STAAR Surgical Reports First Quarter Results

ICL Units Up 39% Resulting in Seventh Consecutive Quarter of
Significant Growth

Earnings per Share of $0.03

Announces U.S. Surgeons Summit

LAKE FOREST, Calif.–(BUSINESS WIRE)–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 first quarter ended
March 29, 2019.

First Quarter 2019 Overview

  • Net Sales of $32.6 Million Up 20% from the Prior Year Quarter
  • ICL Sales Up 31% and Units Up 39% from the Prior Year Quarter
  • ICL Sales Up 34% and Net Sales Up 23% on a Constant Currency Basis
    from the Prior Year Quarter
  • Gross Margin at 74.2% Up 250 Basis Points from the Prior Year Quarter
  • First Quarter Net Income of $0.03 per Share vs. Prior Year Net Income
    of $0.01 per Share
  • Cash, Cash Equivalents and Restricted Cash Ended the Quarter at $102.2
    Million

“Our ICL family of lenses continue to grow at rates significantly above
reported growth for the Ophthalmic Refractive sector,” said Caren Mason,
President and CEO of STAAR Surgical. “Total ICL units grew 39% globally
in the first quarter including 86% growth in Japan, 62% in Korea, 56% in
China, 27% in Germany and 23% in India as compared to the prior year
quarter. As we recognize and appreciate seven quarters of strong double
digit ICL sales and unit growth, we anticipate the strong future our
product pipeline and market expansion should provide. The U.S. is one of
many markets with significant potential for the ICL and we are pleased
to announce our inaugural invitation only U.S. Surgeons Summit. This
summer weekend summit will bring together key ophthalmic opinion leaders
and executives for educational, podium and panel participation and a
thoughtful exchange of ideas as we execute our path forward in the U.S.
Joining the U.S. contingent will be top surgeons from China, Japan and
Germany who will share their clinical pathways, learnings, and business
models to a new ICL continuum of visual freedom care and economic
expansion. We are delighted to report the initial response to our
surgeon outreach has been very strong with U.S. refractive surgeon
opinion leaders leading educational sessions and surgeons from the
largest refractive markets in the U.S. participating.”

Financial Overview – Q1 2019

Net sales were $32.6 million for the first quarter of 2019, up 20%
compared to $27.1 million reported in the prior year quarter. The sales
increase was driven by ICL revenue and unit growth of 31% and 39%,
respectively. Other Product Sales decreased 19% compared to the prior
year quarter. Currency, primarily the Euro, negatively impacted Net
Sales by approximately $0.7 million in the first quarter. Adjusting for
the impact of Currency, Net sales in the first quarter of 2019 were
$33.3 million, representing 23% growth over the prior year quarter.

Gross profit margin for the first quarter of 2019, was 74.2% compared to
the prior year period of 71.7%. The 250 basis point increase in gross
profit margin for the quarter is due to favorable product mix resulting
from increased sales of ICLs and decreased sales of injector parts and
lower unit costs, partially offset by the effect of lower average
selling prices (ASPs) for lower diopter ICLs and large volume commitment
strategic partners.

Operating expenses for the quarter were $22.6 million compared to the
prior year quarter of $18.6 million. General and administrative expenses
were $6.8 million compared to the prior year quarter of $5.8 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. Marketing and selling expenses were $10.1
million compared to the prior year quarter of $7.5 million. The increase
in marketing and selling expenses was due to increased headcount and
salary-related expenses including stock-based compensation, increased
travel expenses and continued investments in digital, strategic, and
consumer marketing. Research and development expenses were $5.6 million
compared to the prior year quarter of $5.4 million.

Net income for the first quarter of 2019 was $1.4 million or
approximately $0.03 per share compared with net income of $0.6 million
or $0.01 per share for the prior year quarter. Non-GAAP Adjusted Net
Income for the first quarter of 2019 was $4.3 million or $0.09 per share
compared to $2.0 million or $0.05 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 March 29, 2019 totaled
$102.2 million, compared to $104.0 million at the end of the fourth
quarter of 2018. The Company generated $0.7 million in cash from
operations in the first quarter.

Conference Call

The Company will host a conference call and webcast today, Wednesday,
May 1, 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 2299537), 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 2299537) 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 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.

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. To
learn more about the ICL go to: www.discovericl.com.
STAAR markets lenses in over 75 countries and had approximately 475
full-time equivalent employees at December 28, 2018. Headquartered in
Lake Forest, CA, the company operates manufacturing facilities in Aliso
Viejo, CA and Monrovia, CA. 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, 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; potential 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
 

 

 

ASSETS

March 29,
2019

December 28,
2018

Current assets:
Cash and cash equivalents $ 102,111 $ 103,877
Accounts receivable trade, net 26,601 25,946
Inventories, net 16,439 16,704
Prepayments, deposits, and other current assets   7,534     5,045  
Total current assets   152,685     151,572  
Property, plant, and equipment, net 11,300 11,451
Finance lease right-of-use assets, net 2,445
Operating lease right-of-use assets, net 6,629
Intangible assets, net 263 243
Goodwill 1,786 1,786
Deferred income taxes 1,275 1,278
Other assets   836     1,009  
Total assets $ 177,219   $ 167,339  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Line of credit $ 3,272 $ 3,780
Accounts payable 7,018 6,524
Obligations under finance leases 1,158 1,098
Obligations under operating leases 2,495
Allowance for sales returns 2,971 2,895
Other current liabilities   11,317     13,431  
Total current liabilities   28,231     27,728  
Obligations under finance leases 656 459
Obligations under operating leases 4,270
Deferred income taxes 1,100 1,022
Asset retirement obligations 206 206
Deferred rent 188
Pension liability   5,418     5,310  
Total liabilities   39,881     34,913  
 
 
Stockholders’ equity:
Common stock 444 442
Additional paid-in capital 292,722 289,584
Accumulated other comprehensive loss (1,343 ) (1,320 )
Accumulated deficit   (154,485 )   (156,280 )
Total stockholders’ equity   137,338     132,426  
Total liabilities and stockholders’ equity $ 177,219   $ 167,339  
 
           
Consolidated Statements of Income
(In 000’s except for per share data)
Unaudited
 
 
Three Months Ended

% of
Sales

March 29, 2019

% of
Sales

March 30, 2018 Fav (Unfav)
Amount %  
Net sales 100.0 % $ 32,583 100.0 % $ 27,093 $ 5,490 20.3 %
 
Cost of sales 25.8 %   8,403   28.3 %   7,662     (741 ) -9.7 %
 
Gross profit 74.2 %   24,180   71.7 %   19,431     4,749   24.4 %
 
Selling, general and administrative expenses:
General and administrative 21.0 % 6,837 21.3 % 5,771 (1,066 ) -18.5 %
Marketing and selling 31.1 % 10,143 27.5 % 7,454 (2,689 ) -36.1 %
Research and development 17.3 %   5,635   20.0 %   5,407     (228 ) -4.2 %
Total selling, general, and administrative expenses 69.4 % 22,615 68.8 % 18,632 (3,983 ) -21.4 %
 
Operating income 4.8 %   1,565   2.9 %   799     766   95.9 %
 
Other income (expense):
Interest Income (expense), net 0.8 % 271 0.0 % (12 ) 283 2358.3 %
Loss on foreign currency transactions -0.7 % (248 ) -0.3 % (77 ) (171 ) -222.1 %
Royalty income 0.5 % 171 0.6 % 157 14 8.9 %
Other income, net 0.3 %   97   0.1 %   17     80   470.6 %
Total other income, net 0.9 %   291   0.4 %   85     206   242.4 %
 
Income before provision for income taxes 5.7 % 1,856 3.3 % 884 972 110.0 %
 
Provision for income taxes 1.5 %   489   1.1 %   301     (188 ) -62.5 %
 
Net income 4.2 % $ 1,367   2.2 % $ 583   $ 784   134.5 %
 
 
Net income per share – basic $ 0.03   $ 0.01  
Net income per share – diluted $ 0.03   $ 0.01  
 
Weighted average shares outstanding – basic   44,235     41,410  
Weighted average shares outstanding – diluted   46,913     43,087  
 
     
Consolidated Statements of Cash Flows
(in 000’s)
Unaudited
Three Months Ended

March 29,
2019

March 30,
2018

Cash flows from operating activities:
Net income $ 1,367 $ 583
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation of property and equipment 1,222 549
Amortization of long-lived intangibles 8 9
Deferred income taxes 79 92
Change in net pension liability 119 87
Stock-based compensation expense 2,641 1,301
Loss on disposal of property and equipment 6
Provision for sales returns and bad debts (34 ) 514
Inventory provision 455 506
Changes in working capital:
Accounts receivable (554 ) (2,755 )
Inventories (7 ) (396 )
Prepayments, deposits and other current assets (2,317 ) (730 )
Accounts payable (185 ) 2,038
Other current liabilities   (2,063 )   726  
Net cash provided by operating activities   731     2,530  
 
Cash flows from investing activities:
Acquisition of property and equipment (2,203 ) (965 )
Increase in patents and licenses   (30 )    
Net cash used in investing activities   (2,233 )   (965 )
 
Cash flows from financing activities:
Repayment on line of credit (499 )
Repayment of finance lease obligations (365 ) (380 )

Proceeds from vested restricted stock and exercise of stock options

  624     454  
Net cash provided by (used in) financing activities   (240 )   74  
 
Effect of exchange rate changes on cash, cash equivalents and
restricted cash
  (24 )   612  
 
(Decrease) increase in cash, cash equivalents and restricted cash (1,766 ) 2,251
Cash, cash equivalents and restricted cash, at beginning of the
period
  103,999     18,641  
Cash, cash equivalents and restricted cash, at end of the period $ 102,233   $ 20,892  
 
         
Global Sales
(in 000’s)
Unaudited
 
 
Three Months Ended

 

 

% Change
Sales by Region

March 29, 2019

March 30, 2018

Fav (Unfav)
North America 6.7 % $ 2,198 7.7 % $ 2,079 5.7 %
Europe 21.6 % 7,027 25.8 % 6,990 0.5 %
Middle East, Africa, Latin America 3.8 % 1,238 5.6 % 1,519 -18.5 %
Asia Pacific 67.9 %   22,120 60.9 %   16,505 34.0 %
Total Sales 100.0 % $ 32,583 100.0 % $ 27,093 20.3 %
 
 
Core Product Sales
ICLs 85.3 % $ 27,786 78.1 % $ 21,158 31.3 %
Other Product Sales
IOLs 12.3 % 4,017 15.0 % 4,058 -1.0 %
Injector Parts and Other 2.4 %   780 6.9 %   1,877 -58.4 %
Total Other Sales 14.7 %   4,797 21.9 %   5,935 -19.2 %
Total Sales 100.0 % $ 32,583 100.0 % $ 27,093 20.3 %
 
   
Reconciliation of Non-GAAP Financial Measure
(in 000’s)
Unaudited Three Months Ended
 
March 29, 2019   March 30, 2018
Net income (as reported) $ 1,367 $ 583
Less:
Foreign currency impact 248 77
Stock-based compensation expense   2,641     1,301
Net income (adjusted) $ 4,256   $ 1,961
 
Net income per share, basic (as reported) $ 0.03 $ 0.01
Foreign currency impact 0.01
Stock-based compensation expense   0.06     0.03
Net income per share, basic (adjusted) $ 0.10   $ 0.05
 
Net income per share, diluted (as reported) $ 0.03 $ 0.01
Foreign currency impact 0.01
Stock-based compensation expense   0.06     0.03
Net income per share, diluted (adjusted) $ 0.09   $ 0.05
 
Weighted average shares outstanding – Basic 44,235 41,410
Weighted average shares outstanding – Diluted 46,913 43,087
 
Note: Net income per share (adjusted), basic and diluted, may not
add due to rounding
 

Contacts

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

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