Iridex Q1 2026 Earnings Call: Complete Transcript

Iridex (NASDAQ:IRIX) released first-quarter financial results and hosted an earnings call on Tuesday. Read the complete transcript below.

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Summary

Iridex reported flat revenue of $11.8 million for Q1 2026, aligning with guidance despite international supply chain and regulatory challenges.

The Glaucoma segment, particularly the G6 platform, showed strong performance with a 14% year-over-year increase in probe sales, despite flat system sales.

Operational improvements included cost reductions and strategic relocations, with expectations to complete manufacturing transitions by 2027 to enhance margins.

The company reaffirmed its 2026 revenue guidance of $51 million to $53 million, excluding Middle East contributions, indicating a 1-5% pro forma growth.

Management highlighted strategic partnerships, such as with IPRO GPO, to expand market reach and enhance sales of retina laser systems.

Full Transcript

OPERATOR

Thank you for standing by and welcome to IRIDEX First Quarter 2026 Earnings Conference Call. I'd like to remind everyone that this call is being recorded and all lines have been placed in 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 this time, simply press Star followed by the number one on your telephone keypad. If you would like to withdraw your question, press Star one again. Thank you. I would now like to turn the call over to Trip Taylor, Investor Relations. Please go ahead.

Trip Taylor (Investor Relations)

Thank you and thank you all for participating in today's call. Joining me from the company are Patrick Mercer, Iridex Chief Executive Officer, and Romeo Dezon, the Company's Chief Financial Officer. Earlier today, Iridex released financial results for the quarter ended April 4, 2026. 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, products and 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, May 19, 2026.. And with that, I'll turn the call over to Patrick.

Patrick Mercer (Chief Executive Officer)

Good afternoon everyone and thank you for joining us. I am pleased to share our first quarter results and the continued progress we're making as we build on the positive momentum we delivered throughout last year. For context, before diving into the first quarter, I want to highlight some of the significant milestones we achieved last year. In 2025, we delivered positive adjusted EBITDA for the first time in the Company's recent history and we also achieved positive cash flow from operations in Q4. These achievements represent a fundamental shift in Iridex's financial profile and reflect the hard work completed to reposition the business for sustainable profitability going forward. As a result of this work and our solid start to the year, we remain on track to be cash flow positive in 2026. We executed according to plan in the first quarter despite several anticipated headwinds including the Iran conflict, temporary supply chain constraints and extended timelines associated with certain regulatory approvals. Against this backdrop, we delivered revenue of 11.8 million essentially flat year over year and above the guidance communicated on our last earnings call. Our Highest margin business, G6 Probes was a clear bright spot during the quarter. Continued growth and adoption of our glaucoma solution underscore the strength of our clinical value proposition and the loyalty physicians have to the G6 platform. Internationally, we operated in a challenging environment with supply disruptions, regulatory delays and geopolitical volatility, particularly impacting revenue in Asia and the Middle East. Importantly, underlying demand remains solid and we believe revenue and earnings would have been higher had we been able to fulfill certain orders that were backlogged at the end of the quarter. Looking ahead, supply chain conditions and regulatory processes are improving and we continue to actively manage through these dynamics. As a result, we believe some of the timing relating impacts that affected our first quarter performance represent incremental revenue opportunities for the balance of the year. On the operations front, we again reduced our operating expense compared to the prior year period as we continue to drive efficiencies across the organization. We are pleased to report that the relocation of certain general and administrative functions out of California again delivering quarterly savings starting in the first quarter 2026. We also remain on schedule to relocate our headquarters later this year which is expected to reduce our fixed cost base by approximately 600,000 on an annualized basis. Additionally, our multi year initiative to transition production to lower cost third party contract manufacturers is underway with meaningful transfers initiated in the first quarter. Full implementation is expected to be completed in 2027 and this transition will drive gross margin improvement as we progress through the year and into next year. Turning now to our commercial performance in the first quarter, starting with our glaucoma business. In total in the first quarter we sold 15,500 pros versus 13,900 in the prior year period. This represented growth in the competitive glaucoma market which is a testament to the strength of our value proposition and physician loyalty to the G6 platform. Utilizing MedScout to target G6 adopters with average utilization continues to be our most effective strategy. Our MedScout platform continues to be a valuable tool for targeted outreach. Here we are focused on two groups. The first are those who already have G6 systems and are average users and the second are high volume facilities that do not currently perform micropulse procedures. With the mid-utilization accounts, we focus on education, working with physicians to expand their patient selection criteria to treat patients earlier in the glaucoma severity continuum. With the second group, the focus is also on education with particular focus on the efficacy of those patients who have already had a mixed procedure. Speaking of mix, the Medicare LCDs introduced last year are creating tailwinds for us including expanding our target segments and supporting earlier adoption of G6 therapy for both the mild to moderate and post migs glaucoma patients. Combined with our updated sweep speed procedural techniques and clinical data demonstrating the IOP lowering efficacy of the procedure, we believe we are well positioned to drive sustainable growth in this business throughout 2026. Pricing discipline also supported our the first quarter performance as RASP increases on both probes and systems in the US carried over from 2025. This is indicative of enhanced recognition of the value proposition of our procedure and the growing recognition among ophthalmologists of G6 as a safe, effective alternative to incisional surgery. On the system side, we sold 24 G6 units in the quarter in line with the prior year period. Unit placement has remained steady year over year and physician relocations continue to drive dedicated system acquisitions at new practice sites. This steady growing install base provides a solid foundation for driving incremental probe utilization as we execute on our commercial strategy. Turning to our international glaucoma business, performance was mixed across regions as we navigated a number of operational and macroeconomic challenges. In Europe, Middle east and Africa, we conducted Multiple high impact G6 symposiums and clinical trainings that reinforced our value proposition in multiple countries including Russia, Saudi Arabia, Egypt and Poland. UK registry product is moving forward as planned. The engagement from the clinical community has been strong and we believe this positions us well for continued adoption in the region. In Germany, G6 probe cells remain stable with existing customers and we believe our German market utilization is well positioned to absorb incremental volume as we work through distributor transitions in the country. In Asia, we navigated ongoing volatility throughout the year. Demand of our products remained stable, but challenging economic conditions created some headwinds for our commercial execution. In Japan, we restored G6 probe inventory following prior regulatory challenges which was a meaningful positive development for the region. However, macro headwinds from a weak end continue to persist and we are monitoring the macro environment closely and expect conditions to improve over time. In Latin America and Canada, we saw stable G6 Pro performance with uses being led by Peru and Mexico. Additional focus is being placed on Canada, Brazil and Argentina to leverage the sizable installed base of G6 systems. Turning to our Retina portfolio, our strategic priorities remain focused on three areas driving the US PASCAL upgrade cycle, expanding international PASCAL adoption and obtaining regulatory clearances for our next generation platforms to leverage our established global distribution footprint. In the United States, Surgical Retina was a standout performer driven by continued strong demand for SLX, TX and LIOs. This category exceeded expectations for the quarter and demonstrated the underlying strength of our surgical platforms. Medical Retina continued to perform strongly, particularly pascal, benefiting from a robust pipeline of leads generated at the American Academy of Ophthalmology annual meeting in Q4. It is worth noting that Pascal continues to be firmly established as our flagship system in the US Market. We are seeing a consistent trend of existing Pascal customers upgrading to our newer platforms and newly graduating ophthalmologists are selecting Pascal systems due to our efforts to ensure Pascal is the preferred system used in university and training programs. On the commercial front, we announced an important partnership with IPRO GPO in early April. This agreement expands access to our retina laser portfolio to their more than 1,800 members, including ophthalmology practices, ambulatory surgery centers and hospitals in the United States. Through this partnership, IPRO GPO members receive preferred pricing on our Pascal laser platform, IQ532 and IQ577 lasers, and the Oculyte TX laser. This adds to our existing cyclogistics contract with IPro GPO and represents a significant commercial milestone. The on contract status reinforces the credibility of our technology, enables a more streamlined sales process for our team and customers while expanding the addressable market for our retina laser systems. We believe this partnership will be an important driver of retina systems placements in the coming quarters. Turning to international Retina in Europe, Middle east and Africa, lack of MDR approval continues to constrain Pascal growth in Europe, mildly offset by the launch of the new Iridex PASCAL in Africa. In Germany, Endo probe cells are gaining traction in line with plan as we take over business from our previous distributor in Asia. China experienced some challenges during the quarter, including endoprobe supply constraints that materially impacted sell through. We have been working with our manufacturing partners and these issues should be resolved this month. In Japan, large PASCAL orders were deferred to Q2 due to regulatory delays associated with electrical safety testing. This is a timing item, not a demand concern and we expect the order to ship in the current quarter. In Latin America and Canada, Pascal and Medical Retina sales came below expectations, impacted in part by seasonal summer holiday slowdown. As we look ahead to the remainder of 2026, our strategic priorities remain clear and focused for the full year 2026, we are reaffirming our revenue guidance of 51 million to 53 million. As a reminder, this guidance excludes revenue from the Middle east region and represent approximately 1 to 5% pro forma growth versus 2025. I am proud of the sustained execution we have demonstrated across all four of our 2025 commitments revenue growth, cost reduction, positive adjusted EBITDA and positive cash flow from operations in Q4. The foundation is set for continued progress in 2026. Now I'll hand the call over to Romeo to discuss our financial results.

Romeo Dezon (Chief Financial Officer)

Thank you Patrick Good afternoon everyone. Thank you for joining us today. As we noted in our press release and in Patrick's comments, our total revenues for the first quarter of 2026 were 11.8 million, basically flat with 11.9 million reported in the first quarter of 2025. Revenue was in line with our expectations and the guidance we provided with our the fourth quarter results. The decrease in revenue was primarily driven by a decrease in Retina System sales partially offset by an increase in Glaucoma probe sales and service and other revenues. Retina Product revenue was 5.8 million compared to 6.6 million in the prior year period driven primarily by lower sell through of Retina system sales internationally. Total product revenue from the Cyclo G6 product family was 3.6 million, representing growth of 14% year over year compared to 3.2 million in the prior year quarter. The increase is attributable to both an increase in units sold domestically and internationally and an increase in ASP domestically. Other revenue increased 0.2 million to 2.3 million in the first quarter of 2026 compared to 2.1 million in the first quarter of 2025, driven primarily by the increase in service and other certain legacy product revenues. Gross Profit in the first quarter of 2026 was 4.7 million or a 40% gross margin, a decrease of 0.3 million compared to 5.0 million or a 43% gross margin in the prior year period. Gross margin decreased primarily due to the increase in overall manufacturing costs, including increased product costs associated with the recent tariff development on a sequential basis. First quarter gross margins improved 300 basis points compared to fourth quarter 2025. Gross margins operating expenses were 5.1 million in the first quarter of 2026, a decrease of 0.2 million or 4% compared to 5.3 million in the first quarter of 2025. The decrease was primarily attributable to lower general and administrative expenses driven by reduced consulting costs, reduced deal related legal expenses, and cost savings realized from the General Administrative Transfer Initiative discussed in prior period. In the fourth quarter, we announced that we were relocating certain GNA functions out of California commencing in the first quarter of 2026. We have achieved about 70% of this initiative and have realized approximately 100,000 in savings in the first quarter of 2026, short of our expected quarterly benefit of approximately 165,000. We will update you on our progress on our next call. Loss from operations was 0.3 million, an increase of 0.1 million compared to a loss from operations of 0.2 million in the first quarter of 2025. Other expense net was 0.1 million in the first quarter of 2026, primarily consisting of interest and amortization of loan expenses. Other expense net was $1.5 million in the first quarter of 2025, due primarily to costs associated with a note payable settlement. Consequently, net loss was 0.5 million or $0.03 per share in the first quarter of 2026 compared to a net loss of 1.7 million or $0.10 per share in the same period of the prior year. Non GAAP adjusted EBITDA for the quarter of 2026 was 0.3 million compared to non GAAP adjusted EBITDA of 0.4 million for the first quarter of 2025. Cash and cash equivalents as of April 4, 2026 were 4.6 million, a decrease of 1.4 million in the quarter as we guided on our last call. In general, our cash issuance is highest in the first quarter of the fiscal year resulting from payments of accrued compensation and other year end accrued expenses and liabilities. For the remaining quarters of the year, we expect to generate cash and for the quarterly cash generation to improve sequentially as we sell through inventory and collect receivables on increased revenues. Cumulatively, this will result in positive cash flow for fiscal year 2026. Total operating expenses continued a favorable trend in the first quarter 2026, reflecting the sustained impact of cost reduction initiatives implemented beginning in the fourth quarter of fiscal 2024. Our first quarter performance confirms that we are on track for 2026. The sequential revenue decline we saw in the first quarter was anticipated as consistent with the normal seasonality we see in our business and we managed to reduce our net loss despite the lower revenue. As Patrick mentioned, we are reaffirming our 2026 guidance. We expect to generate revenue of 51 million to 53 million as a result of market disruption from the ongoing conflict in the Middle East. This guidance does not include revenue from that region on a pro forma basis. Adjusted to exclude Middle east revenue in 2025 guidance represents 2026 growth of 1 to 5% compared to 2025. We also want to reiterate the seasonality we experienced in our business. the first quarter on average represents 22% of our annual revenue and is the lowest quarterly total revenue for the year. From the total dollar perspective, second and fourth quarters are seasonally stronger than the first, with the fourth quarter being the strongest quarter of the year and the third quarter is generally a sequential decline from the second quarter. We are also reiterating our expectations for adjusted operating expenses, which exclude depreciation, amortization and stock compensation to be in the range of 19 to 19.5 million for the full year 2026. We also continue to expect generate positive operating cash flow for the full year 2026. And with that I'll turn the call back to Patrick.

Patrick Mercer (Chief Executive Officer)

Thank you, Romeo. As I reflect on the first quarter, I am encouraged by the progress we are making on our strategic initiatives. Our US Glaucoma business delivered solid growth in a competitive environment. Our cost structure improvements are flowing through as planned and our manufacturing transition is underway and on track to drive meaningful margin expansion. We remain confident in our ability to deliver on our priorities and for 2026 these priorities are clear. Expand our G6 utilization through effective targeting, advance regulatory approvals internationally to unlock new geographies for our retina systems and continue to transition to lower cost contract manufacturers to drive gross margin improvement. We will now turn the call over to the operator for your questions.

OPERATOR

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press Star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press Star one again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. And your first question comes from the line of Scott Henry from agp. Your line is now open.

Scott Henry (Equity Analyst)

Thank you and good afternoon. A lot of information in there. Just to get Started on the retina line. One of the lighter quarters we've seen in a while is that a lot to do with the international headwinds. Anything else there? And when we think about full year 2026, I know last year was a strong retina year. Should we be thinking about that comp making the 2026 kind of a negative year over year move for retina revenues?

Patrick Mercer (Chief Executive Officer)

Hi Scott, thank you for your question. You know, in first quarter we ran into some regulatory delays that hurt us internationally, particularly on Pascal. There were orders that didn't ship to Japan. Because of that, there were other orders that didn't ship due to a material issue with our endoprobes. That issue has been resolved and we are going to ship the product this month. The regulatory issues have been resolved. So going forward, we do not see these as issues at all. In fact, our Pascal in the US performed very well and so did our surgical retina. So going forward we don't expect anything different. We still see the Pascal upgrade cycle to be ongoing both international and in the US We've engaged hospitals and universities for graduating ophthalmologists to start using our Pascal systems. And you know, particularly with this IPro GPO partnership, we see things improving over Q1. Q1, we got snagged by a few challenges in supply chain and regulatory issues, but those hopefully will be behind us. We feel strong that certainly moving forward they will be okay.

Scott Henry (Equity Analyst)

Great. And you mentioned you had some backlog at the end of the quarter. I didn't hear. But did you quantify the amount of that and should that have a favorable impact on Q2Q? And also was that backlog, was that in the retina section or was it NG6?

Patrick Mercer (Chief Executive Officer)

That backlog was around 800,000 and it was all retina. And we anticipated the endo probe backlog. We did not anticipate the regulatory. We had hoped to get that over the finish line. But as you know with regulatory items, some of those things are up to the bodies of those countries. But going forward we look for that revenue to shift this quarter. And yes, okay, great.

Scott Henry (Equity Analyst)

And then shifting gears to G6. The system sold was flat year over year. Do you think you can grow that total system sold in 2026 or will the focus be more on the probes, which did very well in the quarter?

Patrick Mercer (Chief Executive Officer)

Yeah, we think we will grow the system somewhat, but we're really focused on driving probe utilization and driving particularly those more moderate patients. In the US there's 2.1 million moderate patients, and we're just scratching the surface there. And with our medscout targeting that, we are going after where we can see who's doing what procedures. We're going to continue to focus on utilization and selling more probes. Certainly we are setting up new accounts and we look for those numbers to remain in line with our expectations and our plan. But our real objective is to drive probe utilization. And one reminder is we in the US Particularly, we increased ASP on both the probes and the systems. So we saw growth from obviously the ASP, but also from units as well. And we're excited about that. We feel really good about our glaucoma business going throughout the rest of the year.

Scott Henry (Equity Analyst)

Okay, great. Final question. Gross margin was up sequentially in Q1, but last year it did dip in those middle quarters. How should we think about Gross margin in 2q and 3q relative to what we saw this quarter? Thank you.

Romeo Dezon (Chief Financial Officer)

Hi, Scott. This is Romeo. Thanks for the question. Yeah, basically going forward now, the last couple quarters, we've been setting the reserves for the contract manufacturing transition of products. So we figured those part costs, we'd expense them there. That's why the margins were lower. But even with the continued increase in our production cost, I think they've normalized in the high 30s, low 40s. Just really dependent on the product and region mix as well, which helped this quarter.

Scott Henry (Equity Analyst)

Okay, great. Thank you for the color, Romeo, and thank you for taking the questions. Thanks, Scott.

OPERATOR

That concludes our Q and A session. I will now turn the conference back over to Patrick for closing remarks.

Patrick Mercer (Chief Executive Officer)

Thank you for your time today. We look forward to updating you on future calls. Thank you.

OPERATOR

Thank you. Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.