STAAR Surgical Reports Third Quarter 2020 Results

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Nov. 4, 2020 21:01 UTC

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 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 operating
activities:
               
  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

%

View source version on businesswire.com: https://www.businesswire.com/news/home/20201104005614/en/

Contacts

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

 

Source: STAAR Surgical Company

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