IRIDEX Corporation

Thank you for standing by and welcome to Aerodeck's first quarter 2023 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 1-1 on your telephone. I would now like to hand the call over to Tripp Taylor, Investor Relations. Please go ahead.

Thank you, and thank you all for participating in today's call. Joining me are David Bruce, Chief Executive Officer, and Fuad Ahmad, Interim Chief Financial Officer. Earlier today, Iridex released financial results for the quarter ended April 1, 2023. 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. ERDX 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, May 11, 2023. And with that, I'll turn the call over to Dave.

Thank you, Tripp, and good afternoon. Thanks for joining us today. I'll provide updates on our business progress, then FWOD will provide details on the first quarter financials, and we will open the call for questions. In the first quarter of 2023, we generated $13.7 million in total revenue, growth of 2% compared to the prior year period. Growth was driven by our Cyclo-G6 glaucoma laser platform and offset by a slight decline in the retina sales. In our glaucoma business, Cycle G6 revenue increased by 4% year-over-year to $3.7 million. When we continue to experience solid adoption of the G6 technology worldwide, 61 systems were sold in the quarter compared to 56 in the first quarter of last year. In the U.S., we were pleased to have achieved a 19% increase in G6 probe revenue driven by ASP increases and a 7% volume growth. Worldwide glaucoma probe revenue grew by 6% despite a decline in units to 13,800 probes in the quarter, a 6% decrease from the prior year. Quarterly, international probe volumes remain volatile, with this first quarter dip following record high volumes in the fourth quarter. Embedded in this volatility is a relatively flat multi-quarter volume trend. International opportunity for MPTLP, that's micropulse transcleral laser therapy. Adoption is very large, and we believe its safety and efficacy will drive long-term penetration. We're focused on returning to solid growth internationally through our partners. We saw the Cyclo-G6 rollout in China benefit from the COVID reopening, with order activity increasing late in the first quarter. Underlying demand in international markets remains strong, as shown by continued strength of international system sales, and we expect a return to probe growth for the rest of the year. To continue to have confidence, we will execute on the significant growth opportunity for G6 in the moderate severity glaucoma patient. To propel G6 utilization and adoption, continue to focus on four key initiatives. First is advancing physician education by increasing awareness of proper dosing and patient selection. Second is identifying and targeting comprehensive ophthalmologists who see most of the moderate stage pre-incisional patients. Third, adding users at surgery centers by capitalizing on those that already have G6 systems and And the final initiative is expanding clinical evidence to drive adoption of MPT-LT. These initiatives are targeted to address the current barriers to greater adoption and growth. User variability in technique and procedure protocols can lead to suboptimal results, forming the perception that the technology and procedure have a limited role. Since micropulse TLT originally evolved, from the late-stage treatment methodology of cyclophotocoagulation intended to reduce production of aqueous fluid, there's still a perception that this is the appropriate patient profile. To address these views, we sponsored the clinical consensus panel and are educating the market on conclusions around dosing and applicable patient recommended by the group. Another challenge we found is that surgeons' natural inclination is to sweep too fast during procedures, which leads to underdosing and is counter to the best long-lasting outcomes. So we launched and continue to roll out our sweep management software for G6 systems to aid in proper and consistent technique that can be reproduced across any user. Surgeon feedback on the simplification and clinical outcomes generated using software are very positive. We're confident improved sweep speed optimization will generate improved clinical outcomes and durability, ultimately leading to greater utilization of our procedures. Additionally, we continue to focus on educating providers on the benefits of micropulse technology use within a broader patient value, specifically as it pertains to pre-incisional, moderate-stage patients, and post-cateract surgery patients who may or may not have had a concomitant MIGS device used to treat their intraocular pressures. It happens with all treatments in this progressive disease. Eventually, pressures rise, requiring additional treatment. Micropulse TLT durability and repeatability enables avoidance or significant deferral of more aggressive, higher-risk surgical glaucoma interventions. Another opportunity for further penetration in the market is to drive D6 adoption by comprehensive ophthalmologists. This group of providers usually diagnose and treat patients with earlier stages of glaucoma. There are five times more comprehensive ophthalmologists than glaucoma specialists and 10 times more moderate and advanced stage glaucoma patients. This past week, we had a very productive conference at the American Society of Cataract and Infractive Surgery meeting in San Diego, engaging with key opinion leaders, customers, and prospective customers. We were encouraged by the many comprehensive ophthalmologists at our booth, wet lab training sessions where we introduced and educated them on the benefits of the Iridex product portfolio. The early clinical experience using appropriate treatment parameters guided by suite management software has given us confidence to design and launch a larger-scale multicenter prospective trial to prove the safety and substantial effectiveness of micropulse TLT for moderate-stage glaucoma patients. For example, a recent single-center prospective study with three arms of escalating dosing achieved very strong early results of 31% to 44% intraocular pressure reduction with excellent safety in all three arms. We're looking to build on these results to generate more substantial data that can validate true clinical value proposition. We're conducting a series of meetings with our KOL guidance group to identify the preliminary study protocol and identify appropriate research centers interested in participating. Our target is to begin enrolling patients in the study by year end. I look forward to sharing the details of the study once formalized. We believe a definitive multi-center study on the right targeted moderate stage patient profile would significantly support increased D6 adoption and utilization by a broad range of clinicians treating these patients. As we look at the remainder of 2023, we expect to improve the growth rate of our glaucoma business and increased utilization. We are reiterating our guidance and continue to expect to sell 65 to 67,000 probes, representing growth of 9 to 12% compared to 2022, and expect to grow the G6 install base by 225 to 250 systems. Turning to our retina business, in the first quarter, retina performance was largely in line with our expectations on sales of 7.2 million, a slight dip compared to the prior year. with U.S. retina growth offset by modest international weakness. Internationally, our distributors are managing inventory more tightly, which has introduced more quarter-to-quarter volatility. As we've broadened promotion from the limited launch of our new Pascal platform, customers are responding, and we're seeing strong interest in the new platform. Incorporating MicroPulse technology in the integrated Pascal system with half the footprint offers clinicians expanded treatment capabilities that can fit in nearly any size office. While interest is solid, we have seen signs of lengthening decision cycles amid the challenging macro environment, causing customers to be more methodical with their capital purchasing decisions. Our plans are progressing to achieve additional international regulatory approvals throughout the year to expand the commercial launch globally. FDA clearance for our other major platform for the single-spot Iridex 532 laser and Iridex 577 laser keeps us on track to commercially launch the platform mid-year in the U.S., and we look forward to sharing updates on that progress. To summarize, the start of the year was productive for Iridex, highlighted by 19% first quarter year-over-year growth of U.S. glaucoma probe revenue. We continue to build the foundation for further glaucoma market adoption and sustained long-term cyclo-G6 growth. Its hard work requires focused selling and clinical support activities, increased marketing communication of our clinical benefits in the treatment paradigm, and our investments in the larger-scale multicenter prospective trial to further our clinical evidence base. Looking ahead, we expect to increase our growth rates and remain confident Our current cash balance is sufficient to execute our multi-year growth initiatives. On that note, we believe cash usage in the first quarter was a high watermark for the year and not reflective of the quarterly cadence in 2023. FWAD will detail more specifics of cash management expectations later in the call. Now, I'd like to turn the call over to FWAD to cover the financial results.