Full Press Release Details
STAAR Surgical Reports First Quarter
MONROVIA, CA, May 11, 2016---STAAR Surgical Company (NASDAQ:
STAA), a leading developer, manufacturer and marketer of implantable lenses and delivery systems for the eye today reported financial
results for the first quarter ended April 1, 2016.
First Quarter 2016 Overview
in the first quarter was solid especially taking into account a record Q4 and the first quarter of 2015 having been unusually
strong due to backlog replenishment. While our Korean ICL sales softened after two strong quarters, our German ICL sales increased
108% and our Chinese ICL sales momentum continued with a 46% increase in ICL revenue for the quarter", said Caren Mason,
President and CEO. "As we begin the second year of our three year transformation for STAAR, we are continuing our efforts
to strengthen the clinical, R&D and operational foundation of our business. Our focus on operations in the first quarter included
attention to our IOL line along with the ICL line, wherein we continue to dedicate significant resources to our quality system
rebuild. We chose to delay shipment of certain of our IOL lenses while we continue this quality process and are reviewing the
commercial fitness of certain of our cataract lens offerings as we indicated last quarter. This quality process contributed to
the 19% year over year reduction in revenue for the IOL line in the U.S. Conversely, our IOL sales in Japan, our largest IOL market
for STAAR, grew 7%," added Ms. Mason.
American Society of Cataract and Refractive Surgery (ASCRS)
STAAR successfully introduced its new global branding, ten year
clinical data analysis, surgeon training, practice development, and Brand Ambassador and Patient appearances at the ASCRS Meeting
in New Orleans from May 6th through the 10th. The Evolution in Visual Freedom initiative included
the introduction of the new EVO+ line of expanded optic ICL's available in selected international markets in April. Dr. Jaime
Aramberri, a renowned refractive surgeon from Spain, implanted the first EVO+ lenses in March. He presented his findings at the
meeting and concluded that, "Increasing the optical zone diameter means improving the optics which is the goal of premium
refractive surgery." Our Collamer ICL's with the CentraFLOW technology will be branded as EVO and EVO+ lenses and the
EU version of our new consumer facing website will be discoverevo.com. The ICL lenses offered in the U.S. will remain branded
as the Visian ICL with a new consumer facing website online today which is discovervisianicl.com. Major initiatives at the
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Packer M. Meta-Analysis and Review: Effectiveness, Safety and Central Port Design of the Intraocular Collamer Lens (ICL). In
2 Ieong A, Hau SC, Rubin GS, Allan BD.
Quality of life in high myopia before and after implantable Collamer lens implantation. Ophthalmology. 2010 Dec; 117(12): 2295-300.
Net sales were $19.3 million for the first quarter of 2016,
up 2% compared to $18.9 million reported in the prior year. The sales increase was driven by a 46% increase in ICL sales in China,
a doubling of ICL sales in Germany due to the conversion to direct selling, and the impact of increased pricing which occurred
in most markets in the fourth quarter of 2015. These increases were partially offset by lower IOL sales and injector parts sold
to a third-party. In the regional markets, Asia Pacific ICL sales increased 10% and units increased 4%; Europe, Middle East and
Africa sales increased 9% and units decreased 3%; and North America sales decreased 5% and units decreased 14%.
For the first quarter of 2016, the gross profit margin was 67.4%
including the cost of accelerated vesting of stock compensation which had a negative impact of 290 basis points compared to the
prior year period of 68.4%. Excluding the accelerated vesting, the gross profit margin was 70.3%, or a 190 basis point improvement
from the prior year period, resulting from an increased mix of higher margin ICL units, higher average selling prices (net of the
impact of a weaker euro), and lower ICL unit and other costs, partially offset by higher IOL unit costs.
Operating expenses for the quarter increased $8.6 million to
$23.0 million from $14.4 million in the prior year period primarily due to $6.3 million in non-cash expense for the accelerated
vesting of stock compensation. Excluding the accelerated vesting, operating expenses increased $2.3 million, or 16%. General and
administrative expense was $8.5 million, an increase of $3.3 million compared to the prior year of which $2.9 million was due to
the accelerated vesting of stock compensation and $0.4 million primarily to reserve for local taxes in Japan. Marketing and selling
expense was $7.7 million, an increase of $2.0 million compared to the prior year of which $1.5 million was due to the accelerated
vesting of stock compensation and $1.0 million was for higher international selling and promotional costs, primarily headcount-related,
partially offset by $0.5 million in optimization of North American selling and promotional costs. Research and development expense,
which includes remediation and other FDA expenses, was $6.9 million, an increase of $3.3 million compared to the prior year of
which $1.9 million was due to accelerated vesting of stock compensation, $0.9 million was for investments in clinical affairs and
$0.6 million was for costs related to quality system improvements. We expect our current level of investing in our operations,
particularly quality, clinical affairs, and research and development, to continue for the next several quarters.
The net loss for the first quarter of 2016 was $8.0 million
or $0.20 per share compared with a net loss of $2.3 million or $0.06 per share for the prior year period. Included in the net loss
for the first quarter of 2016 was a non-cash expense of $6.5 million net of taxes, or $0.16 per share, for the accelerated vesting
of stock compensation.
The adjusted net loss for the first quarter of 2016 was $0.5
million or $0.01 per share, compared with adjusted net income of $1.0 million or $0.02 per diluted share for the prior year period.
The reconciliation between GAAP and non-GAAP financial information is provided in the financial tables included with this release.
Cash and cash equivalents at April 1, 2016 totaled $9.0 million,
compared to $10.8 million at the end of the first quarter of 2015 and $13.4 million at year-end 2015. The Company used $4.4 million
in cash during the first quarter of 2016. The first quarter normally represents the highest usage of cash of any quarter for the
Company. This year was no exception as approximately $3.3 million of the $4.4 million of cash used in the first quarter is not
expected to repeat in the remaining quarters of the year. The Company believes that its current cash balances, coupled with cash
flow from operating activities, will be sufficient to meet its working capital requirements for the foreseeable future.
The Company will host a conference call and webcast on Wednesday,
May 11 at 4:30 p.m. Eastern / 1:30 p.m. Pacific to discuss its financial results and operational progress, including activities
at the American Society of Cataract and Refractive Surgery (ASCRS) annual meeting in New Orleans May 6-10. To access the conference
call (Conference ID 83736865), please dial 855-765-5684 for domestic participants and 262-912-6252 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 (Conference ID 83736865)
will be available beginning approximately one hour after the call's conclusion for seven days. This replay can be accessed
by dialing 855-859-2056 for domestic callers and 404-537-3406 for international callers. An archived webcast will also be available
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
(or Loss)" excludes the following items that are included in "Net Income (or Loss)" as calculated in accordance
with U.S. generally accepted accounting principles ("GAAP"): gain or loss on foreign currency transactions, stock-based
compensation expenses, and quality remediation expenses.
Management believes that "Adjusted Net Income (or Loss)"
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
Management has excluded quality remediation expenses because
their inclusion may mask underlying trends in our business performance.
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.
In calculating Adjusted Net Income STAAR excludes these expenses because they are non-cash expenses and because of the complexity
and 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.
During the quarter ended April 1, 2016, the Company
recorded $0.5 million in charges to cost of goods sold in its Statement of Operations related to the accelerated vesting of
stock compensation. The Company believes that removing the effect of these charges that are non-recurring in nature, provides
useful information to investors about the underlying trends in gross profit. The table below shows the Gross Profit and Gross
Profit Margin calculated in accordance with GAAP, the effect of the acceleration, and the resulting non-GAAP measure.
The Company has provided below a detailed reconciliation table,
which is useful to investors in providing the context to understand STAAR Surgical's non-GAAP information and how it differs
About STAAR Surgical