IRIDEX CORP (IRIX)·Q2 2026 Earnings Summary

Executive Summary

• Q2 2026 delivered revenue of $13.57M (+7.4% YoY, +14% QoQ), while gross margin compressed to 34.5% (from 40.7% YoY) on higher manufacturing costs and mix shift toward capital systems and international sales .
• Operating expenses fell 28% YoY to $5.62M, driving non-GAAP adjusted EBITDA to roughly breakeven ($0.02M) and a narrowed net loss of $1.0M ($0.06 diluted EPS) .
• Segment performance: Retina revenue grew to $8.05M (+10% YoY), Cyclo G6 was ~$3.29M (flat YoY), and Other rose to $2.23M (+$0.23M YoY) .
• Management reiterated 2025 goals of cash flow breakeven and positive adjusted EBITDA with revenue consistent with 2024; backlog and supply normalization support near-term execution, but margin recovery depends on manufacturing cost reductions and better mix .

What Went Well and What Went Wrong

What Went Well

• Retina strength and PASCAL adoption: “Medical and surgical retina system sales were particularly strong” with U.S. PASCAL above plan and EMEA Middle East/Africa robust; quarter ended with backlog expected to carry into Q3 .
• Cost discipline: Opex down 28% YoY; third consecutive quarter of year-over-year revenue growth and positive/breakeven adjusted EBITDA as management executes expense reductions and efficiency measures .
• Strategic operating actions underway: CEO highlighted negotiations with contract manufacturers to lower costs and intent to relocate to a smaller, less expensive facility when the lease expires in Aug-2026 to further improve profitability .

What Went Wrong

• Gross margin compression: GM fell to 34.5% from 40.7% YoY due to higher manufacturing costs, product mix skewed to lower-margin consoles, and international mix through distributors; tariffs and inflation also cited by CFO .
• Glaucoma disposables softness: Cyclo G6 probe units were “materially lighter than expected” due to late-quarter supply constraints; shipment backlog identified, but utilization growth remains a focus and mixed regional outcomes persist (Asia stagnant) .
• Regulatory and regional friction: MDR certification delays for PASCAL in Germany slowed progress; Japan logistics delays impacted rollout; pricing pressures affected Latin America and Canada .

Financial Results

Consolidated Comparison

Segment Revenue

KPIs (Volume)

Balance Sheet and Liquidity (Select)

• Cash and cash equivalents: $6.78M at Q2 2026 quarter-end, down $0.47M from $7.24M at Q1 2026, reflecting improved but still modest cash usage .
• Working capital: $13.2M at Q2 2026; management believes existing cash is sufficient for the next 12 months under current plans .

Guidance Changes

Note: No explicit ranges for revenue, margins, OpEx, OI&E, tax rate, or segment-specific guidance disclosed in Q2 2026 materials .

Earnings Call Themes & Trends

Management Commentary

• “Our second quarter results represent the transformational progress we are making… For the third consecutive quarter, we have achieved year-over-year revenue growth, reduced operating expenses, and delivered breakeven or better adjusted EBITDA.” — Patrick Mercer, CEO .
• “We’re… negotiating with several contract manufacturers… Our current facilities lease expires on August 2026, and we intend to relocate to a smaller space in a less expensive zip code… We are on track to deliver… cash flow breakeven and positive adjusted EBITDA in 2025.” — Patrick Mercer .
• “Gross margin… decreased… driven primarily by the increase in overall manufacturing costs… product mix with materially higher console sales… strong international sales… tariffs and rising costs from inflation.” — Romeo Dizon, CFO .

Q&A Highlights

• The provided transcript consists of prepared remarks; no distinct Q&A section was included. Clarifications offered in remarks covered margin drivers, supply constraints on Cyclo G6 probes, and operational plans with contract manufacturers and facility downsizing .

Estimates Context

• Wall Street consensus (S&P Global) for Q2 2026 revenue and EPS was unavailable through our data source; as a result, we cannot assess beats/misses versus consensus for the quarter. Models may need to reflect stronger retina systems demand, continued opex reductions, but lower gross margin due to mix/international distribution until manufacturing cost actions take hold [GetEstimates returned no data].

Key Takeaways for Investors

• Sequential momentum with disciplined cost control: Revenue rose to $13.57M (+14% QoQ) while opex fell to $5.62M; adjusted EBITDA was near breakeven, underscoring improved operating leverage even with margin pressure .
• Margin recovery is the swing factor: Gross margin dropped to 34.5% on mix and international distributor economics; management’s contract manufacturing and facility move are critical to restoring margins .
• Retina strength and PASCAL adoption: U.S. PASCAL demand above plan; EMEA MEA strong; backlog supports near-term revenue visibility into Q3 .
• Glaucoma utilization push: Cyclo G6 systems sold over plan but probe shipments were constrained late-quarter; normalization plus LCD changes could support disposables growth and margin mix ahead .
• Liquidity improving but still modest: Cash at $6.78M; working capital $13.2M; management expects sufficient liquidity for 12 months, aided by strategic capital from Novel and early Lind payoff .
• Concentration risks: Topcon accounted for ~32% of Q2 revenue; partner stability is a plus, but concentration warrants monitoring for receivables/counterparty exposure .
• Near-term trading implication: Expect sensitivity to gross margin commentary and any updates on manufacturing outsourcing and facility relocation; upside if probe utilization rebounds and backlog converts, downside if mix remains console-heavy and international dependence persists .