STAAR Surgical Reports Fourth Quarter and Full Year 2018 Results

STAAR Surgical Company, a leading developer, manufacturer and marketer of implantable lenses and companion delivery systems for the eye, reported financial results for the fourth quarter and full year ended December 28, 2018.

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Feb. 21, 2019 21:01 UTC

Fourth Quarter ICL Sales Rise 41%; Full Year 2018 ICL Sales Rise 48%

GAAP Net Income of $0.02 Per Share in Fourth Quarter; $0.11 Per Share for Full Year 2018

MONROVIA, 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 fourth quarter and full year ended December 28, 2018.

Fourth Quarter 2018 Overview

  • Net Sales of $31.2 Million Up 26% from the Prior Year Quarter
  • ICL Sales Up 41% and Units Up 54% from the Prior Year Quarter
  • Gross Margin at 73.7% of Sales from 69.9% of Sales in the Prior Year Quarter
  • Fourth Quarter Net Income of $0.02 per Share vs. Prior Year Net Loss of ($0.00) Per Share
  • Cash, Cash Equivalents and Restricted Cash Ended the Quarter at $104.0 Million

Full Year 2018 Overview

  • Record Net Sales of $124.0 Million Up 37% from Prior Year
  • Record ICL Sales Up 48% and Units Up 54% from the Prior Year
  • Gross Margin Improved to 73.8% of Sales from 70.9% of Sales in the Prior Year
  • Full Year Net Income of $0.11 per Share vs. Prior Year Net Loss of ($0.05) Per Share

“2018 was a breakout year for STAAR. The transformation of the business over the past two years has created a strong trajectory toward paradigm change in refractive vision correction delivering visual freedom. Lens based correction of Myopia is becoming a preferred surgical solution and EVO ICL only clinics are opening in Asia and Europe. We expect our momentum to continue with strong clinical evidence from refractive surgeons publishing ever more data supporting the safety and effectiveness of the ICL,” said Caren Mason, President and CEO. “Surgeons refer to the ICL patient as their ‘happiest patients’ and 99.4% of patients in a Patient Registry said they would have the procedure again. As such, we far exceeded our projection of breaking the $100.0 million revenue mark in 2018 by achieving $124.0 million in revenue. In fact, our ICL sales alone recorded $101.1 million in sales. My appreciation to the entire STAAR team and our surgeon partners around the globe for such outstanding performance.”

Financial Overview – Q4 2018

Net sales were $31.2 million for the fourth quarter of 2018, up 26% compared to $24.9 million reported in the prior year quarter. The sales increase was driven by ICL revenue and unit growth of 41% and 54%, respectively. Other Product Sales decreased 20% compared to the prior year quarter. ICL revenue was 84% of total Net sales for the fourth quarter of 2018.

Gross profit margin for the fourth quarter of 2018, was 73.7% compared to the prior year period of 69.9%. The increase in gross profit margin for the quarter is due to favorable product mix resulting from increased sales of ICLs, and lower freight and inventory provisions, 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 $21.8 million compared to the prior year quarter of $18.6 million. General and administrative expenses were $6.2 million compared to the prior year quarter of $5.1 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. Marketing and selling expenses were $9.9 million compared to the prior year quarter of $7.9 million. The increase in marketing and selling expenses was due to increased headcount and salary-related expenses including stock-based compensation and investments in digital, strategic, and consumer marketing. Research and development expenses were $5.7 million compared to the prior year quarter of $5.6 million. The increase in research and development expenses was due to an increase in headcount and salary-related expenses including stock-based compensation, and increased clinical expenses associated with our clinical trial for the next generation ICL with EDOF optic.

Net income for the fourth quarter of 2018 was $1.1 million or approximately $0.02 per share compared with a net loss of ($0.1) million or ($0.00) per share for the prior year quarter. Non-GAAP Adjusted Net Income for the fourth quarter of 2018 was $3.2 million or $0.07 per share compared to $0.8 million or $0.02 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.

Financial Overview – Full Year 2018

Net sales were $124.0 million for FY 2018, up 37% compared to $90.6 million reported in the prior year. The sales increase was driven by ICL revenue and unit growth of 48% and 54%, respectively. Other Products Sales increased 3% compared to the prior year. ICL revenue was 82% of total Net sales for FY 2018.

Gross profit margin for FY 2018 increased to 73.8% of revenue compared to 70.9% of revenue for fiscal 2017. The increase in gross profit margin for the year is due to favorable product mix resulting from increased sales of ICLs, and lower unit costs, freight costs, and inventory provisions, partially offset by the effect of lower ASPs for lower diopter ICLs and large volume commitment strategic partners.

Operating expenses for FY 2018 were $84.9 million compared to prior year of $67.9 million. The increase in operating expense is due to increased headcount and salary-related expenses including stock-based compensation and increased investments in digital, consumer, and strategic marketing.

Net income for full year 2018 was $5.0 million or approximately $0.11 per share compared with a net loss of $2.1 million or $0.05 per share for the prior year. Non-GAAP Adjusted Net Income for full year 2018 was $12.6 million or $0.28 per share, compared with a Non-GAAP Adjusted Net Income of $0.4 million or $0.01 per share for FY 2017. 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 December 28, 2018 totaled $104.0 million, compared to $18.6 million at the end of the fourth quarter of 2017. The Company generated $12.8 million in cash from operations in fiscal 2018 and raised $72.2 million in gross proceeds from the sale of approximately 2 million shares of common stock to increase its cash balances.

Outlook – Full Year 2019

The Company reaffirms its Outlook as follows:

  • ICL Unit Growth Percentage Target Increase of 30% over FY18
  • Company Overall Revenue Growth Percentage Target Increase of 20% over FY18; Overall Revenue Target Expected to be Impacted by Other Products Segment Sales Decline of Approximately $3.60M, including a $2.60M Reduction in Sales of Low Margin Injector Parts
  • GAAP Net Income Anticipated to Increase over FY18
  • Company Anticipates Achieving Positive Full Year Cash Flow and Cash Balance Increase.

Conference Call

The Company will host a conference call and webcast on Thursday, February 21, 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 2888737), 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 2888737) 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 (Loss)” as calculated in accordance with U.S. generally accepted accounting principles (“GAAP”): gain or loss on foreign currency transactions, stock-based compensation expenses, and quality remediation 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 excluded quality remediation expenses because their inclusion may mask underlying trends in our business performance.

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 900,000 Visian ICLs have been implanted to date. To learn more about the ICL go to: www.discovericl.com. STAAR has approximately 400 full-time equivalent employees and markets lenses in over 75 countries. Headquartered in Monrovia, 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, and any statements of assumptions underlying any of the foregoing. 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 29, 2017 and on the Company’s Current Report on Form 8-K on August 10, 2018, under the caption “Risk Factors,” respectively which are 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
         
   

December 28,

 

December 29,

ASSETS  

2018

 

2017

Current assets:        
Cash and cash equivalents   $ 103,877     $ 18,520  
Accounts receivable trade, net     25,946       17,853  
Inventories, net     16,704       13,310  
Prepayments, deposits, and other current assets     5,045       4,207  
Total current assets     151,572       53,890  
Property, plant, and equipment, net     11,451       9,776  
Intangible assets, net     243       271  
Goodwill     1,786       1,786  
Deferred income taxes     1,278       1,242  
Other assets     1,009       967  
Total assets   $ 167,339     $ 67,932  
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
Current liabilities:        
Line of credit   $ 3,780     $ 4,438  
Accounts payable     6,524       6,033  
Obligations under capital leases     1,098       1,278  
Allowance for sales returns     2,895       -  
Other current liabilities     13,431       7,339  
Total current liabilities     27,728       19,088  
Obligations under capital leases     459       531  
Deferred income taxes     1,022       350  
Asset retirement obligations     206       202  
Deferred rent     188       172  
Pension liability     5,310       4,653  
Total liabilities     34,913       24,996  
         
         
         
Stockholders' equity:        
Common stock     442       414  
Additional paid-in capital     289,584       204,920  
Accumulated other comprehensive loss     (1,320 )     (1,150 )
Accumulated deficit     (156,280 )     (161,248 )
Total stockholders' equity     132,426       42,936  
Total liabilities and stockholders' equity   $ 167,339     $ 67,932  
                 
                 
Consolidated Statements of Operations
(In 000's except for per share data)
Unaudited
                                                   
    Three Months Ended     Twelve-Months Ended
    % of  

December 28,

  % of  

December 29,

  Fav (Unfav)     % of  

December 28,

  % of  

December 29,

  Fav (Unfav)
    Sales  

2018

  Sales  

2017

  Amount   %       Sales  

2018

  Sales  

2017

  Amount   %  
Net sales   100.0 %   $ 31,186     100.0 %   $ 24,852     $ 6,334     25.5 %     100.0 %   $ 123,954     100.0 %   $ 90,611     $ 33,343     36.8 %
                                                   
Cost of sales   26.3 %     8,194     30.1 %     7,472       (722 )   -9.7 %     26.2 %     32,444     29.1 %     26,331       (6,113 )   -23.2 %
                                                   
Gross profit   73.7 %     22,992     69.9 %     17,380       5,612     32.3 %     73.8 %     91,510     70.9 %     64,280       27,230     42.4 %
                                                   
Selling, general and administrative expenses:                                            
General and administrative   20.0 %     6,233     20.5 %     5,085       (1,148 )   -22.6 %     19.6 %     24,287     21.5 %     19,465       (4,822 )   -24.8 %
Marketing and selling   31.6 %     9,867     31.9 %     7,929       (1,938 )   -24.4 %     31.1 %     38,600     31.3 %     28,402       (10,198 )   -35.9 %
Research and development   18.3 %     5,705     22.6 %     5,626       (79 )   -1.4 %     17.8 %     22,028     22.1 %     20,044       (1,984 )   -9.9 %
Total selling, general, and administrative expenses   69.9 %     21,805     75.0 %     18,640       (3,165 )   -17.0 %     68.5 %     84,915     74.9 %     67,911       (17,004 )   -25.0 %
                                                   
Operating income (loss)   3.8 %     1,187     -5.1 %     (1,260 )     2,447     194.2 %     5.3 %     6,595     -4.0 %     (3,631 )     10,226     281.6 %
                                                   
Other income (expense):                                                  
Interest expense, net   0.7 %     230     -0.1 %     (24 )     254     1058.3 %     0.1 %     165     -0.1 %     (112 )     277     247.3 %
Gain (loss) on foreign currency transactions   -0.9 %     (291 )   0.3 %     81       (372 )   -459.3 %     -0.7 %     (836 )   0.9 %     819       (1,655 )   -202.1 %
Royalty income   0.5 %     168     0.7 %     181       (13 )   -7.2 %     0.5 %     633     0.6 %     581       52     9.0 %
Other income (expense), net   0.1 %     21     0.1 %     30       (9 )   -30.0 %     0.1 %     82     0.1 %     47       35     74.5 %
Total other income (expense), net   0.4 %     128     1.0 %     268       (140 )   -52.2 %     0.0 %     44     1.5 %     1,335       (1,291 )   -96.7 %
                                                   
Income (loss) before provision for income taxes   4.2 %     1,315     -4.1 %     (992 )     2,307     232.6 %     5.3 %     6,639     -2.5 %     (2,296 )     8,935     389.2 %
                                                   
Provision for income taxes   0.7 %     219     -3.4 %     (854 )     (1,073 )   -125.6 %     1.3 %     1,671     -0.2 %     (157 )     (1,828 )   -1164.3 %
                                                   
Net income (loss)   3.5 %   $ 1,096     -0.7 %   $ (138 )   $ 1,234     894.2 %     4.0 %   $ 4,968     -2.3 %   $ (2,139 )   $ 7,107     332.3 %
                                                   
                                                   
Net income (loss) per share - basic       $ 0.02         $ -                   $ 0.12         $ (0.05 )        
Net income (loss) per share - diluted     $ 0.02         $ -                   $ 0.11         $ (0.05 )        
                                                   
Weighted average shares outstanding - basic       44,146           41,223                     42,587           41,004          
Weighted average shares outstanding - diluted       46,976           41,223                     45,257           41,004          
                                                                 
                                                                 
Consolidated Statements of Cash Flows
(in 000's)
Unaudited
    Three Months Ended   Twelve-Months Ended
   

December 28,
2018

 

December 29,
2017

 

December 28,
2018

 

December 29,
2017

Cash flows from operating activities:                
Net income (loss)   $ 1,096     $ (138 )   $ 4,968     $ (2,139 )
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:        
Depreciation of property and equipment     638       789       2,430       3,133  
Amortization of long-lived intangibles     8       55       34       221  
Deferred income taxes     78       (711 )     441       (547 )
Change in net pension liability     (2 )     91       231       186  
Stock-based compensation expense     1,836       976       6,762       3,161  
Loss on disposal of property and equipment     2       601       10       623  
Provision for sales returns and bad debts     13       277       905       463  
Inventory provision     292       472       1,473       1,739  
Changes in working capital:                
Accounts receivable     (2,051 )     (1,898 )     (6,040 )     (1,857 )
Inventories     (569 )     (413 )     (4,194 )     312  
Prepayments, deposits and other current assets     423       700       (598 )     (64 )
Accounts payable     (1,878 )     250       243       (2,501 )
Other current liabilities     2,459       61       6,102       123  
Net cash provided by operating activities     2,345       1,112       12,767       2,853  
                 
Cash flows from investing activities:                
Acquisition of property and equipment     (524 )     (77 )     (2,245 )     (1,046 )
Net cash used in investing activities     (524 )     (77 )     (2,245 )     (1,046 )
                 
Cash flows from financing activities:                
Repayment on line of credit     (496 )     -       (747 )     -  
Repayment of capital lease obligations     (511 )     (316 )     (1,907 )     (1,300 )
Net proceeds from public offering of common stock     -       -       72,150       -  
Repurchase of employee common stock for taxes withheld     (54 )     -       (54 )     (234 )
Proceeds from vested restricted stock and exercise of stock options     615       1,695       5,197       3,971  

Net cash provided by (used in) financing activities

    (446 )     1,379       74,639       2,437  
                 
Effect of exchange rate changes on cash, cash equivalents and restricted cash     308       (26 )     197       279  
                 
Increase in cash, cash equivalents and restricted cash     1,683       2,388       85,358       4,523  
Cash, cash equivalents and restricted cash, at beginning of the period     102,316       16,253       18,641       14,118  
Cash, cash equivalents and restricted cash, at end of the period   $ 103,999     $ 18,641     $ 103,999     $ 18,641  
                 
                 
Global Sales
(in 000's)
Unaudited
                                         
    Three Months Ended   Twelve-Months Ended
       

December 28,

     

December 29,

  % Change        

December 28,

     

December 29,

  % Change  
Sales by Region      

2018

     

2017

  Fav (Unfav)      

2018

     

2017

  Fav (Unfav)
North America   7.4 %   $ 2,314   9.0 %   $ 2,228   3.9 %   7.0 %   $ 8,671   9.9 %   $ 9,014   -3.8 %
Europe   20.5 %     6,408   23.9 %     5,950   7.7 %   20.7 %     25,698   24.8 %     22,449   14.5 %
Middle East, Africa, Latin America   6.7 %     2,080   7.3 %     1,821   14.2 %   5.1 %     6,273   5.9 %     5,351   17.2 %
Asia Pacific   65.4 %     20,384   59.8 %     14,853   37.2 %   67.2 %     83,312   59.4 %     53,797   54.9 %
Total Sales   100.0 %   $ 31,186   100.0 %   $ 24,852   25.5 %   100.0 %   $ 123,954   100.0 %   $ 90,611   36.8 %
                                         
                                         
Core Product Sales                                        
ICLs   84.1 %   $ 26,214   75.0 %   $ 18,627   40.7 %   81.5 %   $ 101,082  

75.4

%   $ 68,325   47.9 %
Other Product Sales                                        
IOLs   13.2 %     4,125   17.6 %     4,383   -5.9 %   13.1 %     16,193   19.0 %     17,258   -6.2 %
Injector Parts and Other   2.7 %     847   7.4 %     1,842   -54.0 %   5.4 %     6,679   5.6 %     5,028   32.8 %
Total Other Sales   15.9 %     4,972   25.0 %     6,225   -20.1 %   18.5 %     22,872   24.6 %     22,286   2.6 %
Total Sales   100.0 %   $ 31,186   100.0 %   $ 24,852   25.5 %   100.0 %   $ 123,954   100.0 %   $ 90,611   36.8 %
                                                             
                                                             
Reconciliation of Non-GAAP Financial Measure            
(in 000's)                  
Unaudited     Three Months Ended   Twelve-Months Ended
     

December 28,

 

December 29,

 

December 28,

 

December 29,

       

2018

   

2017

     

2018

   

2017

 
Net income (loss) - (as reported)     $ 1,096   $ (138 )   $ 4,968   $ (2,139 )
Less:                  
Foreign currency impact       291     (81 )     836     (819 )
Stock-based compensation expense       1,836     976       6,762     3,161  
Quality remediation expense       -     -       -     210  
Net income (loss) - (adjusted)     $ 3,223   $ 757     $ 12,566   $ 413  
                   
Net income (loss) per share, basic - (as reported)   $ 0.02   $ -     $ 0.12   $ (0.05 )
Foreign currency impact       0.01     -       0.02     (0.02 )
Stock-based compensation expense       0.04     0.02       0.16     0.08  
Quality remediation expense       -     -       -     0.01  
Net income (loss) per share, basic - (adjusted)   $ 0.07   $ 0.02     $ 0.30   $ 0.01  
                   
Net income (loss) per share, diluted - (as reported)   $ 0.02   $ -     $ 0.11   $ (0.05 )
Foreign currency impact       0.01     -       0.02     (0.02 )
Stock-based compensation expense       0.04     0.02       0.15     0.08  
Quality remediation expense       -     -       -     -  
Net income (loss) per share, diluted - (adjusted)   $ 0.07   $ 0.02     $ 0.28   $ 0.01  
                   
Weighted average shares outstanding - Basic     44,146     41,223       42,587     41,004  
Weighted average shares outstanding - Diluted     46,976     42,823       45,257     42,096  
                   
Note: Net income (loss) per share (adjusted), basic and diluted, may not add due to rounding

Contacts

Investors & Media
EVC Group
Brian Moore, 310-579-6199
Doug Sherk, 415-652-9100

 

Source: STAAR Surgical Company

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