IRIDEX Corporation

Hello, thank you for standing by and welcome to the ERADEX first quarter 2022 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'll need to press star one on your telephone. Please be advised that today's conference may be recorded. If you require any further assistance, please press star zero. I would not like to hand the conference over to Hunter Cobby. Please go ahead.

Thank you all for participating in today's call. Joining me are David Bruce, Chief Executive Officer, and Fouad Ahmad, Interim Chief Financial Officer. Earlier today, IRDX released financial results for the quarter ended April 2, 2022. A copy of the presentation 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 of 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, and 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 the SEC. Your district claims 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 in future events or otherwise. This conference call contains time-sensitive information and is accurate only as of live broadcast today, May 12, 2022. And with that, I'll turn the call over to Dave.

Good afternoon, and thank you all for joining us. While it's only been a few months since our last call, the Aerodex team has continued to make progress in expanding awareness and gaining share in the market for our non-incisional approach to glaucoma and retinal disease treatment. Record first quarter results reflected an encouraging start to the year. Despite the Omicron-related impact to our business seen early in the quarter, Thank you for joining us today. through an improved sales process and dedicated commercial teams, augmented by our investments to support physicians with peer-to-peer training and increased clinical data. As a result, our physician customers are experiencing improved outcomes and durability from our micropulse TLT treatment, further expanding confidence in the procedure, and we expect that to drive broader utilization. In addition, we've seen upside from the TopCon collaboration. which has improved our competitive position by delivering a more robust portfolio, a broader distribution network, and cash from the transaction for investment in our future growth. In terms of our traction in the retina market, we've seen a turnaround from a slowly declining business to levels exceeding the overall market growth rate. Specifically, our Pascal platform, new U.S. sales team, and a new OUS distribution network have been key contributors. Lastly, our focus on cash management and well-funded operating runway have delivered stability to invest in growth vehicles of product launches, targeted clinical data and publications, physician training, and recently inventory management to de-risk potential supply chain issues such as carrying extra inventory and prepaying suppliers to secure commitments later in the year. Turning to some highlights from the past few months. Once again, we're pleased to see encouraging trends throughout the business. In glaucoma, we continue to benefit from investments in clinical evidence, developing KOL proof statements, and expanding our clinical physician-to-physician messaging around the benefits of our micropulse TLT. Overall, the Cyclo-G6 product family achieved 6% revenue growth over first quarter of 2021. Year-over-year Cyclo-G6 probe sales increased 8%. We are confident progress was made to drive utilization in the installed base, despite a soft start to the quarter due to COVID limited access to ophthalmologists, delayed procedures, and customer staffing shortages. Strength in the U.S. offset extended COVID disruptions outside the U.S. The rebound we saw in the latter half of the quarter leaves us confident in our ability to achieve the guidance we provided on our fourth quarter conference call of 18% year-over-year probe growth for the full year 2022. We're encouraged by the progress our team is seeing, but also recognize that physician adoption isn't instantaneous. To be fully confident in our TLT treatment for glaucoma, a physician needs to see consistency and effectiveness over multiple patients and track those outcomes over three to 12 months to confirm durability. Though it takes time, Our current stage of penetration into the large opportunity in glaucoma requires these investments to provide physicians the necessary study data, clinical support, and follow-up training to gain confidence and adopt TLT in their practice. Physician engagement tells us we're delivering desired support and clinically relevant materials. To illustrate this progress, in Q1, we trained 35 physicians in peer-to-peer programs with follow-up certification procedure support. In addition, interest in clinical information is strong, as demonstrated by over 3,600 views of the first TLT Clinical Consensus Panel webcast and 2,200 views of the second, and summary papers are submitted for publication in upcoming quarters. Internationally, we conducted distributor training in the Middle East, two sessions in Europe, and have upcoming events in Singapore and Japan to train and support our distribution partners around the world. As we've highlighted in prior calls, expanding clinical data for micropulse TLT, specifically in terms of optimizing techniques that improve results, has been a key area for investment and key opinion leader support. with over 2,100 Cyclo-G6 site installations worldwide. We believe the clinical community supports our non-incisional runway for ILP control in glaucoma patients and is increasingly recognizing the benefits of deferring the need for more invasive incisional surgeries. We have a significant opportunity today to improve the current practice of TLT. This includes improved clarity of the key factors affecting outcomes, standardizing around recommended sweep speeds, implementing our recently released sweep management software that helps clinicians maintain desired sweep speeds, and messaging from clinical opinion leaders communicating studies and techniques that demonstrate consistent results combining the right probe, targeted dosing, and accurate delivery. Turning to Retina, it's clear that last year marked a significant turning point in what had been a slowly declining business excitement for Iridex. As anticipated, our investment in the Pascal line acquired from Topcon is delivering revenue growth and scale efficiencies. First quarter revenue grew 10% year over year, of which 29% came from sales of Pascal products. Overall, are driving demand to continue the momentum we began in 2021. We expect this growth to progress in 2022 and continue to outpace growth in the overall retina market. In summary, we have an exciting opportunity ahead in 2022 to further capitalize on the momentum we gained in 2021. We are executing on the plan we laid out on our last call. by continuing to drive clinical data supporting key TLT parameters and techniques, coupled with education programs from key opinion leaders in peer-to-peer training to present the durability and results from using best practices in TLT to drive physician utilization, delivering further data supporting the use of TLT by comprehensive ophthalmologists for pre-incisional treatment of more moderate-stage glaucoma patients, expanding the size and geographic reach of our U.S. sales team. And internationally, we plan to expand into new markets, including anticipated regulatory clearance in China later this year, as well as additional bundled tender programs in collaboration with Topcon. Lastly, we expect to introduce enhanced performance and cost-reduced platform laser systems across our product line later in the year. In order to achieve our goals for the year, We set a plan to invest this year's increased gross profit while still maintaining our secure capital position and multi-year operating runway. Additionally, we're closely monitoring and taking appropriate actions in our supply chain to mitigate potential future impacts to meet our customers' demands. With that, I'd like to turn the call over to Fuad.