IRIDEX's Q3 2025 Earnings Call: Contradictions Emerge on Glaucoma and Retina Revenue Growth, Operating Expenses, Cash Flow, and Gross Margins

Date of Call: November 11, 2025

Financials Results

• Revenue: $12.5M, up 8% year-over-year
• EPS: Net loss of $0.09 per share, improved from a $0.12 loss per share in the prior-year period
• Gross Margin: 32.1%, down from 37.3% in the prior year (decrease of 520 basis points); would have been 38.7% excluding a one-time inventory write-down

Guidance:

• Expect cash flow break-even in Q4 2025 and positive adjusted EBITDA for full-year 2025.
• Targeting sustained cash-flow-positive operations in 2026.
• Transitioning production to contract manufacturers to reduce COGS and improve gross margins in 2026.
• Relocating certain G&A functions outside California to save approximately $165,000 per quarter beginning Q1 2026.

Business Commentary:

• Revenue Growth and Cost Control:
• IRIDEX reported revenue growth of 8% year-over-year to $12.5 million in Q3 2025.

• The growth was driven by increased glaucoma probe sales and Pascal system sales, while operating expenses were reduced by 12%, contributing to a $1.3 million improvement in adjusted EBITDA.

• Glaucoma Product Performance:

• The CycloG6 glaucoma product group saw a 13% year-over-year increase in total product revenue to $3.5 million.

• Growth was attributed to increased system sales and higher probe utilization, particularly in international markets like Europe and Asia, despite challenges in China due to tariff disputes.

• Retina Product Line Expansion:

• Retina product revenue increased by 4% to $6.7 million, driven by higher Pascal system sales.

• The company is focusing on securing additional international regulatory approvals and leveraging its distribution network for future growth.

• Gross Margin and Inventory Management:

• Gross profit margin decreased to 32.1%, primarily due to a $0.8 million inventory write-down.
• Despite this, excluding the write-down, the gross margin rate would have improved to 38.7%, reflecting better product and geographic mix.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management highlighted a fourth consecutive quarter of year-over-year revenue growth, 12% reduction in operating expenses, $1.3M improvement in adjusted EBITDA, and stated they are "on track to achieve both positive cash flows in the fourth quarter and positive adjusted EBITDA for the full year 2025," targeting sustained cash positivity in 2026.

Contradiction Point 1

Glaucoma and Retina Product Revenue Growth

It involves differing statements regarding the growth and performance of glaucoma and retina product lines, which are significant revenue contributors for IRIDEX. This impacts investor trust and expectations about the company's financial performance.

Financial results and performance for Q3? - Romeo Dizon(CFO)

2025Q3: Glaucoma product revenue grew 13%, and retina product revenue increased 4%. - Romeo Dizon(CFO)

Financial results for Q2? - Romeo Dizon(CFO)

2025Q2: We saw growth in glaucoma and retina products, with glaucoma product revenue increasing 12%. - Romeo Dizon(CFO)

Contradiction Point 2

Operating Expense Reduction and Improvement

It involves differing statements regarding the reduction and improvement in operating expenses, which directly impact profitability and operational efficiency.

What were the financial results and performance for Q3? - Romeo Dizon(CFO)

2025Q3: Operating expenses decreased by 12%. - Romeo Dizon(CFO)

What were the financial results and performance for Q2? - Romeo Dizon(CFO)

2025Q2: Operating expenses were $5.7 million, a 14% increase from Q2 2024. - Romeo Dizon(CFO)

Contradiction Point 3

Revenue Growth and Financial Performance

It involves differing statements about revenue growth and financial performance, which are critical for investor expectations.

Can you provide an overview of your third-quarter performance and strategic progress? - Not specified

2025Q3: IRIDEX achieved a fourth consecutive quarter of year-over-year revenue growth, reduced operating expenses, and improved adjusted EBITDA. - Patrick Mercer(CEO)

What are your full-year 2024 financial expectations? - Trip Taylor (Investor Relations)

2025Q1: We expect revenue to be in the range of $90 million to $95 million for fiscal year 2024. - Romeo Dizon(CFO)

Contradiction Point 4

Cash Flow and Financial Goals

It involves changes in financial forecasts, specifically regarding cash flow expectations and the company's ability to achieve financial breakeven, which are critical indicators for investors.

Can you provide an overview of third-quarter performance and strategic progress? - Not specified

2025Q3: We are making great progress on financial discipline with another quarter of cash burn reduction. - Patrick Mercer(CEO)

Can you repeat the full year cash number? - Atul Goyal (Jefferies)

2025Q1: As for cash, we expect to use about $6 million in the quarter and $24 million for the year. - Romeo Dizon(CFO)

Contradiction Point 5

Gross Profit Margin Trends

It involves the volatility of gross profit margins, which impacts the company's profitability and investor expectations.

Can you provide an update on Q3 financial results and performance? - Unknown (Company)

2025Q3: Gross profit margin was 32.1%, down 5.2%, partly due to a $0.8 million inventory write-down. - Romeo Dizon(CFO)

Can you provide the financial performance for Q4 ended Dec 28, 2024? - Unknown (Company)

2024Q4: Gross profit margin improved to 44.0%. - Romeo Dizon(CFO)