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IRIDEX Corp. Reports Operating Results (10-Q)

November 12, 2009 | About:
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10qk

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IRIDEX Corp. (IRIX) filed Quarterly Report for the period ended 2009-10-03.

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 $21.2 million; its shares were traded at around $2.4 with and P/S ratio of 0.4.

Highlight of Business Operations:

For the three months ended October 3, 2009, total revenue decreased 13.2% to $10.4 million compared to $12.0 million for the same three month period in 2008. For the nine months ended October 3, 2009, total revenue decreased 13.0% to $31.6 million compared to $36.4 million for the same nine month period in 2008. The decline in total revenue was primarily due to the global economic environment which has significantly impacted our aesthetics business; which declined $1.1 million and $3.8 million in the three and nine month periods ended October 3, 2009 and September 27, 2008, respectively, and to a lesser extent impacted our ophthalmology business, which declined $0.5 million and $1.0 million, respectively, over the three and nine month periods under discussion.

Total ophthalmology revenues decreased $0.5 million, or 5.7%, from $8.2 million to $7.7 million. The major cause of the decline was a decline in OEM revenues, which decreased $0.4 million, or 58.6%, from $0.7 million to $0.3 million. OEM revenues are generated from a long standing relationship and the demand for this product is dependent on the OEMs market demand. Ophthalmology recurring revenues consist of consumables and service and remained constant at $4.0 million; domestic ophthalmology systems revenue decreased $0.1 million, or 3.6%, from $1.7 million to $1.6 million; international ophthalmology systems revenue remained constant at $1.8 million. Domestic system sales have been impacted by the ongoing recession which caused a significant reduction in spending on capital equipment in the U.S. market for the first two quarters of 2009. We did see some recovery in demand in the third quarter ending October 3, 2009. Demand overseas has remained less affected by the global recession however competition remains intense.

Total aesthetics revenues decreased $1.1 million or 29.5%, from $3.8 million to $2.7 million; aesthetics service revenues decreased $0.2 million or 11.9%, from $1.7 million to $1.5 million; domestic aesthetics system revenues decreased $0.3 million or 35.0%, from $0.9 million to $0.6 million; and international aesthetics system revenues decreased $0.6 million or 51.4%, from $1.2 million to $0.6 million. The aesthetics market is still in a sharp downturn as a result of the global economy, which has impacted our sales both domestically and internationally, and 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.

Total ophthalmology revenues decreased $1.0 million, or 4.1%, from $23.9 million to $22.9 million. OEM revenues accounted for $0.4 million of the decrease, falling 25.8%, from $1.5 million to $1.1 million. Ophthalmology recurring revenues increased $0.1 million, or 0.9%, from $12.6 million to $12.7 million; domestic ophthalmology systems revenue decreased $0.9 million, or 20.5%, from $4.4 million to $3.5 million; international ophthalmology systems revenue increased $0.2 million, or 3.7%, from $5.4 million to $5.6 million. As previously mentioned, domestic system sales were directly impacted by the ongoing recession which has caused a significant reduction in spending on capital equipment in the U.S. market particularly in the first six months of this year before recovering in the last three months.

Total aesthetics revenues decreased $3.8 million or 30.1%, from $12.5 million to $8.7 million; domestic aesthetics system revenues remained constant at $1.8 million; service revenues decreased $0.8 million or 14.8%, from $5.4 million to $4.6 million; and international aesthetics system revenues decreased $3.0 million or 56.0%, from $5.3 million to $2.3 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.

General and administrative expenses decreased by $0.4 million or 30.0%, to $1.1 million from $1.5 million for the three months ended October 3, 2009 compared to the same three month period in 2008 and decreased by $1.4 million or 27.7%, to $3.9 million from $5.3 million for the nine months ended October 3, 2009 compared to the same nine month period in 2008. The decreases in general and administrative spending are primarily attributable to decreases in audit, accounting and tax, consulting and temporary service providers. In addition, at the end of June 2008, we transferred our operating activities in the UK to a third party distributor, which contributed to the decrease in general and administrative spending subsequent to the transfer.

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