Transcript of STAA earnings conference call

Transcript of STAA earnings conference

* Brian Moore, EVC Group - IR

* Caren Mason, STAAR Surgical Co -

* Steve Brown, STAAR Surgical Co -

Conference Call Participants

* Chris Cooley, Stephens Inc. - Analyst

* Matt Larew, William Blair & Company

* Jeff Chu, Canaccord Genuity - Analyst

* Jim Sidoti, Sidoti & Company

* Raymond Myers, Benchmark Capital

Good day, ladies and gentlemen, thank

you for standing by. Welcome to the STAAR Surgical first quarter 2016 financial results conference call.

(Operator Instructions)

This call is being recorded today Wednesday,

May 11, 2016. At this time I would like to turn the conference over to Mr. Brian Moore with EVC Group. You have the floor, sir.

Brian Moore, EVC Group - IR [2]

Thank you, Andrew, 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 first quarter which ended on April 1, 2016. Joining me on the call today are Caren Mason, President and CEO of STAAR Surgical

and Steve Brown, CFO. The news release detailing the first quarter results was issued just after 4:00 pm Eastern Time and is now

available on STAAR's website at www.STAAR.com.

Before we get started, 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. STAAR assumes no obligation to update these forward-looking statements to reflect future

events or outcomes and does not intend to do so.

In 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. The table

reconciling the GAAP information to the non-GAAP information is included in today's financial release which is available on our

website. Now I would like to turn the call over to Caren Mason, President and Chief Executive Officer of STAAR Surgical.

Caren Mason, STAAR Surgical Co -

Thank 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 first quarter

2016 financial results before we open the call for your questions.

Our first quarter revenue of $19.3

million was solid, especially following a record Q4 in 2015. In addition, in Q1 2015, we booked approximately $1 million in ICL

revenue directly tied to backlog replenishment. This would then, for comparison purposes only, reduce the prior year's quarterly

demand to $17.8 million. To further elaborate, if you compare the six month periods of Q4 2014 through Q1 2015, to Q4 2015 through

Q1 2016, we increased total revenue by 13% and ICL units by 25%.

Performance in this period included

the tailwind effects of the manufacturing move to Monrovia, and continuing variation in seasonality and distributor inventory demand.

It is important to note that our ability to meet Spheric and Toric ICL on-time delivery requirements has been steady for the last

several quarters and we expect to continue this positive performance. We have built up inventory to appropriate levels to assure

supply and it is reaping dividends in many international markets where the EVO lens, formerly known as the CentraFLOW lens, can

be implanted on the same refractive surgery timetable measured from patient interest to procedure as other refractive surgeries.

We've made it clear that as we move

toward becoming a more premium and primary ICL practice partner for our surgeons, the traditional rather up-and-down cycles of

our ordering partners should transition to a more steady and predictable pattern. The achievement of a central base business development

is predicated on our becoming a far more significant and revenue generating portion of the refractive surgeons' business than we

In managing the larger and more transformational

strategic partnerships, we are providing co-marketing and branding support, social media and website integration, practice development,

certified training and other primary practice development support programs. We are working through this model most effectively

in China and are bringing that experience to other major markets where we are in discussion with several large multi-clinic and

eye hospital potential partners. That being said, we reiterate our 2016 goal to increase ICL units by double digits, to expand

our gross margins and to determine by year end what our IOL offering should look like as a true cataract care business.

I will spend the rest of my time giving

a quick update on the FDA progress and the remainder covering the American Society of Cataract and Refractive Surgery, the ASCRS

meeting. FDA remediation and continuation of quality systems overhaul remains at the top of the list of our strategic priorities.

The achievement of remediation and quality system plan commitments, as submitted to the FDA, and assuring that our global quality

certifications are maintained, remain as essential goals. In Q1, our internal goal achievement was on target and on budget.

Turning to the 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 6 through 10, 2016. The evolution in visual freedom initiatives

included the introduction of the new EVO+ line of expanded optic ICLs 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

with its CentraFLOW technology will be branded as EVO and EVO+ lenses and the EU version of our new consumer facing website will

be www.discoverevo.com. The ICL lenses offered in the US will remain branded as the Visian ICL with the new consumer facing website

online today which is www.discovervisianicl.com.

Major initiatives at the ASCRS included

-- clinical data. Leading surgeons in ophthalmology presented results from peer-reviewed scientific literature highlighting the

safety and effectiveness of STAAR's implantable Collamer lenses. These data presentations included key findings from a comprehensive

meta-analysis now in press entitled ICL Decade In Review, authored by internationally recognized leader in ophthalmology, Mark

Dr. Packer cited the authors of a paper

from the Journal of Ophthalmology who noted that the ICL provides, "significant gains across a broad range of life activities

and is clearly a life-changing intervention." Meta-analysis of safety data from the peer-reviewed literature including up

to 10 years of experience, comprehensively demonstrated a low rate of complications.

In surgeon training and practice development,

STAAR's new practice development programs and initiation of the inaugural clinical ICL Training Institute, CITI, were introduced.

Presenters included Barnett Delaney Perkins' CEO, Mark Rosenberg. Barnett Delaney Perkins is a 15 clinic and 9 surgery center practice

in Arizona, which will be providing certified ICL training to surgeons and will become a new strategic partner for STAAR. Mr. Rosenberg's

presentation highlighted the practice patterns and economics of successfully integrating ICL implant surgery as a premium and primary

offering of a cataract and refractive surgery practice.

Patients and surgeons also highlighted

the patient experience. Patients for whom the ICL truly has been a life-changing experience, along with their surgeons, presented

the rationale for choosing ICL and very compelling stories of life before and after the achievement of visual freedom with the

ICL. Patients included Dr. Alison Tendler, a leading cataract lens implant and refractive surgeon, Ki-Shui Liao, a professional

golfer and Dr. Jessica Hua, a professor and ecotoxicologist.

Our newest brand ambassador, Eve Torres

Gracie, an athlete, WWE champion, actress and advocate trainer for women's self-defense presented her professional and personal

evolution to visual freedom upon having the ICL implanted. Eve's profile and video highlighting her six years with her ICLs can

be found on www.discoverVisianICL.com or on www.facebook.com/evetorresdotcom. Eve has over 1 million Twitter followers and advocates

for visual freedom with the Visian ICL through social media and personal appearances.

Fundamentally, at the ASCRS, our progress