IRIX - Earnings call transcript Q3 2020

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the IRIDEX Third Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to your host, Hunter Cabi, Investor Relations. Thank you, and please go ahead.

Hunter Cabi

you participating thank today’s and you, all in for call. Thank

results Executive are Earlier Jim financial press ended release Dave company’s of me on A Officer; XX, today, the XXXX. September Bruce, released is Officer. Joining the Financial Chief and copy quarter Chief MacKaness, IRIDEX the available for website. Interim

provisions events goals Safe assumptions. which Reform priorities, statements actual statements reliance of not will on and involve forward-looking statements matters, are the that material risks federal this call sales during during strategic we Private I’d forward-looking in we place to you like Act but statements the current our not to begin, our These pursuant of remind include of made of and or make by various upon within statements should not Harbor development this and this Securities estimates implied anticipated XXXX. operate. forward-looking statements. trends of which are Before securities made including, to, meaning laws, Litigation you historical fact, Any that product uncertainties management and differ statements limited the cause call Accordingly, these statements these that are results All those or markets the from to could concerning statements. based materially that

information the XXXX. turn broadcast with This or information, new only today, filings November over as and of or XX-Q uncertainties revise required I’ll conference our intentions financial please business, of as because events law, Form most live whether statements, the disclaims accurate and forward-looking Form call that, with the call Dave. update associated time-sensitive by contains is a or risks to XX-K of otherwise. and or except For the discussion see And X, our SEC. any obligations, recent to any projections with IRIDEX future

Dave Bruce

Thank Good all for us. joining you Hunter. you, thank afternoon, and

questions. not strategic our for challenging have I’d continued call a appreciate quarters everyone, these priorities financial MicroPulse MacKaness, each Overall, in our Financial with to QX recovery recent to were we After next you began persisted with see our transscleral the that, non-incisional the the made highlights. therapy, short-term us we we some encouraged significant throughout development customers confident Also judicious and we’ll operating on your and and dealing kept investments of one and from our by runway. call plan COVID-XX of the that for goals of number to few highlights our foresaw start adjustments to business been I and we At to And additional laser on COVID-XX. our progress would open challenges operations presented the acknowledge with gross goals. no support time, improvement share to widespread our a we and we’ve minutes Chief of reacted by past our the exited objectives strategies impact take extend lastly, In beyond. and product let’s reengaging of structural initial pursue the And our the margins. those review year I’m like cost goals. Officer, mitigated those quarter. the and expand to and strengthen base. adoption toward as with for our in will Then sales processes our color brief resource those both mid-XXXX, several First, positive results trends IRIDEX. the cash for COVID-XX measures could identified the to wavered lead financial interest to I we key to reduce provide and we longer-term necessarily Jim our an Interim like to implementation recent and XXXX dramatic to adjustments And growth allocation, competitiveness of preservation QX. our of significant that on eye while progress and pandemic. these that improve changes marketing for while would made continuously new by installed In short, have included

While over impact in the to the with over the centers, line throughput early revenue improved some quarter Top rebound point third increase practices X%, the our quarter. business experienced experience in second outperformance substantially by of from our probes we we last and improved QX from XXXX. to restrictions, million from sequentially we $X.X that experienced exceeded in ophthalmic million, U.S. continued to $X.X year’s capacity from glaucoma reduced strongest surgery a XX% in XX% We sales trough

team $XXX,XXX. our results, third quarter. end $XXX,XXX. us lower of bounce management, our cash slower with impacts financially work third our we revenue about of from capital deferred international position the this XXXX a quarter our or sheet balance a despite they accomplishment pre-COVID remained This full year-to-date, These have customers, the to particularly sequential revenue duration sales, mitigate as in led with back improved of procedures toward a To in seeing We’re with we And throughout conservative by systems declined the pandemic. purchases, a and activities capital spending largely levels runway and marketing inevitable positioned meaningful cash operating and well the gradually direct reduce increase our third the to contact a the as it enabled limit This access at significantly business in to with to with by web-based made only us recovery to line be shifts, shift in environment customer beyond. priority approximately top a and opened by as quarter. losses quarter volatile increased to and sales delayed operating coupled in balances the sets is

noted, on-site line In wherever XXXX, that of with focus recall, installed challenges fourth marketing quarter to glaucoma adoption those the unique and significant of of by daily our of a facilities redirected you team drive support to training customers. work initiatives half tools capabilities continued and reengaging the the our operations full groups As a our to new and marketing we’ve March, the we customer non-incisional with XXXX and sales therapy, our in I quickly pandemic. sales, to that XXXX. onset Prior two work-from-home to first of result possible, organizational responded of combination online for to use the the emerged and results maintain virtual pandemic, second from capacity Since as our then, the provide owners. as clinical and our facilitate both customers through improving and the renewed saw System GX Cyclo months of in we of base top engagement

have support well we’ve our Our adapted and been while everyone environment, the our teams and new safe. to able keeping operations to customers

IRIDEX in been accomplished improvement in patients under experienced the extraordinary procedures. circumstances. what’s hospitals month-to-month We’re continue We quarter scheduled as third to and favorable customers proud of in reopen our by surge

its will like as has within increasing the U.S. business sequentially, Throughout reflecting of to and U.S. the of geography, utilization. this impact On with outside sales business PX regions and catalyst our U.S. recognition of COVID glaucoma within the and revised XXXX biggest XX%, be non-incisional driven the some probe. business ease growth to use, very development effective program. the new continues now resurgence supportive, terms beneficiary recovered increased benefits by been U.S. our conversion to we customers In U.S. to around outside to XX%. quarter reduction of basis, landscape, XX% praising continue IOP the continued XX% TLT improved recovery in world. believe Feedback our and slower our of a increased probe with MicroPulse shift which a highlight improved progress for of adoption, product our I’d year-over-year

retina platform from we’ve launches from users, Though XXX-nanometer in say XXXX. over to This our new new our our suffered co-developing it’s quarter, we Indirect toward COVID continue platform October, offering. for received been progress Ophthalmoscope, market. we feedback partner And a laser, this to the FDA Laser China. major newest make launched LIO, our due in prior for In with first a clearance we delays new development impacts, or the improvement a

the of key of in laser costs. platform, the we platform before, be one out the north this remainder wake growth year, strategy, expect discussed given will progress short-term will in of despite we reacting margin three on we’ve executing Once make the COVID-XX. As rolled anticipated recent gross new manufacturing have on the improvement completely infection year benefit reduction surges in far adjustments in so our significant trajectory to several margin. to of focus percentage through side in quarter remaining the gross capital continue we’ve due equipment continue as fourth leading to business points overall In the into of established the anticipate needed play improvement longer-term uncertainty our seen our our the the the $X.X that summary, business, I’m million lasers we and shift to encouraged adjustments pandemic in needed operational we the from coming in rates. this meaningful strategic with the objectives to we of as by COVID

to our and The and us a Back success of able the virtual costs for but cash to partial impact closely. proud as have second And drive has even quickly the setting We the us well our in revised a in dormant once quarter, in declined exit $XXX,XXX probe reacted the to training weathering from attractive new by our a driven up And quarter to improvement third we and balance enabling COVID-XX more of pandemic that than levels. since market, better sales position the March, ophthalmology start recovering so quarter strong exceeded pre-COVID showed from quarterly succeed as result, at XX% diminishes. to were our probe renewed the interest in team’s only sheet customers. recovery. year. sales year of the the as and in the previous year midst I’m of customers processes manage tough

help interim team IRIDEX. taking eight the like experience Jim the MacKaness, thank like over it partner from and the very to disposables us that, laser recent like broad With another will over FLG Ahmad, seamless company to and particularly and call to I’d for in with to assignment months. leadership strong I’d aesthetic also Fuad Jim. Fuad’s Before the assignment is financial transitions another CFO I’d I role. with his turn introduce over to to as through a for turn and service CFO an provide over turbulent who for he past and his situation managing Jim welcome

Jim MacKaness

Dave, you, good and afternoon, everyone. Thank

from million the third revenue of QX year, was from million, $X.X XX% total in XX% quarter Our last but down $XX.X last up $X.X million quarter XXXX.

of primarily with selling Our laser probes the approach year involve to last increase the change and ASPs over we last of sales XX% product of compared to QX XX from line $X.X in in quarter laser. X,XXX to recovering million, quarter, $X.X sold X% the Cyclo XX deferrals in an of strategy laser. for the to family units QX. revenue. in of The offering We sales XX on discount million the nicely. capital ongoing in approach sold This COVID. QX to and in new sold QX and the and was third and compared XXXX. XX,XXX purchase does We probes probes in Overall sold QX significant bundling our is increase compared the uptick was in prior The up quarter period in away the probes XX% revenues this year’s year down resulted an GX probes the practice, although Cyclo from GX year glaucoma $X.X quarter quarter third prior this resulting product sold seen U.S. sold with of was from a in probe X% a due improvement of The deep this year GX XX,XXX glaucoma a last in Cyclo the compared in XXXX. have the the reduction year. The million for Systems in increase in the

XX%. Our retina revenues product impacted continues most the line be with to down

for offset of $X.X XXXX. $X.X And strategy delayed the resulted gross million the Both a the was measures share, a second derived revenue being XX% force quarter XXXX The XX.X% royalties, Operating quarter XX.X% COVID-XX the by reduced Cyclo XXXX percentage prudent sales a improvement in resulted to retina higher include in product. in over any of of activity second XXXX expenses we prior of expense tend with margins the was COVID-XX decreased of of sales of impact and capital U.S. back-end improved lasers, $X.X in Sales continued the Our increases volume product the result compared with of third be million quarter. procedure margin and introduced Consequently, define towards are equipment the distribution. various sales consoles. to The third volatility. the of million management loss an our third half procedure in XXXX. products to which the same the loss improved and per to equipment" gross in expenses compared minute of compared higher in in $X.X of or and increased from quarter shift of particular loaded per revenues, variable sales quarter are was single-use which $X.XX and to we quarter. $X.X products loss execution as XXXX the reduction of result mix in margin XX% share international period of this third reduction subject sales per Laser half XXXX. an at business lower continued quarter decrease a weighting third in as loss a our to margin legacy year. pricing services as in or a million a Gross other net quarter of the GX lower are Other "capital delivery and the cost-saving a to through which of of the products last sold direct third the include per to year. in that in devices, compared sold the Gross despite prior decreased $X.XX of margin through net in implemented in a million

impact on expense first our this by we loss although nine For the million revenues $X.X to of XX% months were of able the due compared to XXXX, management, down focus to net our were approximately earlier. and XXXX, $XX.X from to $X.X up XXXX, for cash the Dave noted only $XXX,XXX at million year-end QX as million. from And $X.X $XXX,XXX the ended balance quarter, XXXX down million from reduce

our We’re with and very to capital business and resources firm with to these times management, our us weather believe the existing COVID the puts expense to of long-term, strategy the us management headwinds tough guidance. execute our pleased on together which a for during on foot this, brings

to result, business I XXXX. And provide turn COVID-XX continue as Dave range We we remain find variable related the unable call to the for questions. and uncertainties create and meaningful a to would And a to that that, a over environment outbreak for operator guidance broadly like for us. with Operator?

Operator

comes [Operator the with Instructions] from line Our Stifel. of first question Block Jon

open. is line Your

Thomas Stephan

this Thanks taking begin guys, Tom Jon. Hey want on is questions. for I with trends. my for to

Just remarks probe the I talk quarter think at for sales of trends total maybe pre-COVID the you the GX you off, for or total in noted company was company start you to to if XX% prepared Was exited levels. than clarification that quarter? shipments? it could GX in And sales, a that better

Dave Bruce

the down are year. of And think compared was the number The the up is XX% reflected overall to XX% improvement Those This quarter as just GX more in last pre-COVID. second summarized I significantly it in the in the we up year around so within trough probes. glaucoma against trends actually Yes, the Tom. quarter. Sure, were against comments Dave. and last third

little U.S. the business in secondly, we’re capital the So in harder. segments than probe disposable the both recovering Capital equipment outside strongest business, U.S. hit was seeing and quicker that equipment a

of that closer so recovery And down brought average XX% to the to overall the pre-COVID. level

the of some as quarter affect terms may and something COVID end around see world, the see certain as the access. but quarter, And of fourth continuing affecting partly is we’ll in well. that’s So it here and the we’re their at seeing their in appetite we areas resurgence which that through

in a we’re forecasting little So recovery. more circumspect that

Thomas Stephan

Got it.

experience been just Okay. that trends, recovery That the second you maybe Any markets has in was impacted maybe recent super did sticking of in U.S. surges by with in waves? recently helpful. And COVID. specific know some international pauses the

Dave Bruce

for to and country. some draw hard there possibly always when a try was new order the haven’t extent, other metropolitan in in you experienced short seen in anything are third And on But it on sections can see given any effect. – we example, of in had major the the flow areas the in daily general, week even several to to and been that, see short And the bore a the some times, in quarter, cases. conclusions term place given It’s you transient highs that significant in restrictions have in or month. in Texas certain term being

predict in That intend and it’s restricted that. continue significantly. they services truly So will to capacity to to have to little unless safe us said, try told not our manner that customers instructed a early a be provide

Thomas Stephan

it. Got

then gears a And Congrats shifting laser Okay. platform. the receiving of new clearance bit. on

in on a press And from mix line just additional a solid, and our year. be and when tack the you a have also release And margins the that meaningful would I the new the could of and there? Gross prepared contribution margins? the the from Any you think expect maybe can think estimate. bit family. perspective were to benefits remarks follow-on the noted said term, above timing color more I laser maybe tailwinds family a top we good And the introduced of in around I near then amount there. next

throughout about So guys. how gross should this XXXX, potential coming we just Thanks, quarter’s figure? margin latest expansion off be maybe thinking XX%

Dave Bruce

Sure. margin impact us on then potentially the then maybe year. out XXXX. next Jim gross can newer how I’ll roll and And can about for ultimately comment talk products the

That in environment different us common laser lower platform three us has retina. China higher volume opportunity it to So be the talking plus cost glaucoma production applications nice frequency basis that or are basically gives platform, platform products about potential and with different specific gross improve higher are developing modification a working that a a frequencies in the we’ve the drives would a like our position they in the commonality the used for. those realize use gives for and for in the both margin and in and that on the been on And cost pricing partner to that volumes.

So very by that. we’re encouraged

secondly, when what you whenever product decisions for not and the being and versions up exactly new or going wait about don’t primarily can introducing freeze specific you And competitive particularly out exactly to make set you’re roll reasons. that We’re products, of customers the feature we’re want in new before defer marketplace end to situations. they the having see up necessarily to is those

of in So course getting see those want XXXX. rolling gross impact the three we – the full improvements over some? it, the you do XXXX in, but to add out call and Jim, of margin

Jim MacKaness

Yes.

I it. identified think, you Tom,

We we working are there’s that do to number our favor. – of feel a are things

obviously, the the identified, I of GX think probes a to product portfolio. continue bigger as you product part – become

bounce So volumes rebound having little back, actually although that’s capital are positive. margins a looking a it come There is sense we gross will to and dollars, gross absorption. better a margin little help irony international compression. overhead because bit in of bit the forward that Increased we’ll of margin absolute will sense increase the the in with the will of have also

stream said, to I XXXX. So then margin you the and incretion forward Dave sort a right think in as end at to of ultimately, transition, we on that little to will just towards had start come those said, of sensitive as projects that. come bit really XXXX be we’ll And

then over starting right time, normalizing some perhaps we around of see So sort period are we’re of to that now and where uptick.

Thomas Stephan

Thanks, Okay. guys.

Operator

Capital. comes from next Henry question the of our line ROTH Scott And with

is open. line Your

Scott Henry

A of given Thank good results couple you, afternoon. and Dave. challenging questions. times, Strong

revenues? say give a see not increase First, trends, looking but you’re would you from comfortable expect you guidance, that I in QX know current QX you’re would based on to to sequential to

Dave Bruce

Well, so QX. seasonally, QX is weaker than

has were I But the equipment, that would all been not easy with answer QX. okay, being clear all for equal, say things recovery the in that the So example, sounded. idea pleased we the to bounce and yes. back that, an capital

make capital the a to of cycle capital We’ll close end decision And as of so be and to goes. his product. equipment most think capital comments, forecast good little we’re it’s, in noted year hesitant equipment the portion But how defer loaded Jim or ready equipment is it. deal it’s of a the this ship easy back-end certainly to I to

we’re true fourth general, might the why circumspect. and that’s any That’s feeling, should here so bit in that be in more the be yes, third quarter. true And COVID than environment the better a sequentially in But quarter a little environment. we’re

Scott Henry

least we and to strongly until system numbers, looking Great. per of looks state an Would QX that back system per of although the probes trend the sense to have at to think in to And expect kind probes raw reaching get shooting pretty half the normalized even low Okay. second towards jumped trying the XX-Q, through I utilization. last if off continue it kind numbers like get to levels. you year, know almost a of the I that of steady normal you’re higher, just

Dave Bruce

Yes.

new systems adopt we pushing figuring the potentially more and volume patients, already from profile even strong preferred and buy towards where where system, a a patients. good model later the safe, the significant safety on shifted pressure and and procedure they going later and those usage of looking combination or more and more in a are focusing to it should is our have really customers, where a actually But the with to we’re out make more late which to As non-incisional whether of into do system back locations our both pretty stage severity production. glaucoma intraocular and reductions stage, stages procedure, to moderate

the and on this, are peers that supporting first, usage, driving practicing we’re them educate system second. the and and customers to papers go we as so And this placements

over We our base aren’t have that a average average still a the helps portion on usage, of that driving higher installed increase sites or successful in drive the have systems per the that we’re a right get as new site higher total. users So sites and older and average now. we than come the

and volumes, We helps usage very moderate them average them as to so of of the patients a that we And with go as to severe overall and back penetration glaucoma. online into big ourselves increase degree obviously, the see bring small their as pool well.

and there’s we probes quite a large so upside And for adoption disposable revenue think us. for that ultimately, and,

we’re And it. driving how about so thinking that’s

So our and is to total average obviously, intent the significantly increase also, base. installed usage the increase

Scott Henry

for Okay. that And retina, still maintain down, there a Thank then good lows anything while Do off than unique of number you QX in the well of color. QX. was was and can that Or higher pretty that level you QX? happened sales? think you

Dave Bruce

Well, we think our competitiveness. we’re improving

delivery of So laser but into we’ve eye, headset whether retina. the and so was on or the a that a launch that the the they the the and ophthalmologist scanner-type the laser the to the to delivers significant do energy system performance wears some we these through product them can treatments improvements LIO attaches ancillary that some equipment they’re of product other, call and done devices,

that’s improve we competitiveness, should as intent. our we and so And improve those that think our numbers

historically, we’ve world. a segment, for that but price just compression decline. Now of capital in decline seen equipment, increasing combination example, can a around suffering And the just, lead holding to competitiveness share, a slow

well just competitive that we think systems and in we’re with margins improve choose newer strongly profitability gross to spending space. gross some of space, And be to pricing higher future. to more that of think We We’ll get in choose aggressive we a development and on retina we in the position. be to margin why whether or our So the compete share. can improving that’s cost our we’ve improvement pure be positioned been use that we more the

Scott Henry

Okay.

GX. the ASP question. there Okay. QX system of this in is recall, QX final versus comments QX And in QX? up that further from increased substantially, how increase QX I was about Or even a in ASP comparison? going Thank the just it some is In trending? you. over the Did to ASP probes remarks, QX, A kind prepared If year.

Jim MacKaness

Jim. this Yes, Tom, is

this for actually, a of you increase QX sure. And when bit QX significant pricing So we year-over-year, uptick see definitely of a between did go and little year.

positive very So trends. both are

As pricing much well hasn’t pricing really of pro quarters. far from as very too over pricing, is generally been couple – on general, held there last and the the in fluctuation

Scott Henry

Okay. question. for Great. the taking Thank you

Operator

question you. Paul comes of Thank Nouri line our with the And next Equity. from Noble

Your line is open.

Paul Nouri

was Hi. company equipment as quarter, should could the The quarter? quarter about equipment been expect, on the trend whole, a later if this saw on accelerating you have wondering we own whether it’s talk of capital if might months GX in the I or whole. in or the its something we QX whether the capital sales this sales, like

Dave Bruce

the is world, the potentially know in forecast. bigger solid you long seeing It’s a for of come the if nice of end from you you restrictions tends was percentage know into deal. flow quarter. Dave. for said, or it’s we’re QX market business What Paul, of of QX products, the a just toward equipment of the we’re the COVID quarter any trained Hi, significant in did which difficult capital broaden have that’s QX, to going we’re and to to buyers guess, compare the best that toward to been QX, out that out to mindful with last, to currently going and comfortable a increasing. to industry medical – in was And lot countries the of see is around potential of some recovery But a it’s the there. trough don’t to I in like percentage sales wait U.S. the world the end has, going the from quarter. That And QX it QX how don’t the capital The when again, impacts equipment occur

quarter, today, a it, for consistent seen the forecast potential of with to the recovery quarter tough in it’s quarter. and reasonable so activity capital terms And where call is, sit demand third I’ll the but in we’ve we

Paul Nouri

you. That my question. Thank only was

Dave Bruce

Sure.

Operator

And the not I’m further now call turn remarks. showing Thank to questions. I’ll over you. any back for closing you

Dave Bruce

with Thank you interest everyone and joining for IRIDEX. like everyone. to And look the quarters. Goodbye. in for your in to Thanks, right. call All Bridget. we talking I’d you, continued thank forward future

Operator

does Ladies program. and this gentlemen, the conclude

a You may have great disconnect. now day. Everyone,

IRIDEX (IRIX) 9 Nov 202020 Q3 Earnings call transcript