STAAR Surgical Reports Third Quarter Net Sales of $76 Million Up 30% Y/Y

Rhea-AI Summary

STAAR Surgical Company (STAA) reported Q3 2022 net sales of $76 million, up 30% from the prior year. Constant currency net sales hit $80 million, reflecting a 37% increase. ICL sales accounted for $72 million, a 33% rise, with units sold up 40%. Gross margin improved to 79.5%, and net income per share rose to $0.21. Despite robust growth, the company anticipates challenges in Q4 due to COVID restrictions in China, forecasting total 2022 net sales near $285 million. STAAR emphasizes focus on its premium EVO products while facing supply chain issues in its low-margin Other Products segment.

Positive

• 30% growth in net sales compared to Q3 2021.
• ICL sales increased 33% to $72 million.
• Gross margin improved to 79.5% from 77.6% year-over-year.
• Net income per share increased to $0.21 from $0.12.

Negative

• Anticipated total net sales of approximately $285 million for 2022, lower than previously expected.
• Supply chain challenges impacting the Other Products business line.

ICL Units Up 40% Y/Y; Constant Currency Net Sales of $80.0 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 September 30, 2022.

Third Quarter 2022 Overview

• Net Sales of $76.0 Million Up 30% and Constant Currency Net Sales of $80.0 Million Up 37% from the Prior Year Quarter
• ICL Sales of $72.0 Million Up 33% and Constant Currency ICL Sales of $75.2 Million Up 39% from the Prior Year Quarter
• ICL Units Up 40% from the Prior Year Quarter
• Gross Margin at 79.5% vs. 77.6% in the Prior Year Quarter
• Net Income of $0.21 per Share vs. $0.12 per Share in the Prior Year Quarter
• Cash, Cash Equivalents and Investments Available for Sale Ended the Quarter at $224.7 Million

“STAAR achieved 30% net sales growth in the third quarter which reflects strong EVO ICL unit growth in APAC and strong accelerating growth in the U.S., despite constant currency challenges and, in Europe, macroeconomic headwinds,” said Caren Mason, President and CEO of STAAR Surgical. “In the third quarter, global ICL unit growth was up 40% year over year, highlighted by unit growth in China up 52%, the U.S. up 63%, Japan up 40%, South Korea up 49% and Asia Pacific distributor markets up 47%. We advanced our patient awareness, engagement and market building initiatives for EVO in the U.S. during and subsequent to the third quarter, highlighted by media campaigns with global entertainment celebrity Joe Jonas and NBA player Max Strus, and introduced our presbyopia lens, EVO Viva™, to surgeons at our Experts Meeting preceding the annual congress of the European Society of Cataract and Refractive Surgeons. Despite stringent COVID policies in China we achieved strong results in the third quarter and expect our EVO lenses to capture more than 25% of China’s estimated 1.2 million annual refractive procedures by the end of 2022. However, due to tighter COVID restrictions in China resulting in expected delayed demand in the fourth quarter, ongoing headwinds in Europe, weakness in the Yen and Euro, and lower Other Products sales, we now anticipate total net sales will be approximately $285 million for fiscal 2022, which represents $300 million adjusted for constant currency. Our fiscal 2022 outlook includes ICL sales of approximately $272 million, representing approximately 28% year over year growth, and Other Products sales of approximately $13 million.”

Ms. Mason continued, “Today it is vital that STAAR focus on the significant growth opportunities we have with our premium EVO products. At the same time, our low margin Other Products business, which represents approximately 5% of sales and consists of cataract IOLs, IOL injectors and injector parts, has faced increasing supply chain challenges. As a result of third-party materials and supply chain challenges that only affect our Other Products business, we will no longer be able to support Other Products as we have historically. We will continue to support customers of Other Products through the end of 2023. As we look to fiscal 2023, despite the aforementioned challenges, we expect to achieve approximately 30% ICL sales growth, year over year, to approximately $355 million in total company net sales which contemplates limited sales from Other Products. We see significant growth potential for our EVO family of lenses globally and look forward to continuing our focus, efforts and resources on especially large growth opportunities in the U.S. and Asia in 2023.”

Financial Overview – Q3 2022

Net sales were $76.0 million for the third quarter of 2022, up 30% compared to $58.4 million reported in the prior year quarter. The sales increase was driven by ICL sales and unit growth of 33% and 40%, respectively, as compared to the prior year period. Other Product sales decreased 3% compared to the prior year quarter. ICL sales were 95% of total net sales for the third quarter of 2022. Changes in currency, primarily in the Japanese Yen as well as the Euro, negatively impacted reported total net sales by $4.0 million for the third quarter of 2022.

Gross profit margin for the third quarter of 2022 was 79.5% compared to the prior year quarter of 77.6%. Factors impacting gross margin in the third quarter of 2022, as compared to the prior year quarter, due mainly to product and geographic mix, partially offset by increased period costs associated with manufacturing projects.

Operating expenses for the third quarter of 2022 were $46.8 million compared to the prior year quarter of $37.5 million. General and administrative expenses were $14.0 million compared to the prior year quarter of $11.0 million. The increase in general and administrative expenses was due to compensation related expenses, increased facilities costs and outside services. Selling and marketing expenses were $23.1 million compared to the prior year quarter of $18.2 million. The increase in selling and marketing expenses is due to increased trade shows and sales meetings, advertising and promotional activities, travel expenses and compensation related expenses. Research and development expenses were $9.6 million compared to the prior year quarter of $8.3 million due to increased compensation related expenses.

Net income for the third quarter of 2022 was $10.3 million or $0.21 per diluted share compared with net income of $6.0 million or $0.12 per diluted share for the prior year quarter. The year over year increase is attributable to higher sales and gross profit and, as a percentage of sales, lower operating expenses. Adjusted Net Income for the third quarter of 2022 was $18.1 million or $0.37 per diluted share compared to $10.3 million or $0.21 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, cash equivalents and investments available for sale at September 30, 2022 totaled $224.7 million compared to $199.7 million at December 31, 2021.

Conference Call

The Company will host a conference call and webcast today, Wednesday, November 2 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 976076), 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 710361) 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 stock-based compensation expenses and valuation allowance adjustments 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 provided in this press release 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 40 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 ICL™ product line. More than 2,000,000 ICLs have been sold to date and STAAR markets these lenses in over 75 countries. To learn more about the ICL go to: EVOICL.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 2022, 2023, 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 current and pipeline of ICL products with regulators, and any statements of assumptions underlying any of the foregoing, including those relating to our current and pipeline of ICL products 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 December 31, 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.

Consolidated Balance Sheets
(in 000's)
Unaudited
		September 30, 2022				December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents		$	129,242			$	199,706
Investments available for sale			82,091				-
Accounts receivable trade, net			55,429				43,531
Inventories, net			19,930				17,274
Prepayments, deposits, and other current assets			10,218				10,900
Total current assets			296,910				271,411
Investments available for sale			13,360				-
Property, plant, and equipment, net			48,048				35,912
Finance lease right-of-use assets, net			380				506
Operating lease right-of-use assets, net			29,503				31,310
Intangible assets, net			171				218
Goodwill			1,786				1,786
Deferred income taxes			3,710				3,813
Other assets			808				822
Total assets		$	394,676			$	345,778
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	7,567			$	8,699
Obligations under finance leases			167				127
Obligations under operating leases			3,474				3,283
Allowance for sales returns			5,040				4,816
Other current liabilities			29,072				31,877
Total current liabilities			45,320				48,802
Obligations under finance leases			252				382
Obligations under operating leases			26,032				28,269
Deferred income taxes			1,554				811
Asset retirement obligations			158				198
Pension liability			1,228				8,758
Total liabilities			74,544				87,220
Stockholders' equity:
Common stock			482				477
Additional paid-in capital			398,448				373,519
Accumulated other comprehensive loss			(310	)			(4,048	)
Accumulated deficit			(78,488	)			(111,390	)
Total stockholders' equity			320,132				258,558
Total liabilities and stockholders' equity		$	394,676			$	345,778

Consolidated Statements of Income
(In 000's except for per share data)
Unaudited
		Three Months Ended																			Nine Months Ended
		% of		September 30, 2022				% of		October 1, 2021				Fav (Unfav)							% of		September 30, 2022				% of		October 1, 2021				Fav (Unfav)
		Sales						Sales						Amount				%			Sales						Sales						Amount				%
Net sales		100.0	%	$	76,046			100.0	%	$	58,352			$	17,694			30.3	%		100.0	%	$	220,347			100.0	%	$	171,471			$	48,876			28.5	%
Cost of sales		20.5	%		15,584			22.4	%		13,051				(2,533	)		-19.4	%		21.2	%		46,749			22.1	%		37,825				(8,924	)		-23.6	%
Gross profit		79.5	%		60,462			77.6	%		45,301				15,161			33.5	%		78.8	%		173,598			77.9	%		133,646				39,952			29.9	%
Selling, general and administrative expenses:
General and administrative		18.4	%		14,011			18.9	%		11,018				(2,993	)		-27.2	%		18.1	%		39,934			19.0	%		32,671				(7,263	)		-22.2	%
Selling and marketing		30.4	%		23,130			31.1	%		18,175				(4,955	)		-27.3	%		29.3	%		64,633			29.3	%		50,229				(14,404	)		-28.7	%
Research and development		12.7	%		9,616			14.2	%		8,271				(1,345	)		-16.3	%		12.0	%		26,193			14.5	%		24,790				(1,403	)		-5.7	%
Total selling, general, and administrative expenses		61.5	%		46,757			64.2	%		37,464				(9,293	)		-24.8	%		59.4	%		130,760			62.8	%		107,690				(23,070	)		-21.4	%
Operating income		18.0	%		13,705			13.4	%		7,837				5,868			74.9	%		19.4	%		42,838			15.1	%		25,956				16,882			65.0	%
Other expense, net:
Interest income (expense), net		1.2	%		897			0.0	%		(23	)			920			4000.0	%		0.4	%		934			0.0	%		(35	)			969			2768.6	%
Loss on foreign currency transactions		-2.8	%		(2,129	)		-1.1	%		(610	)			(1,519	)		-249.0	%		-2.2	%		(4,904	)		-1.2	%		(2,040	)			(2,864	)		-140.4	%
Royalty income		0.1	%		77			0.3	%		185				(108	)		-58.4	%		0.2	%		527			0.3	%		496				31			6.3	%
Other income (expense), net		0.0	%		27			0.0	%		(13	)			40			307.7	%		0.1	%		178			0.0	%		(47	)			225			478.7	%
Total other expense, net		-1.5	%		(1,128	)		-0.8	%		(461	)			(667	)		-144.7	%		-1.5	%		(3,265	)		-0.9	%		(1,626	)			(1,639	)		-100.8	%
Income before provision for income taxes		16.5	%		12,577			12.6	%		7,376				5,201			70.5	%		17.9	%		39,573			14.2	%		24,330				15,243			62.7	%
Provision for income taxes		3.0	%		2,315			2.3	%		1,356				(959	)		-70.7	%		3.0	%		6,671			2.8	%		4,751				(1,920	)		-40.4	%
Net income		13.5	%	$	10,262			10.3	%	$	6,020			$	4,242			70.5	%		14.9	%	$	32,902			11.4	%	$	19,579			$	13,323			68.0	%
Net income per share - basic				$	0.21					$	0.13												$	0.69					$	0.42
Net income per share - diluted				$	0.21					$	0.12												$	0.67					$	0.40
Weighted average shares outstanding - basic					48,102						47,483													47,915						47,064
Weighted average shares outstanding - diluted					49,549						49,592													49,371						49,448

Consolidated Statements of Cash Flows
(in 000's)
Unaudited
			Three Months Ended								Nine Months Ended
			September 30, 2022				October 1, 2021				September 30, 2022				October 1, 2021
Cash flows from operating activities:
Net income			$	10,262			$	6,020			$	32,902			$	19,579
Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation of property and equipment			1,077				917				3,101				2,671
	Amortization of long-lived intangibles			7				9				22				26
	Accretion/Amortization of investments available for sale			(307	)			-				(307	)			-
	Deferred income taxes			23				-				23				845
	Change in net pension liability			(12	)			118				40				91
	Stock-based compensation expense			5,727				3,663				15,375				10,985
	Loss on disposal of property and equipment			-				-				-				2
	Provision for sales returns and bad debts			(439	)			137				361				1,069
	Inventory provision			592				400				2,020				1,097
Changes in working capital:
	Accounts receivable			7,029				6,725				(13,108	)			(7,072	)
	Inventories			(2,298	)			(937	)			(4,123	)			1,301
	Prepayments, deposits and other current assets			2,786				1,595				526				1,288
	Accounts payable			(5,077	)			228				(1,834	)			(40	)
	Other current liabilities			4,739				3,441				(2,253	)			3,622
	Net cash provided by operating activities			24,109				22,316				32,745				35,464
Cash flows from investing activities:
	Acquisition of property and equipment			(6,273	)			(3,273	)			(14,083	)			(8,956	)
	Purchase of investments available for sale			(95,576	)			-				(95,576	)			-
	Net cash used in investing activities			(101,849	)			(3,273	)			(109,659	)			(8,956	)
Cash flows from financing activities:
	Repayment of finance lease obligations			(40	)			(36	)			(85	)			(314	)
	Proceeds from vested restricted stock and exercise of stock options			5,034				4,212				8,180				18,323
	Net cash provided by financing activities			4,994				4,176				8,095				18,009
Effect of exchange rate changes on cash and cash equivalents				(502	)			(56	)			(1,645	)			(724	)
Increase (decrease) in cash and cash equivalents				(73,248	)			23,163				(70,464	)			43,793
Cash and cash equivalents, at beginning of the period				202,490				173,083				199,706				152,453
Cash and cash equivalents, at end of the period			$	129,242			$	196,246			$	129,242			$	196,246

Reconciliation of Non-GAAP Financial Measure
Adjusted Net Income and Net Income Per Share
(in 000's)
Unaudited		Three Months Ended					Nine Months Ended
		September 30, 2022		October 1, 2021			September 30, 2022		October 1, 2021
Net income (as reported)		$	10,262	$	6,020		$	32,902	$	19,579
Less:
Foreign currency impact			2,129		610			4,904		2,040
Stock-based compensation expense			5,727		3,663			15,375		10,985
Valuation allowance adjustment			-		-			-		845
Net income (adjusted)		$	18,118	$	10,293		$	53,181	$	33,449
Net income per share, basic (as reported)		$	0.21	$	0.13		$	0.69	$	0.42
Foreign currency impact			0.05		0.01			0.10		0.04
Stock-based compensation expense			0.12		0.08			0.32		0.23
Valuation allowance adjustment			-		-			-		0.02
Net income per share, basic (adjusted)		$	0.38	$	0.22		$	1.11	$	0.71
Net income per share, diluted (as reported)		$	0.21	$	0.12		$	0.67	$	0.40
Foreign currency impact			0.04		0.01			0.10		0.04
Stock-based compensation expense			0.12		0.08			0.31		0.22
Valuation allowance adjustment			-		-			-		0.02
Net income per share, diluted (adjusted)		$	0.37	$	0.21		$	1.08	$	0.68
Weighted average shares outstanding - Basic			48,102		47,483			47,915		47,064
Weighted average shares outstanding - Diluted			49,549		49,592			49,371		49,448
Note: Net income per share (adjusted), basic and diluted, may not add due to rounding

STAAR Surgical Company
Reconciliation of Non-GAAP Financial Measure
Constant Currency Sales
(in 000's)
Unaudited
	Three Months Ended
	September 30, 2022		Effect of Currency		Constant Currency			October 1, 2021			As Reported						Constant Currency
Sales											$ Change			% Change			$ Change			% Change
ICL	$	71,953	$	3,210	$	75,163		$	54,153		$	17,800		32.9	%		$	21,010		38.8	%
Cataract IOL		2,191		484		2,675			2,525			(334	)	-13.2	%			150		5.9	%
Other		1,902		284		2,186			1,674			228		13.6	%			512		30.6	%
Other Products		4,093		768		4,861			4,199			(106	)	-2.5	%			662		15.8	%
Total Sales	$	76,046	$	3,978	$	80,024		$	58,352		$	17,694		30.3	%		$	21,672		37.1	%
	Nine Months Ended
	September 30, 2022		Effect of Currency		Constant Currency			October 1, 2021			As Reported						Constant Currency
Sales											$ Change			% Change			$ Change			% Change
ICL	$	208,550	$	7,166	$	215,716		$	159,889		$	48,661		30.4	%		$	55,827		34.9	%
Cataract IOL		7,640		1,137		8,777			9,324			(1,684	)	-18.1	%			(547	)	-5.9	%
Other		4,157		721		4,878			2,258			1,899		84.1	%			2,620		116.0	%
Other Products		11,797		1,858		13,655			11,582			215		1.9	%			2,073		17.9	%
Total Sales	$	220,347	$	9,024	$	229,371		$	171,471		$	48,876		28.5	%		$	57,900		33.8	%

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20221102005910/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 Q3 2022 financial results?

STAAR Surgical reported Q3 2022 net sales of $76 million, up 30% year-over-year.

How did ICL sales perform in Q3 2022 for STAA?

ICL sales reached $72 million in Q3 2022, marking a 33% increase compared to the prior year.

What is the expected total net sales for STAAR Surgical in 2022?

The company anticipates total net sales of approximately $285 million for fiscal 2022.

What challenges is STAAR Surgical facing in Q4 2022?

STAAR faces delays in demand due to tighter COVID restrictions in China and ongoing headwinds in Europe.

What is the gross margin for STAAR Surgical in Q3 2022?

The gross margin improved to 79.5% in Q3 2022, up from 77.6% in the same quarter last year.