Full Press Release Details
| TRANSCRIPT |
| STAA - Q2 2016 STAAR Surgical Co Earnings Call |
| EVENT DATE/TIME: AUGUST 03, 2016 / 04:30PM ET |
CORPORATE PARTICIPANTS
Moore EVC Group - IR
Mason STAAR Surgical Company - President, CEO
Brown STAAR Surgical Company - CFO
Myers Benchmark Capital - Analyst
Sidoti Sidoti & Company - Analyst
Cooley Stephens Inc. - Analyst
Larew William Blair & Company - Analyst
day, ladies and gentlemen. Thank you for standing by. Welcome to the STAAR Surgical Second Quarter 2016 Financial Results Conference
Call. (Operator Instructions) This call is being recorded today, Wednesday, August 3, 2016. At this time, I would like to turn
the conference over to Mr. Brian Moore with EVC Group.
Moore - EVC Group - IR
you, Michelle, 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 second quarter, which ended on July 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 second quarter results was issued just
after 4 p.m. Eastern Time and is now available on STAAR's website at www.staar.com.
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 this 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 actual outcomes, and does not intend to do so.
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. Also, in order to compare our performance from period-to-period without the effect of currency fluctuation,
we apply the same average exchange rate application to the prior period, or constant currency rate to sales. A 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 CEO of STAAR Surgical.
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 second quarter 2016 financial results before we open the call for your questions. Q2 2016 results signify
solid growth and a broadening momentum for the Company. For the second quarter we achieved record net sales of $21 million, and
record ICL sales of $15.4 million. We also achieved record ICL units, which brought our total implanted ICL's since introduction
to well over 600,000 lenses. We are also pleased to report that the strategic priorities we have committed to achieve in 2016 are
on track and delivering value for STAAR. I will spend a few moments highlighting our progress on selected key initiatives.
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 essential goals. In Q2, our internal goal achievement was on target. We expect not to exceed our remediation
budget of $2.2 million for 2016. Two major areas of emphasis for the remediation plan and quality system build include the acquisition
of a new quality management system and building monitoring system. Both have been acquired and qualification and implementation
is progressing well.
the visual freedom market for implantable lenses is an essential strategic priority, and we have made great strides thus far this
year. STAAR successfully introduced its new global branding at the ASCRS meeting in May as reported during our last earnings call.
The evolution in visual freedom initiative includes the introduction of the new EVO+ line of expanded optic ICLs to our international
surgeons. We have received positive reports thus far and will be highlighting the surgeon and patient experience with EVO+ at our
experts meeting and the European Congress in September.
of our most prominent and prolific ICL surgeons implanted a new EVO+ lens as a birthday gift for his daughter. He was compelled
to write to us expressing in his words that father and daughter are both over the moon. The approval of our EVO lenses in Canada
in mid-May resulted in our first EVO implant surgeries in North America, which were well received with high surgeon and patient
satisfaction. As we are anticipating the EVO Toric approval for Canada, we expect that the implant momentum will pick up in Q3
and especially Q4. We are planning high profile digital and media campaigns for major markets in Canada in the months ahead.
global growth statistics regarding myopia, which I have routinely shared and continue to update, now includes a new study regarding
the rate of myopia in the United States. The Journal of the American Academy of Ophthalmology published a study in its June 21
issue, and issued a news release announcing the publication of the study with the headline, and I quote -- Nearly 10 million adults
found to be severely nearsighted in the United States. Largest US study of its kind using the American Academy of Ophthalmology's
national ophthalmologic database also finds women at higher risk of blinding complications, unquote. The study was conducted jointly
by AAO, Genentech, NIH and UC Davis. Among the findings, nearly 9.6 million people in the US have high myopia at minus 6 diopters
and above. This challenging statistic further reinforces the opportunity for the prescriptive and visual freedom value of our implantable
collamer lenses. The significant investment we are making in clinical validation and clinical utility, medical affairs expansion,
significant meta-analysis of all published data, upgrading of our own safety and effectiveness data database, and continued expansion
of our myopia implantable lens line, including delivery system, is in anticipation of the essential pickup of the ICL as a premium
and primary refractive vision enhancement and choice for surgeons and their patients globally.
strategic priorities for 2016, which also advanced during the quarter, include the finalization of four additional strategic cooperation
agreements in the Asia-Pacific region. These new partners are comprised of large clinics and hospitals which we anticipate will
help to create the foundation for meaningful sales growth in the coming years.
now have six strategic cooperation agreements and several others are in development. These agreements include a strong collaboration
with a strategic partner where STAAR provides certified surgeon training, marketing and pricing support in exchange for specified
unit growth of our products, as well as potential participation in our patient registry, clinical data, and new product development
efforts. We are very pleased with these transformational partnerships and what they can achieve for our partners, their patients
and for STAAR. The clinical study agreements for our first-in-man implants of the Presbyopic ICL were finalized, and we are on
schedule to provide lenses for surgeries scheduled during the third quarter. We will conduct a presbyopia working group with outstanding
implant surgeons who continue to advise us regarding their requirements for the first bilateral Presbyopic ICLs with EDOF, or extended
depth of field. We plan to share and evaluate the findings from our first-in-man implants during this working group session.
previously announced, we have been reviewing the commercial fitness of certain cataract lens offerings and evaluating our approach
to the cataract care market. As a result of these activities, we have decided to focus on Collamer IOL lens implants and to cease
manufacturing of our silicone IOL products for the North America market. We will continue to manufacture and market our preloaded
silicone IOLs, which have higher technological differentiation, in overseas markets. Silicone IOL usage has been declining globally
for years, and Marketscope has forecasted that silicone IOLs will garner less than 5% of global IOL units in 2016.
material is proprietary to STAAR and is used in both our ICL and certain IOL lines. Key features of Collamer include 20 years of
proven history with over one million nanoFLEX Collamer IOL lens implants worldwide. Collamer is a biocompatible material, inhibiting
inflammatory responses to achieve a postoperative quiet eye. Collamer has inherent antireflective properties enabling sharper vision
and less higher order aberrations. We believe there is growth potential for nanoFLEX Collamer IOLs as potential applications of
Collamer material for other cataract IOL technologies, such as lenses for the treatment of presbyopia. Several Collamer IOL product
expansion projects are under consideration. Further elements of our cataract care strategy will be determined, as previously discussed,
finally, during the quarter we strengthened our cash optimization strategy and increased our cash at the end of Q2 to $12.7 million.
We are also pleased to have generated $2.5 million in operating cash flow for the quarter. I will now turn over the call to Steve
for a review of our second quarter 2016 financial results. Steve?
Brown - STAAR Surgical Company - CFO
you, Caren, and good afternoon, everyone. For my prepared remarks today and consistent with feedback from shareholders, I'll touch
on more significant aspects of our second quarter 2016 results. I'll start with a summary of top line results and then provide
more details by product and market.
achieved record sales of $21 million in the second quarter of 2016, an increase of 12% over the $18.7 million in sales reported
in the second quarter of 2015. The sales increase was driven by ICL revenue and unit growth of 26% and 18%, respectively, with
strong double-digit unit growth in all of the Asia-Pacific markets and in Germany. These increases were partially offset by lower
IOL revenues and lower injector parts sales. For the first half of 2016, ICL revenue and unit growth was 17% and 9%, respectively.
For ICL product line, total sales were $15.4 million for the second quarter of 2016, increasing 26% from the prior year period,
with units increasing 18% compared to the prior year period.