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IRIDEX Corp. Reports Operating Results (10-Q)

May 15, 2009 | About:

IRIDEX Corp. (IRIX) filed Quarterly Report for the period ended 2009-04-04.

IRIDEX Corporation is the leading worldwide provider of semiconductor-based laser systems used to treat eye diseases in ophthalmology and skin lesions in dermatology. The products are sold in the United States predominantly through a direct sales force and internationally through independent distributors. The company markets the products using three brand names: IRIS Medical to the ophthalmology market IRIDERM to the dermatology market and Light Solutions to the research market. IRIDEX Corp. has a market cap of $16.4 million; its shares were traded at around $1.87 with and P/S ratio of 0.3.

Highlight of Business Operations:

Ophthalmology revenues in total remained constant. Ophthalmology recurring revenues consisting of consumables and service increased $0.3 million, or 6.7%, from $4.1 million to $4.4 million. Domestic ophthalmology systems decreased $0.4 million, or 31.6%, from $1.2 million to $0.8 million. We believe the reduction was caused by customers delaying capital equipment expenditures in the quarter due to the uncertain economic circumstances. International ophthalmology systems increased $0.1 million, or 7.1%, from $1.8 million to $1.9 million. OEM revenues remained constant at $0.4 million. OEM revenues are generated from a long standing relationship and the demand for this product is dependent on the OEM’s market demand.

Aesthetics revenues in total decreased $0.8 million or 18.9%, from $4.0 million to $3.2 million. Service revenues decreased $0.2 million or 11.2%, from $1.8 million to $1.6 million. International aesthetics system revenues decreased $1.1 million or 59.5%, from $1.9 million to $0.8 million and domestic aesthetics system revenues increased $0.6 million or 300.8%, from $0.2 million to $0.8 million. Aesthetics systems revenues 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.

Gross profit for the quarter ended April 4, 2009 was $5.0 million compared with $4.8 million for the comparable quarter of the prior year, an increase of $0.2 million even though revenues decreased by $0.7 million. This was because gross margins improved to 47.0% of revenues for the quarter ended April 4, 2009 compared with 41.9% of revenues for the same quarter a year earlier.

Research and development (R&D) expenses decreased by $0.2 million or 18%, to $0.8 million from $1.0 million for the quarter ended April 4, 2009 compared to the same period of the prior year. R&D expenses benefited from transferring $0.1 million of previously expensed project materials into inventory in connection with a project completion. In the future, with increasing profitability, we expect to target our research and development spending level to approximate 10% of our revenues to maintain a consistent level of new product introductions.

General and administrative expenses decreased by $0.4 million or 21.6%, to $1.5 million from $1.9 million for the quarter ended April 4, 2009 compared to the same period of the prior year. The decrease in general and administrative spending is primarily attributable to decreases in consulting and temporary help of $0.3 million and accounting and other public company expenses of $0.1.

Interest and other expense consist primarily of $0.1 million of interest expense and $0.1 million in foreign exchange losses for the quarter ended April 4, 2009, compared with $0.3 million of interest expense and $0.1 million in foreign exchange gains for the quarter ended March 29, 2008. The interest expense relates to the bank debt outstanding in the respective periods offset by interest earned on cash deposits.

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