Iridex Corp. has a market cap of $35.4 million; its shares were traded at around $3.95 with a P/E ratio of 12.3 and P/S ratio of 0.8. IRIX is in the portfolios of Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:For the comparable three month period: ophthalmology revenues remained unchanged at $7.7 million; domestic ophthalmology systems revenue remained unchanged at $1.1 million; international ophthalmology systems revenue increased 25.2% from $1.9 million to $2.4 million; ophthalmology recurring revenues consisting of consumables and service, decreased $0.3 million, or 7.7%, from $4.2 million to $3.9 million; and OEM revenues decreased 43.3% from $0.4 million to $0.2 million. Although international ophthalmology systems revenues increased as a result of demand for the IQ577 laser system, recurring revenues are still suffering from the loss of momentum that occurred in the first half of 2009 which we attributed to a reduction in procedures, certain product issues and an increasingly competitive market place. OEM revenues are generated from a long standing relationship and revenues are expected to decline as this product reaches its end of life. Aesthetics revenues in total decreased $0.6 million or 22.3%, from $2.9 million to $2.2 million; domestic aesthetics system revenues increased $0.2 million or 36.3%, from $0.4 million to $0.6 million; international aesthetics system revenues decreased $0.7 million or 72.8%, from $1.0 million to $0.3 million; and service revenues remained unchanged at $1.4 million. Aesthetics systems revenues can fluctuate period to period due to the timing of individual deals because of the relatively high price and low volume of systems being sold. This effect is magnified for international sales where distributors often place multiple system orders at one time. International sales, particularly in Europe, were negatively impacted during the quarter by renewed fears about economic conditions.
For the comparable six month period: ophthalmology revenues in total increased $0.1 million, or 0.5 %, from $15.2 million to $15.3 million; domestic ophthalmology systems revenue increased $0.3 million, or 17.5%, from $1.9 million to $2.2 million; international ophthalmology systems revenue increased $0.9 million, or 22.9%, from $3.8 million to $4.6 million; ophthalmology recurring revenues decreased $0.8 million, or 8.9%, from $8.7 million to $7.9 million; and OEM revenues decreased $0.3 million, or 41.8% from $0.8 million to $0.5 million. Domestic system sales are showing some signs of recovery as the domestic economy started to show signs of recovery, although some momentum was lost in the latter half of the most recent quarter due to renewed economic concerns. International system sales have continued to show strong demand across multiple geographic markets. Recurring revenues have stabilized but are still down over the prior period, product issues are being resolved but competition remains strong. As mentioned above, OEM revenues are generated from a long standing relationship and revenues are expected to decline as this product reaches its end of life. Aesthetics revenues in total decreased $0.7 million or 11.2%, from $6.1 million to $5.4 million; domestic aesthetics system revenues remained unchanged at $1.2 million; international aesthetics system revenues decreased $0.4 million, or 21.4%, from $1.8 million to $1.4 million; and service revenues decreased $0.2 million, or 7.7%, from $3.0 million to $2.8 million.
Gross profit for the three months ended July 3, 2010 was $4.5 million compared with $4.8 million for the same three month period in 2009, a decrease of 6.1% or $0.3 million. However gross margin remained unchanged at 45.9% of revenues. Gross profit for the six months ended July 3, 2010 was $9.8 million compared to $9.9 million for the same three month period in 2009, a decrease of 1.2% or $0.1 million. However, gross margin improved to 47.3% for the six months ended July 3, 2010 from 46.5% for the same three month period in 2009.
General and administrative expenses decreased by $0.2 million or 15.6%, to $1.1 million from $1.3 million for the three months ended July 3, 2010 compared to the same three month period in 2009 and decreased by 15.7% to $2.4 million from $2.8 million for the six months ended July 3, 2010 compared to the same six month period in 2008. During the three months ended July 3, 2010; we closed our UK subsidiary and recorded the final entries: $170,000 of accounts receivables outstanding that had been reserved for in prior periods that were written off against the reserve, the remaining entries resulted in a credit to general and administrative expenses of $50,000; and incurrence of $76,000 of acquisition-related charges associated with RetinaLabs transaction.
The legal settlement relates to monies received from Synergetics associated with a 2007 settlement of legal claims for patent infringement. The settlement called for an initial payment of $2.5 million which was received in the second quarter of 2007 and five subsequent annual payments of $0.8 million, totaling $6.5 million. The annual payment of $0.8 million was received in the second quarter of 2009 and in the second quarter of 2010, leaving a balance of $1.6 million to be received over the next three years. Interest and other income (expense) relates to interest incurred on the bank debt outstanding in the respective periods, offset by interest earned on cash deposits.
As of July 3, 2010, we had cash and cash equivalents of $7.0 million and working capital of $15.1 million compared to cash and cash equivalents of $9.4 million, bank debt of $3.5 million and working capital of $13.2 million as of January 2, 2010. During the first quarter of 2010 the Company repaid amounts owed to Wells Fargo Bank and terminated the credit agreement. During the second quarter of 2010 the Company entered into a new credit agreement with Silicon Valley Bank refer to Note 6 for details.
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