Iridex outlines further cost reductions and targets profitability in 2025 as Q2 revenue rises 14% sequentially

Earnings Call Insights: IRIDEX Corporation (IRIX) Q2 2025

MANAGEMENT VIEW

* CEO Patrick Mercer highlighted that IRIDEX achieved year-over-year revenue growth, operating expense reductions, and positive adjusted EBITDA for the third consecutive quarter. Mercer explained, "In the second quarter, we achieved year-over-year revenue growth, operating expense reductions compared to the prior year period and positive adjusted EBITDA. Importantly, this is our third quarter in a row achieving each of these items, and I can confidently say we have successfully transitioned our business consistent with the mandate I was given upon becoming CEO in October of last year."
* Mercer emphasized aggressive cost reduction efforts that reduced operating expenses by 28% compared to the prior year. He stated, "We are now taking action to further reduce operating expenses and improve our gross margins. This includes continuing negotiation with several contract manufacturers... Our current facilities lease expires in August 2026, and we intend to relocate to a smaller space... to realize further savings."
* The company reported Q2 revenue of $13.6 million, representing 7% growth year-over-year and 14% sequential growth. Growth was driven by higher laser console sales, especially Pascal and G6 systems, and strength in medical and surgical retina system sales.
* Mercer noted ongoing supply challenges and international delays, particularly in Asia due to tariff disputes with China and in Japan from logistics delays, but outlined measures being taken to address these issues.
* CFO Romeo R. Dizon stated, "Total revenues for the second quarter of 2025 were $13.6 million, representing a 7% year-over-year growth and a 14% sequential growth versus the first quarter of 2025. Retina product revenue increased 10% in the second quarter of 2025 to $8.0 million compared to the second quarter of 2024, driven primarily by higher Pascal system sales, medical and surgical retina system sales, partially offset by a decrease in surgical retina probe sales."

OUTLOOK

* IRIDEX reiterated its commitment to achieving cash flow breakeven and positive adjusted EBITDA in 2025. Mercer stated, "We are on track to deliver upon our financial commitments of achieving cash flow breakeven and positive adjusted EBITDA in 2025."
* Management expects the reduced operating expense levels to continue throughout the year and is pursuing further gross margin improvements through contract manufacturing and relocation plans.
* The company aims to expand adoption of its Pascal system, achieve additional international regulatory approvals, and increase utilization of G6 systems through targeted training and sales initiatives.

FINANCIAL RESULTS

* Total Q2 revenue was $13.6 million, with retina product revenue at $8.0 million and Cyclo G6 glaucoma product revenue at $3.3 million. Other revenue increased to $2.2 million, mainly from higher service revenue.
* Gross profit for Q2 was $4.7 million, or a gross margin of 34.5%, down from $5.1 million and 40.7% a year earlier, primarily due to higher manufacturing costs and a shift in product mix toward lower-margin consoles and international sales.
* Operating expenses were $5.6 million, a decrease from $7.8 million in Q2 2024, reflecting the impact of recent cost reduction measures.
* Net loss narrowed to $1.0 million or $0.06 per share, compared to a net loss of $2.7 million or $0.16 per share in Q2 2024. Adjusted EBITDA was $21,000, a $1.7 million improvement from the prior year period.
* Cash and cash equivalents totaled $6.8 million at quarter end, down slightly from $7.2 million in Q1, with management noting continued progress in limiting cash burn.

Q&A

* NOT_APPLICABLE: The transcript does not contain a Q&A section with analyst questions and management responses for this quarter.

SENTIMENT ANALYSIS

* Analysts' sentiment cannot be assessed as no analyst questions or commentary were provided in the current transcript.
* Management maintained a confident and positive tone in prepared remarks, emphasizing operational progress and ongoing cost control, with statements such as "We outperformed in key areas... With strong fundamentals and clear plans to address obstacles, we're confident in the path ahead."
* Compared to the previous quarter, management's confidence and focus on cost efficiency remain strong, with increased emphasis on taking further action to drive profitability and margin improvement.

QUARTER-OVER-QUARTER COMPARISON

* Sequential revenue increased from $11.9 million in Q1 to $13.6 million in Q2, with retina product revenue rising from $6.6 million to $8.0 million.
* Gross margin declined from 42.5% in Q1 to 34.5% in Q2, attributed to higher manufacturing costs and a product mix shift toward consoles and international sales.
* Operating expenses increased slightly from $5.3 million in Q1 to $5.6 million in Q2, but both quarters showed significant year-over-year reductions.
* Net loss narrowed from $1.7 million in Q1 to $1.0 million in Q2, while adjusted EBITDA decreased from $0.4 million in Q1 to $21,000 in Q2.
* Management's strategic focus shifted further toward aggressive cost management, gross margin improvement, and leveraging contract manufacturers, with continued commitment to achieving cash flow breakeven and profitability in 2025.

RISKS AND CONCERNS

* Management identified supply constraints affecting probe shipments at quarter end, particularly in the glaucoma segment, noting that the issue has been resolved and backlog is being addressed.
* International challenges included tariff disputes with China, logistics delays in Japan, and pricing pressures in Latin America.
* The company faces ongoing risks from product mix shifts to lower-margin sales, inflationary manufacturing costs, and delays in international regulatory certifications, such as MDR for the Pascal system in certain regions.
* Management is actively pursuing mitigation strategies, including negotiations with contract manufacturers, relocation plans for cost savings, and new business models to drive higher probe consumption in stagnant geographies.

FINAL TAKEAWAY

IRIDEX Corporation reported a solid Q2 2025, achieving both year-over-year and sequential revenue growth, continued cost reductions, and positive adjusted EBITDA. Management underscored ongoing progress in business transformation, with a focus on further operating expense cuts, margin improvement via contract manufacturing, and relocation to a lower-cost facility. The company reiterated its target to achieve cash flow breakeven and profitability this year, while navigating supply chain, margin, and international regulatory challenges. Strategic priorities remain centered on driving adoption of flagship products and leveraging operational efficiencies for sustained financial health.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/irix/earnings/transcripts]

MORE ON IRIDEX

* IRIDEX Corporation (IRIX) Q2 2025 Earnings Call Transcript [https://seekingalpha.com/article/4812879-iridex-corporation-irix-q2-2025-earnings-call-transcript]
* Financial information for IRIDEX [https://seekingalpha.com/symbol/IRIX/income-statement]