IRIDEX Corporation

Good day, and thank you for standing by. Welcome to the IRDEC's third quarter 2022 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'll need to press star 1 on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, We can tally with investor relations. Please begin.

Thank you, Operator, and thank you all for participating in today's call. Joining me are David Bruce, Chief Executive Officer, and Fahd Ahmad, Interim Chief Financial Officer. Earlier today, Iridex released financial results for the quarter ended October 1, 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 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, 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 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, November 10, 2022. And with that, I'll turn the call over to Dave.

Good afternoon, and thank you all for joining us today. On this call, I'll provide updates on our business and commercial progress. Then Fuad will cover the third quarter financials, and we will open the call for questions. Third quarter was highly productive for Aerodex, highlighted by a 29% increase in placements of Cyclo-G6 systems globally, the launch of Cyclo-G6 in China, and the U.S. soft launch of our next-generation retinal laser systems at the American Academy of Ophthalmology. We expect these developments to be growth drivers for the business over many quarters to come. Turning to our results in the third quarter, revenue total 14.6 million, growth of 10% compared to the third quarter of 2021, and importantly, 6% sequential quarterly growth despite elevated foreign exchange headwinds and typical summer seasonality. Growth in the quarter was led by the retina business growing 13% year-over-year, and the Cyclo-G6 product family growth of 10% year-over-year. In the glaucoma market, G6 system placements grew 29% compared to the prior year period with 54 systems shift, representing a strong appetite for adoption of our non-incisional approach to treat glaucoma both in the U.S. and internationally. On the probe utilization front, we experienced an improved operating environment relative to second quarter. In Q3, G6 probe unit sales in the U.S. grew 6%, while probe revenue grew 10% as ASP increased compared to the third quarter of 2021. Outside the U.S., G6 probe revenue did not meet our expectations and was down slightly, resulting in overall G6 probe growth of only 2%. The expanding growth rate in the U.S. is encouraging. However, the OUS return to growth has lagged expectations that we're starting to see signs of improvement. To drive increased G6 adoption, we're focused on educating clinicians on the updated dosing recommendations and the benefits of MPTLT used earlier in the treatment continuum as a pre-incisional intervention as published by our clinical consensus panel, plus expanding adoption among comprehensive ophthalmologists and adding users at surgery centers that already have psycho G6 systems. Our top initiative has been training clinicians on the updated dosing recommendations that have been shown to improve TLT efficacy and durability, a crucial aspect for building the foundation for increased utilization. We believe this effective clinician-led dosing guidance is demonstrating improved consistency of patient outcomes. And to facilitate this method, we're rolling out our suite management software upgrade designed to better guide clinicians' technique and help achieve desired outcomes. This process will take time but our confidence remains high that physician recognition of improved outcomes and consistent durability will lead to much broader adoption. Looking ahead, as we more closely align with our distributors, we believe the international opportunities, especially Japan and China, can drive significant incremental growth. In collaboration with our distribution partners in China, The Cyclo-G6 launch in the region is underway. The launch initially focused on 10 to 15 key opinion leader pilot sites to build a strong experience and outcome foundation for future adoption within China. These early sites are treating their initial patient cohorts or evaluated at 30 days post-treatment and regular increments thereafter to confirm efficacy, safety, and durability results. We expect more meaningful contribution from this new market going forward as results emerge and site expansion begins. As we mentioned on our last call, we've added to our international commercial team to increase our geographic footprint and resources to support the needs of our distribution partners and customers. While we expect growth to return internationally and increase domestically, The third quarter lags caused us to expect G6 probe sales for the year of about 60,000 versus guidance of 61,000 to 63,000. This still implies strong fourth quarter probe sales of about 16,000 units. We are focused on the large opportunity for increased procedure adoption from moving earlier in the treatment continuum and our confidence in the strong growth potential and differentiated competitive position of Micropulse Transcleral Laser Therapy remains high. Now turning to our retina business, strong third quarter execution drove revenue growth of 13% year over year. U.S. Pascal sales were particularly strong. As a reminder, in the comparable period a year ago, we were transitioning the technology into our portfolio. In September, at the American Academy of Ophthalmology, We held showings of our new laser platforms in a private technology suite. We're launching our next generation versions of our three mainstream laser projects for retina treatment. Their reveal generated strong engagement and positive feedback from clinicians. We are also announcing today that we have received U.S. FDA clearance for our new Iridex Pascal platform and are excited to begin shipments to customers in the U.S. this quarter. regulatory approvals beyond the U.S. are expected to be achieved throughout 2023. The new Iridex Pascal platform combines leading pattern scanning precision and speed pioneered by Pascal with clinically proven tissue sparing micropulse and endpoint management capabilities plus pattern scanning laser trabeculoplasty for early stage glaucoma treatment. providing incredible versatility and proven clinical power in half the footprint. We believe combining this fast and broadly capable system with the emerging need for combined laser and anti-VEGF drug protocols will drive higher laser procedure volumes and can trigger a replacement motive for older, less capable scanning laser systems. As a reminder, these new platforms also have manufacturing cost advantages which can enable pricing flexibility for share gains or improved margins. At the AAO, we also invited multiple speakers to present their findings at our booth to highlight clinical and practice advantages. Presentations covered combined laser and anti-VEGF therapy for diabetic macular edema, micropulse TLT glaucoma experience with dosing and broad patient selection, Micropulse TLT adoption experience by a comprehensive ophthalmologist practice, and progress made in the ongoing MPTLT dose escalation study. We're excited to share the full readout, including developing durability data as it becomes available. This will serve as an important guide for MPTLT users demonstrating the specific outcomes, safety, and durability from cohorts receiving escalated levels of parameter dosing. While we've experienced our challenges this year, we're confident in our efforts to drive further adoption and utilization of our glaucoma procedures and continue to grow our broad retina product line across key market distribution channels and build off the momentum of our new product launches and geographic expansion opportunities. Finally, we continue to carefully manage our capital to provide sufficient operating runway for us to execute these growth initiatives. With that, I'd like to turn the call over to Fuad.