Full Press Release Details
Surgical Company - EVC Group - IR
you Vince, good afternoon everyone. Thank you for joining us on the STAAR Surgical conference call this afternoon to review the
Company's financial results for the fourth quarter which ended on December 30, 2016. On the call today are Caren Mason, President
and CEO of STAAR Surgical; and Steve Brown, Chief Financial Officer. The news release detailing the fourth-quarter results was
issued just after 4:00 PM Eastern time and is now available on STAAR's website at www.STAAR.com.
we begin, let me quickly remind you that during the course of this conference call the Company will make forward-looking statements.
We caution you that any statement that is not a statement of historical fact is a forward-looking statement. This includes remarks
about the Company's projections, expectations, plans, beliefs, and prospects. These statements are based on judgment and analysis
as of the date of this conference call, and are subject to numerous important risks and uncertainties that could cause actual results
to differ materially from those described in the forward-looking statements.
risks and uncertainties associated with the forward-looking statements made in this conference call and webcast are described in
the Safe Harbor statement and today's press release, as well as STAAR's public periodic filings with the SEC. STAAR assumes no
obligation to update these forward-looking statements to reflect future events or actual outcomes. And does not intend to do so.
addition to supplement the GAAP numbers we have provided non-GAAP adjusted net income and diluted net income per share information.
We believe that these non-GAAP numbers provide meaningful supplemental information and are helpful in assessing our historical
and future performance. A table reconciling the GAAP information to the non-GAAP information is included in today's financial release.
our prepared remarks, we will open the line to questions from publishing analysts. We ask analysts to limit themselves to two initial
questions during the Q&A session, then re-queue with any follow-ups. We thank everyone in advance for their cooperation with
this process. Now I would like to turn the call over to Caren Mason, President and Chief Executive Officer of STAAR Surgical.
Surgical Company - President & CEO
you Brian, and good afternoon everyone. I will begin our discussion with an abbreviated overview of 2016 performance highlights
and conclude with strategic priorities for 2017 and a general overview of how we expect the year to play out. Steve will then review
key fourth-quarter and full-year 2016 financial results before we open the call for your questions.
2016 we devoted significant efforts and resources towards rebuilding our quality system and meeting our remediation efforts commitments,
which included acquiring and validating a new quality management system. We completed a comprehensive meta-analysis of global,
peer-reviewed clinical data regarding the ICL which was published in the peer-reviewed journal Ophthalmology in June. We added
several new key employees particularly in the research and development, clinical and medical affairs, and quality and operations
finalized nine strategic cooperation agreements with customers, which currently represent in excess of 20% of our committed ICL
volume and are intended to enhance our future growth. We rebranded STAAR by launching Evolution In Visual Freedom websites
in our major markets and by initiating a new marketing campaign that positions the EVO Visian ICL as a premium and primary solution
for patients seeking visual freedom from eyeglasses and contact lenses. We launched the EVO+, which is the Visian ICL with CentraFLOW
and an expanded optical zone in Europe, and obtained regulatory approval to sell the EVO spherical and Toric versions in Canada.
designed and completed a new technology center in Orange County, California, to house our research and development labs and personnel
as well as to function in 2017 as a state-of-the-art training center for surgeons and ODs. Our R&D and clinical affairs teams
initiated the first in-man clinical trial phase to validate an EVO lens with extended depth of field, and the initial results are
positive. And finally, we met our commitment of achieving double-digit ICL unit growth and expanding our gross margins versus prior-year
while achieving record revenue.
2017, our strategic priorities are as follows. First, we plan to complete our remediation plan and quality systems rebuild this
year. Our goal is to complete our internal remediation and quality system plan commitments, while also maintaining our global quality
we will continue to build the Evolution in Visual Freedom market for implantable lenses. We will continue our activities to position
the ICL as a primary and premium refractive procedure with expanded clinical validation, new digital and social media marketing,
strengthening of the product branding launched in 2016, and by introducing an enhanced surgeon training and practice development
we are starting the process to expand our commercialization and go-to-market strategy for global market share growth. We are planning
for double-digit ICL unit growth through a refreshed sales strategy and by entering into additional strategic business relationships
with growth oriented refractive surgical providers operating eye hospitals and clinics.
we plan to deliver global clinical validation and clinical utility excellence. The expanded global clinical and medical affairs
teams will continue to assist in supporting submissions to and responding to queries from regulatory agencies and will monitor
clinical data, conduct and monitor clinical studies, and patient registries established in 2016. And we'll continue to enhance
our medical communications protocol. Our primary focus in 2017 will be studies associated with clinical results of our lenses used
in the lower diopter range.
we will continue our efforts to innovate, develop, and release to market premium collamer lenses and delivery systems. Our goal
is to introduce a pre-loaded delivery device for our ICL family of lenses and a next-generation ICL, which we refer to now as an
EVO with aspheric EDOF optic. In addition, we are launching development projects to include premium Collamer IOLs with EDOF as
we look ahead to 2017, we expect double-digit ICL unit growth for the year driven primarily by increasing market acceptance of
the EVO Visian ICL in established markets, with the exception of the US and Korea. We are working with our Korean distributor to
address significant declines in orders anticipated for 2017 as a result of various market and economic conditions in Korea.
expect IOL sales in 2017 to be similar to IOL sales in 2016, with the exception of the decrease associated with the discontinuation
of the silicone IOL product line in the US. We anticipate gross margin expansion again in 2017, as compared to year-end 2016. We
also anticipate 2017 operating expenses may trend above 2016 total operating expenses.
are planning further based business investment in our operations to primarily include clinical affairs, corporate infrastructure
and systems, sales and marketing, and research and development. As we complete our three-year strategic transformation priorities
and investments in 2017, our goal is to provide a preview of 2018 to 2020 strategic priorities and financial results direction
during the third quarter this year. That concludes my prepared remarks for this afternoon. Steve?
Surgical Company - CFO
you, Caren, and good afternoon everyone. I'll start the financial overview with a summary of top line results and then provide
more details by product and market.
achieved record sales of $22.1 million in the fourth quarter of 2016, an increase of 6% over the $20.9 million of sales reported
in the fourth quarter of 2015. The sales increase was driven by ICL revenue and unit growth of 11% and 10%, respectively. Sales
of injector parts grew by 2% with IOL revenue flat compared to the prior-year quarter.
also achieved record sales of $82.4 million for the full FY16, an increase of 7% over 2015 driven by record annual ICL unit sales
in 2016 that increased 11%.
the fourth quarter of 2016, total sales of our ICL product line also set a record at $15.7 million.
ICL sales were $7.9 million during the fourth quarter, a decrease of 1% in revenue and flat units compared to the prior-year period.
China, Japan and Southeast Asia experienced strong double-digit growth that was offset by softness in Korea and a decline in India
caused by a temporary cash shortage that affected the market.
ICL sales were $5.8 million during the fourth quarter, an increase of 18% in revenue and 18% in units compared to the prior-year
period. Europe and the Middle East experienced strong double-digit sales and unit growth, while Latin America grew modestly.
America ICL sales were $2.1 million during the fourth quarter, up 57% in revenue and 61% in units from the prior-year period. The
increase in units was driven by new marketing programs in the United States to support patient education in customer clinics, timing
of a military order, and the successful commercialization of the EVO Toric lens in Canada which was approved in late September
our IOL product line, total IOL sales were $4.9 million for the fourth quarter of 2016, which was flat in revenue but an increase
of 5% in units from the prior-year period. Solid growth in Japan and Europe were offset by the phase-out of silicone IOLs in the
United States and North America.
the discussion now to margins and spending:
gross margin was 71.7% compared to the prior-year period gross profit margin of 70.3%, or an increase of 1.4 points. This improvement
resulted from a favorable mix of higher-margin ICL units that added 1.9 points, and lower other cost of sales attributable to lower
inventory reserves that added 1.4 points, partially offset by higher unit costs mainly on IOLs due to lower production volumes
of 1.7 points and lower price mix of 0.2 points. For the full-year 2016, our gross profit margin expanded 2.4 points to 70.8% from
expenses in the fourth quarter decreased approximately $100,000 to $14.6 million compared to the prior-year quarter. General and
administrative expense was $3.9 million and $1 million lower than the prior-year quarter primarily due to lower compensation costs.
Marketing and selling expense was $6.4 million, and $600,000 higher than the prior-year quarter, primarily due to international
selling and promotional costs.
and development expense was $4.3 million, and $300,000 higher than the prior-year quarter due to investments in project-related
spending and quality system improvements, partially offset by lower clinical and FDA remediation expenses. Remediation expense
for the quarter was on budget.
regard to the bottom line, the net loss for the fourth quarter of 2016 was approximately $200,000 or approximately breakeven per
share, compared with a net loss of about $800,000 or $0.02 per share for the prior-year period. Higher sales volume and improved
gross margin generated a higher gross profit in the fourth quarter of 2016 versus the prior-year period combined with reduced operating
expenses and lower other expense to offset a higher tax provision.
a non-GAAP basis, the adjusted net income for the fourth quarter of 2016 was $800,000 or $0.02 per diluted share, compared with