STAAR Surgical Company (NASDAQ: STAA), a leading developer, manufacturer and marketer of implantable lenses and companion delivery systems for the eye, today reported financial results for the third quarter ended October 2, 2020.

Third Quarter 2020 Overview

  • Record Quarterly Net Sales of $47.1 Million Up 21% from the Prior Year Quarter
  • Record Quarterly ICL Sales of $41.5 Million Up 23% from the Prior Year Quarter
  • Record Quarterly ICL Units, Up 25% from the Prior Year Quarter
  • Gross Margin at 74.1% vs. 74.4% in the Prior Year Quarter
  • Net Income of $0.08 per Share vs. Prior Year Quarter Net Income of $0.05 per Share
  • Cash and Cash Equivalents Ended the Quarter at $128.3 Million up from $116.3 Million in Q2 2020

“STAAR achieved 25% year-over-year global ICL unit growth for the third quarter of 2020 with demand building each month throughout the quarter. Third quarter results reflect strong growth in our North America, Europe and APAC markets, partially offset by the India and Middle East markets which significantly underperformed and were more greatly impacted by COVID-19,” said Caren Mason, President and CEO of STAAR Surgical. “Standout markets in the third quarter included China up 33%, Japan up 67%, Korea up 21%, Rest of Asia Pacific up 67%, Spain up 24%, Germany up 13% and distributor markets in Europe up 17% in ICL units year over year. ICL implanted units in the U.S. were up 74% sequentially in the quarter as STAAR supported our physician customers with a Refractive Restart program designed to encourage doctor recommendation and patient selection of our current Visian ICL lenses. Lens-based practice support in the U.S. using STAAR-provided clinical and business development validation continues to gain adoption by surgeons who speak to us of happy patients today and excitement about the possibilities of a future with the EVO version of our ICL lenses.”

“In a year of considerable uncertainty, STAAR is endeavoring to provide a level of predictability to both our financial performance and the clinical experience. We achieved strong unit and sales growth while also demonstrating an operating discipline that allowed increased operating income. During the third quarter we also advanced our pipeline of new products for the U.S. and Europe. We completed enrollment for the primary study analysis cohort of 300 subjects in our U.S. EVO clinical trial and are pleased to report they have now been implanted with the EVO lens and will be followed pursuant to the clinical trial protocol. Today, we also announced via press release, the initial implementation of the phased rollout of STAAR’s innovative EVO Viva™ presbyopia-correcting lens in Europe. A paper on the EVO Viva lens has been published in Clinical Ophthalmology, consumer websites were recently launched, and the first commercial EVO Viva lens patient has been implanted in Belgium,” concluded Ms. Mason.

Financial Overview – Q3 2020

Net sales were $47.1 million for the third quarter of 2020, up 21% compared to $39.1 million reported in the prior year quarter. The sales increase was driven by ICL revenue and unit growth of 23% and 25%, respectively, as compared to the prior year period. Other Product Sales increased 7% compared to the prior year quarter due to increased injector parts sales. ICL revenue was 88% of total Net sales for the third quarter of 2020.

Gross profit margin for the third quarter of 2020 was 74.1% compared to the prior year period of 74.4%. Factors negatively impacting gross margin in the third quarter of 2020, as compared to the prior year period, include geographic sales mix, period costs associated with manufacturing expansion projects, and the increased mix of injector part sales which carry a lower margin.

Operating expenses for the third quarter were $30.0 million compared to the prior year quarter of $25.7 million. General and administrative expenses were $8.6 million compared to the prior year quarter of $7.1 million. The increase in general and administrative expenses was due to due to increased salary-related expenses, variable compensation and facility costs. Selling and marketing expenses were $12.6 million compared to the prior year quarter of $12.5 million. The increase in selling and marketing expenses is due to increased salary-related expenses, advertising and promotional activities and variable compensation, offset by decreased trade show and travel expenses. Research and development expenses were $8.8 million compared to the prior year quarter of $6.2 million. The increase in research and development expenses is primarily due to increased clinical expenses associated with the EVO clinical trial in the U.S., and increased salary-related expenses and variable compensation.

Net income for the third quarter of 2020 was $3.9 million or $0.08 per diluted share compared with net income of $2.4 million or $0.05 per diluted share for the prior year quarter. Adjusted Net Income for the third quarter of 2020 was $6.7 million or $0.14 per diluted share compared to $5.5 million or $0.12 per diluted share for the prior year quarter. The reconciliation between GAAP and non-GAAP financial information is provided in the financial tables included with this release.

Cash and cash equivalents at October 2, 2020 totaled $128.3 million, compared to $116.3 million at July 3, 2020. The Company had $1.4 million drawn on its line of credit in Japan and no other debt at October 2, 2020. The sequential increase in cash is primarily due to $9.6 million of cash generated from operations during the third quarter.

Conference Call

The Company will host a conference call and webcast today, Wednesday, November 4 at 4:30 p.m. Eastern / 1:30 p.m. Pacific to discuss its financial results and operational progress. To access the conference call (Conference ID 6253229), please dial 833-350-1429 for domestic participants and 647-689-6661 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 6253229) will be available beginning approximately one hour after the call’s conclusion for seven days. This replay can be accessed by dialing 800-585-8367 for domestic callers and 416-621-4642 for international callers. An archived webcast will also be available at www.staar.com.

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” excludes the following items that are included in “Net Income” as calculated in accordance with U.S. generally accepted accounting principles (“GAAP”): gain or loss on foreign currency transactions, stock-based compensation expenses, and valuation allowance adjustments. Management believes that “Adjusted Net Income” 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 has control.

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. Valuation allowance adjustments can occur from time to time based on forecasted changes in operating results until all net operating loss carryforwards are fully utilized. In calculating Adjusted Net Income, STAAR excludes these expenses because they are non-cash expenses and because of the 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.

The Company also uses Constant Currency as a Non-GAAP financial measure to exclude the effects of currency fluctuations on net sales. The Company conducts a significant part of its activities outside the U.S. It receives sales revenue and pays expenses principally in U.S. dollars, Swiss francs, Japanese yen and euros. The exchange rates between dollars and non-U.S. currencies can fluctuate greatly and can have a significant effect on the Company’s results when reported in U.S. dollars. In order to compare the Company's performance from period to period without the effect of currency, the Company will apply the same average exchange rate applicable in the prior period, or the "constant currency" rate to sales or expenses in the current period as well. Because changes in currency are outside of the control of the Company and its managers, management finds this non-GAAP measure useful in determining the long-term progress of its initiatives and determining whether its managers are achieving their performance goals. The Company believes that the non-GAAP constant-currency sales results measures provided in this press release are similarly useful to investors to give insight on long term trends in the Company's performance without the external effect of changes in relative currency values. The table below shows sales results calculated in accordance with GAAP, the effect of currency, and the resulting non-GAAP measure expressed in constant currency.

About STAAR Surgical

STAAR, which has been dedicated solely to ophthalmic surgery for over 30 years, designs, develops, manufactures and markets implantable lenses for the eye with companion delivery systems. These lenses are intended to provide visual freedom for patients, lessening or eliminating the reliance on glasses or contact lenses. All of these lenses are foldable, which permits the surgeon to insert them through a small incision. STAAR’s lens used in refractive surgery is called an Implantable Collamer® Lens or “ICL”, which includes the EVO Visian ICL™ product line. More than 1,000,000 Visian® ICLs have been implanted to date and STAAR markets these lenses in over 75 countries. To learn more about the ICL go to: www.discovericl.com. Headquartered in Lake Forest, CA, the company operates manufacturing and packaging facilities in Aliso Viejo, CA, Monrovia, CA and Nidau, Switzerland. For more information, please visit the Company’s website at www.staar.com.

Safe Harbor

All statements that are not statements of historical fact are forward-looking statements, including statements about any of the following: any financial projections, plans, strategies, and objectives of management for 2020 or 2021 or prospects for achieving such plans, expectations for sales, revenue, margin, expenses or earnings, the expected impact of the COVID-19 pandemic and related public health measures (including but not limited to its impact on sales, operations or clinical trials globally), product safety or effectiveness, the status of our pipeline of ICL products with regulators, including our EVO family of lenses in the U.S., and any statements of assumptions underlying any of the foregoing, including those relating to our product pipeline and market expansion activities. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include risks and uncertainties related to the COVID-19 pandemic and related public health measures, as well as the factors set forth in the Company’s Quarterly Report on Form 10-Q for the quarter ended April 3, 2020, and Annual Report on Form 10-K for the year ended January 3, 2020 under the caption “Risk Factors,” which is on file with the Securities and Exchange Commission and available in the “Investor Information” section of the company’s website under the heading “SEC Filings.” We disclaim any intention or obligation to update or revise any financial projections or forward-looking statement due to new information or events. These statements are based on expectations and assumptions as of the date of this press release and are subject to numerous risks and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements. The risks and uncertainties include the following: global economic conditions; the discretion of regulatory agencies to approve or reject existing, new or improved products, or to require additional actions before approval, or to take enforcement action; international trade disputes; uncertainty caused by the outcome of the U.S. election; and the willingness of surgeons and patients to adopt a new or improved product and procedure. The EVO version of our ICL lens is not yet approved for sale in the United States.

Consolidated Balance Sheets (in 000's) Unaudited   October 2, 2020 January 3, 2020 ASSETS Current assets: Cash and cash equivalents

$

128,338

 

$

119,968

 

Accounts receivable trade, net

 

42,063

 

 

30,996

 

Inventories, net

 

18,234

 

 

17,142

 

Prepayments, deposits, and other current assets

 

7,368

 

 

6,560

 

Total current assets

 

196,003

 

 

174,666

 

Property, plant, and equipment, net

 

22,662

 

 

17,065

 

Finance lease right-of-use assets, net

 

640

 

 

1,867

 

Operating lease right-of-use assets, net

 

7,725

 

 

6,684

 

Intangible assets, net

 

275

 

 

296

 

Goodwill

 

1,786

 

 

1,786

 

Deferred income taxes

 

5,007

 

 

3,750

 

Other assets

 

600

 

 

751

 

Total assets

$

234,698

 

$

206,865

 

  LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Line of credit

$

1,353

 

$

1,827

 

Accounts payable

 

7,830

 

 

8,050

 

Obligations under finance leases

 

422

 

 

560

 

Obligations under operating leases

 

2,215

 

 

2,700

 

Allowance for sales returns

 

4,427

 

 

3,644

 

Other current liabilities

 

17,612

 

 

17,697

 

Total current liabilities

 

33,859

 

 

34,478

 

Obligations under finance leases

 

73

 

 

366

 

Obligations under operating leases

 

5,571

 

 

4,086

 

Asset retirement obligations

 

216

 

 

211

 

Pension liability

 

8,587

 

 

7,840

 

Total liabilities

 

48,306

 

 

46,981

 

  Stockholders' equity: Common stock

 

461

 

 

448

 

Additional paid-in capital

 

328,074

 

 

304,288

 

Accumulated other comprehensive loss

 

(2,925

)

 

(3,048

)

Accumulated deficit

 

(139,218

)

 

(141,804

)

Total stockholders' equity

 

186,392

 

 

159,884

 

Total liabilities and stockholders' equity

$

234,698

 

$

206,865

 

Consolidated Statements of Income (In 000's except for per share data) Unaudited     Three Months Ended Nine Months Ended % of October 2, 2020 % of September 27, 2019 Fav (Unfav) % of October 2, 2020 % of September 27, 2019 Fav (Unfav) Sales Sales Amount % Sales Sales Amount % Net sales

100.0

%

$

47,081

 

100.0

%

$

39,055

 

$

8,026

 

20.6

%

100.0

%

$

117,462

 

100.0

%

$

111,302

 

$

6,160

 

5.5

%

  Cost of sales

25.9

%

 

12,210

 

25.6

%

 

10,004

 

 

(2,206

)

-22.1

%

28.4

%

 

33,401

 

25.3

%

 

28,172

 

 

(5,229

)

-18.6

%

  Gross profit

74.1

%

 

34,871

 

74.4

%

 

29,051

 

 

5,820

 

20.0

%

71.6

%

 

84,061

 

74.7

%

 

83,130

 

 

931

 

1.1

%

  Selling, general and administrative expenses: General and administrative

18.2

%

 

8,589

 

18.2

%

 

7,098

 

 

(1,491

)

-21.0

%

20.8

%

 

24,406

 

19.3

%

 

21,443

 

 

(2,963

)

-13.8

%

Selling and marketing

26.9

%

 

12,649

 

31.9

%

 

12,463

 

 

(186

)

-1.5

%

29.0

%

 

34,003

 

30.8

%

 

34,288

 

 

285

 

0.8

%

Research and development

18.6

%

 

8,751

 

15.8

%

 

6,156

 

 

(2,595

)

-42.2

%

19.5

%

 

22,960

 

16.1

%

 

17,889

 

 

(5,071

)

-28.3

%

Total selling, general, and administrative expenses

63.7

%

 

29,989

 

65.9

%

 

25,717

 

 

(4,272

)

-16.6

%

69.3

%

 

81,369

 

66.2

%

 

73,620

 

 

(7,749

)

-10.5

%

  Operating income

10.4

%

 

4,882

 

8.5

%

 

3,334

 

 

1,548

 

46.4

%

2.3

%

 

2,692

 

8.5

%

 

9,510

 

 

(6,818

)

-71.7

%

  Other income (expense): Interest income, net

0.0

%

 

1

 

0.6

%

 

266

 

 

(265

)

-99.6

%

0.2

%

 

237

 

0.7

%

 

796

 

 

(559

)

-70.2

%

Gain (loss) on foreign currency transactions

1.0

%

 

468

 

-1.5

%

 

(584

)

 

1,052

 

180.1

%

0.3

%

 

388

 

-0.7

%

 

(821

)

 

1,209

 

147.3

%

Royalty income

0.2

%

 

93

 

0.3

%

 

106

 

 

(13

)

-12.3

%

0.2

%

 

239

 

0.4

%

 

440

 

 

(201

)

-45.7

%

Other income (expense), net

-0.1

%

 

(63

)

0.1

%

 

26

 

 

(89

)

-342.3

%

0.0

%

 

(83

)

0.1

%

 

124

 

 

(207

)

-166.9

%

Total other income (expense), net

1.1

%

 

499

 

-0.5

%

 

(186

)

 

685

 

368.3

%

0.7

%

 

781

 

0.5

%

 

539

 

 

242

 

44.9

%

  Income before provision for income taxes

11.5

%

 

5,381

 

8.0

%

 

3,148

 

 

2,233

 

70.9

%

3.0

%

 

3,473

 

9.0

%

 

10,049

 

 

(6,576

)

-65.4

%

  Provision for income taxes

3.2

%

 

1,489

 

1.9

%

 

760

 

 

(729

)

-95.9

%

0.8

%

 

887

 

2.1

%

 

2,380

 

 

1,493

 

62.7

%

  Net income

8.3

%

$

3,892

 

6.1

%

$

2,388

 

$

1,504

 

63.0

%

2.2

%

$

2,586

 

6.9

%

$

7,669

 

$

(5,083

)

-66.3

%

    Net income (loss) per share - basic

$

0.08

 

$

0.05

 

$

0.06

 

$

0.17

 

Net income (loss) per share - diluted

$

0.08

 

$

0.05

 

$

0.05

 

$

0.16

 

  Weighted average shares outstanding - basic

 

45,903

 

 

44,563

 

 

45,394

 

 

44,426

 

Weighted average shares outstanding - diluted

 

48,180

 

 

46,857

 

 

47,589

 

 

46,848

 

Consolidated Statements of Cash Flows (in 000's) Unaudited Three Months Ended Nine Months Ended October 2, 2020 September 27, 2019 October 2, 2020 September 27, 2019   Cash flows from operating activities: Net income

$

3,892

 

$

2,388

 

$

2,586

 

$

7,669

 

Adjustments to reconcile net income to net cash provided by operatingactivities: Depreciation of property and equipment

 

758

 

 

870

 

 

2,276

 

 

2,853

 

Amortization of long-lived intangibles

 

9

 

 

9

 

 

26

 

 

26

 

Deferred income taxes

 

154

 

 

133

 

 

(1,215

)

 

526

 

Change in net pension liability

 

146

 

 

61

 

 

522

 

 

264

 

Stock-based compensation expense

 

3,126

 

 

2,558

 

 

8,965

 

 

7,778

 

Loss on disposal of property and equipment

 

-

 

 

14

 

 

3

 

 

14

 

Provision for sales returns and bad debts

 

210

 

 

341

 

 

815

 

 

309

 

Inventory provision

 

379

 

 

435

 

 

1,195

 

 

1,222

 

Changes in working capital: Accounts receivable

 

(2,566

)

 

2,273

 

 

(10,975

)

 

(4,260

)

Inventories

 

(421

)

 

(285

)

 

(1,353

)

 

(179

)

Prepayments, deposits and other current assets

 

1,536

 

 

924

 

 

(636

)

 

(230

)

Accounts payable

 

(954

)

 

(17

)

 

(657

)

 

546

 

Other current liabilities

 

3,320

 

 

2,090

 

 

(151

)

 

(536

)

Net cash provided by operating activities

 

9,589

 

 

11,794

 

 

1,401

 

 

16,002

 

  Cash flows from investing activities: Acquisition of property and equipment

 

(2,049

)

 

(2,568

)

 

(6,259

)

 

(7,169

)

Increase in patents and licenses

 

-

 

 

-

 

 

-

 

 

(30

)

Net cash used in investing activities

 

(2,049

)

 

(2,568

)

 

(6,259

)

 

(7,199

)

  Cash flows from financing activities: Repayment on line of credit

 

(3

)

 

(513

)

 

(511

)

 

(1,512

)

Repayment of finance lease obligations

 

(109

)

 

(317

)

 

(455

)

 

(998

)

Proceeds from vested restricted stock and exercise of stock options

 

4,429

 

 

719

 

 

13,987

 

 

1,831

 

Net cash provided by (used in) financing activities

 

4,317

 

 

(111

)

 

13,021

 

 

(679

)

  Effect of exchange rate changes on cash and cash equivalents

 

166

 

 

(39

)

 

207

 

 

204

 

  Increase in cash and cash equivalents

 

12,023

 

 

9,076

 

 

8,370

 

 

8,328

 

Cash, cash equivalents and restricted cash, at beginning of the period

 

116,315

 

 

103,251

 

 

119,968

 

 

103,999

 

Cash, cash equivalents and restricted cash, at end of the period

$

128,338

 

$

112,327

 

$

128,338

 

$

112,327

 

Reconciliation of Non-GAAP Financial Measure Adjusted Net Income and Net Income Per Share (in 000's) Unaudited Three Months Ended Nine Months Ended October 2, 2020 September 27, 2019 October 2, 2020 September 27, 2019   Net income (as reported)

$

3,892

 

$

2,388

$

2,586

 

$

7,669

Less: Foreign currency impact

 

(468

)

 

584

 

(388

)

 

821

Stock-based compensation expense

 

3,126

 

 

2,558

 

8,965

 

 

7,778

Valuation allowance adjustment

 

154

 

 

-

 

(1,215

)

 

-

Net income (adjusted)

$

6,704

 

$

5,530

$

9,948

 

$

16,268

  Net income per share, basic (as reported)

$

0.08

 

$

0.05

$

0.06

 

$

0.17

Foreign currency impact

 

(0.01

)

 

0.01

 

(0.01

)

 

0.02

Stock-based compensation expense

 

0.08

 

 

0.06

 

0.20

 

 

0.18

Valuation allowance adjustment

 

-

 

 

-

 

(0.03

)

 

-

Net income per share, basic (adjusted)

$

0.15

 

$

0.12

$

0.22

 

$

0.37

  Net income per share, diluted (as reported)

$

0.08

 

$

0.05

$

0.05

 

$

0.16

Foreign currency impact

 

(0.01

)

 

0.01

 

(0.01

)

 

0.02

Stock-based compensation expense

 

0.07

 

 

0.06

 

0.19

 

 

0.17

Valuation allowance adjustment

 

-

 

 

-

 

(0.02

)

 

-

Net income per share, diluted (adjusted)

$

0.14

 

$

0.12

$

0.21

 

$

0.35

  Weighted average shares outstanding - Basic

 

45,903

 

 

44,563

 

45,394

 

 

44,426

Weighted average shares outstanding - Diluted

 

48,180

 

 

46,857

 

47,589

 

 

46,848

  Note: Net income per share (adjusted), basic and diluted, may not add due to rounding STAAR Surgical Company Reconciliation of Non-GAAP Financial Measure Constant Currency Sales (in 000's) Unaudited   Three Months Ended October 2, 2020 Effect of Constant September 27, 2019 As Reported Constant Currency Sales Currency Currency $ Change % Change $ Change % Change ICL

$

41,493

$

(346

)

$

41,147

$

33,815

$

7,678

 

22.7

%

$

7,332

 

21.7

%

  IOL

 

3,325

 

(76

)

 

3,249

 

4,093

 

(768

)

-18.8

%

 

(844

)

-20.6

%

Other

 

2,263

 

(25

)

 

2,238

 

1,147

 

1,116

 

97.3

%

 

1,091

 

95.1

%

Other Products

 

5,588

 

(101

)

 

5,487

 

5,240

 

348

 

6.6

%

 

247

 

4.7

%

  Total Sales

$

47,081

$

(447

)

$

46,634

$

39,055

$

8,026

 

20.6

%

$

7,579

 

19.4

%

  Nine Months Ended October 2, 2020 Effect of Constant September 27, 2019 As Reported Constant Currency Sales Currency Currency $ Change % Change $ Change % Change ICL

$

101,561

$

(251

)

$

101,310

$

96,033

$

5,528

 

5.8

%

$

5,277

 

5.5

%

  IOL

 

9,880

 

(117

)

 

9,763

 

11,984

 

(2,104

)

-17.6

%

 

(2,221

)

-18.5

%

Other

 

6,021

 

(92

)

 

5,929

 

3,285

 

2,736

 

83.3

%

 

2,644

 

80.5

%

Other Products

 

15,901

 

(209

)

 

15,692

 

15,269

 

632

 

4.1

%

 

423

 

2.8

%

  Total Sales

$

117,462

$

(460

)

$

117,002

$

111,302

$

6,160

 

5.5

%

$

5,700

 

5.1

%

 

Investors & Media Brian Moore Vice President, Investor, Media Relations and Corporate Development (626) 303-7902, Ext. 3023 bmoore@staar.com