Full Press Release Details
REFINITIV STREETEVENTS
STAA.OQ - Q2 2023 STAAR Surgical Co
EVENT DATE/TIME: AUGUST 02, 2023 / 8:30PM GMT
AUGUST 02, 2023 / 8:30PM, STAA.OQ - Q2 2023 STAAR Surgical Co Earnings Call
CORPORATE PARTICIPANTS
Brian Moore STAAR Surgical Company - VP of Investor, Media Relations & Corporate Development
Patrick F. Williams STAAR Surgical Company - CFO
Thomas G. Frinzi STAAR Surgical Company - President, CEO & Chairman
CONFERENCE CALL PARTICIPANTS
Petrone Mizuho Securities USA LLC, Research Division-MD & Senior Medical Devices, Diagnostics and Therapeutics Equity Research Analyst
Bruce David Jackson The Benchmark Company, LLC, Research Division - Senior Equity Analyst
David Joshua Saxon Needham & Company, LLC, Research Division - Senior Analyst
James Philip Sidoti Sidoti & Company, LLC - Research Analyst
Malgorzata Maria Kaczor Andrew William Blair & Company L.L.C., Research Division -
Partner & Research Analyst
Steven Michael Lichtman Oppenheimer & Co. Inc., Research Division
- MD & Senior Analyst
Thomas M. Stephan Stifel, Nicolaus & Company, Incorporated, Research
Division - Associate
Xuyang Li Jefferies LLC, Research Division - Equity Analyst
Good day, ladies and gentlemen. Thank you for standing by. Welcome to the STAAR Surgical Second Quarter Financial Results Conference Call. (Operator
Instructions) This call is being recorded today, Wednesday, August 2, 2023.
At this time, I would like to turn the conference over to Mr. Brian
Moore, Vice President, Investor, Media Relations and Corporate Development for STAAR Surgical.
Brian Moore - STAAR Surgical Company - VP of
Investor, Media Relations & Corporate Development
Thank you, operator, and good afternoon, everyone. Thank you for joining us on the STAAR
Surgical conference call this afternoon to discuss the company s financial results for the second quarter ended June 30, 2023.
today are Tom Frinzi, President and Chief Executive Officer; and Patrick Williams, Chief Financial Officer. The press release of our second quarter results was issued just after 4:00 p.m. Eastern Time and is now available on STAAR s website at
Before 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
risks 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.
Except as required by law, STAAR assumes no obligation to update these forward-looking statements to reflect future events or actual outcomes and does not intend to do so.
AUGUST 02, 2023 / 8:30PM, STAA.OQ - Q2 2023 STAAR Surgical Co Earnings Call
In addition, to supplement the GAAP numbers, we have provided Non-GAAP Adjusted Net Income, Adjusted Net
Income for ICL, the corresponding Adjusted Earnings per share and Sales in Constant Currency. During the quarter, the company also reported various accounting adjustments related to its other product, cataract IOL business. Please refer to the Non-GAAP financial measures tables to Adjusted Net Sales, Adjusted Cost of Sales, Adjusted Gross Profit Margin, Adjusted Operating Expenses and Adjusted Income Tax Provision. We believe that these Non-GAAP and adjusted 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 press release. For brevity, all references to growth rates on today s call refer to year-over-year growth unless otherwise stated.
Following our prepared remarks, we will open the line to questions from publishing analysts. We ask analysts limit themselves to two initial questions, then re-queue with any follow-ups. We thank everyone in advance for their cooperation with this process.
And with that, I would like to now turn the call over to Tom Frinzi, President and CEO of STAAR.
Thomas G. Frinzi - STAAR Surgical Company - President, CEO & Chairman
Thank you, Brian, and good afternoon, everyone, and thank you for joining us on today s call. I am pleased to report STAAR achieved record sales and
profitable growth for the second quarter 2023. Results were driven by our EVO family of proprietary Implantable Collamer Lenses, ICLs, which are designed to correct refractive error for people seeking visual freedom from the hassles of contacts and
For the second quarter of 2023, total ICL sales were $93.1 million were in line with the outlook of approximately $93 million that
we provided on our last earnings call in May. Globally, ICL sales growth in the second quarter was up 19% as reported and up 20% in Constant Currency. Global ICL unit growth was up 21% with results in the second quarter driven by strength in APAC,
the largest region for refractive procedures. APAC was up 29% in units and 26% in sales for the second quarter of 2023. In China specifically, ICL units were up 35% and sales up 33% for the second quarter of 2023. And we are encouraged by a strong
start to the peak implant season for ICLs in that market.
For the second quarter, sales in our EMEA region declined 9%, impacted by the ongoing
macroeconomic and geopolitical environment, as well as an inability to ship ICLs into 1 non-European country as a result of a country-specific product labeling change. However, looking at European markets
only, ICL units were up 6% and sales up 2% for the second quarter of 2023.
Turning attention to the United States. ICL sales grew 10% for the second
quarter, well ahead of U.S. refractive industry procedure volumes, which the Refractive Surgery Council recently reported declines approximately 15% in the quarter. Sequentially, our U.S. sales in the second quarter were relatively flat.
Lower than expected results in the U.S., the macroeconomic impact in Europe and certain other refractive markets merits additional conservatism as we look to
the second half of 2023. We have therefore today updated our fiscal 2023 ICL sales outlook to a range of approximately $320 million to $325 million. At the midpoint, our new outlook represents a high level of sales growth at approximately
Since becoming CEO in January, I have now had the opportunity to make a more complete assessment of the business in the U.S. and around the world.
We have implemented a high-performance management system that helps us get closer to our customers and other stakeholders and identify top priorities for accelerating EVO adoption. We have created cross-functional teams for each top priority who are
accountable for achieving the desired results. Among the priorities and actions we have taken to accelerate adoption in the U.S. and globally are the following.
Number 1, we ve enhanced our leadership in April, appointing 2 seasoned executives, Warren Foust as Chief Operating Officer; and Magda Michna as Chief
Clinical, Regulatory and Medical Affairs Officer.
Number 2, we are taking actions to make our company even easier to do business with. The projects
related to this top priority are focused on increasing surgeon confidence in measurement and lens size selection, simplifying our ordering process, delivering our lenses to customers faster, and longer term, making the EVO ICL even easier to deliver
AUGUST 02, 2023 / 8:30PM, STAA.OQ - Q2 2023 STAAR Surgical Co Earnings Call
Number 3, we have developed and are implementing new analytic tools, which is allowing us to better target
high volume customers with favorable economics. For example, we have mapped the over 430 practices representing our 600-plus surgeon customers in the U.S., and as a result, we are implementing tailored
programs that effectively leverage the knowledge we have gained from these tools.
Number 4, we will pilot a patient call center education and surgeon
referral program aimed at better answering patient questions and shepherding patients to the most appropriate EVO customers. We believe the call center will create a closed loop for our patient Doc Finder, allowing us to better support and track the
patient journey and thereby better monitor the effectiveness of our investment in the U.S. in consumer awareness and other activities.
actions and projects I just outlined, among others, will accelerate EVO adoption in the U.S. as we exit 2023 and beyond. Our vital few priorities and our learnings in the U.S. will also have positive implications for our markets globally. So while
I ve previously stated that laser vision correction is well established, I remain confident in EVO s ability to be successful in the U.S. and beyond. And my confidence is buoyed as I spent time in the field with key opinion leaders
discussing the impact that EVO is and can have on their practices.
The investment rationale for STAAR remains compelling. We have a fantastic technology
without peer. If you define good medicine as I do excellent patient outcomes, high patient and surgeon satisfaction, and favorable economics EVO is indeed good medicine. STAAR is the dominant player globally in lens-based refractive
vision correction for 21 to 60 year olds who are facing an increasing epidemic of myopia.
Next, we expect to remain a high growth company based on our
strength in APAC, the largest region for refractive procedures in the world. Additional growth will come as we deliver similar results in the U.S., the second largest market for refractive procedures in the world, and Europe emerges from the current
macro and geopolitical headwinds. And finally, we are profitable, we generate cash and we have a rock solid balance sheet.
For those of you that would
like to learn more, we will host an Investor and Analyst Meeting in New York next month on September 14 where we will outline in more detail initiatives, projects, including some next-generation product pipeline initiatives, and the significant
growth opportunities ahead for STAAR. We also expect to have several EVO surgeons from around the world who will speak to their experience. Patrick?
Patrick F. Williams - STAAR Surgical Company -
Thank you, Tom, and good afternoon, everyone.
go through the various financial metrics, I want to reference additional Non-GAAP reconciliation tables in this quarter s earnings release. As we have previously mentioned on prior earnings calls and in
our filings, we are exiting our other product, cataract IOL business, as we focus on our core ICL products. This resulted in some accounting adjustments, primarily due to excess inventory and a smaller sales return reserve adjustment. Please refer
to the Non-GAAP financial measures tables in our earnings release as I will be referencing both as reported and adjusted impact in my prepared comments.
Total net sales for Q2 2023 were $92.3 million, up 14% as compared to the $81.1 million of net sales in Q2 2022 and up 26% on a sequential basis
from Q1 2023 net sales of $73.5 million. The year-over-year increase in net sales is attributable to a $50 million or a 19% increase in ICL sales, partially offset by a $4 million decrease in other product sales. This included a
$742,000 sales return reserve adjustment, or reduction in sales, for our other product cataract IOL business, resulting in adjusted net sales of $93 million or up 15% year-over-year. We continue to expect other products will represent a smaller
and smaller percentage of net sales as we move through fiscal 2023 and taper our support of this non-core cataract IOL business.
Gross profit for Q2 2023 was $70.7 million, or 76.6% of net sales, as compared to gross profit of $63.9 million, or 78.8% of net sales, for Q2 2022,
and $57.6 million or 78.3% of net sales for Q1 2023. The 220 basis point decrease in gross margin as compared to Q2 2022 is primarily due to inventory reserves related to the other product cataract IOL business. The 170 basis point sequential
decrease in gross margin from the first quarter is also due to the other product cataract IOL inventory reserve.
AUGUST 02, 2023 / 8:30PM, STAA.OQ - Q2 2023 STAAR Surgical Co Earnings Call
The total amount of additional inventory reserves was $2.8 million, and when adjusted, our gross margin
was 79.8% in the quarter. Due to the additional IOL reserves booked in the second quarter, but primarily driven by the lower sales outlook for fiscal 2023, we now expect gross margin will be approximately 79% for both Q3 and Q4 and approximately 78%
for the full year. We continue to drive initiatives to improve our manufacturing efficiency. When combined with more favorable geographic mix related to direct markets like the United States, we believe company gross margins can exceed 80% as we
Moving down the income statement. Total operating expenses for Q2 2023 were $62.1 million as compared to $46.9 million in Q2
2022 and $54.8 million in Q1 2023. This included $154,000 intangible asset impairment adjustment related to our other product cataract IOL business.
Taking a closer look at the components of operating expenses. G&A expense for Q2 2023 was $18.1 million compared to $14 million for Q2 2022 and
$18.1 million for Q1 2023. The year-over-year increase in G&A is due to increased compensation-related expenses, outside services and facilities costs. For fiscal 2023, we continue to expect G&A expense will be approximately
$19 million per quarter.