IRIDEX Corporation

Good day and thank you for standing by. At this time, I would like to welcome everyone to Euridex second quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again press the star one. Thank you. I would now like to turn the conference over to Trip Taylor, Investor Relations. Please go ahead.

Thank you, and thank you all for participating in today's call. Joining me from the company are David Bruce, Chief Executive Officer, and Fuad Ahmad, Interim Chief Financial Officer. Earlier today, Iridex released financial results for the quarter ended June 29, 2024. 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. IRDX 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, August 8th, 2024. And with that, I'll turn the call over to Dave.

Good afternoon and thank you all for joining us today. On the call, I'll start by discussing our recent business progress, including our second quarter 2024 performance. Then I will provide updates on our strategic review process, and color around our recent financing. Following that, Quad will provide details on the second quarter financials, and we will open the call to questions. During the company's 30-plus year history, we've maintained a deep commitment to improving treatments for patients with sight-threatening eye conditions through technical innovations such as the introduction of the 577 nanometer laser, our patented tissue-sparing micropulse technology, and non-incisional laser treatment for glaucoma. We've established a reputation for driving clinical proofs for laser treatment systems used by retina specialists, and we continue to be the leading provider of non-incisional transcleral laser treatment in the glaucoma market. Now let's review second quarter highlights and recent business progress made. Second quarter 2024 revenue was $12.6 million, representing sequential growth of 7% from the first quarter of 2024. Overall, our results demonstrate recovery of capital equipment in the retina business and recovery of probe sales in the glaucoma business. In glaucoma, elimination of the uncertainty regarding U.S. Medicare reimbursement from late 2023 is driving stabilization and for micropulse TLT procedures in the U.S., and we're beginning to benefit from a firmer capital equipment environment. We saw notable strength in our retina business segment from the sale of Pascal scanning laser systems growing double digits year over year. In addition, we closed on some extended cycle equipment purchases, but in general, cycles remain elongated. We continue to expect our differentiated features and clinical evidence supporting Iridex technology, plus our upcoming launch of our new Iridex 532 and 577 single-spot laser platforms to sustain our leading market position. In glaucoma, the Cyclo-G6 product family revenue was $3.3 million, representing sequential growth from the first quarter, primarily driven by 12% increase in cyclo-G6 probe sales. Compared to the second quarter of 2023, glaucoma revenue was down 0.3 million due mainly to softness in system sales. System sales have been impacted by the ongoing capital purchasing constraints and some procedural reimbursement uncertainty. We sold 15,100 G6 probes driven by increased awareness of reimbursement stability in the U.S., and a strong recovery internationally. ProBorders were slightly down compared to the prior year period, but that was before the various Medicare administrators created reimbursement concerns with their issuances and then withdrawals of coverage-limiting LCDs. While we're encouraged to see improvements sequentially in our glaucoma laser system sales, we already have a strong U.S. installed base and we're placing a greater emphasis on driving probe utilization, which drives penetration into the large, moderate-stage patient opportunity and produces better growth margins. In our retina segment, product revenue was $7.3 million, representing sequential growth of 8% from the first quarter and growth of 6% from the prior year period. We saw strength in Pascal scanning laser systems and closings on extended cycle equipment purchases, resulting from the improvements in interest rate and exchange rate macro environment. Changing topics, as you know, Iridex is actively engaged in a strategic review process. The company is pursuing a transaction or series of transactions that will benefit its stockholders. Discussions relating to our various product lines are ongoing, and the processes remain dynamic. At this time, we're not able to share specific updates regarding potential transactions, but we remain committed to pursuing all options to unlock value for our stockholders, and our goal is to reach a transaction this fiscal year. To support the strategic review process, in May, the Board of Directors promoted our Chief Operating Officer, Patrick Mercer, to President. Patrick now holds both positions and has assumed broader responsibility in driving our operational execution, cost reductions, and prudent asset management. I continue in my role as chief executive officer and member of the board with increased focus on the strategic alternatives process, sales growth, and capital management. Earlier this week, we announced a private placement financing of a senior convertible note with Lind Partners for net proceeds of $3.4 million and the option to issue a second note for an additional proceeds of $1.5 million. The financing approves our balance sheet and secures operating runway for the company to pursue both our strategic process and further business growth recovery. Several benefits make this financing favorable for the company. Flexible and low risk adjusted cost of capital with optionality for discounted early prepayment in the event of a transaction and reduced dilution in the event of conversion at a share price premium. To conclude, managing our capital and expenses prudently is a top priority and we expect to continue making progress improving our operating cash flow. We have structured and funded the company to provide appropriate liquidity runway in the business to achieve success with our strategic process and continue our growth recovery to benefit Iridex stockholders. With that, I will turn the call over to Fuad.