IRIDEX Corp (IRIX) 2013 Q1 法說會逐字稿

Welcome to the IRIDEX Corporation's Q1 2013 earnings call. At this time all participants are in a listen-only mode. Following the presentation we will conduct a question-and-answer session, instructions will be provided at that time. If anyone has any difficulties hearing the conference please (Operator Instructions). I would like to remind everyone that this conference call is being recorded today, May 2, 2013.

I will now turn the conference over to Will Moore, Chief Executive Officer. Please go ahead, Sir.

Thank you, Angel. Good afternoon and thank you for joining us as we discuss the results for the first quarter of 2013. For those of you who have not met me or listened to past calls, my name is Will Moore and I have been serving as the CEO of IRIDEX since August of last year. Today I'm joined by Jim Mackaness, our CFO. Jim and I will both be delivering some prepared remarks related to the quarter and the business and we will open the floor for questions. Before we get started, Susan Bruce, our Executive Administrator, will read the safe -- required Safe Harbor statements.

This conference call will contain forward-looking statements within the meaning of Section 27A take of the Securities Act of 1933 as amended, and Section 21E of the Securities Act of 1934 as amended. Relating to global and domestic market conditions, demand for the Company's product and market acceptance of the Company's new products such as MicroPulse-enabled laser devices, development of new products, the Company's growth strategy, including acquisitions, technology investments and strategic relationships, including the anticipated benefits of the Company's relationship with Peregrine Surgical Ltd., pricing of the Company's products, the success of the Company's operating expense controls, the Company's margin goals, the Company's share repurchase program, and the Company's financial outlook and performance in the remainder of fiscal 2013 and future periods.

These statements are not guarantees of future performance and actual results may differ materially from those described in these forward-looking statements as a result of a number of factors. Please see a detailed description of these and other risks contained in our Annual Report on Form 10 K for the fiscal year ended December 29, 2012 filed with the Securities and Exchange Commission. Forward-looking statements contained in this conference call are made as of this date and will not be updated.

Thank you, Susan. I'd like to start today by reiterating the most immediate goal I set when I took over as CEO last fall. IRIDEX needed to becoming a market-focused company. Our Company's DNA needed to change from a clinically driven scientific IRIDEX of the past to commercially minded company that directly responds to the challenges of modern-day healthcare marketplace. I'm glad to report that we are making progress, the Company's leaner, decisions are faster, accountability at all levels have improved and we are no longer satisfied until we see our products shipping and our earnings rising.

The first quarter was another record revenue quarter at IRIDEX. During the period ending March -- typically a seasonally soft quarter for capital equipment -- we posted revenue of $8.9 million. That's approximately 8% over the first quarter of 2012. More evidence we are making progress, OpEx during the quarter was reduced and this occurred during -- despite the first quarter being a very active period in sales and marketing and strategic areas. What is most exciting about our quarter was witnessing the growth, growing evidence and excitement surrounding our unique technology.

IRIDEX has developed a proprietary technology we call MicroPulse, which is interruptive therapy for treating serious ophthalmology conditions like glaucoma and diabetic macro edema, or DME. Our MicroPulse-based products and therapies are not only safe and effective but they eliminate the side effects of older laser modalities or drug-based therapies and are much more cost-efficient, which is an important consideration, particularly in today's economic and healthcare environment.

Our sales in the first quarter demonstrate how MicroPulse is gaining traction in the marketplace. The percentage of customers ordering our new IQ lasers with MicroPulse more than doubled in the year over year. Furthermore, there is growing interest in MicroPulse at ophthalmology conferences. A total of 12 papers on MicroPulse, 10 on DME and two on glaucoma, will be presented at the upcoming annual meeting of the Association of Research in Vision and Ophthalmology in early May, more than we have ever had. At the Euretina conference in September 26-29 in Hamburg, Germany, the conference organizers are sponsoring a training session on MicroPulse. In the past we had to sponsor those types of activities so we believe we are edging towards a technology-driven tipping point for MicroPulse in the DME market.

At the same time we've executed successful product launch of the types called for our TxCell scanning laser delivery system that received FDA and CE clearance in the fourth quarter last year. TxCell [phased] doctors and their staff significant time in a variety of laser procedures. We believe that clinical benefits associated using TxCell will accelerate the adoption of MicroPulse technology as it applies to several clinical procedures.

While the market is adapting our new product, our revenues are rising. We have to expect that [cardinal] sales will continue to remain lumpy for a period of time, therefore it is important we are main focus on improving efficiencies and looking to increase our disposal revenue.

Finally, before I turn the call over to Jim to review the operational and financial results for the quarter I would like to comment on another one of our goals, to be opportunistic in acquiring or partnering with other opthamology companies as a means to drive revenue. A great example of our progress in this area is the recently announced selling of the supply chain agreement with Peregrine Surgical, a high-quality manufacturer of surgical instruments based in Pennsylvania.

This is a strategic marriage that makes sense. We get to outsource manufacturing and drive cost out of supply chain and bring to market additional consumable products at different price points. Also, we are already working with Peregrine combining our technology and their know-how in two new product initiatives in the high-margin consumable category. With that I'd like to turn the call over to Jim.

Thanks Will. As Will indicated we had a solid first quarter as revenues hit $8.9 million, up 8% from $8.3 million in Q1 2012. Our total revenue system sales to Q1 2013 were $4.3 million, up from $3.9 million in Q1 2012, driven in part by the growing adoption of MicroPulse-enabled units.

To characterize the revenue mix in the quarter, we had a strong international system sales that were aided by the launch of the TxCell system. Domestic system sales were also up year over year but slightly down versus the record Q4 domestic system sales. Recurring revenues in the first quarter 2013 represented the balance of the revenues, up $0.2 million or 4% from Q1 2012, and up $0.4 million or 9% sequentially. Recurring revenues represented approximately 50% of the total revenue mix which is down as a percentage from last year's first quarter representing a shift in product mix toward system sales but up from the Q4 percentage which was even more heavily weighted to system sales.

We continued to benefit from consumable sales from our distribution partner, Alcon, and as Will mentioned, we are looking at a number of ways of getting additional consumable products to market, both directly and via partners as illustrated by our agreement with Peregrine. Gross margins were 47.3% for the 2013 first quarter, down from 48.0% over last year's comparable period but a slight improvement from gross margins of 47.0% for Q4. We are steadily working to improve our margins on recently released products, while capturing supply and manufacturing cost opportunities in areas where we can find them to improve margins in the near term. While the majority of the margin impacted is the result of the product mix with higher levels of system sales being sold through our international distribution channel, we believe a strengthening market and recognition of the value in our new technology will allow us more pricing leverage going forward. That and continued work on our cost structure and manufacturing processes makes us confident in being able to achieve gross margins of closer to 50% by the second half of the year, depending on how weighted toward system sales we remain.

Operating expenses continue to trend in the right direction as we came in at the low end of our target range at $3.8 million, and we did benefit from an insurance refund of just under $500,000 in bringing our reported OpEx down to $3.3 million in the period. This allowed us to generate a net income from continuing operations of $0.9 million, or $0.10 per basic share, compared to a loss in 2012 first quarter of $0.3 million or a $0.03 loss per basic share.

Looking at the second quarter of 2013, we are projecting revenues between $8.9 million to $9.2 million, gross margins between 47% to 49%, and operating expenses between $4.0 million and $4.2 million. OpEx will nudge up from our recent past high of $4 million as a result of certain selling expenses associated with growing revenues and the expense of the medical device tax which we take to the G&A.

From an operations perspective, in this, the second quarter we are hard at work integrating the independent channel with our direct channel here in the US, and once complete our goal is to watch both IRIDEX- and Peregrine-branded consumable products across all our channels -- domestic direct, domestic independent and international -- to maximize the revenue potential of our new enlarged product portfolio and sales footprint. We see the Peregrine products bringing us revenues in excess of $1 million on an annualized basis, and our goal with full integration of our products across all channels is to drive revenues in the region of $2 million on an annualized basis.

During our last call we announced that the Board had approved a new share buyback program to invest up to $3 million in 2013. Due to volume restrictions and the short amount of time we've had the plan working, we haven't really made a dent as of yet. To date, under the plan we've purchased approximately 38,000 shares to $58,000. And as we stated before we remain committed to delivering shareholder value and will remain fairly aggressive under the stock buyback program while continuing to explore other alliances and possible acquisitions.

And with that I'll turn the call back over to Will.

Thank you, Jim. To summarize, we're getting much closer to the commercially focused company we need to be. We executed well in the first quarter, increasing revenues and profits and successfully launching TxCell. We are investing in our product that our customers want, we can deliver to the market in a reasonable amount of time and are aligned with growing clinical trends in ophthalmology.

I would also like to thank our employees for their continued dedication, flexibility and support during our period of transformation. With that I'd like to thank each of you for listening and for your interest in IRIDEX.

At that point I would like to turn the call over for questions. Angel?

(Operator Instructions). Joe Munda, Sidoti.

Good afternoon, Will and Jim. Real quick, a couple questions here. In regards to -- you made reference that 12 papers were produced on MicroPulse. I'm curious, how many of those papers included MicroPulse with injection?

Are you talking about the ones we just mentioned in regards to the upcoming meeting?

Yes.

I haven't seen the stickers at this point in time, that information, all we have is the agenda of what's being presented. That is I believe next week and when the show was out. And I doubt very seriously that many of them have a combination.

But that seems to be a point of emphasis in the investor presentation, that's why --

Our viewpoint is that we think what will happen is there will be a -- doctors will do an injection and a laser treatment in the beginning. (multiple speakers)

I'm just wondering, because a doc I spoke to had never -- he cited the fact he explained to me that he hasn't seen a research paper with the use of MicroPulse with injection. So I was just curious if maybe upcoming ones included that as well.

But as far as TxCell is concerned, Jim, can you give us a little bit of a breakout there of what the revenues were in the quarter?

Well, we don't normally go into that level of unit detail. Just let's put it this way. We had a target for the year, and we are having to put an extra buy-in because we think we are not going to -- we're going to exceed the annual target. So we are very happy with the unit sellthrough that we see.

Okay. As far as -- Will, I know we spoke the last time, we had talked about getting the MicroPulse into the classroom setting, so I'm just curious to see how that process is going on your end.

Well, our sales force continues to work through that and when you're talking about the classroom, you're talking in regards to the --

Teaching --

(multiple speakers) right, talking about George Washington University and how they were teaching MicroPulse before they were teaching residents to do injections?

Yes.

That process is ongoing, and I think I would like to have an opportunity to get back to you and what the numbers are, if any more. I know that they were talking to a number of different universities but I don't have the exact number at this point.

Okay. And then as far as Peregrine is concerned, Jim, can you give us some sense of what their contribution, if there was one, to the growth of the overall gross margin was?

We started selling them as of April, so they will come online in Q2.

Is that where the bump in the gross margin comes from or is it more the product mix?

For the Q2 forecast, you mean? Or --

Yes, for the Q2 as well as for the year. It is part of the mix, but I'm just wondering, is it more the benefit from Peregrine or is it more the benefit from a shift to consumables?

It will be a combination of both. The Peregrine-branded products will just be absorbed into our overall consumable product portfolio, so they will basically align alongside the existing consumable products we have. And as a combination, they all have good margins to it. It will all be accretive to the overall margin.

And they are OEMing it for you, as I understand?

They will continue to manufacture the Peregrine-branded product, and we are the distributor of that. And then they will also ultimately become part of the supply chain for the IRIDEX-branded products. So they will also supply us those over time.

And then you touched -- my final question, you touched on the recurring revenue, it was right around 50% now, I missed the part -- I don't know if you mentioned it. What was it the first quarter of '12?

First quarter of '12 -- I have it at 52.7%.

Okay. Now how should we look at that going forward? Do we expect it to drift more --

I think as we've said, the longer-term goal is we want to drive that percentage up. But in the short strokes we recognize that with sort of the system sales driver we've got at the moment, it's going to be a little more volatile. Will mentioned to the lumpy phenomena that we see for the system sales. So as we work our way through that, it will continue to move around. But I think it's going to move around plus or minus on the 50%, but ultimately we are looking to drive it further north by bringing more product to that ilk in to the mix.

And I guess, Will, one final question. In the investor presentation, the reimbursement figures that you used, are those hard and solid numbers to really use going forward, or are those more projected for the macular projections that you gave?

So the supply that we provided, that is a hard number that comes from a specific position. And that's what we use.

Okay. So it's universal. You're saying that the Medicare reimbursement rate --

The Medicare reimbursement rates are consistent, yes. We just pull those off the notes.

Great. I appreciate it, thank you.

Larry Haimovitch.

Will, what impact over the long term do you think your interest in the comprehensive ophthalmologist could have to the Company? It's been an area in the past that has not been addressed. What should we expect from this over a period of time?

What it does for us as a market, currently we are calling on around 1,500 -- we will talk about US to begin with because it's easy to track those numbers. We are calling around 1,500+ retinal specialists in the US. By including the comprehensive [physician] in this category, that moves the number up to around 6,000+ customers. So you can see the value for us is expanding our market substantially. It's a thesis that we started with that we can move into that space. We want to then move from that to a few anecdotal information -- anecdotal data points and then move it on before we before we start calling it a trend. At this point in time anecdotally we are getting orders out that market place.

Over time that could become a very significant part of the business, given there so many more doctors that you haven't been serving in the past?

That's correct. I think that should give you some other information in regards to the Peregrine transaction. It allows us to pull up these extra 10 independent reps to help complement our direct sales force which allows direct sales force to spend more time talking to both retinal and the comprehensive, and allowing the independents to do a little more work on the disposables in the operating room.

And on top of that we've been spending an awful lot of time and energy in developing our new sites from the webpage, social media, etc. on how we're going to touch these physicians that are a much larger group.

Thanks. And Jim, the shift of manufacturing from another supplier to Peregrine, is that significant in the long term for gross margins?

It should be -- yes, significant depends on perhaps my view or your view. I think significant yes. Whether it will contribute one or two points on the overall gross margin, too early to tell. But it is, the purpose is to drive the cost out of a large part of our consumable supply chain.

Thanks guys.

[Stan Mann].

Hello. Two questions. One, the $11.6 million we have, do you see any probability of using that on an acquisition that would sizably add to our business topline, bottom line?

Stan, we have cash on the balance sheet, we're going to use it in a manner that allows us to deal with the acquisitions, but I don't see us spending anywhere close to that amount on a particular acquisition at this time.

Okay. The increase in diluted shares are because options become viable?

Yes. The two pieces would be that, if you compare versus 200 last year, when we are at a loss situation, we used the basic number both for the basic and diluted calculation. This year being profitable, we add in, to your comment, the options and other diluting elements. And as the price of the stock goes up we will find more of those options in the money.

Okay.

And they will add more to it, yes.

Last question. Several years ago, when I asked the question about the ultimate direction of gross profitability, I remember being told that the possibility of moving to the upper 50% range was distinctly possible. So I ask you, Will, with all the efficiency improvement, Peregrine, do you see that as a ultimate goal? Moving just 50%, but moving to the mid- to upper 50% gross margin range?

I like you putting the term in goal. Jim and I -- I think Jim's earlier comments were we were targeting the 50% range by the end of this year, and a target over long-term is the 55+.

It is. (multiple speakers) that is as rational as possible in a reasonable period of time.

I'm not sure what you mean by reasonable. If you want to give me a little more definition I can answer it. But --

I think I've been an investor for I don't know, eight years, so I guess that's reasonable, isn't it?

So Stan, I think there are efficiencies we still can ring out. There are products -- part of the problem what we have today is the IQ series and the TxCell are relatively new products and it takes some time to get the bugs worked out and move it through the system to get the cost improvements we need. On top of that, we are looking at more and more disposable products coming out which have higher margins versus the system sales.

So with that, we are moving with the target to be 50% this year, and I'll use your term -- in a reasonable time reaching up to the 55% range.

Anyway, good job, gentlemen. Thank you.

Paul [Sonz].

Yes, thank you very much, and good job. Compared to our meeting in Boston you guys are moving the pace. A couple of questions. One is what was the number of employee count in the quarter?

It's pretty close to I think 108 rings a bell.

And what was the free cash flow generation?

I'm going to go with -- I wrote down the EBITDA for you, which will get pretty close. So $1.2 million.

And it was approximately the EBITDA. And a couple of questions on the TxCell product, in its design, is that product a standalone product or is it designed to accept added modules in the future for other applications?

I'll take a first go at that, and Will can follow-up as well. So when purchases delays a console first if you like in the sense of making a buying decision on the laser console, and then you decide on what delivery device options you wish to select to go with your laser console, the TxCell is a delivery device that gives you the high efficiency through giving you pattern generation and scanning capabilities. So it's a stand-alone durable device that is used in conjunction with the laser console.

So it is a platform and there will be an upgrade track in the future?

I certainly think you can, I imagine there'll be more -- I would say the product family category, and you would expect more products in it. If that's what you're thinking on an alliance of the platform that has more than one SKU, I don't think of it as a product that in and of itself can receive upgrades.

Okay. I understand, that's very clear. A couple other things. One is you have an education process, and I assume the penetration of the TxCell platform is very -- it's a very low amount at the moment. You have an education process to convince folks that this is causing much less scar tissue, and that's a difficult process. So I assume there's some kind of cycle for educating the base and convincing them that they should go with the laser versus the injections. Do you have any kind of timed cycle that you're thinking of for that penetration?

I think I'm going to answer the question as I think I heard it, but -- currently what we have done is we've produced about 59 papers that go through the process of educating the marketplace on the scientific benefit of our laser system with MicroPulse. That's step one. Step two is to start to deal with the scientific research side, which is going on vis-a-vis this upcoming study or upcoming presentation at this congress this next month. That has been going on.

We have training sessions where we will have as well as on-site at conventions, such as we had at the Hawaiian Eye meeting, we will have webinars which we are having one in another couple of weeks with a couple of doctors. This has to do with glaucoma. On top of that, we have the webpage that gets into lots of education and providing information.

How long it takes, the education -- these doctors know how to use the laser, there's no question about having to teach them how to use the laser. The information that comes with that is a cognitive dissonance between going from using a laser that's supposed to burn, to a laser that doesn't burn. And that education process comes about by selecting the number of doctors which we believe are key influentials in the marketplace, having their comfort level and those begin to produce papers which are going out on a regular basis now.

And I think that's why we said in the call that coming up in September it will be the first time that a congress is sponsoring their own MicroPulse training session. We have nothing to do with it other than the fact they are bringing in three other doctors that have been doing research on our work and are using it clinically. Those are the types so how long does it takes to get this tipping over to where everybody wants to do it? I can't really answer yet. It is moving in that direction, how fast I can't respond.

Who is sponsoring the conference?

It is -- the conference is an annual meeting between the Society of Retinal Specialists of Europe. And so there will be hundreds of hundreds of doctors, probably in the thousands.

It sounds like you're making good progress.

We hope so. We think so.

Lastly, who do you consider the two direct competitors to TxCell?

[Pascal]? I would say -- do you mean MicroPulse or TxCell?

MicroPulse.

At this point in time we have the IP, we've licensed it to one person. That's it.

Okey-doke.

I think the real competition has to do with whether it's a continuous wave laser injection. Other than that we own the space around MicroPulse.

Thank you.

Jason Stankowski.

Hi guys. Good job, I like -- the progress looks great. I wanted to make sure I understood the Peregrine deal. So, Jim, are you saying that sort of a run rate of $1 million is kind of what you see coming out of Q2? You'll have a kind of rolling and then building over the next what, year or two to try to get to a $2 million revenue or run rate from that relationship? Is that the right way to think about it?

That's the way, yes.

And then, maybe with regard to the comprehensive docs, did you guys have any new customers in the quarter, and is that something you track, just people that have never ordered a laser from you in the past?

I would say that is what -- we do track some of that. In regards to where we are today I will say we sold a few customers in the comprehensive space. I don't have the exact number, Jason. I don't track it to that detail. That, I let marketing do.

And I guess with regard to the international order you just announced a day or two ago, was that one particular research group, or doctor group, and is it a particular country, and I guess in that, is it -- will it come in a quarter or is that something that gets kind of delivered over the next nine months or so?

So the order came from two different places. And one was in South America and the other one was in India. Approximately the same size, and when you say research group, I'm not sure what you are meaning there.

Like the NIH of some country or (multiple speakers)

Going into clinical use. For example, the one in India went to 12 different clinics, private clinics, not through the government.

Okay. And has that been shipped and a done deal or is that something that happens over time?

It's as soon as we can build it and get parts and do things.

That's great.

It's not to be shipped over here. That's not the case.

Right, right. Okay, that's helpful. Are there any other large conferences in the next nine months other than the Hamburg one in Europe? Are there any other large conferences coming up where you think you have MicroPulse being pulled out and kind of shown to the world at a higher level maybe then it has been at some of the major conferences to date?

The next large conference that would be AAO, and I do not have confirmation that a training session has been put in place yet. I do have information saying that they are talking about it, that's about it.

So we are working hard to get our shot. Great. Good job, guys, appreciate it. Thank you.

Joe Munda.

Hey guys, just a few quick follow-ups. Jim, mostly on the OpEx line, as far as R&D and SG&A are concerned, both have come down somewhat substantially quarter over quarter here. I'm just wondering how we should look at that going forward. It seems like sales are moderately ramping a little bit here, yet those two lines seem to be reducing. Or coming down.

On the R&D we could take a little bit of headcount out this year compared with last year, so I would expect to see it reset to this lower level, if you like. And we do try -- one of the things that we are moving towards is more of a sort of shared development process where we bring skill sets in and put them back, so we can use them for specific projects. So I think this reset is going to be -- it still provides us with the flexibility to work on new product if and when we need to. And then on the sales and marketing, I think a little bit of that is the shakeout. One of the things we've been really doing is to refocus our dollars on marketing in sort of a social and online media and a little bit away from physical footprint, so there's a little bit of sort of investment changing going on there. And also a little bit though does get timing depending on which shows we decide we want to go and really put a presence in.

So historically we've always had a larger Q4 because of AAO which Will mentioned. So we always assess the shows and where we should have the presence, so there will be a little bit of shifting between period to period on that. As I said there has also been some efficiencies in trying to move to more of an online presence.

I understand that, but then it looks like the G&A line cranked up here to almost $1.2 million here in the quarter. So --

It was [1176 to 1186].

I'm looking sequentially it was $900,000 in the fourth quarter. (multiple speakers).

There some element of timing things -- the new expense if you like that showed up is the medical device tax that we put into the G&A. So that's in there. And some other items of that ilk that have stepped it up a little bit.

Okay, but as far as following up on your comments, we shouldn't see selling and marketing dip probably below those levels, correct?

No, as I said we are still thinking about in aggregate between 4% and 4.2% for Q2, so something of this magnitude would make sense.

Thank you.

Stan Mann.

I just have one other question. You mentioned that you're going to be going from 1,500 retinal specialists to adding 4,500 additional specialists, eye specialists, ocular. So my question to you is how many salesmen do we have now, and how many will you add? I understand that we can do things by Twitter, etc., but usually a sale is face-to-face. So are you going to add any direct sale salesman in these territories to expand coverage? And where are you now?

I'm going to make a correction on the comments. There is approximately 6,000 to 8,000 comprehensive specialists -- comprehensive opthamologists from the United States. That's over and above the 1,500 or so retinal specialists we call on today. So your question is obvious. It says, how are you going to cover them.

The point I'm going to make is we are not going to add any salespeople at this point in time, we just added 10 independents and we're going to integrate that within our current 10 US salesmen. We have four sales people outside the United States. There's no need to push on every one of the 6,000 today and -- because they will slowly come around to our side. The aspect of, I will agree with you that in the past, a sale took a face-to-face conversation. But we've had a few sales over recently from this comprehensive group that have spoken to people on the inside after reviewing data on the web, or reviewing information about a clinical study and calling, where our salespeople went to that doctors office to do that in service, not to do the sale.

Times are changing a bit, and as Jim talked about, changing the footprint on the exposure at trade shows. We have to be smarter and use our money more efficiently. And the way to address people today with webinars and the Internet is an efficient manner.

And I'll come back to my comment about these comprehensive doctors. It's a group of doctors that may have a resident, or it may have a fellow that is a recent graduate that is a retinal person in the group, or they may not. But the 6,000 to 8,000 people are probably doing injections, and they become our target. And it will just take us some time. But I don't see as adding another person at this point until after we get the other group integrated.

So you know, you've not spoken about the Peregrine salesmen. Are they retinal specialists?

No. The Peregrine sales reps are independent reps that carry a number of different lines, predominantly around disposable products. Calling on [ASVs] and operating rooms. They do call on a few doctors' offices, but not many. Their products are usually designed to be around surgery. That frees up my salespeople at IRIDEX that are selling hardware to concentrate on where the MicroPulse has its best entry point, which is in the clinic.

Okay, so they do not cover the retinal specialists specifically, or the ocular eye treatments specifically.

You're talking about independent reps?

Yes.

The independent reps predominantly spend their time in the operating room talking with any ophthalmology surgeon. Whether it's retinal or something else, that's where they spend their time.

But they are ophthalmology specialists? That's what I am trying to get at.

There are so many. We have retinal guys, we have glaucoma, we have cornea, we have refractive, there's a variety of people in that ophthalmology space. And that's who those independents call on.

Okay, thank you.

Sam Bergman.

Nice quarter. A couple of questions. Was there any revenue from Alcon this quarter, and if there wasn't do you expect it over the next six months?

No, we've been receiving the Alcon revenue for a number of quarters now. It's been predominantly in the form of the royalty payments to date. Our relationship and our agreement with Alcon has us working on supplying them with an IRIDEX-branded product, and we anticipate being able to put that into their channel probably in this quarter. But we have had Alcon revenues in our past quarters.

So you expect disposables coming this quarter?

For sale -- Alcon selling our disposables this quarter, yes.

In terms of international, similar to what you just released on this $500,000 contract, how would you categorize your funnel for other clinical labs overseas?

I think international side of our business is fairly strong at this point in time. When you talk about funnel, you're talking -- I assume you're talking about our visibility into future orders? Is that what you're talking about?

Correct.

That's a tough one when you are talking about international sales, because you're dealing with tenders. You never really know when they are going to come. That leads us to having this concentration around hardware which I tend to use the term lumpy. It comes in kind of spurts. Whereas in the US we sell them one at a time. Internationally, a lot of our orders come in clusters. And I can say that we are continuing to work a number of different transactions when they arrive. I don't really know.

And the last question, seems like you have a terrific story. You're getting to a tipping point hopefully by the end of the year at those conferences. Should we see some insider buying, or -- we haven't seen a whole lot.

Should we see insider buying? I bought some shares not long ago. Just before the window closed. (multiple speakers). The insider buying comes and goes, it's each individual's choice. That's not a requirement from our side. I think you saw -- you should've seen a small buy from one of our Board members, a buy for myself. You'll see sales coming and going for people's own personal tax issues and things. I don't really know how to respond to it by saying other than what I do.

Very good.

I am going to close the window at this point in time.

When the window reopens, do you think you'll be buying?

I'm going to leave that as private. Okay?

Sounds good. Thank you.

There are no further questions at this time. I will now hand the call back to management for any closing remarks.

I would just like to say thank you to everybody for tuning in and listening to this call. And we look forward to providing increased shareholder value as we move forward. Thank you.

Ladies and gentlemen, this concludes the conference call for today. Thank you for participating. Please disconnect your lines.