IRIDEX Corporation

Thank you for standing by and welcome to Aerodex fourth quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker 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. Please be advised that today's call may be recorded. Should you require any further assistance, please press star 0. I would now like to hand the call over to Hunter Cobby, Investor Relations.

Thank you and thank you for participating in today's call. Joining me are David Bruce, Chief Executive Officer, and Fawad Ahmad, Interim Chief Financial Officer. Earlier today, IRDX released financial results for the quarter ended January 1st, 2022. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of the federal securities laws, which are made pursuant to the state-powered provisions of the Private Securities Education 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, and 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. Accordingly, you should not place reliance on these statements. For discussion of the risks and uncertainties associated with our business, please see our most recent Form 10-K and Form 10-Q filings with SEC. Your DEX 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 today, March 10, 2022. And with that, I'll turn the call over to Dave.

Good afternoon, and thank you all for joining us. To quickly recap 2021, the Iridex team significantly advanced the company as we navigated and adapted to pandemic-driven global challenges. Our achievements included a transformational collaboration with Topcon, a leading market participant, that strengthened our balance sheet, improved our competitive positioning, expanded our product portfolio and enhanced our global distribution network. We also significantly increased utilization of our Cyclo-G6 platform for the treatment of glaucoma, which yielded a 27% year-over-year increase in probe sales. Our retina business was revitalized in both U.S. and international markets through the acquisition of a new product platform, a retina-focused U.S. sales team, and Nuo US Distribution Network. So for the full year, Retina revenue grew 72% over 2020 and we employed judicious cash management that's going to enable us to securely pursue our growth plans in 22 and beyond. We're highly confident in our ability to continue delivering valuable execution with progress in both of our key ophthalmic markets. Turning to recap our recent results. In our glaucoma business, we continue to prioritize investments in clinical evidence, developing key opinion leader proof statements, and expanding clinical physician to physician messaging around the benefits of our micropulse TLT treatment. In addition, while in-person training and industry trade shows return late in the year, we also successfully hosted virtual training sessions and showcased several new clinical papers. As we had preannounced in January, our fourth quarter Cyclo-G6 probe sales increased 13% year-over-year. Despite facing headwinds due to the Omicron spike in the latter half of the quarter, we still achieved the guidance set back in March for the full year. Cyclo-G6 system placements in the fourth quarter increased 58% year-over-year, bringing our total global install base to more than 2,100 systems at year-end. In addition, our international sales teams had initial success bundling offerings with our collaboration partner, Topcon, that allowed us to win a significant joint tender contract, and we expect this bundling model to yield more opportunities in the future. On our last call, we announced Iridex's support of an independent assessment of our MicroPulse TLT product by 10 key opinion leaders from around the world with the goal of determining proper dosing levels and settings to optimize clinical results. These KOLs presented their conclusions prior to the AAO conference and have submitted the findings for peer-reviewed publication. A follow-on session occurred at the recent American Glaucoma Society meeting and more sessions are planned at the upcoming ASCRS as well as in additional smaller meetings around the country. We expect to have this data and key users drive procedure optimization and lead to greater adoption. As a result, we achieved success in increasing awareness of our micropulse technology in treating moderate severity glaucoma prior to surgical incision-based procedures that resulted in increased usage throughout the year. The Cyclo G6 product family achieved 24% revenue growth over the full year of 2020. Turning to our retina business, 2021 marked a significant turning point in what had been a slowly declining market for Euridex. As anticipated, our investment in the Pascal line acquired from Topcon is delivering revenue growth and scale efficiencies. Fourth quarter revenue grew 31% year over year, of which 17% came from sales of Pascal products. For the full year 2021, total retina revenue grew 72% year-over-year, which included 22% contribution from Pascal products. This large move upward in 2021 was primarily driven by two unique events, Pascal acquisition and recovery from the 2020 COVID trough. We believe our retina business has been significantly strengthened and can grow at or above the 3% worldwide retinal laser market rate compared to the slow decline we had experienced in prior years. In 2022, our focus is on accelerating the momentum we gained in 2021 in each of the markets we serve. This includes further supporting our global commercial team with increased clinical data and education programs aimed at consistent, strong outcomes combined with continued key opinion leader support, and peer-to-peer training, plus podium presentations, all expected to drive continued physician adoption. In addition, our KOL consensus group recommended a broad TLT patient profile, including use as a key non-incisional tool for treating moderate-stage glaucoma patients, thereby creating an opportunity to expand market penetration and utilization in our growing installed base. In the U.S., we will invest in selectively expanding territories and sales rep headcount. And internationally, we will expand opportunities such as glaucoma product regulatory clearance in China, as well as bundled tender programs in collaboration with Topcon. Lastly, we expect to see our increased product development investments bear fruit as we introduce enhanced performance and cost-reduced platform laser systems across our product line. In order to achieve our goals for the year, we plan to leverage revenue growth and the resulting gross profit to judiciously expand our investments while still maintaining our secure capital position and multi-year operating runway. In terms of guidance for the full year 2022, we anticipate Cyclo-G6 probe unit sales of 67,000 to 70,000, which represents growth of approximately 18% over the prior year at the midpoint. Cyclo-G6 systems installed base is expected to expand by 225 to 250 units. Total revenue for the full year is expected to be 57 million to 59 million. So far in 2022, we've been successful navigating the challenges of our supply chain and have set our guidance based on continuing success sourcing components and products. We also note that the worldwide impact of Omicron continue to exhibit softness in glaucoma procedure volumes, but we see a shift to increasing traction as capacity limits and mandates are lifted and anticipation of solid growth is reflected in our guidance for 2022. With that, I'd like to turn the call over to Fuad.