Press Release

Shipped Record Cyclo G6™ Laser Systems and G6 Probes

MOUNTAIN VIEW, Calif., March 08, 2018 (GLOBE NEWSWIRE) --

IRIDEX Corporation (Nasdaq: IRIX) today reported financial results for the fourth quarter and full year ended December 30, 2017.

Fourth Quarter Highlights

• Fourth quarter 2017 revenue for Cyclo G6™ glaucoma laser platform increased approximately 17% year-over-year
• Shipped a record 133 Cyclo G6 glaucoma laser systems
• Shipped a record 10,600 G6 probes
• Fourth quarter 2017 revenue of $10.2 million, an 18% year-over-year decrease
• Significant presence at the recent American Glaucoma Society (AGS) Annual Meeting in New York City, including two main podium presentations highlighting the G6

“Throughout 2017, we made significant progress executing a shift in our target market from retinal disease to glaucoma and from capital equipment sales to a sustainable disposables model. In the first half of the year, we invested in infrastructure and process improvements to support our focus on G6 sales. In the second half of the year, we began to see the benefits of those investments, which included a record number of shipments of both G6 systems and probes in the fourth quarter,” said William M. Moore, President and CEO. “Our focus in 2018 is to drive G6 probe utilization from our existing G6 system installed base while continuing to expand our installed base worldwide, and to introduce new products that improve the quality, reliability, and manufacturing cost of all of our products.”

Fourth Quarter 2017 Financial Results
Revenue for the three months ended December 30, 2017 decreased 18% to $10.2 million from $12.5 million during the same period of the prior year. The decrease in revenue was primarily driven by the Company’s voluntary recall of its TruFocus LIO Premiere™, a laser accessory used in both its medical and surgical retina product lines. The decrease was partially offset by revenue from record G6 system and probe shipments.

Gross profit for fourth quarter of 2017 was $2.2 million, or 21.2% gross margin, compared to $5.6 million, or 44.4% gross margin, in the same period of the prior year. Gross margin was primarily impacted by expenses related to the LIO recall and pricing pressure on its retina products, which offset the benefit from higher margin G6 revenues.

Operating expenses for the fourth quarter of 2017 were $7.4 million compared to $6.6 million in the same period of the prior year. This increase is attributable to investments to support the Company’s commercial infrastructure, including increased sales and marketing expenses.

Loss from operations for the fourth quarter of 2017 was $5.2 million, compared to loss from operations of $1.1 million for the same period of the prior year.

Full Year 2017 Financial Results
Revenue for the year ended December 30, 2017 decreased 10% to $41.6 million from $46.2 million in 2016. The decrease in revenue was primarily driven by lower medical and surgical retina product sales, which were impacted primarily by the LIO recall.

Gross profit for the full year 2017 was $15.5 million, or 37.3% gross margin, compared to $20.8 million, or 45.1% gross margin, for the prior year. Gross margin decreased primarily due to expenses related to the Company’s LIO product recall, unfavorable product and geographic mix changes, lower selling price for its retina products, and an increase in manufacturing variances.

Operating expenses for 2017 were $28.4 million compared to $23.4 million in the prior year. This increase is attributable to investments to support the Company’s commercial infrastructure, including increased sales and marketing expenses.

Loss from operations for 2017 was $12.9 million, compared to net loss of $2.6 million in the prior year.

Cash and cash equivalents were $21.7 million as of December 30, 2017.

Guidance for Full Year 2018
IRIDEX projects 2018 G6 probe shipments of 40,000 to 45,000, which represents growth of approximately 32% year-over-year at the midpoint, and projects shipments of 350 to 400 G6 systems in 2018.  Total revenue for the full year is expected to be $37 million to $41 million.

Webcast and Conference Call Information
IRIDEX’s management team will host a conference call today beginning at 2:00 p.m. PT / 5:00 p.m. ET.  Investors interested in listening to the conference call may do so by dialing (844) 707-0665 for domestic callers or (703) 326-3030 for international callers, using conference ID: 8195624.  A live and archived webcast of the event will be available on the “Investors” section of the Company’s website at: www.iridex.com.  A telephone replay will also be available beginning Thursday, March 8, 2018 through Friday, March 9, 2018 by dialing (855) 859-2056 for domestic callers or (404) 537-3406 for international callers, using conference ID: 8195624.

About IRIDEX
IRIDEX Corporation is a worldwide leader in developing, manufacturing, and marketing innovative and versatile laser-based medical systems, delivery devices and consumable instrumentation for the ophthalmology market. The Company’s proprietary MicroPulse® technology delivers a differentiated treatment that provides safe, effective, and proven treatment for targeted sight-threatening eye conditions. IRIDEX’s current product line is used for the treatment of glaucoma, diabetic macular edema (DME) and other retinal diseases. IRIDEX products are sold in the United States through a direct sales force and internationally primarily through a network of independent distributors into more than 100 countries. For further information, visit the IRIDEX website at http://www.iridex.com/.

Safe Harbor Statement
This announcement contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Act of 1934, as amended, including those statements concerning our efforts to shift our target market from retinal disease to glaucoma and from capital equipment sales to a sustainable disposables model, our focus in 2018 to drive G6 probe utilization from our existing G6 system installed base while expanding our installed base worldwide, and to introduce new products that improve the quality, reliability, and manufacturing cost of all of our products, the amount and timing of revenue and Cyclo G6 system and probe sales for fiscal 2018, statements concerning the Company’s recall of its LIO product, future demand and order levels for the Company's products, future operating expenses, the adoption and effect of Company products on its results, the markets in which the Company operates, usage and efficacy of the Company's products, the Company’s guidance for fiscal 2018 and future financial results, and the Company's strategic and operational plans and objectives. These statements are not guarantees of future performance and actual results may differ materially from those described in these forward-looking statements as a result of a number of factors. Please see a detailed description of these and other risks contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, and Quarterly Reports on Form 10-Q for subsequent fiscal quarters, each of which was filed with the Securities and Exchange Commission. Forward-looking statements contained in this announcement are made as of this date and will not be updated.

Investor Relations Contact
Lynn Pieper Lewis or Leigh Salvo
(415) 937-5404
investors@iridex.com

IRIDEX Corporation Condensed Consolidated Statements of Operations (In thousands, except per share data) (unaudited)
	Three Months Ended								Twelve Months Ended
	December 30,				December 31,				December 30,				December 31,
	2017				2016				2017				2016
Total revenues	$	10,243			$	12,530			$	41,593			$	46,158
Cost of revenues		8,073				6,967				26,090				25,319
Gross profit		2,170				5,563				15,503				20,839
Operating expenses:
Research and development		1,278				1,358				5,730				5,365
Sales and marketing		4,195				3,069				14,541				10,281
General and administrative		1,880				2,092				8,260				7,638
Gain on sale of intellectual property		-				-				(175	)			-
Impairment of long-lived assets		35				120				35				120
Total operating expenses		7,388				6,639				28,391				23,404
Loss from operations		(5,218	)			(1,076	)			(12,888	)			(2,565	)
Other expense, net		(88	)			(8	)			(107	)			(91	)
Loss from operations before (benefit from) provision for income taxes		(5,306	)			(1,084	)			(12,995	)			(2,656	)
(Benefit from) provision for income taxes		(151	)			9,731				(128	)			9,057
Net loss	$	(5,155	)		$	(10,815	)		$	(12,867	)		$	(11,713	)
Net loss per share:
Basic	$	(0.44	)		$	(1.04	)		$	(1.11	)		$	(1.15	)
Diluted	$	(0.44	)		$	(1.04	)		$	(1.11	)		$	(1.15	)
Weighted average shares used in computing net loss per share
Basic		11,586				10,443				11,555				10,173
Diluted		11,586				10,443				11,555				10,173

IRIDEX Corporation Condensed Consolidated Balance Sheets (In thousands and unaudited)
		December 30,			December 31,
		2017			2016
Assets
Current assets:
Cash and cash equivalents		$	21,707		$	23,747
Accounts receivable, net			7,863			10,025
Inventories			9,381			11,643
Prepaid expenses and other current assets			500			450
Total current assets			39,451			45,865
Property and equipment, net			1,403			1,534
Intangible assets, net			116			132
Goodwill			533			533
Other long-term assets			143			80
Total assets		$	41,646		$	48,144
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable		$	1,724		$	1,994
Accrued compensation			2,459			2,346
Accrued expenses			2,153			2,135
Accrued warranty			1,536			310
Deferred revenue			2,520			1,383
Total current liabilities			10,392			8,168
Long-term liabilities:
Accrued warranty			199			293
Other long-term liabilities			533			523
Total liabilities			11,124			8,984
Stockholders' equity:
Common stock			126			124
Additional paid-in capital			59,385			55,158
Accumulated deficit			(28,989	)		(16,122	)
Total stockholders' equity			30,522			39,160
Total liabilities and stockholders' equity		$	41,646		$	48,144

Source: IRIDEX Corporation