Le Lézard
Classified in: Business, Covid-19 virus
Subjects: EARNINGS, Conference Call, Webcast

STAAR Surgical Reports Third Quarter Net Sales of $76 Million Up 30% Y/Y


STAAR Surgical Company (NASDAQ: STAA), a leading developer, manufacturer and marketer of implantable lenses and companion delivery systems for the eye, today reported financial results for the third quarter ended September 30, 2022.

Third Quarter 2022 Overview

"STAAR achieved 30% net sales growth in the third quarter which reflects strong EVO ICL unit growth in APAC and strong accelerating growth in the U.S., despite constant currency challenges and, in Europe, macroeconomic headwinds," said Caren Mason, President and CEO of STAAR Surgical. "In the third quarter, global ICL unit growth was up 40% year over year, highlighted by unit growth in China up 52%, the U.S. up 63%, Japan up 40%, South Korea up 49% and Asia Pacific distributor markets up 47%. We advanced our patient awareness, engagement and market building initiatives for EVO in the U.S. during and subsequent to the third quarter, highlighted by media campaigns with global entertainment celebrity Joe Jonas and NBA player Max Strus, and introduced our presbyopia lens, EVO Vivatm, to surgeons at our Experts Meeting preceding the annual congress of the European Society of Cataract and Refractive Surgeons. Despite stringent COVID policies in China we achieved strong results in the third quarter and expect our EVO lenses to capture more than 25% of China's estimated 1.2 million annual refractive procedures by the end of 2022. However, due to tighter COVID restrictions in China resulting in expected delayed demand in the fourth quarter, ongoing headwinds in Europe, weakness in the Yen and Euro, and lower Other Products sales, we now anticipate total net sales will be approximately $285 million for fiscal 2022, which represents $300 million adjusted for constant currency. Our fiscal 2022 outlook includes ICL sales of approximately $272 million, representing approximately 28% year over year growth, and Other Products sales of approximately $13 million."

Ms. Mason continued, "Today it is vital that STAAR focus on the significant growth opportunities we have with our premium EVO products. At the same time, our low margin Other Products business, which represents approximately 5% of sales and consists of cataract IOLs, IOL injectors and injector parts, has faced increasing supply chain challenges. As a result of third-party materials and supply chain challenges that only affect our Other Products business, we will no longer be able to support Other Products as we have historically. We will continue to support customers of Other Products through the end of 2023. As we look to fiscal 2023, despite the aforementioned challenges, we expect to achieve approximately 30% ICL sales growth, year over year, to approximately $355 million in total company net sales which contemplates limited sales from Other Products. We see significant growth potential for our EVO family of lenses globally and look forward to continuing our focus, efforts and resources on especially large growth opportunities in the U.S. and Asia in 2023."

Financial Overview ? Q3 2022

Net sales were $76.0 million for the third quarter of 2022, up 30% compared to $58.4 million reported in the prior year quarter. The sales increase was driven by ICL sales and unit growth of 33% and 40%, respectively, as compared to the prior year period. Other Product sales decreased 3% compared to the prior year quarter. ICL sales were 95% of total net sales for the third quarter of 2022. Changes in currency, primarily in the Japanese Yen as well as the Euro, negatively impacted reported total net sales by $4.0 million for the third quarter of 2022.

Gross profit margin for the third quarter of 2022 was 79.5% compared to the prior year quarter of 77.6%. Factors impacting gross margin in the third quarter of 2022, as compared to the prior year quarter, due mainly to product and geographic mix, partially offset by increased period costs associated with manufacturing projects.

Operating expenses for the third quarter of 2022 were $46.8 million compared to the prior year quarter of $37.5 million. General and administrative expenses were $14.0 million compared to the prior year quarter of $11.0 million. The increase in general and administrative expenses was due to compensation related expenses, increased facilities costs and outside services. Selling and marketing expenses were $23.1 million compared to the prior year quarter of $18.2 million. The increase in selling and marketing expenses is due to increased trade shows and sales meetings, advertising and promotional activities, travel expenses and compensation related expenses. Research and development expenses were $9.6 million compared to the prior year quarter of $8.3 million due to increased compensation related expenses.

Net income for the third quarter of 2022 was $10.3 million or $0.21 per diluted share compared with net income of $6.0 million or $0.12 per diluted share for the prior year quarter. The year over year increase is attributable to higher sales and gross profit and, as a percentage of sales, lower operating expenses. Adjusted Net Income for the third quarter of 2022 was $18.1 million or $0.37 per diluted share compared to $10.3 million or $0.21 per diluted share for the prior year quarter. The reconciliation between GAAP and non-GAAP financial information is provided in the financial tables included with this release.

Cash, cash equivalents and investments available for sale at September 30, 2022 totaled $224.7 million compared to $199.7 million at December 31, 2021.

Conference Call

The Company will host a conference call and webcast today, Wednesday, November 2 at 4:30 p.m. Eastern / 1:30 p.m. Pacific to discuss its financial results and operational progress. To access the conference call (Access Code 976076), please dial 844-200-6205 for domestic participants and 929-526-1599 for international participants. The live webcast can be accessed from the investor relations section of the STAAR website at www.staar.com.

A taped replay of the conference call (Replay Code 710361) will be available beginning approximately one hour after the call's conclusion for seven days. This replay can be accessed by dialing 866-813-9403 for domestic callers and 929-458-6194 for international callers. An archived webcast will also be available at www.staar.com.

Use of Non-GAAP Financial Measures

This press release includes supplemental non-GAAP financial information, which STAAR believes investors will find helpful in understanding its operating performance. "Adjusted Net Income" excludes the following items that are included in "Net Income" as calculated in accordance with U.S. generally accepted accounting principles ("GAAP"): gain or loss on foreign currency transactions, stock-based compensation expenses, and valuation allowance adjustments. Management believes that "Adjusted Net Income" is useful to investors in gauging the outcome of the key drivers of the business performance: the ability to increase sales revenue and our ability to increase profit margin by improving the mix of high value products while reducing the costs over which management has control.

Management has also excluded gains and losses on foreign currency transactions because of the significant fluctuations that can result from period to period as a result of market driven factors. Stock-based compensation expenses consist of expenses for stock options and restricted stock under the Financial Accounting Standards Board's Accounting Standards Codification (ASC) 718. Valuation allowance adjustments can occur from time to time based on forecasted changes in operating results until all net operating loss carryforwards are fully utilized. In calculating Adjusted Net Income, STAAR excludes stock-based compensation expenses and valuation allowance adjustments because they are non-cash expenses and because of the considerable judgment involved in calculating their values. In addition, these expenses tend to be driven by fluctuations in the price of our stock and not by the same factors that generally affect our other business expenses.

The Company also uses Constant Currency as a Non-GAAP financial measure to exclude the effects of currency fluctuations on net sales. The Company conducts a significant part of its activities outside the U.S. It receives sales revenue and pays expenses principally in U.S. dollars, Swiss francs, Japanese yen and euros. The exchange rates between dollars and non-U.S. currencies can fluctuate greatly and can have a significant effect on the Company's results when reported in U.S. dollars. In order to compare the Company's performance from period to period without the effect of currency, the Company will apply the same average exchange rate applicable in the prior period, or the "constant currency" rate to sales or expenses in the current period as well. Because changes in currency are outside of the control of the Company and its managers, management finds this non-GAAP measure useful in determining the long-term progress of its initiatives and determining whether its managers are achieving their performance goals. The Company believes that the non-GAAP constant-currency sales results measures provided in this press release are similarly useful to investors to give insight on long term trends in the Company's performance without the external effect of changes in relative currency values. The table provided in this press release shows sales results calculated in accordance with GAAP, the effect of currency, and the resulting non-GAAP measure expressed in constant currency.

About STAAR Surgical

STAAR, which has been dedicated solely to ophthalmic surgery for over 40 years, designs, develops, manufactures and markets implantable lenses for the eye with companion delivery systems. These lenses are intended to provide visual freedom for patients, lessening or eliminating the reliance on glasses or contact lenses. All of these lenses are foldable, which permits the surgeon to insert them through a small incision. STAAR's lens used in refractive surgery is called an Implantable Collamer® Lens or "ICL", which includes the EVO ICLtm product line. More than 2,000,000 ICLs have been sold to date and STAAR markets these lenses in over 75 countries. To learn more about the ICL go to: EVOICL.com. Headquartered in Lake Forest, CA, the company operates manufacturing and packaging facilities in Aliso Viejo, CA, Monrovia, CA and Nidau, Switzerland. For more information, please visit the Company's website at www.staar.com.

Safe Harbor

All statements that are not statements of historical fact are forward-looking statements, including statements about any of the following: any financial projections (including sales), plans, strategies, and objectives of management for 2022, 2023, or prospects for achieving such plans, expectations for sales, revenue, margin, expenses or earnings, the expected impact of the COVID-19 pandemic and related public health measures (including but not limited to its impact on sales, operations or clinical trials globally), product safety or effectiveness, the status of our current and pipeline of ICL products with regulators, and any statements of assumptions underlying any of the foregoing, including those relating to our current and pipeline of ICL products and market expansion activities. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include risks and uncertainties related to the COVID-19 pandemic and related public health measures, as well as the factors set forth in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 under the caption "Risk Factors," which is on file with the Securities and Exchange Commission and available in the "Investor Information" section of the company's website under the heading "SEC Filings." We disclaim any intention or obligation to update or revise any financial projections or forward-looking statement due to new information or events. These statements are based on expectations and assumptions as of the date of this press release and are subject to numerous risks and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements. The risks and uncertainties include the following: global economic conditions; the impact of the COVID-19 pandemic on markets; the discretion of regulatory agencies to approve or reject existing, new or improved products, or to require additional actions before approval, or to take enforcement action; international trade disputes; and the willingness of surgeons and patients to adopt a new or improved product and procedure.

Consolidated Balance Sheets
(in 000's)
Unaudited
 
September 30, 2022 December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents

$

129,242

 

$

199,706

 

Investments available for sale

 

82,091

 

 

-

 

Accounts receivable trade, net

 

55,429

 

 

43,531

 

Inventories, net

 

19,930

 

 

17,274

 

Prepayments, deposits, and other current assets

 

10,218

 

 

10,900

 

Total current assets

 

296,910

 

 

271,411

 

Investments available for sale

 

13,360

 

 

-

 

Property, plant, and equipment, net

 

48,048

 

 

35,912

 

Finance lease right-of-use assets, net

 

380

 

 

506

 

Operating lease right-of-use assets, net

 

29,503

 

 

31,310

 

Intangible assets, net

 

171

 

 

218

 

Goodwill

 

1,786

 

 

1,786

 

Deferred income taxes

 

3,710

 

 

3,813

 

Other assets

 

808

 

 

822

 

Total assets

$

394,676

 

$

345,778

 

 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable

$

7,567

 

$

8,699

 

Obligations under finance leases

 

167

 

 

127

 

Obligations under operating leases

 

3,474

 

 

3,283

 

Allowance for sales returns

 

5,040

 

 

4,816

 

Other current liabilities

 

29,072

 

 

31,877

 

Total current liabilities

 

45,320

 

 

48,802

 

Obligations under finance leases

 

252

 

 

382

 

Obligations under operating leases

 

26,032

 

 

28,269

 

Deferred income taxes

 

1,554

 

 

811

 

Asset retirement obligations

 

158

 

 

198

 

Pension liability

 

1,228

 

 

8,758

 

Total liabilities

 

74,544

 

 

87,220

 

 
 
 
Stockholders' equity:
Common stock

 

482

 

 

477

 

Additional paid-in capital

 

398,448

 

 

373,519

 

Accumulated other comprehensive loss

 

(310

)

 

(4,048

)

Accumulated deficit

 

(78,488

)

 

(111,390

)

Total stockholders' equity

 

320,132

 

 

258,558

 

Total liabilities and stockholders' equity

$

394,676

 

$

345,778

 

 
Consolidated Statements of Income
(In 000's except for per share data)
Unaudited
 
 
Three Months Ended Nine Months Ended
% of September 30, 2022 % of October 1, 2021 Fav (Unfav) % of September 30, 2022 % of October 1, 2021 Fav (Unfav)
Sales Sales Amount % Sales Sales Amount %
Net sales

100.0

%

$

76,046

 

100.0

%

$

58,352

 

$

17,694

 

30.3

%

100.0

%

$

220,347

 

100.0

%

$

171,471

 

$

48,876

 

28.5

%

 
Cost of sales

20.5

%

 

15,584

 

22.4

%

 

13,051

 

 

(2,533

)

-19.4

%

21.2

%

 

46,749

 

22.1

%

 

37,825

 

 

(8,924

)

-23.6

%

 
Gross profit

79.5

%

 

60,462

 

77.6

%

 

45,301

 

 

15,161

 

33.5

%

78.8

%

 

173,598

 

77.9

%

 

133,646

 

 

39,952

 

29.9

%

 
Selling, general and administrative expenses:
General and administrative

18.4

%

 

14,011

 

18.9

%

 

11,018

 

 

(2,993

)

-27.2

%

18.1

%

 

39,934

 

19.0

%

 

32,671

 

 

(7,263

)

-22.2

%

Selling and marketing

30.4

%

 

23,130

 

31.1

%

 

18,175

 

 

(4,955

)

-27.3

%

29.3

%

 

64,633

 

29.3

%

 

50,229

 

 

(14,404

)

-28.7

%

Research and development

12.7

%

 

9,616

 

14.2

%

 

8,271

 

 

(1,345

)

-16.3

%

12.0

%

 

26,193

 

14.5

%

 

24,790

 

 

(1,403

)

-5.7

%

Total selling, general, and administrative expenses

61.5

%

 

46,757

 

64.2

%

 

37,464

 

 

(9,293

)

-24.8

%

59.4

%

 

130,760

 

62.8

%

 

107,690

 

 

(23,070

)

-21.4

%

 
Operating income

18.0

%

 

13,705

 

13.4

%

 

7,837

 

 

5,868

 

74.9

%

19.4

%

 

42,838

 

15.1

%

 

25,956

 

 

16,882

 

65.0

%

 
Other expense, net:
Interest income (expense), net

1.2

%

 

897

 

0.0

%

 

(23

)

 

920

 

4000.0

%

0.4

%

 

934

 

0.0

%

 

(35

)

 

969

 

2768.6

%

Loss on foreign currency transactions

-2.8

%

 

(2,129

)

-1.1

%

 

(610

)

 

(1,519

)

-249.0

%

-2.2

%

 

(4,904

)

-1.2

%

 

(2,040

)

 

(2,864

)

-140.4

%

Royalty income

0.1

%

 

77

 

0.3

%

 

185

 

 

(108

)

-58.4

%

0.2

%

 

527

 

0.3

%

 

496

 

 

31

 

6.3

%

Other income (expense), net

0.0

%

 

27

 

0.0

%

 

(13

)

 

40

 

307.7

%

0.1

%

 

178

 

0.0

%

 

(47

)

 

225

 

478.7

%

Total other expense, net

-1.5

%

 

(1,128

)

-0.8

%

 

(461

)

 

(667

)

-144.7

%

-1.5

%

 

(3,265

)

-0.9

%

 

(1,626

)

 

(1,639

)

-100.8

%

 
Income before provision for income taxes

16.5

%

 

12,577

 

12.6

%

 

7,376

 

 

5,201

 

70.5

%

17.9

%

 

39,573

 

14.2

%

 

24,330

 

 

15,243

 

62.7

%

 
Provision for income taxes

3.0

%

 

2,315

 

2.3

%

 

1,356

 

 

(959

)

-70.7

%

3.0

%

 

6,671

 

2.8

%

 

4,751

 

 

(1,920

)

-40.4

%

 
Net income

13.5

%

$

10,262

 

10.3

%

$

6,020

 

$

4,242

 

70.5

%

14.9

%

$

32,902

 

11.4

%

$

19,579

 

$

13,323

 

68.0

%

 
 
Net income per share - basic

$

0.21

 

$

0.13

 

$

0.69

 

$

0.42

 

Net income per share - diluted

$

0.21

 

$

0.12

 

$

0.67

 

$

0.40

 

 
Weighted average shares outstanding - basic

 

48,102

 

 

47,483

 

 

47,915

 

 

47,064

 

Weighted average shares outstanding - diluted

 

49,549

 

 

49,592

 

 

49,371

 

 

49,448

 

 
Consolidated Statements of Cash Flows
(in 000's)
Unaudited
Three Months Ended Nine Months Ended
September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021
 
Cash flows from operating activities:
Net income

$

10,262

 

$

6,020

 

$

32,902

 

$

19,579

 

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property and equipment

 

1,077

 

 

917

 

 

3,101

 

 

2,671

 

Amortization of long-lived intangibles

 

7

 

 

9

 

 

22

 

 

26

 

Accretion/Amortization of investments available for sale

 

(307

)

 

-

 

 

(307

)

 

-

 

Deferred income taxes

 

23

 

 

-

 

 

23

 

 

845

 

Change in net pension liability

 

(12

)

 

118

 

 

40

 

 

91

 

Stock-based compensation expense

 

5,727

 

 

3,663

 

 

15,375

 

 

10,985

 

Loss on disposal of property and equipment

 

-

 

 

-

 

 

-

 

 

2

 

Provision for sales returns and bad debts

 

(439

)

 

137

 

 

361

 

 

1,069

 

Inventory provision

 

592

 

 

400

 

 

2,020

 

 

1,097

 

Changes in working capital:
Accounts receivable

 

7,029

 

 

6,725

 

 

(13,108

)

 

(7,072

)

Inventories

 

(2,298

)

 

(937

)

 

(4,123

)

 

1,301

 

Prepayments, deposits and other current assets

 

2,786

 

 

1,595

 

 

526

 

 

1,288

 

Accounts payable

 

(5,077

)

 

228

 

 

(1,834

)

 

(40

)

Other current liabilities

 

4,739

 

 

3,441

 

 

(2,253

)

 

3,622

 

Net cash provided by operating activities

 

24,109

 

 

22,316

 

 

32,745

 

 

35,464

 

 
Cash flows from investing activities:
Acquisition of property and equipment

 

(6,273

)

 

(3,273

)

 

(14,083

)

 

(8,956

)

Purchase of investments available for sale

 

(95,576

)

 

-

 

 

(95,576

)

 

-

 

Net cash used in investing activities

 

(101,849

)

 

(3,273

)

 

(109,659

)

 

(8,956

)

 
Cash flows from financing activities:
Repayment of finance lease obligations

 

(40

)

 

(36

)

 

(85

)

 

(314

)

Proceeds from vested restricted stock and exercise of stock options

 

5,034

 

 

4,212

 

 

8,180

 

 

18,323

 

Net cash provided by financing activities

 

4,994

 

 

4,176

 

 

8,095

 

 

18,009

 

 
Effect of exchange rate changes on cash and cash equivalents

 

(502

)

 

(56

)

 

(1,645

)

 

(724

)

 
Increase (decrease) in cash and cash equivalents

 

(73,248

)

 

23,163

 

 

(70,464

)

 

43,793

 

Cash and cash equivalents, at beginning of the period

 

202,490

 

 

173,083

 

 

199,706

 

 

152,453

 

Cash and cash equivalents, at end of the period

$

129,242

 

$

196,246

 

$

129,242

 

$

196,246

 

 
Reconciliation of Non-GAAP Financial Measure
Adjusted Net Income and Net Income Per Share
(in 000's)
Unaudited Three Months Ended Nine Months Ended
September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021
 
Net income (as reported)

$

10,262

$

6,020

$

32,902

$

19,579

Less:
Foreign currency impact

 

2,129

 

610

 

4,904

 

2,040

Stock-based compensation expense

 

5,727

 

3,663

 

15,375

 

10,985

Valuation allowance adjustment

 

-

 

-

 

-

 

845

Net income (adjusted)

$

18,118

$

10,293

$

53,181

$

33,449

 
Net income per share, basic (as reported)

$

0.21

$

0.13

$

0.69

$

0.42

Foreign currency impact

 

0.05

 

0.01

 

0.10

 

0.04

Stock-based compensation expense

 

0.12

 

0.08

 

0.32

 

0.23

Valuation allowance adjustment

 

-

 

-

 

-

 

0.02

Net income per share, basic (adjusted)

$

0.38

$

0.22

$

1.11

$

0.71

 
Net income per share, diluted (as reported)

$

0.21

$

0.12

$

0.67

$

0.40

Foreign currency impact

 

0.04

 

0.01

 

0.10

 

0.04

Stock-based compensation expense

 

0.12

 

0.08

 

0.31

 

0.22

Valuation allowance adjustment

 

-

 

-

 

-

 

0.02

Net income per share, diluted (adjusted)

$

0.37

$

0.21

$

1.08

$

0.68

 
Weighted average shares outstanding - Basic

 

48,102

 

47,483

 

47,915

 

47,064

Weighted average shares outstanding - Diluted

 

49,549

 

49,592

 

49,371

 

49,448

 
Note: Net income per share (adjusted), basic and diluted, may not add due to rounding
STAAR Surgical Company
Reconciliation of Non-GAAP Financial Measure
Constant Currency Sales
(in 000's)
Unaudited
 
Three Months Ended
September 30, 2022 Effect of
Currency
Constant
Currency
October 1, 2021 As Reported Constant Currency
Sales $ Change % Change $ Change % Change
ICL

$

71,953

$

3,210

$

75,163

$

54,153

$

17,800

 

32.9

%

$

21,010

 

38.8

%

 
Cataract IOL

 

2,191

 

484

 

2,675

 

2,525

 

(334

)

-13.2

%

 

150

 

5.9

%

Other

 

1,902

 

284

 

2,186

 

1,674

 

228

 

13.6

%

 

512

 

30.6

%

Other Products

 

4,093

 

768

 

4,861

 

4,199

 

(106

)

-2.5

%

 

662

 

15.8

%

 
Total Sales

$

76,046

$

3,978

$

80,024

$

58,352

$

17,694

 

30.3

%

$

21,672

 

37.1

%

 
Nine Months Ended
September 30, 2022 Effect of
Currency
Constant
Currency
October 1, 2021 As Reported Constant Currency
Sales $ Change % Change $ Change % Change
ICL

$

208,550

$

7,166

$

215,716

$

159,889

$

48,661

 

30.4

%

$

55,827

 

34.9

%

 
Cataract IOL

 

7,640

 

1,137

 

8,777

 

9,324

 

(1,684

)

-18.1

%

 

(547

)

-5.9

%

Other

 

4,157

 

721

 

4,878

 

2,258

 

1,899

 

84.1

%

 

2,620

 

116.0

%

Other Products

 

11,797

 

1,858

 

13,655

 

11,582

 

215

 

1.9

%

 

2,073

 

17.9

%

 
Total Sales

$

220,347

$

9,024

$

229,371

$

171,471

$

48,876

 

28.5

%

$

57,900

 

33.8

%

 


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