distribution partners, all of whom are familiar with the special demands of medical device manufacturing, and particularly, the necessary regulatory approvals. We anticipate that the temporary working capital investment, which impacted our Q2 cash flow and will further impact our Q3 cash flow, will enable us to achieve our 2026 revenue guidance of $51 to $53 million. Cash flow from operations should be unaffected, but the increased deployment of working capital will reduce our cash on hand through 2026.

Speaker #3: This project is being implemented in careful coordination with our vendors and distribution partners, all of whom are familiar with the special demands of medical device manufacturing and, particularly, the necessary regulatory approvals.

Speaker #3: We anticipate that the temporary working capital investment, which impacted our second quarter cash flow and will further impact our third quarter cash flow, will enable us to achieve our 2026 revenue guidance of $51 to $53 million.

Speaker #3: Cash flow from operations should be unaffected. But the increased deployment of working capital will reduce our cash on hand through 2026. That should reverse and become a cash tailwind in 2027, as we work down the elevated inventory levels and continue to more tightly manage our working capital.

Patrick Mercer: With that reversing and becoming a cash tailwind in 2027 as we work down the elevated inventory levels and continue to more tightly manage our working capital. We continue to right size the business with discipline, and the positive cash flow we delivered in the Q2 is proof point of our success and the growing financial strength of the business. I am pleased to announce that we have again reduced our operating expenses compared to the prior year period through our various cost savings initiatives. As mentioned previously, the relocation of our headquarters is ongoing and the multi-year shift of production to lower cost third-party contract manufacturers continues to advance. We view both as becoming powerful drivers of improving gross margins ahead in 2027. We believe some of the timing related impacts that affected our H1 2026 performance represent incremental revenue opportunities for the remainder of the year.

Speaker #3: We continue to rightsize the business with discipline, and the positive cash flow we delivered in the second quarter is a proof point of our success and the growing financial strength of the business.

Speaker #3: I am pleased to announce that we have again reduced our operating expenses compared to the prior-year period through our various cost-saving initiatives.

Speaker #3: As mentioned previously, the relocation of our headquarters is ongoing, and the multi-year shift to production to lower costs through third-party contract manufacturers continues to advance.

Speaker #3: We view both as becoming powerful drivers of improving gross margins ahead in 2027. We believe some of the timing-related impacts that affected our first-half 2026 performance represent incremental revenue opportunities for the remainder of the year.

Speaker #3: Our focus in the back half of the year remains on strengthening our supply chain, building inventory ahead of our manufacturing transitions, and advancing our international regulatory submissions.

Patrick Mercer: Our focus in the back H2 of the year remains on strengthening our supply chain, building inventory ahead of our manufacturing transitions, and advancing our international regulatory submissions. Now, turning to our commercial performance in the quarter. Our glaucoma business once again delivered solid probe led growth this quarter. This continued growth in demand and utilization for this higher margin product is an encouraging indicator of the increasing utilization of our G6 platform, demonstrating the increasing adoption of our technology by physicians. In our retina business, we faced a number of market dynamics and operational execution challenges that have affected commercial activity during the quarter. We are actively addressing these factors and remain focused on strengthening execution, improving performance, and positioning the retina business for sustainable, profitable growth. Total revenue for the quarter was $12.6 million.

Speaker #3: Now, turning to our commercial performance in the quarter, our glaucoma business once again delivered growth this quarter. This continued growth in demand and utilization for this higher margin product is an encouraging indicator of the increasing utilization of our G6 platform.

Speaker #3: Demonstrating the increasing adoption of our technology by physicians and in our retina business, we faced a number of market dynamics and operational execution challenges that have affected commercial activity during the quarter.

Speaker #3: We are actively addressing these factors and remain focused on strengthening execution, improving performance, and positioning the retina business for sustainable, profitable growth. Total revenue for the quarter was $12.6 million. Cyclo G6 probe volume rose roughly 35% year over year, and G6 product family revenue increased 19%.

Patrick Mercer: Cyclo G6 probe volume rose roughly 35% year-over-year, and G6 product family revenue increased 19%, a direct reflection of expanding physician adoption of our non-incisional approach and increased utilization of the G6 platform. The breadth of this growth is encouraging as it came from every region in which we operate. The year-over-year revenue decline in our overall business was driven entirely by retina and by a set of temporary commercial transition and regulatory related factors internationally rather than by any change in the fundamental demand of our products. Starting with glaucoma for the quarter, Cyclo G6 probe volume totaled 17,700 units, a 35% increase from 13,100 units sold in the prior year period. In the US, three initiatives are driving strong growth, customer targeting with MedScout, LCD tailwinds, and increased ASPs.

Speaker #3: This is a direct reflection of expanding physician adoption of our non-incisional approach and increased utilization of the G6 platform. The breadth of this growth is encouraging, as it came from every region in which we operate. The year-over-year revenue decline in our overall business was driven entirely by retina and by a set of temporary commercial transition and regulatory-related factors.

Speaker #3: Internationally, rather than by any change in the fundamental demand for our products. Starting with glaucoma for the quarter, Cyclo G6 probe volume totaled 17,700 units, a 35% increase from 13,100 units sold in the prior year period.

Speaker #3: In the U.S., three initiatives are driving strong growth: customer targeting with MedScout, LCD tailwinds, and increased ASPs. Our primary growth driver in glaucoma this quarter continued to be increased utilization of the G6 platform, with particularly strong momentum in probe volumes.

Patrick Mercer: Our primary growth driver in glaucoma this quarter continued to be increased utilization of the G6 platform with particularly strong momentum and probe volumes. Through MedScout, we have become increasingly targeted in how we identify and engage physicians with the greatest opportunity to expand utilization. We are focused on two key segments, existing G6 accounts with moderate utilization, where there is an opportunity to increase procedure volume and high-volume glaucoma practices that have not yet incorporated MicroPulse therapy into their treatment protocols. In both segments, our commercial team is working directly with physicians through education focused on appropriate patient selection, clinical outcomes, and the efficacy and versatility of the procedure. This targeted approach is helping us move beyond simply placing systems and toward driving great utilization of the installed base.

Speaker #3: Through MedScout, we have become increasingly targeted in how we identify and engage physicians with the greatest opportunity to expand utilization. We are focused on two key segments: existing G6 accounts with moderate utilization, where there's an opportunity to increase procedure volume, and high-volume glaucoma practices that have not yet incorporated Micropulse therapy into their treatment protocols.

Speaker #3: In both segments, our commercial team is working directly with physicians through education focused on appropriate patient selection, clinical outcomes, and the efficacy and versatility of the procedure.

Speaker #3: This targeted approach is helping us move beyond simply placing systems and toward driving greater utilization of the installed base. We are also seeing continued tailwinds from the Medicare LCDs implemented last year, which have supported broader consideration of MicroPulse therapy across the glaucoma treatment continuum.

Patrick Mercer: We are also seeing continued tailwinds from the Medicare LCDs implemented last year, which have supported broader consideration of MicroPulse therapy across the glaucoma treatment continuum. Our commercial organization is using these reimbursement developments as an important educational opportunity, working with physicians to highlight the procedure's ability to lower IOP while providing a non-incisional repeatable treatment option, which we believe this combination of clinical education, reimbursement support, and growing physician experience is helping expand the role of G6 therapy within glaucoma treatment pathways. The third contributor to glaucoma revenue growth was another increase in US average selling prices for both probes and systems. The continued improvement in ASPs reflects the value physicians place on MicroPulse therapy and the clinical utility of the G6 platform.

Speaker #3: Our commercial organization is using these reimbursement developments as an important educational opportunity, working with physicians to highlight the procedure's ability to lower IOP while providing a non-incisional, repeatable treatment option. We believe this combination of clinical education, reimbursement support, and growing physician experience is helping expand the role of G6 therapy within glaucoma treatment pathways.

Speaker #3: The third contributor to glaucoma revenue growth was another increase in U.S. average selling prices for both probes and systems. The continued improvement in ASPs reflects the value physicians place on MicroPulse therapy and the clinical utility of the G6 platform.

Speaker #3: Importantly, as we increase utilization within the installed base, we believe the combination of higher probe volumes and increased ASPs provides an attractive foundation for continued growth in the glaucoma business.

Patrick Mercer: Importantly, as we increase utilization within the installed base, we believe the combination of higher probe volumes and increased ASPs provides an attractive foundation for continued growth in the glaucoma business. On systems, we placed 18 Cyclo G6 units during the quarter versus 35 in the prior year period. That step-down was driven largely by order timing in Europe, Middle East, and Africa, together with ongoing competitive pressures on new console placements in our GmbH business. Moving to the international glaucoma business. In Europe, Middle East, and Africa, our UK registry is progressing nicely, and engagement from the clinical community has remained strong. We believe the data generated through the registry will be an important step in supporting broader reimbursement for MicroPulse therapy in the UK.

Speaker #3: On systems, we placed 18 Cyclo G6 units during the quarter versus 35 in the prior-year period. That step-down was driven largely by order timing in Europe, the Middle East, and Africa, together with ongoing competitive pressures on new console placements in our GmbH business.

Speaker #3: Moving to the international glaucoma business, in Europe, the Middle East, and Africa, our UK registry is progressing nicely, and engagement from the clinical community has remained strong.

Speaker #3: We believe the data generated through the registry will be an important step in supporting broader reimbursement for Micropulse therapy in the UK. Expanded reimbursement would improve access for patients, increase physician adoption, and, over time, drive greater utilization of the installed G6 base and increased probe volumes.

Patrick Mercer: Expanded reimbursement would improve access for patients, increase physician adoption, and over time, drive greater utilization of the installed G6 base and increase probe volumes. We believe this positions us well for continued growth in the UK and broader adoption across the region. In IRIDEX GmbH, Germany and Austria operations again performed well as we continue to reclaim business previously handled by our former distributor. The main soft spot in the region remains G6 console sales, where competition persists for new console placements. In Asia, our distributor partner began stocking inventory ahead of the coming business transition in Japan, which increased purchases of MicroPulse P3 probes, EndoProbes, and Pascal systems. In Latin America and Canada, G6 probe sales held steady, driven primarily by Brazil, where our distributor increased inventory in preparation for our upcoming business. In Canada, we are seeing the commercial focus and initiatives implemented last quarter deliver stable results.

Speaker #3: We believe this positions us well for continued growth in the UK and broader adoption across the region. In GmbH, Germany and Austria operations again performed well, as we continue to reclaim business previously handled by our former distributor.

Speaker #3: The main soft spot in the region remains G6 console sales, where competition persists for new console placements. In Asia, our distributor partner began stocking inventory ahead of the coming business transition in Japan, which increased purchases of MicroPulse P3 probes, Endo probes, and Pascal systems.

Patrick Mercer: In Asia, our distributor partner began stocking inventory ahead of the coming business transition in Japan, which increased purchases of MicroPulse P3 probes, EndoProbes, and Pascal systems. In Latin America and Canada, G6 probe sales held steady, driven primarily by Brazil, where our distributor increased inventory in preparation for our upcoming business. In Canada, we are seeing the commercial focus and initiatives implemented last quarter deliver stable results.

Speaker #3: In Latin America and Canada, G6 probe sales held steady, driven primarily by Brazil, where our distributor increased inventory in preparation for our upcoming business.

Speaker #3: In Canada, we are seeing the commercial focus and initiatives implemented last quarter deliver stable results. Taken together, glaucoma growth was broad across our international regions this quarter, which reinforces how durable our value proposition is globally.

Patrick Mercer: Taken together, glaucoma growth was broad across our international regions this quarter, which reinforces how durable our value proposition is globally. Now turning to our retina portfolio. Our strategy remains focused on three pillars, advancing the Pascal upgrade cycle domestically, expanding Pascal's international footprint, and securing regulatory clearances for our next generation platforms that will allow us to leverage our global distribution network. We remain encouraged by the opportunity for our retina business and customer demand remains strong. That said, during the quarter, we confronted some market and operational execution dynamics that impacted sales during the quarter. We are actively addressing these factors and are confident we are implementing long-term solutions that will improve our execution and distributor sell-through.

Speaker #3: Now, turning to our retina portfolio, our strategy remains focused on three pillars: advancing the Pascal upgrade cycle domestically, expanding Pascal’s international footprint, and securing regulatory clearances for our next-generation platforms.

Speaker #3: That will allow us to leverage our global distribution network. We remain encouraged by the opportunity for our retina business, and customer demand remains strong.

Speaker #3: That said, during the quarter, we confronted market and operational execution dynamics that impacted sales. We are actively addressing these factors and are confident we are implementing long-term solutions that will improve our execution and distributor sell-through.

Speaker #3: Since our last earnings call, we took an important step to broaden access to our retina product portfolio domestically, announcing the addition of our Endo Probe handpieces to our existing product offering with iPro GPO.

Patrick Mercer: Since our last earnings call, we took an important step to broaden access to our retina product portfolio domestically, announcing the addition of our EndoProbe handpieces to our existing product offering with EyeProGPO. That agreement now gives us more than 4,300 member practices, ambulatory surgery centers, and hospitals across the country preferred pricing on EndoProbe, building on the Pascal, IQ 532, IQ 577, OcuLight TX, and Cyclo G6 platforms already available through that channel. We see this as a meaningful expansion of the value we offer retina specialists and ophthalmic providers and another lever supporting our US retina business going forward. Turning to international retina. Abroad, retina results were inconsistent, and we are taking steps to ensure we are executing commercially and operationally to satisfy the strong demand from our global customer base.

Speaker #3: That agreement now gives us more than 4,300 member practices, ambulatory surgery centers, and hospitals across the country preferred pricing on Endo Probe, building on the Pascal, IQ 532, IQ 577, OcuLight TX, and Cyclo G6 platforms already available through that channel.

Speaker #3: We see this as a meaningful expansion of the value we offer retina specialists and ophthalmic providers, and another lever supporting our U.S. retina business going forward.

Speaker #3: Turning to international retina, abroad, retina results were inconsistent, and we are taking steps to ensure we are executing commercially and operationally to satisfy the strong demand from our global customer base.

Speaker #3: In Europe, the Middle East, and Africa, we expect Pascal's to secure MDR approval in Europe in the first half of next year, and we anticipate meaningful demand once that certification is complete.

Patrick Mercer: In Europe, Middle East, and Africa, we expect Pascals to secure MDR approval in Europe in the H1 of next year, and we anticipate meaningful demand once that certification is complete. In China, sell-through was impacted by regulatory constraints as well as the need for our distributor to work through existing inventory before placing additional orders. We are actively progressing the regulatory renewal process and expect these factors to normalize over the coming quarters. In Latin America and Canada, Pascal sales resumed following previous market challenges, and we anticipate continued momentum and growth throughout the remainder of the year. As we turn to the rest of 2026, our priorities remain focused on commercial and operational execution, in conjunction with continued expense management to drive positive cash flow from operations for the year.

Speaker #3: In China, sell-through was impacted by regulatory constraints, as well as the need for our distributor to work through existing inventory before placing additional orders.

Speaker #3: We are actively progressing the regulatory renewal process and expect these factors to normalize over the coming quarters. In Latin America and Canada, PASCAL sales resumed following previous market challenges, and we anticipate continued momentum and growth throughout the remainder of the year.

Speaker #3: As we turn to the rest of 2026, our priorities remain focused on commercial and operational execution, in conjunction with continued expense management, to drive positive cash flow from operations for the year. In alignment with these priorities, we are reaffirming our full-year revenue guidance of $51 million to $53 million.

Patrick Mercer: In alignment with these priorities, we are reaffirming our full-year revenue guidance of $51 million to $53 million. To reiterate, that range excludes revenue from the Middle East region, and on a comparable basis, reflects roughly 1% to 5% pro forma growth against 2025. The cadence of international ordering has had a meaningful effect on our results this quarter. In some markets, that sets up incremental opportunity as previously deferred backlog shifts and the product re-registration tied to our relocation are completed. In others where distributors placed larger stocking orders this quarter, we expect a corresponding decline next quarter, representing some continued choppiness in different regions globally. I will now hand the call over to Romeo to take you through the financials.

Speaker #3: To reiterate, that range excludes revenue from the Middle East region and, on a comparable basis, reflects roughly 1% to 5% pro forma growth against 2025.

Speaker #3: The cadence of international ordering has had a meaningful effect on our results this quarter. In some markets, that sets up incremental opportunity as previously deferred backlog shifts and the product re-registration tied to our relocation are completed.

Speaker #3: In other cases, where distributors place larger stocking orders this quarter, we expect a corresponding decline next quarter, representing some continued choppiness in different regions globally.

Speaker #3: I'll now hand the call over to Romeo to take you through the financials.

Speaker #2: Thanks, Patrick. And good afternoon, everyone. As Patrick noted, and as detailed in our press release, total revenue for the second quarter of 2026 was $12.6 million, down 7 percent from $13.6 million in the second quarter of 2025.

Romeo Dizon: Thanks, Patrick, and good afternoon, everyone. As Patrick noted, and as detailed in our press release, total revenue for Q2 2026 was $12.6 million, down 7% from $13.6 million in Q2 2025. The year-over-year decline stemmed mainly from lower retina product sales, which were partly offset by continued growth in glaucoma probe sales. Turning to components, retina product revenue was $6.5 million versus $8.0 million in the prior year period. As Patrick noted, the decline was driven entirely by temporary headwinds, including international commercial transitions and regulatory-related factors. Underlying global demand for our core products remained robust and fundamentally intact. Total product revenue for the Cyclo G6 product family was $3.9 million, representing growth of 19% year-over-year compared to $3.3 million in the prior year quarter.

Speaker #2: The year-over-year decline stemmed mainly from lower retina product sales, which were partly offset by continued growth in glaucoma probe sales. Turning to the components, retina product revenue was $6.5 million versus $8.0 million in the prior year period.

Speaker #2: As Patrick noted, the decline was driven entirely by temporary headwinds, including international commercial transitions and regulatory-related factors. Underlying global demand for our core products remained robust and fundamentally intact.

Speaker #2: Total product revenue for the Cyclo G6 product family was $3.9 million, representing growth of 19 percent year-over-year compared to $3.3 million in the prior year quarter.

Speaker #2: The growth is attributed to both an increase in unit volumes, both in the U.S. and internationally, and an increase in ASP domestically. Other revenue was $2.2 million, essentially flat compared to $2.2 million in the second quarter of 2025.

Romeo Dizon: The growth is attributed to both an increase in unit volumes, both in the US and internationally, and an increase in ASP domestically. Other revenue is $2.2 million, essentially flat compared to $2.2 million in Q2 2025. Gross profit in Q2 was $4.3 million, translating to a gross margin of 34.2%, relatively flat with $4.7 million or 34.5% in the prior year period. Favorable contribution from our higher margin glaucoma probe was largely offset by softer retina systems margins and by a number of cost pressures in the quarter. We continue to view our transition to lower cost third-party contract manufacturers as a meaningful driver of gross margin improvement over the balance of the year and into 2027. Operating expenses were $5.3 million in Q2 2026, down $0.3 million or 5%, compared to $5.6 million in Q2 2025.

Speaker #2: Gross profit in the second quarter was $4.3 million, translating to a gross margin of 34.2%, relatively flat with $4.7 million, or 34.5%, in the prior year period.

Speaker #2: Favorable contribution from our higher-margin glaucoma probe was largely offset by softer retina systems margins, and by a number of cost pressures in the quarter.

Speaker #2: We continue to view our transition to lower-cost, third-party contract manufacturers as a meaningful driver of gross margin improvement over the balance of the year and into 2027.

Speaker #2: Operating expenses were $5.3 million in the second quarter of 2026, down $0.3 million, or 5 percent, compared to $5.6 million in the second quarter of 2025.

Speaker #2: That reduction was driven primarily by lower general and administrative expenses, reflecting savings from the administrative function transfer initiative we've highlighted in prior periods. Progress on that initiative continues, and we remain on schedule to complete our headquarters relocation later this year.

Romeo Dizon: That reduction was driven primarily by lower general and administrative expenses, reflecting savings from the administrative function transfer initiative we have highlighted in prior periods. Progress on that initiative continues, and we remain on schedule to complete our headquarters relocation later this year. Net loss was $1.3 million or $0.07 per share for Q2 2026, compared to a net loss of $1.0 million or $0.06 per share in the same period of the prior year. Non-GAAP adjusted EBITDA for Q2 2026 was a loss of $0.4 million for the quarter, compared to a non-GAAP adjusted EBITDA income of $21,000 in Q2 2025. We ended the quarter with cash and cash equivalents of $4.7 million as of 4 July 2026, an increase of $0.1 million compared to 4 April 2026.

Speaker #2: Net loss was $1.3 million, or $0.07 per share, for the second quarter of 2026, compared to a net loss of $1.0 million, or $0.06 per share, in the same period of the prior year.

Speaker #2: Non-GAAP adjusted EBITDA for the second quarter of 2026 was a loss of $0.4 million for the quarter, compared to non-GAAP adjusted EBITDA income of $21,000 in the second quarter of 2025.

Speaker #2: We ended the quarter with cash and cash equivalents of $4.7 million as of July 4, 2026, an increase of $0.1 million compared to April 4, 2026.

Speaker #2: As Patrick emphasized, we were pleased to deliver positive cash flow in the quarter—a meaningful marker of the financial discipline now driving the business, achieved through disciplined cost control and improved working capital, even as we build safety stock for certain distributors ahead of our relocation.

Romeo Dizon: As Patrick emphasized, we were pleased to deliver positive cash flow in the quarter, a meaningful marker of the financial discipline now driving the business, achieved through disciplined cost control and improved working capital, even as we build safety stock for certain distributors ahead of our relocation. Across the remaining quarters, we expect core cash generation to build sequentially as we sell through inventory and collect receivables on higher revenue. However, we anticipate a temporary reinvestment of operating cash flow into advanced inventory procurement. This proactive buffer secures our international supply chain and protects top-line distributor revenue streams while we transition to our new production facility. Turning to guidance, we are reaffirming our 2026 guidance. We continue to expect revenue in the range of $51 million to $53 million. As a reminder, given the market disruptions and ongoing conflict in the Middle East, that outlook excludes revenue from the region.

Speaker #2: Across the remaining quarters, we expect quarterly cash generation to build sequentially as we sell through inventory and collect receivables on higher revenue. However, we anticipate a temporary reinvestment of operating cash flow into advanced inventory procurement.

Speaker #2: This proactive buffer secures our international supply chain and protects top-line distributor revenue streams while we transition to our new production facility. Turning to guidance, we are reaffirming our 2026 guidance.

Speaker #2: We continue to expect revenue in the range of $51 million to $53 million. As a reminder, given the market disruptions and ongoing conflict in the Middle East, that outlook excludes revenue from the region.

Speaker #2: On a pro forma basis that strips out 2025 Middle East revenue, the guidance implies 2026 growth of 1% to 5% over 2025.

Romeo Dizon: On a pro forma basis that strips out 2025 Middle East revenue, the guidance implies 2026 growth of 1% to 5% over 2025. We are also reiterating our expectation for adjusted operating expenses, which include depreciation and amortization and stock compensation, to be in the range of $19 million to $19.5 million for the full year of 2026. I will now pass the call back to Patrick for his closing remarks.

Speaker #2: We are also reiterating our expectation for adjusted operating expenses, which include depreciation and amortization and stock compensation, to be in the range of $19.0 million to $19.5 million for the full year of 2026.

Speaker #2: I'll now pass the call back to Patrick for his closing remarks.

Speaker #3: Thanks, Romeo. Looking back on the second quarter, I'm energized by the continued broad-based strength of our glaucoma franchise, and above all, by our demonstrated ability to manage the business to positive cash flow.

Patrick Mercer: Thanks, Romeo. Looking back on the Q2, I am energized by the continued broad-based strength of our glaucoma franchise, and above all, by our demonstrated ability to manage the business to positive cash flow. Our cost discipline keeps translating into stronger cash generation, and both our manufacturing transition and our headquarters relocation remain firmly on course to deliver meaningful additional margin improvement as the year unfolds. Our priorities for 2026 remain firmly in place, growing G6 utilization and adoption globally, securing international regulatory approvals to open up new geographies for our retina systems, and completing the move to lower cost contract manufacturers to increase gross margin. The foundation we built is solid. Our path to sustained profitability is clear, and we are excited about what lies ahead. We appreciate your continued support of IRIDEX, and we look forward to sharing our progress with you again next quarter.

Speaker #3: Our cost discipline keeps translating into stronger cash generation, and both our manufacturing transition and our headquarters relocation remain firmly on course to deliver meaningful additional margin improvement as the year unfolds.

Speaker #3: Our priorities for 2026 remain firmly in place: growing G6 utilization and adoption globally, securing international regulatory approvals to open up new geographies for our retina systems, and completing the move to lower-cost contract manufacturers to increase gross margin.

Patrick Mercer: Our priorities for 2026 remain firmly in place, growing G6 utilization and adoption globally, securing international regulatory approvals to open up new geographies for our retina systems, and completing the move to lower cost contract manufacturers to increase gross margin. The foundation we built is solid. Our path to sustained profitability is clear, and we are excited about what lies ahead. We appreciate your continued support of IRIDEX, and we look forward to sharing our progress with you again next quarter. Now we will turn the call over to the operator for questions.

Speaker #3: The foundation we built is solid. Our path to sustained profitability is clear, and we're excited about what lies ahead. We appreciate your continued support of IRIDEX, and we look forward to sharing our progress with you again next quarter.

Speaker #3: Now, we'll turn the call over to the operator for questions.

Patrick Mercer: Now we will turn the call over to the operator for questions.

Speaker #1: Our first question comes from the line of Scott Henry. Please go ahead.

Operator: Our first question comes from the line of Scott Henry. Please go ahead.

Speaker #4: Thank you, and good afternoon. Just a couple of questions. First, on retina—it sounds like there are a lot of moving parts, both domestically and internationally.

Scott Henry: Thank you, and good afternoon. Just a couple of questions. First, on retina, it sounds like there is a lot of moving parts domestically and international. The question is, do you expect retina to grow year-over-year if I look at the full year? That would require a pretty significant boost in H2. Even if we forget about the full year, do you expect H2 2026 to be higher than H2 2025? Thank you.

Speaker #4: The question is, do you expect Retina to grow year over year if I look at the full year? That would require a pretty significant boost in the second half.

Speaker #4: So even if we forget about the full year, do you expect the second half of 2026 to be higher than the second half of 2025? Thank you.

Speaker #3: Yes, thank you, Scott, for the question. We expect the second half of the year for retina to show low single-digit growth. We have several important tailwinds as we advance international regulatory approvals.

Patrick Mercer: Yes. Thank you, Scott, for the question. We expect H2 of the year for retina to show low single-digit growth. We have several important tailwinds as we advance international regulatory approvals. We expect that to broaden our addressable market and improve overall performance, particularly with our flagship product, PASCAL. In the US, on the back half of the year, we expect momentum as we head into the American Academy of Ophthalmology meeting. We plan on implementing our annual promotion programs, which really help us with the sale of the capital equipment and really drive customer engagement coming out of that meeting. We had some tailwinds. Those are the tailwinds that we see. We had headwinds due to the continued disruption in the Middle East.

Speaker #3: We expect that to broaden our addressable market and improve overall performance, particularly with our flagship product, Pascal. In the US, in the back half of the year, we expect momentum as we head into the American Academy of Ophthalmology meeting.

Speaker #3: We plan on implementing our annual promotion programs, which really help us with the sale of the capital equipment and really drive customer engagement coming out of that meeting.

Speaker #3: We had some tailwinds; those are the tailwinds that we see. We had headwinds due to the continued disruption in the Middle East. We had some sell-through delays in China due to some stocking orders previously for the tariffs.

Patrick Mercer: We had some sell-through delays in China due to some stocking orders previously for the tariffs, and just managing our relocation and those subsequent inventory management for the blackout periods due to our headquarter relocation. We do, again, expect H2 to generate low single-digit growth for retina.

Speaker #3: And just managing our relocation and those subsequent inventory management efforts for the blackout periods due to our headquarters relocation. But we do, again, expect the second half to generate low single-digit growth for Retina.

Speaker #4: Okay. And would you expect—historically—the fourth quarter is a lot stronger than the third quarter. Would you expect that to be the case this year as well?

Scott Henry: Okay. Historically, Q4 is a lot stronger than Q3. Would you expect that to be the case this year as well?

Speaker #3: Yes, most definitely. It's our largest by quite a bit, generally speaking—Q4.

Patrick Mercer: Yes, most definitely. It's our largest by quite a bit, generally speaking, Q4.

Speaker #4: Okay. And then, shifting to glaucoma, 17,700 probes was a lot for Q3—the biggest quarter of the last five or six quarters by far.

Scott Henry: Okay. Shifting to glaucoma, 17,700 probes was a lot for Q3, biggest quarter of the last five quarters or six quarters by far. Do you think there was any inventory build there among your customers? Should we expect that to normalize back to more typical levels, or is this a new normal?

Speaker #4: Do you think there was any inventory build there among your customers? I mean, should we expect that to normalize back to more typical levels, or is this a new normal?

Speaker #3: I wouldn't say it's a new normal. We do expect low double-digit growth for the second half of the year. If you back out—so we did have Japan place some heavier orders to manage the blackout period.

Patrick Mercer: I wouldn't say it's a new normal. We do expect low double-digit growth for H2. We did have Japan place some heavier orders to manage the blackout period. Not just Japan, but in Europe, we had some of that too to support the blackout periods. But if you back that out, we still had over 15% growth, which if we get that at the back half of the year, we'll be very happy with. So there was some, I'll call it lumpiness due to the pre-orders to cover the blackout period, but with that backed out, we still had really good growth.

Speaker #3: And it's not just Japan—in Europe, we had some of that too, to support the blackout periods. But if you back that out, we still had over 15% growth.

Speaker #3: Which was, if we get that in the back half of the year, we'll be very happy with. So there was some, I'll call it, lumpiness due to the preorders to cover the blackout period, but with that backed out, we still had really good growth.

Speaker #4: Okay, and also, final question: The system sold—18, on the other hand—was a little bit of a lower number. Would you expect that to jump back higher in the second half of the year?

Scott Henry: Okay. Also, final question. The systems sold, 18, on the other hand, was a little bit of a lower number. Would you expect that to jump back higher in the H2 of the year? How should we think about that 18 as far as a go-forward number?

Speaker #4: How should we think about that 18 as far as a go-forward number?

Speaker #3: We believe it's going to be much higher towards the back end of the year. Again, Q4 is our largest quarter, and that includes system sales as well.

Patrick Mercer: We believe it is going to be much higher towards the back end of the year. Q4 is our largest quarter, and that includes system sales as well, so we expect those numbers to be higher as we move forward. We did have some slowness in Europe, Middle East, and Africa, waiting on that approval for that UK registry. Once we get that approval there for reimbursement, that will help boost some sales there. So that hurt us this quarter, but we do expect those numbers to increase over the H2 of the year.

Speaker #3: So we expect those numbers to be higher as we move forward. We did have some slowness in Europe, Middle East, and Africa, waiting on that approval from the UK registry. Once we get that approval there for reimbursement, that will help boost some sales there.

Speaker #3: So, that hurt us this quarter, but we do expect those numbers to increase over the second half of the year.

Speaker #4: Okay, great. Thank you for taking the questions.

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

Speaker #3: Thank you. And thank you all for joining us.

Patrick Mercer: Thank you. Thank you all for joining us.

Operator: Thank you again for joining us today. This does conclude today's conference call. You may now disconnect.