Full Press Release Details
| EDITED TRANSCRIPT |
| STAA - Q3 2016 STAAR Surgical Co Earnings Call |
| EVENT DATE/TIME: NOVEMBER 03, 2016 / 04:30PM ET |
CORPORATE PARTICIPANTS
Surgical Company - President, CEO
Surgical Company - VP, CFO
Benchmark Company - Analyst
day, ladies and gentlemen. Thank you for standing by. Welcome to the STAAR Surgical third-quarter 2016 financial results conference
call. (Operator Instructions). This call is being recorded today, Thursday, November 3, 2016.
this time, I would like to turn the conference over to Mr. Brian Moore with EVC Group.
Brian Moore - EVC Group - IR
you, Operator, and 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 third quarter, which ended on September 30, 2016.
the call today are Caren Mason, President and CEO of STAAR Surgical; Steve Brown, Chief Financial Officer; and Dr. Keith Holliday,
Vice President, Research and Development.
news release detailing the third-quarter results was issued just after 4 PM Eastern time and is now available on STAAR's website
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.
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.
The risk and uncertainties associated with the forward-looking statements made in this conference call and webcast are described
in the Safe Harbor statement in today's press release, as well as on 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
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 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 requeue with any follow-ups. We thank everyone in advance for their cooperation with
I would like to turn the call over to Caren Mason, President and Chief Executive Officer of STAAR Surgical.
Caren Mason - STAAR Surgical Company - President, CEO
you, Brian, and good afternoon, everyone. I will begin our discussion with general commentary on the state of the business. Steve
will then review key third-quarter 2016 financial results before we open the call for your questions.
performance represents STAAR's continuing positive progress on a broad range of initiatives required to build the short-, medium-,
and longer-term value of the Company for all of its stakeholders. In January of this year, as we outlined our plans for 2016, we
committed to double-digit ICL unit growth and expanding gross margins over year-end 2015. We reported earlier today an ICL unit
growth of 15% for the quarter and 11% for the year. We also reported gross margin of 74.2% for the quarter versus prior-year quarter
of 68.3% and prior-year end of 70.3%.
many of you know, Q3 for STAAR was traditionally a challenging quarter, as seasonality could impact us in the European markets.
This quarter did reflect a traditional softness in some European and Latin American countries. The Asia-Pacific markets, however,
traditionally experience a stronger patient demand cycle during this period and achieved 30% unit growth for the quarter, largely
due to the new business we have added this year. North America was sluggish in Q3, but we believe business will pick up as the
EVO toric version lens received approval for Canada on September 21 and surgeons chose to wait to be trained on and order the toric
I'm very pleased that we've been able to achieve our growth commitments while we are in year two of the three-year transformation
for STAAR. As you know, it is tough to solidly grow a business organically while significant upgrades and changes are underway
in that core business. We have invested in the business, as we indicated, and we are on target to achieve all of the strategic
priorities we feel important for strengthening the business and building a foundation for consistent growth.
is a quick list of our on-target imperatives for 2016. We are on track for completing the FDA remediation and quality systems overhaul
action items per internal project timelines and on budget. We are establishing and building the Evolution in Visual Freedom market
for myopia with a rebranded company and product portfolio, showcasing the ICL as a premium and primary refractive choice for surgeons
and their patients. Our rollout of the EVO Visian ICL brand throughout much of the world is going very well. We have closed large
blocks of transformational business through strategic cooperation agreements in major markets globally. We are enhancing the surgeon
experience through the creation of new practice development and economic validation programs we are test marketing this year to
be launched in 2017. We are fortifying the young surgeons, who are establishing a surgeon-led certified ICL training institute
introduced this year. We have created a clinical affairs and medical affairs core competency, which includes building a significant
library of historical and contemporary data demonstrating the safety and effectiveness of the ICL from the literature and through
rigorous clinical studies and global patient registries. We are building, releasing, and clinically testing new products on schedule.
last imperative leads me to the remainder of my remarks, which will focus upon progress regarding the EVO Visian ICL extended depth
of field lens designed to address presbyopia. As patients age, they begin to lose near and then intermediate vision due to presbyopia,
a long-term, natural progressive loss of accommodation experienced by all people. We have finalized the initial clinical design
of a new extended depth of field EVO+ Visian ICL posterior chamber phakic lens. The initial clinical results are positive.
EVO and EVO+ ICL lenses are made of Collamer, our proprietary, highly biocompatible material that allows for long-term implantation
as the lens remains unnoticed and quiet in the eye indefinitely. Collamer production is a remarkable process that requires an understanding
of collamer chemistry, nuclear physics, and optical physics. The EVO+ extended depth of field lenses are designed to provide good
vision for patients of all ages and prescriptions within our approved ranges, while potentially extending by many years the period
of time before reading glasses are required.
changes have been made to the optical surface of our EVO+ lens design to modify the hyperfocal distance of an eye implanted with
the lens. This leads to an increase in the depth of field for the patient. As the lens is implanted between the cornea and the
crystalline lens, it works together with the crystalline lens without having to surgically alter the cornea. These are potentially
important and significant advantages over corneal inlays, LASIK solutions, and multifocal IOLs.
can disclose very early and high-level results of the initial implanted eyes with no detail as to patient demographics. I want
to emphasize that this is early data on a small number of eyes, but encouraging, and we are continuing the clinical study.
results obtained in computer simulations and during bench testing are being replicated in human subjects. No changes to lens design
lens targeting has been accurate and subjects have typically achieved 20/20 or better uncorrected and best corrected visual acuity.
extended depth of field has been confirmed via subjective visual data and objective examination of the visual pathway of subjects.
lastly, all patients are very satisfied with their new vision. Any minor visual symptoms that have been reported are not stated
concludes my prepared remarks for this afternoon. Steve?
Surgical Company - VP, CFO
you, Caren, and good afternoon, everyone. I will start the financial overview with a summary of topline results and then provide
more details by product and market.
achieved sales of $20.1 million for the third quarter of 2016, an increase of 7% over the $18.8 million of sales reported in the
third quarter of 2015. The sales increase was driven by ICL revenue and unit growth of 15% each and IOL revenue growth of 6%.
increases were partially offset by planned lower sales of injector parts in the third quarter and a delay in orders from Canadian
surgeons awaiting EVO toric lens approval, which occurred on September 21, 2016. For the first nine months of 2016, ICL revenue
and units increased 16% and 11%, respectively.
our ICL product line, total sales were $14.8 million for the third quarter of 2016.
ICL sales were $8.2 million during the third quarter, an increase of 28% compared to the prior-year period, driven by strong double-digit
unit growth of 30% in the region and most notably in China, Japan, and India markets.
ICL sales were $5.1 million during the third quarter, an increase of 6% compared to the prior-year period on unit growth of 4%
in the region and particularly growth in the Middle East, where sales began to normalize as expected coming out of the second quarter
and Latin America experienced moderate unit growth in the third quarter, which is a seasonally low quarter for European sales.
America ICL sales were $1.5 million during the third quarter, down 13% in revenue and 20% in units from the prior-year period.
The decline in units is mostly attributed to a delay in orders from Canadian surgeons awaiting EVO toric lens approval, which,
once again, occurred on September 21, 2016.
our IOL product line, total IOL sales were $4.6 million for the third quarter of 2016, an increase of 6% from the prior-year period,
with units down 3%. The increase in revenue was driven by IOL unit growth in Europe and southeast Asia and the effect of currency
due to the stronger Japanese yen, partially offset by the phaseout of IOL sales in China and silicone IOL sales in North America.
the discussion now to margins and spending, our gross profit margin was 74.2%, compared to the prior-year period gross margin of
68.3%, or an increase of 5.9 points. This improvement resulted from a favorable mix of higher-margin ICL units that added 3.5 points,
lower unit costs that added 0.6 points, higher average selling prices that added 0.2 points, and lower other cost of sales attributable
to lower inventory reserves that added 1.6 points.
expenses for the quarter increased $1.8 million to $16.6 million, primarily due to costs related to quality system improvements