Full Press Release Details
day, ladies and gentlemen. Thank you for standing by. Welcome to the STAAR Surgical Fourth Quarter and Full Year 2017 Financial
Results Conference Call. (Operator Instructions) This call is being recorded today, Wednesday, February 28, 2018.
this time, I would like to turn the conference over to Mr. Brian Moore with EVC Group.
you, Crystal, 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 fourth quarter, which ended on December 29, 2017. On the call today are Caren Mason, President
and CEO of STAAR Surgical; and Deborah Andrews, Chief Financial Officer.
news release detailed in the fourth quarter and full year 2017 results was issued just after 4:00 p.m. 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. 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 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 net income per share information.
We believe that these non-GAAP numbers provide a 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. Following our prepared remarks, we will open the call to questions from publishing analysts. (Operator Instructions)
We thank everyone in advance for their cooperation with this process. And with that, I'd like to turn the call over to Caren Mason,
President and Chief Executive Officer of STAAR Surgical.
Caren L. Mason - STAAR
Surgical Company - CEO, President and Director
you, Brian, and good afternoon, everyone. I will begin our discussion with a brief overview of Q4 and full year 2017 performance
highlights. And then we'll spend a few minutes addressing expectations for 2018. Deborah will then review key fourth quarter and
full year 2017 financial results before we open the call for your questions. We completed our 3-year 2015 to 2017 transformational
base business plan on target and finished 2017 with a solid foundation for growth for 2018 to 2020.
2017 investments in the clinical, quality, regulatory, research and development, commercial and operations infrastructure have
appreciably reinforced STAAR and contributed to our readiness for a stronger growth trajectory in 2018 and beyond. We began to
realize this emerging strength in our ICL sales results in Q3 and Q4 of 2017, which combined, accounted for 20% growth over the
second half of 2016. We began 2018 with several new products and developments, a pivotal clinical trial about to begin in Europe
to validate the EVO Visian ICL EDOF lens for the treatment of presbyopia, recent 3- to 5-year compliance certifications from regulatory
bodies representing Korea and Europe, additional and strengthened strategic cooperation partnerships around the globe and myriad
new programs for our ophthalmic surgeons including upgraded certified training, practice development and consumer outreach support.
disclosed in November, we expect to bolster our strategic imperatives for 2018 with additional investment in commercial infrastructure
expansion, clinical studies, regulatory compliance and consumer outreach, which will require a low double-digit increase in operating
expenses over 2017 actual.
remain committed to double-digit top line growth fueled by anticipated mid-teens or greater ICL sales and unit growth. In 2018,
we expect to continue strong positive cash flow and cash generation. We plan to improve our earnings as compared to 2017 and we
achieved good progress on our sustained profitability promise, which we believe, is realizable as we have indicated later in the
3-year planning cycle.
I'd like to share a little more color on how we see 2018 shaping up. We have set substantial ICL growth goals in our key markets
of China, Korea, Japan, Spain and Germany and with selected global distributor partners. Our goal is to grow revenue double-digit
year-over-year, which will set us up well for the over $100 million in the revenue we are aiming to achieve in 2018. We are pleased
that our Korea strategy is back on track. We expect double-digit growth from Korea in 2018. We are focused on Toric growth, implementation
of STAAR's new practice development tools and digital co-marketing with our distributor partner.
recently embarked on an advertising campaign, which began during the Olympics. Our break free from glasses EVO Visian ICL campaign
carries through the Olympics theme, with no borders strapped in spectacles leading the viewer to our websites to learn how to
break free. The apps are running in 6 subway stations, which carry more than 8 million monthly writers each between Seoul and
PyeongChang. The ads are permanently positioned on large screens next to a set of train doors, as you board. We expect North America
will continue to be void by growth in Canada. We are opened to adding large-volume clinic chains in North America as Strategic
Cooperation Agreement partners. We are stipulating surgeon certification, practice development and consumer outreach commitments
to assure these relationships provide the outstanding premium and primary positioning we enjoy in our largest international markets.
We believe we can change the way the ICL is marketing and proceed to North America with the right partners. We are preparing for
a possible Toric Visian ICL launch in the United States by year-end. Dependent upon achieving an in-compliance QSR rating by the
28, 2018 / 04:30PM ET, STAA - Q4 2017 STAAR Surgical Co Earnings Call
this time, we have limited additional information regarding inspection status. In addition, with recent clinical data and patient
registry reporting from around the globe, we believe we are on steady footing to present a very positive picture of the safety
and effectiveness and patient satisfaction of the EVO Visian ICL family of lenses as our next targeted product family for U.S.
the past year, we have surveyed over 1,400 patients post-ICL implantation. The current patient rating is 99%, reporting being
satisfied or very satisfied, and an impressive 99% reporting they would have the surgery again. We have completed our EDOF ICL,
pilot clinical study for presbyopia and believe the results are compelling as such, we continue as promised to forge ahead with
our EU EDOF ICL for presbyopia pivotal clinical study and expect first patient enrollments in the trial by the end of March.
have planned for a low double-digit increase in overall spending in 2018 to support commercial infrastructure expansion, clinical
studies, increasing regulatory submission fees and consumer outreach. We believe we have struck the right balance in planning
for a more robust long-term growth trajectory with increased spending in the near term. Due to a more than anticipated large-volume
increase and lower price injector part sales and stronger projected growth of price-competitive lower diopter ICLs, we are expecting
our gross margin percentages to flatten or slightly decrease in 2018. We view this as temporary as we initiate a number of new
operations improvements from our foundations 2023-year plan. Of course, let's remember that overall gross margin dollars will
track nicely as double-digit growth, along with the top line. With regard to the bottom line, we do expect improvement over our
$0.05 EPS loss in 2017. We also plan to increase our year-end 2017 cash position of $18.6 million by the end of 2018. Overall,
we are enthusiastic about 2018 and look forward to delivering another strong year for our shareholders. That concludes my prepared
remarks for this afternoon. Deborah?
Deborah Andrews - STAAR
Surgical Company - CFO
you, Karen, 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. STAAR reported net sales of $24.9 million in the fourth quarter of 2017, an increase of 12%
over the $22.1 million of sales reported in the fourth quarter of 2016. The sales increase was driven by ICL revenue growth of
19% with unit growth of 20% and increased injector parts sales partially offset by decreased IOL sales.
the fourth quarter of 2017, total sales for our ICL product line were $18.6 million compared to $15.7 million in the prior year
quarter. The increase in ICL sales is due to strong double-digit growth in China, Japan, India, the Asia distributor markets,
Europe and the Middle East, partially offset by decreased sales in North America, Latin America and Korea.
our IOL product line, total IOL sales were $4.4 million for the fourth quarter of 2017, which was down 11% in revenue and 6% units
from the prior year period. Decreased sales of silicone and Collamer IOLs were partially offset by increased sales of acrylic
other product sales, primarily injector parts, were $1.8 million for the fourth quarter of 2017, up 24% over the prior year period.
Our gross profit grew nearly 10% in the fourth quarter of 2017 compared to the fourth quarter of 2016, a couple of percentage
points below the increase in net sales. Our gross profit margin for the fourth quarter of 2017 was 69.9% compared to the prior
year gross profit margin of 71.7%. The decrease in gross margin for the quarter is primarily the result of unfavorable product
mix due to the increase of lower-margin injector part and other product sales and increased another cost of sales and lower IOL
and ICL ASPs, partially offset by the favorable effect of the 31% increase in Toric ICL sales, our highest margin product.
expenses for the fourth quarter were $18.6 million, an increase of 28% compared to the prior year quarter of $14.6 million. The
increase in operating expense was due to the timing of our Experts Meeting in the ESCRS trade show, which was held in the fourth
quarter of 2017 compared to the third quarter of 2016. Operating expenses were also higher in Q4 2017 due to increased G&A
compensation and travel expenses, increased commercial operations expenses in China, increased clinical expenses associated with
our clinical trials for the next generation ICL with EDOF optic. We also recorded a write-down of certain capital equipment no
longer in use, which was largely offset by an income tax benefit recorded as a result of the 2017 Tax Cuts and Jobs Act.
reported a net loss during the fourth quarter of 2017 of $0.1 million or approximately breakeven per diluted share compared to
a net loss of $0.2 million or breakeven per diluted share for the prior year period. On a non-GAAP basis, we reported the same
adjusted net income for the fourth quarter of 2017 as for the fourth quarter of 2016 of $0.8 million or $0.02 per diluted share.