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 September 27, 2019.
Third Quarter 2019
Overview
- Net Sales of $39.1 Million Up 23% from the Prior Year
Quarter
- ICL Sales of $33.8 Million Up 28% from the Prior Year
Quarter
- ICL Units Up 35% from the Prior Year Quarter
- Gross Margin at 74.4% vs. 75.1% in the Prior Year Quarter
- Net Income of $0.05 per Share vs. Prior Year Quarter Net Income
of $0.03 per Share
- Cash and Cash Equivalents Ended the Quarter at $112.3
Million.
“Record sales for our third quarter and all-time record cash
generation are just two highlights of the strong results we
reported today as our ICL and EVO ICL lens families continued to
capture market share and we concluded another successful
peak-implant season in China.,” said Caren Mason, President and CEO
of STAAR Surgical. “35% ICL unit growth for the third quarter
included Japan up 57%, China up 48%, South Korea up 38%, France up
20%, Spain up 14%, the UK up 13% and Germany up 11%, as compared to
the prior year period. These results compare favorably in contrast
to recent third-party data which indicates a decline in the number
of competing refractive vision correction procedures in the first
half of 2019. Our commercial activities during the quarter focused
on surgeon engagement including significant events for our U.S. and
global customers. In August we hosted leading U.S. surgeons at our
inaugural U.S. Surgeons Council Summit in Dallas where U.S.
surgeons engaged directly with surgeons from China, Japan and
Germany who shared their successes implementing ICL business models
and practice development activities for delighting patients and
accelerating growth. In September we hosted over 300 surgeons and
clinicians, many from Asia and Europe, at our annual EVO Visian ICL
Experts Summit ahead of the 37th Congress of the European Society
of Cataract and Refractive Surgeons in Paris. Enthusiasm for our
ICL lenses among refractive surgeon attendees was palpable as we
also recognized surgeons who implant hundreds and surgeons who
implant thousands of ICLs annually. STAAR’s strong ICL unit growth,
up 36% through the first three quarters of 2019 versus the prior
year period, represents meaningful market share expansion as
compared to recent data published by Market Scope forecasting a
2.4% global increase for refractive procedures in 2019. According
to Market Scope, the total number of laser vision correction
procedures has declined as the number of lens-based procedures has
increased in the first half of 2019.1 This data and our strong
quarterly sales results underscores our view that the future of
vision correction will be lens-based. We today reaffirm our
previously stated target metrics for the fiscal year 2019 including
30% ICL unit growth, 20% company revenue growth and a
year-over-year improvement in GAAP net income.”
Financial Overview – Q3
2019
Net sales were $39.1 million for the third quarter of 2019, up
23% as compared to $31.8 million reported in the prior year
quarter. The sales increase was driven by ICL revenue growth of
28%. Other product sales declined modestly by two percent. ICL
revenue was 87% of total sales in the third quarter and other
product sales was 13% of total sales in the third quarter. Foreign
currency, which negatively impacted reported sales for the first
two quarters of 2019, did not have a meaningful impact on reported
net sales for the third quarter of 2019.
Gross profit margin for the third quarter of 2019 was 74.4%
compared to the prior year period of 75.1%. The change in gross
profit margin for the quarter is primarily due to period expenses
incurred in the construction of new manufacturing facilities
intended to satisfy growing demand for existing products and
products currently under review by regulatory agencies.
Operating expenses for the quarter increased 15% to $25.7
million compared to the prior year quarter of $22.3 million.
General and administrative expenses were $7.1 million compared to
the prior year quarter of $6.1 million. The increase in general and
administrative expenses was due to increased headcount and
salary-related expenses, including stock-based compensation and
increased facility costs and professional fees. Marketing and
selling expenses were $12.5 million compared to the prior year
quarter of $10.6 million. The increase in marketing and selling
expenses was due to continued investments in digital, strategic,
and consumer marketing. Research and development expenses were $6.2
million compared to the prior year quarter of $5.6 million. The
increase in research and development expenses was primarily due to
an increase in consulting expenses related to clinical trial
activities.
Operating income margin for the third quarter of 2019 increased
350 basis points to 8.5% as compared to the prior year operating
income margin of 5.0%. The increase in operating income margin is
attributable to increased leverage on total operating expense.
Net income for the third quarter of 2019 was $2.4 million or
approximately $0.05 per share compared with net income of $1.5
million or $0.03 per share for the prior year quarter. Non-GAAP
Adjusted Net Income for the third quarter of 2019 was $5.5 million
or $0.12 per share compared to $3.4 million or $0.07 per 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, cash equivalents, and restricted cash at September 27,
2019 totaled $112.3 million, compared to $104.0 million at the end
of the fourth quarter of 2018. The Company generated a record $11.8
million in cash from operations in the third quarter.
Conference Call
The Company will host a conference call and webcast today,
Wednesday, October 30, 2019 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 7170127), 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 7170127)
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
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” and
“Adjusted Net Income Per Share” exclude 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 and stock-based compensation
expenses. Management believes that “Adjusted Net Income” and
“Adjusted Net Income per share” are 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. In
calculating Adjusted Net Income and Adjusted Net Income Per Share,
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 in this press release that are not statements of
historical fact are forward-looking statements, including
statements about any of the following: any financial projections,
including those relating to the plans, strategies, and objectives
of management for 2019 or prospects for achieving such plans,
expectations for sales, revenue, or earnings, product safety or
effectiveness, the status of our pipeline of ICL products with
regulators, including our EDOF lens for Presbyopia and 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 are set forth in the
Company’s Annual Report on Form 10-K for the year ended December
28, 2018 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; and the willingness of surgeons and
patients to adopt a new or improved product and procedure. The
Visian ICL with CentraFLOW, now known as EVO Visian ICL, is not yet
approved for sale in the United States.
Consolidated Balance Sheets (in 000's)
Unaudited September 27,2019 December
28,2018 ASSETS Current assets: Cash and cash equivalents
$ 112,327
$ 103,877
Accounts receivable trade, net
30,789
25,946
Inventories, net
16,440
16,704
Prepayments, deposits, and other current assets
5,406
5,045
Total current assets
164,962
151,572
Property, plant, and equipment, net
14,846
11,451
Finance lease right-of-use assets, net
2,006
-
Operating lease right-of-use assets, net
6,677
-
Intangible assets, net
252
243
Goodwill
1,786
1,786
Deferred income taxes
1,460
1,278
Other assets
752
1,009
Total assets
$ 192,741
$ 167,339
LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities: Line of credit
$ 2,340
$ 3,780
Accounts payable
7,535
6,524
Obligations under finance leases
752
1,098
Obligations under operating leases
2,789
-
Allowance for sales returns
3,691
2,895
Other current liabilities
12,865
13,431
Total current liabilities
29,972
27,728
Obligations under finance leases
471
459
Obligations under operating leases
4,003
-
Deferred income taxes
1,539
1,022
Asset retirement obligations
211
206
Deferred rent
-
188
Pension liability
7,205
5,310
Total liabilities
43,401
34,913
Stockholders' equity: Common stock
446
442
Additional paid-in capital
299,597
289,584
Accumulated other comprehensive loss
(2,520
)
(1,320
)
Accumulated deficit
(148,183
)
(156,280
)
Total stockholders' equity
149,340
132,426
Total liabilities and stockholders' equity
$ 192,741
$ 167,339
Consolidated Statements of Income (In 000's except for
per share data) Unaudited Three Months
Ended Nine Months Ended % of September
27,2019 % of September 28,2018 Fav (Unfav)
% of September 27,2019 % of September
28,2018 Fav (Unfav) Sales Sales
Amount % Sales Sales Amount
% Net sales
100.0
%
$ 39,055
100.0
%
$ 31,770
$ 7,285
22.9
%
100.0
%
$ 111,302
100.0
%
$ 92,768
$ 18,534
20.0
%
Cost of sales
25.6
%
10,004
24.9
%
7,910
(2,094
)
-26.5
%
25.3
%
28,172
26.1
%
24,250
(3,922
)
-16.2
%
Gross profit
74.4
%
29,051
75.1
%
23,860
5,191
21.8
%
74.7
%
83,130
73.9
%
68,518
14,612
21.3
%
Selling, general and administrative expenses: General and
administrative
18.2
%
7,098
19.2
%
6,087
(1,011
)
-16.6
%
19.3
%
21,443
19.5
%
18,054
(3,389
)
-18.8
%
Marketing and selling
31.9
%
12,463
33.4
%
10,620
(1,843
)
-17.4
%
30.8
%
34,288
31.0
%
28,733
(5,555
)
-19.3
%
Research and development
15.8
%
6,156
17.5
%
5,570
(586
)
-10.5
%
16.1
%
17,889
17.6
%
16,323
(1,566
)
-9.6
%
Total selling, general, and administrative expenses
65.9
%
25,717
70.1
%
22,277
(3,440
)
-15.4
%
66.2
%
73,620
68.1
%
63,110
(10,510
)
-16.7
%
Operating income
8.5
%
3,334
5.0
%
1,583
1,751
110.6
%
8.5
%
9,510
5.8
%
5,408
4,102
75.9
%
Other income (expense): Interest Income (expense), net
0.6
%
266
-0.1
%
(29
)
295
1017.2
%
0.7
%
796
-0.1
%
(65
)
861
1324.6
%
Gain (loss) on foreign currency transactions
-1.5
%
(584
)
0.2
%
52
(636
)
-1223.1
%
-0.7
%
(821
)
-0.6
%
(545
)
(276
)
-50.6
%
Royalty income
0.3
%
106
0.5
%
159
(53
)
-33.3
%
0.4
%
440
0.5
%
465
(25
)
-5.4
%
Other income, net
0.1
%
26
0.1
%
40
(14
)
-35.0
%
0.1
%
124
0.1
%
61
63
103.3
%
Total other income (expense), net
-0.5
%
(186
)
0.7
%
222
(408
)
-183.8
%
0.5
%
539
-0.1
%
(84
)
623
741.7
%
Income before provision for income taxes
8.0
%
3,148
5.7
%
1,805
1,343
74.4
%
9.0
%
10,049
5.7
%
5,324
4,725
88.7
%
Provision for income taxes
1.9
%
760
1.1
%
346
(414
)
-119.7
%
2.1
%
2,380
1.6
%
1,452
(928
)
-63.9
%
Net income
6.1
%
$ 2,388
4.6
%
$ 1,459
$ 929
63.7
%
6.9
%
$ 7,669
4.1
%
$ 3,872
$ 3,797
98.1
%
Net income per share - basic
$ 0.05
$ 0.03
$ 0.17
$ 0.09
Net income per share - diluted
$ 0.05
$ 0.03
$ 0.16
$ 0.09
Weighted average shares outstanding - basic
44,563
43,054
44,426
42,065
Weighted average shares outstanding - diluted
46,857
46,025
46,848
44,618
Consolidated Statements of Cash Flows (in 000's)
Unaudited Three Months Ended Nine Months Ended
September 27,2019 September 28,2018 September
27,2019 September 28,2018 Cash flows from
operating activities: Net income
$ 2,388
$ 1,459
$ 7,669
$ 3,872
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation of property and equipment
870
624
2,853
1,792
Amortization of long-lived intangibles
9
9
26
26
Deferred income taxes
133
5
526
363
Change in net pension liability
61
74
264
233
Stock-based compensation expense
2,558
2,027
7,778
4,926
Loss on disposal of property and equipment
14
2
14
8
Provision for sales returns and bad debts
341
248
309
892
Inventory provision
435
428
1,222
1,181
Changes in working capital: Accounts receivable
2,273
2,401
(4,260
)
(3,989
)
Inventories
(285
)
(2,089
)
(179
)
(3,625
)
Prepayments, deposits and other current assets
924
(132
)
(230
)
(1,021
)
Accounts payable
(17
)
1,165
546
2,121
Other current liabilities
2,090
1,895
(536
)
3,643
Net cash provided by operating activities
11,794
8,116
16,002
10,422
Cash flows from investing activities: Acquisition of
property and equipment
(2,568
)
(452
)
(7,169
)
(1,721
)
Increase in patents and licenses
-
-
(30
)
-
Net cash used in investing activities
(2,568
)
(452
)
(7,199
)
(1,721
)
Cash flows from financing activities: Repayment on line of
credit
(513
)
(251
)
(1,512
)
(251
)
Repayment of finance lease obligations
(317
)
(515
)
(998
)
(1,396
)
Net proceeds from public offering of common stock
-
72,150
-
72,150
Proceeds from vested restricted stock and exercise of stock options
719
2,175
1,831
4,582
Net cash provided by (used in) financing activities
(111
)
73,559
(679
)
75,085
Effect of exchange rate changes on cash, cash equivalents
and restricted cash
(39
)
(274
)
204
(111
)
Increase in cash, cash equivalents and restricted cash
9,076
80,949
8,328
83,675
Cash, cash equivalents and restricted cash, at beginning of the
period
103,251
21,367
103,999
18,641
Cash, cash equivalents and restricted cash, at end of the period
$ 112,327
$ 102,316
$ 112,327
$ 102,316
Reconciliation of Non-GAAP Financial Measure Adjusted Net
Income and Net Income Per Share (in 000's)
Unaudited Three Months Ended Nine Months Ended
September 27,2019 September 28,2018 September
27,2019 September 28,2018 Net income (as
reported)
$ 2,388
$ 1,459
$ 7,669
$ 3,872
Less: Foreign currency impact
584
(52
)
821
545
Stock-based compensation expense
2,558
2,027
7,778
4,926
Net income (adjusted)
$ 5,530
$ 3,434
$ 16,268
$ 9,343
Net income per share, basic (as reported)
$ 0.05
$ 0.03
$ 0.17
$ 0.09
Foreign currency impact
0.01
-
0.02
0.01
Stock-based compensation expense
0.06
0.05
0.18
0.12
Net income per share, basic (adjusted)
$ 0.12
$ 0.08
$ 0.37
$ 0.22
Net income per share, diluted (as reported)
$ 0.05
$ 0.03
$ 0.16
$ 0.09
Foreign currency impact
0.01
-
0.02
0.01
Stock-based compensation expense
0.06
0.04
0.17
0.11
Net income per share, diluted (adjusted)
$ 0.12
$ 0.07
$ 0.35
$ 0.21
Weighted average shares outstanding - Basic
44,563
43,054
44,426
42,065
Weighted average shares outstanding - Diluted
46,857
46,025
46,848
44,618
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 September 27,2019 Effect of
Constant September 28,2018 As Reported
Constant Currency Sales Currency
Currency $ Change % Change $ Change
% Change ICL
$ 33,815
$ 104
$ 33,919
$ 26,418
$ 7,397
28.0
%
$ 7,501
28.4
%
IOL
4,093
(70
)
4,023
3,824
269
7.0
%
199
5.2
%
Other
1,147
(26
)
1,121
1,528
(381
)
-24.9
%
(407
)
-26.6
%
Other Products
5,240
(96
)
5,144
5,352
(112
)
-2.1
%
(208
)
-3.9
%
Total Sales
$ 39,055
$ 8
$ 39,063
$ 31,770
$ 7,285
22.9
%
$ 7,293
23.0
%
Nine Months Ended September 27,2019 Effect
of Constant September 28,2018 As Reported
Constant Currency Sales Currency
Currency $ Change % Change $ Change
% Change ICL
$ 96,033
$ 1,153
$ 97,186
$ 74,868
$ 21,165
28.3
%
$ 22,318
29.8
%
IOL
11,984
173
12,157
12,068
(84
)
-0.7
%
89
0.7
%
Other
3,285
(16
)
3,269
5,832
(2,547
)
-43.7
%
(2,563
)
-43.9
%
Other Products
15,269
157
15,426
17,900
(2,631
)
-14.7
%
(2,474
)
-13.8
%
Total Sales
$ 111,302
$ 1,310
$ 112,612
$ 92,768
$ 18,534
20.0
%
$ 19,844
21.4
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191030005915/en/
Investors & Media Brian Moore Sr. Director, Investor,
Media Relations and Corporate Development (626) 303-7902, Ext. 3023
bmoore@staar.com
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