STAAR Surgical Reports Third Quarter Net Sales of $58.4 Million Up 24% Y/Y

Rhea-AI Summary

STAAR Surgical Company (NASDAQ: STAA) reported strong third quarter results with net sales of $58.4 million, a 24% increase year-over-year. ICL sales reached $54.2 million, up 31%, while unit growth was 29%. Gross margin improved to 77.6%. The company raised its full-year sales outlook to $230 million - $231 million, reflecting over 40% growth. However, a backlog of over 20,000 lenses was noted, partially due to COVID-related challenges. Net income per share grew to $0.12 from $0.08 in the prior year. Cash reserves rose to $196.2 million from $152.5 million.

Positive

• Net sales increased 24% to $58.4 million compared to the previous year.
• ICL sales surged 31% to $54.2 million, making up 93% of total net sales.
• Gross margin improved to 77.6%, up from 74.1% in the prior year.
• Raised full-year sales outlook to $230-$231 million, indicating over 40% growth.

Negative

• Backlog of over 20,000 lenses due to COVID-related challenges.
• Operating expenses rose to $37.5 million, increasing by 25% from the previous year.

Third Quarter ICL Sales Up 31% Y/Y and Units Up 29% Y/Y

Increases Full Year 2021 Net Sales Outlook to Range of $230 Million to $231 Million

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 1, 2021.

Third Quarter 2021 Overview

• Quarterly Net Sales of $58.4 Million Up 24% from the Prior Year Quarter
• Quarterly ICL Sales of $54.2 Million Up 31% from the Prior Year Quarter
• Quarterly ICL Units Up 29% from the Prior Year Quarter
• Gross Margin at 77.6% vs. 74.1% in the Prior Year Quarter
• Net Income of $0.12 per Share vs. $0.08 in the Prior Year Quarter
• Cash and Cash Equivalents Ended the Quarter at $196.2 Million Up from $152.5 Million in Q4 2020

“We experienced outstanding demand for our ICLs during the third quarter and achieved net sales above the high end of our previously provided outlook,” said Caren Mason, President and CEO of STAAR Surgical. “Enthusiasm for our implantable Collamer® lenses continues to grow and has never been higher. In fact, orders for ICLs outstripped our supply of lenses in the quarter. With China being our largest market, our distributor’s inventory levels in China were drawn down to historically low levels to meet surgeon and patient demand. While we were able to meet 35% growth levels to the surgeon and patient community from our distributor inventory, we were only able to ship units equaling 19% growth to our distributor. COVID-related employment, production output and modest supply chain challenges impacted the quarter and resulted in a backlog of over 20,000 lenses at the end of the third quarter representing several million dollars of orders-in-house. Despite the challenges which we are addressing, we achieved global ICL unit growth up 29%, year over year, for the third quarter of 2021. ICL unit growth was up 44% in Japan, up 21% in South Korea, up 338% in India, up 25% in Germany, up 66% in the U.S. and up 32% in our hybrid distributor markets. In the U.S. our submission of clinical data for STAAR’s EVO ICL family of myopia lenses remains under customary interactive FDA review. While our expectation of pre-COVID approval timelines by the FDA has now passed, we remain confident regarding an approval of our PMA supplement.

Ms. Mason, concluded, “We are squarely focused on meeting the significant level of demand for our ICL lenses and achieving standard inventory level requirements in the coming quarters. Based on our analyses of demand and supply forecasts we are today raising our outlook for full year fiscal 2021 net sales to a range of $230 million to $231 million which represents growth of over 40% year-over-year. We are also reaffirming our previously communicated pre-COVID three-year outlook for 25%+ compound annual sales growth for fiscal 2020 through 2022 despite the 2020 COVID impacted growth rate of 9%.”

Financial Overview – Q3 2021

Net sales were $58.4 million for the third quarter of 2021, up 24% compared to $47.1 million reported in the prior year quarter. The sales increase was driven by ICL net sales and unit growth up 31% and 29%, respectively, as compared to the prior year period. ICL net sales were 93% of total net sales for the third quarter of 2021. Other Product Sales were $4.2 million, representing 7% of total net sales and decreased 25% compared to the prior year quarter due to lower sales of cataract IOLs and low margin injector parts.

Gross profit margin for the third quarter of 2021 was 77.6% compared to the prior year period of 74.1%. Factors positively impacting gross margin in the third quarter of 2021, as compared to the prior year period, include geographic sales mix and a decreased mix of injector part sales which carry a lower margin, partially offset by increased period costs associated with manufacturing projects.

Operating expenses for the third quarter of 2021 were $37.5 million compared to the prior year quarter of $30.0 million. The increase in total operating expenses was due to an overall increase in various functional areas to support higher net sales. General and administrative expenses were $11.0 million compared to the prior year quarter of $8.6 million. The increase in general and administrative expenses was due to increased compensation-related expenses and outside services. Selling and marketing expenses were $18.2 million compared to the prior year quarter of $12.6 million. The increase in selling and marketing expenses was due to increased advertising and promotional activities, compensation-related expenses and trade show expenses. Research and development expenses were $8.3 million compared to the prior year quarter of $8.8 million. The decrease in research and development expenses is primarily due to lower expenses associated with the EVO clinical trial in the U.S.

Net income for the third quarter of 2021 was $6.0 million or $0.12 per diluted share compared with net income of $3.9 million or $0.08 per diluted share for the prior year quarter. Adjusted Net Income for the third quarter of 2021 was $10.3 million or $0.21 per diluted share compared to $6.7 million or $0.14 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 1, 2021 totaled $196.2 million compared to $152.5 million at January 1, 2021.

Conference Call

The Company will host a conference call and webcast today, Wednesday, November 3 at 4:30 p.m. Eastern / 1:30 p.m. Pacific to discuss its financial results and operational progress. To access the conference call (Access Code 249252), please dial 844-200-6205 for domestic participants and 929-526-1599 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 (Replay Code 403818) will be available beginning approximately one hour after the call’s conclusion for seven days. This replay can be accessed by dialing 866-813-9403 for domestic callers and 929-458-6194 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 (including sales), plans, strategies, and objectives of management for 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 Annual Report on Form 10-K for the year ended January 1, 2021 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 impact of the COVID-19 pandemic on markets; 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 EVO version of our ICL lens is not yet approved for sale in the United States.

Consolidated Balance Sheets
(in 000's)
Unaudited
		October 1, 2021				January 1, 2021
ASSETS
Current assets:
Cash and cash equivalents		$	196,246			$	152,453
Accounts receivable trade, net			41,917				35,229
Inventories, net			16,518				18,111
Prepayments, deposits, and other current assets			9,264				10,625
Total current assets			263,945				216,418
Property, plant, and equipment, net			32,266				24,030
Finance lease right-of-use assets, net			45				596
Operating lease right-of-use assets, net			22,006				8,764
Intangible assets, net			232				270
Goodwill			1,786				1,786
Deferred income taxes			3,700				4,944
Other assets			625				608
Total assets		$	324,605			$	257,416
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit		$	1,282			$	1,379
Accounts payable			9,092				7,874
Obligations under finance leases			50				360
Obligations under operating leases			2,646				2,485
Allowance for sales returns			5,566				4,532
Other current liabilities			28,160				24,606
Total current liabilities			46,796				41,236
Obligations under finance leases			21				38
Obligations under operating leases			19,437				6,537
Deferred income taxes			222				222
Asset retirement obligations			205				221
Pension liability			8,816				11,940
Total liabilities			75,497				60,194
Stockholders' equity:
Common stock			476				464
Additional paid-in capital			368,572				338,194
Accumulated other comprehensive loss			(3,628	)			(5,545	)
Accumulated deficit			(116,312	)			(135,891	)
Total stockholders' equity			249,108				197,222
Total liabilities and stockholders' equity		$	324,605			$	257,416

Consolidated Statements of Income
(In 000's except for per share data)
Unaudited
		Three Months Ended																			Nine Months Ended
		% of		October 1, 2021				% of		October 2, 2020				Fav (Unfav)							% of		October 1, 2021				% of		October 2, 2020				Fav (Unfav)
		Sales						Sales						Amount				%			Sales						Sales						Amount				%
Net sales		100.0	%	$	58,352			100.0	%	$	47,081			$	11,271			23.9	%		100.0	%	$	171,471			100.0	%	$	117,462			$	54,009			46.0	%
Cost of sales		22.4	%		13,051			25.9	%		12,210				(841	)		-6.9	%		22.1	%		37,825			28.4	%		33,401				(4,424	)		-13.2	%
Gross profit		77.6	%		45,301			74.1	%		34,871				10,430			29.9	%		77.9	%		133,646			71.6	%		84,061				49,585			59.0	%
Selling, general and administrative expenses:
General and administrative		18.9	%		11,018			18.2	%		8,589				(2,429	)		-28.3	%		19.0	%		32,671			20.8	%		24,406				(8,265	)		-33.9	%
Selling and marketing		31.1	%		18,175			26.9	%		12,649				(5,526	)		-43.7	%		29.3	%		50,229			29.0	%		34,003				(16,226	)		-47.7	%
Research and development		14.2	%		8,271			18.6	%		8,751				480			5.5	%		14.5	%		24,790			19.5	%		22,960				(1,830	)		-8.0	%
Total selling, general, and administrative expenses		64.2	%		37,464			63.7	%		29,989				(7,475	)		-24.9	%		62.8	%		107,690			69.3	%		81,369				(26,321	)		-32.3	%
Operating income		13.4	%		7,837			10.4	%		4,882				2,955			60.5	%		15.1	%		25,956			2.3	%		2,692				23,264			864.2	%
Other income (expense):
Interest income (expense), net		0.0	%		(23	)		0.0	%		1				(24	)		-2400.0	%		0.0	%		(35	)		0.2	%		237				(272	)		-114.8	%
Gain (loss) on foreign currency transactions		-1.1	%		(610	)		1.0	%		468				(1,078	)		-230.3	%		-1.2	%		(2,040	)		0.3	%		388				(2,428	)		-625.8	%
Royalty income		0.3	%		185			0.2	%		93				92			98.9	%		0.3	%		496			0.2	%		239				257			107.5	%
Other expense, net		0.0	%		(13	)		-0.1	%		(63	)			50			79.4	%		0.0	%		(47	)		0.0	%		(83	)			36			43.4	%
Total other income (expense), net		-0.8	%		(461	)		1.1	%		499				(960	)		-192.4	%		-0.9	%		(1,626	)		0.7	%		781				(2,407	)		-308.2	%
Income before provision for income taxes		12.6	%		7,376			11.5	%		5,381				1,995			37.1	%		14.2	%		24,330			3.0	%		3,473				20,857			600.5	%
Provision for income taxes		2.3	%		1,356			3.2	%		1,489				133			8.9	%		2.8	%		4,751			0.8	%		887				(3,864	)		-435.6	%
Net income		10.3	%	$	6,020			8.3	%	$	3,892			$	2,128			54.7	%		11.4	%	$	19,579			2.2	%	$	2,586			$	16,993			657.1	%
Net income per share - basic				$	0.13					$	0.08												$	0.42					$	0.06
Net income per share - diluted				$	0.12					$	0.08												$	0.40					$	0.05
Weighted average shares outstanding - basic					47,483						45,903													47,064						45,394
Weighted average shares outstanding - diluted					49,592						48,180													49,448						47,589

Consolidated Statements of Cash Flows
(in 000's)
Unaudited
			Three Months Ended								Nine Months Ended
			October 1, 2021				October 2, 2020				October 1, 2021				October 2, 2020
Cash flows from operating activities:
Net income			$	6,020			$	3,892			$	19,579			$	2,586
Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation of property and equipment			917				758				2,671				2,276
	Amortization of long-lived intangibles			9				9				26				26
	Deferred income taxes			-				154				845				(1,215	)
	Change in net pension liability			118				146				91				522
	Stock-based compensation expense			3,663				3,126				10,985				8,965
	Loss on disposal of property and equipment			-				-				2				3
	Provision for sales returns and bad debts			137				210				1,069				815
	Inventory provision			400				379				1,097				1,195
Changes in working capital:
	Accounts receivable			6,725				(2,566	)			(7,072	)			(10,975	)
	Inventories			(937	)			(421	)			1,301				(1,353	)
	Prepayments, deposits and other current assets			1,595				1,536				1,288				(636	)
	Accounts payable			228				(954	)			(40	)			(657	)
	Other current liabilities			3,441				3,320				3,622				(151	)
	Net cash provided by operating activities			22,316				9,589				35,464				1,401
Cash flows from investing activities:
	Acquisition of property and equipment			(3,273	)			(2,049	)			(8,956	)			(6,259	)
	Net cash used in investing activities			(3,273	)			(2,049	)			(8,956	)			(6,259	)
Cash flows from financing activities:
	Repayment on line of credit			-				(3	)			-				(511	)
	Repayment of finance lease obligations			(36	)			(109	)			(314	)			(455	)
	Proceeds from vested restricted stock and exercise of stock options			4,212				4,429				18,323				13,987
	Net cash provided by financing activities			4,176				4,317				18,009				13,021
Effect of exchange rate changes on cash and cash equivalents				(56	)			166				(724	)			207
Increase in cash and cash equivalents				23,163				12,023				43,793				8,370
Cash and cash equivalents, at beginning of the period				173,083				116,315				152,453				119,968
Cash and cash equivalents, at end of the period			$	196,246			$	128,338			$	196,246			$	128,338

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 1, 2021		October 2, 2020				October 1, 2021		October 2, 2020
Net income (as reported)		$	6,020	$	3,892			$	19,579	$	2,586
Less:
Foreign currency impact			610		(468	)			2,040		(388	)
Stock-based compensation expense			3,663		3,126				10,985		8,965
Valuation allowance adjustment			-		154				845		(1,215	)
Net income (adjusted)		$	10,293	$	6,704			$	33,449	$	9,948
Net income per share, basic (as reported)		$	0.13	$	0.08			$	0.42	$	0.06
Foreign currency impact			0.01		(0.01	)			0.04		(0.01	)
Stock-based compensation expense			0.08		0.08				0.23		0.20
Valuation allowance adjustment			-		-				0.02		(0.03	)
Net income per share, basic (adjusted)		$	0.22	$	0.15			$	0.71	$	0.22
Net income per share, diluted (as reported)		$	0.12	$	0.08			$	0.40	$	0.05
Foreign currency impact			0.01		(0.01	)			0.04		(0.01	)
Stock-based compensation expense			0.08		0.07				0.22		0.19
Valuation allowance adjustment			-		-				0.02		(0.02	)
Net income per share, diluted (adjusted)		$	0.21	$	0.14			$	0.68	$	0.21
Weighted average shares outstanding - Basic			47,483		45,903				47,064		45,394
Weighted average shares outstanding - Diluted			49,592		48,180				49,448		47,589
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 1, 2021			Effect of			Constant			October 2, 2020			As Reported						Constant Currency
Sales				Currency			Currency						$ Change			% Change			$ Change			% Change
ICL	$	54,153		$	117		$	54,270		$	41,493		$	12,660		30.5	%		$	12,777		30.8	%
Cataract IOL		2,525			50			2,575			3,325			(800	)	-24.1	%			(750	)	-22.6	%
Other		1,674			59			1,733			2,263			(589	)	-26.0	%			(530	)	-23.4	%
Other Products		4,199			109			4,308			5,588			(1,389	)	-24.9	%			(1,280	)	-22.9	%
Total Sales	$	58,352		$	226		$	58,578		$	47,081		$	11,271		23.9	%		$	11,497		24.4	%
	Nine Months Ended
	October 1, 2021			Effect of			Constant			October 2, 2020			As Reported						Constant Currency
Sales				Currency			Currency						$ Change			% Change			$ Change			% Change
ICL	$	159,889		$	(1,605	)	$	158,284		$	101,561		$	58,328		57.4	%		$	56,723		55.9	%
Cataract IOL		9,324			(182	)		9,142			9,880			(556	)	-5.6	%			(738	)	-7.5	%
Other		2,258			70			2,328			6,021			(3,763	)	-62.5	%			(3,693	)	-61.3	%
Other Products		11,582			(112	)		11,470			15,901			(4,319	)	-27.2	%			(4,431	)	-27.9	%
Total Sales	$	171,471		$	(1,717	)	$	169,754		$	117,462		$	54,009		46.0	%		$	52,292		44.5	%

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20211103006067/en/

Investors

Brian Moore

Vice President, Investor, Media Relations and Corporate Development

(626) 303-7902, Ext. 3023

bmoore@staar.com

Media

Jen Jones

Gold PR | Social Media

(310) 918-4313

jjones@goldpr.com

Source: STAAR Surgical Company

FAQ

What were STAAR Surgical's third quarter 2021 net sales?

STAAR Surgical reported net sales of $58.4 million for Q3 2021.

How much did ICL sales increase in the third quarter of 2021?

ICL sales increased by 31%, reaching $54.2 million.

What is the new full-year sales outlook for STAAR Surgical?

The new full-year sales outlook is set between $230 million and $231 million.

What was the gross margin reported for STAAR Surgical in Q3 2021?

The gross margin for Q3 2021 was reported at 77.6%.

What challenges impacted STAAR Surgical's lens sales in Q3 2021?

COVID-related employment and supply chain challenges led to a backlog of over 20,000 lenses.