IRIDEX Corporation

Good day and thank you for standing by. Welcome to the Q1 2021 Airdex Earnings Conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Hunter Cobby, Investor Relations. Please go ahead.

Thank you and thank you all for participating in today's call. Joining me are Dave Bruce, Chief Executive Officer, and Vlad Amon, Interim Chief Financial Officer. Earlier today, Veridex released financial results for the quarter ended April 3rd, 2021. A copy of the presentation is available on the company's website. Before we begin, I'd like to remind you that managers will make statements during this call. that include forward-looking statements within the meaning of the Federal Securities Laws which are made pursuant to the state-powered revisions of the Private Securities Litigation Reform Act of 1995. Any statements made during this call are not statements of historical fact, including but not limited to statements concerning our strategic goals and priorities, product development matters, sales trends, and markets in which we operate. Our 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 these risks and uncertainties associated with our business, please see our most recent Form 10-K, Inform 10 Key Finds with SEC. Thank you all for joining us.

Our first quarter was marked by strong top-line performance, continued operational execution, and substantial progress across our strategic initiatives. On today's call, I'll cover the highlights of our first quarter 2021 results, how we're focused today, and how we'll execute for our longer-term market opportunity. Fuad will cover our financial results and guidance for the fiscal year, and then we'll open the call for questions. SpiritX had a strong start to 2021, achieving a multi-year record for first quarter total revenue. Revenue in the first quarter was $12.0 million, a 33% year-over-year increase. This improvement was the result of a number of factors. First, we maintained strong momentum in our glaucoma product family with record international G6 probe sales and a significant rebound in console sales. Our Retina business also rebounded strongly with sales up 61% from the prior year to $6.7 million. This included a contribution of about $1.1 million from Pascal Products acquired as part of our collaboration agreement with Topcon. Third, we believe our sales and marketing programs are having effect, building awareness and demonstrating the many benefits of our non-incisional glaucoma therapy. In short, creating sales traction. Overall, we were very pleased to see demand for Iridex products increasing, both in our glaucoma and retina markets and in the U.S. and internationally. I'm encouraged by the multiple growth catalysts we have on the horizon including improved sales infrastructure, broader distribution capabilities, a pipeline of enhanced products, expanded key opinion leader support and industry awareness. And importantly, we have a significantly strengthened balance sheet in place to support strategic initiatives designed to leverage these catalysts. We added $19.5 million in funds from TopCon Corporation as part of the strategic collaboration we closed in March. And combined with continued strong cash management, we ended the quarter with a cash position of $28 million. Our cash usage in the quarter was approximately $600,000 from operations and $500,000 from non-recurring payments associated with the TopCon transaction. This was despite already having begun our investments in sales and marketing programs designed to accelerate growth, which I'll explain in a minute. Turning now to focus on the glaucoma business. Our Cycle G6 product family revenue was $3.3 million, an increase of 15% year over year. During the first quarter, we saw 13,600 Cyclo-G6 probes, a 4% year-over-year increase, despite nearing COVID-19 impacts, which you should recall were particularly widespread early in the quarter when countries such as Germany reimposed lockdowns. The sales strength was broad-based, the volumes from Japan were strong, and Asia Pacific, Europe, Middle East, Africa, and Latin America all recovered meaningfully, driving international glaucoma probe sales higher by 18% year-over-year and setting a new quarterly record for international probe volumes. In the U.S., probe sales were slightly below Q1 of 2020, which we attribute to a combination of relative strength last year as customers bought inventory pre-lockdown and this year's restrictive environment in the first half of the first quarter when U.S. COVID cases were peaking. Overall, the growth we've seen in glaucoma probe sales is encouraging on many levels. Importantly, it signals our strategic shift to emphasize higher physician utilization is showing results while in parallel highlighting growing customer support for the enhancements in our revised probe, which was launched last year. Moving to our Cyclo-G6 glaucoma laser systems, we sold 64 units in the first quarter of 2021 compared to 38 in the prior year. This increase is a rebound from the understandable hesitancy on capital purchases last year as we entered the pandemic. We now see business opening toward more normal operation. Turning to Retina, we saw related product revenue grow nearly 61% year-over-year, including a 16% contribution from sales of Pascal products acquired from TopCon. The surge in revenue can be attributed to a return from deferred purchases relating to COVID, but also to our renewed commitment to our retina product line. As you can see, we're enjoying a return on those investments as the business landscape improves. As we announced earlier, in the first quarter, we entered into a strategic collaboration with Topcon Corporation's $430 million revenue eye care division. As part of this collaboration, Topcon purchased exclusive distribution rights in Asia Pacific and key EMEA markets for Iridex Retina and Glaucoma products, which accounted for approximately 60% of our international revenues. In addition, Iridex acquired Topcon's Pascal laser product line, adding it to our Micropulse and Texel Retina scanning laser platform. And Topcon purchased 10% of Iridex's common shares. The total deal netted $19.5 million in new funds to Iridex. We saw immediate results from the collaboration, including a 10% revenue contribution to our top line from sales of Pascal products we acquired under the agreement and began selling in the last three weeks of the quarter following its closing. In April, we began notifying our affected international distributors of our transition to Topcon's distribution network, and we are actively working in these regions to transition and onboard new distributors while minimizing any potential mid-year disruption to sales volumes. We have high confidence in the potential for this collaboration and look forward to updating you on our progress and results as we work through the integration. Next, I'd like to take a few minutes to talk about where we are focused now and highlight some of the investments for growth that we're making in our sales organization. Late last year, we assessed the timing was right to expand our sales team and invest in further clinical and market development efforts to accelerate sales, particularly in glaucoma products. In the first quarter, we executed the following. First, we split and expanded the U.S. sales team, going from 12 hybrid territories selling both glaucoma and retina products to 12 dedicated glaucoma territories and 6 dedicated retina territories. We shifted some internal staffing and hired to fill the remaining new positions. Training and activities are essentially complete and we expect the new members will soon be ramping up their contributions. We began increasing our investments in clinical evidence and closer key opinion leader relationships that can improve confidence and adoption of our non-incisional transcleral laser therapy products. And finally, we budgeted for the anticipated return of in-person trade meetings and local clinical events that will require greater investment, but we expect to pay off downstream. Of note, we are exhibiting live at the Hawaiian Eye and Retina Meeting, our first significant non-virtual event since February of 2020. This is the first meeting in which we showcase the Pascal Laser and our new 810 Laser. Both the reception and attendance at the meeting have been good. Later this year, we plan to attend an expanding schedule of live domestic and international events, including the American Society of Cataract and Refractive Surgery meeting in July in Las Vegas, the American Society of Retina Specialists in October in San Antonio, the European Society of Cataract and Refractive Surgery in Amsterdam during October, and the American Academy of Ophthalmology meeting in New Orleans in November. As we enter the second quarter and look towards the remainder of the year, our company is emerging from the pandemic in a strong position. We're optimistic we can overcome the obvious challenges from continued pockets of COVID resurgence in international regions, the shift in parts of our international distribution network, and how quickly our sales and marketing investments can generate results. We have made significant progress throughout the past year despite extraordinary circumstances. Our focus continues to be on capitalizing on our opportunities for growth and increasing the long-term shareholder value of Airdex. With that, I'd like to turn the call over to Fuad.