Press Release Details

STAAR Surgical Reports Third Quarter 2016 Results

November 3, 2016

MONROVIA, Calif., Nov. 3, 2016 /PRNewswire/ -- 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, 2016.

Third Quarter 2016 Overview

  • Record Quarter for ICL Units Sold Exceeds Q2 2016 Record
  • Quarterly Net Sales of $20.1 Million Up 7% from the Prior Year Quarter
  • Worldwide ICL Sales and Units Up 15% from the Prior Year Quarter
  • Worldwide IOL Sales Up 6% and Units Down 3% from the Prior Year Quarter
  • Gross Margin Improved to 74.2% of Sales from 68.3% of Sales in the Prior Year Quarter
  • On-Going FDA Remediation Effort Finished the Quarter On-Track and On-Budget
  • Third Quarter Net Loss of $0.04 per Share; Adjusted Net Loss of $0.02 per Share
  • Cash and Equivalents Increased by $1.6 Million to $14.3 Million
  • Closed Strategic Cooperation Agreements with Leading Providers in S.E. Europe and India
  • Completed Initial Human Implants of EVO+ Visian ICL™ Extended Depth of Field Lenses Designed to Address Presbyopia. Initial Results are Positive and the Clinical Study for these Lenses Continues.

"We delivered another successive record quarter for ICL units sold and signed two additional Strategic Cooperation Agreements during the quarter," said Caren Mason, President and CEO. "In addition, we have finalized the initial clinical design of our new extended depth of field EVO+ Visian ICL posterior chamber phakic lens and the initial clinical results are positive. The EVO and EVO+ ICL lenses are made of Collamer®, our proprietary highly biocompatible material that allows for long-term implantation. As patients age, they begin to lose near and then intermediate vision due to presbyopia, a long-term, natural progressive loss of accommodation experienced by all people," added Ms. Mason.  "These lenses are designed to provide good vision for patients of all ages and prescriptions within our approved ranges while potentially extending by many years the period of time before reading glasses are required," said Vice President of Research and Development, Keith Holliday Ph.D.  "Hyperopic [far-sighted] patients may benefit most from an extended depth of field as such patients suffer from the effects of presbyopia soonest. Subtle changes have been made to the optical surfaces of our EVO+ lens design to modify the hyperfocal distance of an eye implanted with the lens. This leads to an increase in the depth of field for the patient. As the lens is implanted between the cornea and the crystalline lens it works together with the crystalline lens without having to surgically alter the cornea," added Dr. Holliday.    

Financial Overview

Net sales were $20.1 million for the third quarter of 2016, up 7% compared to $18.8 million reported in the prior year quarter. The sales increase was driven by ICL revenue and unit growth of 15% each, and IOL revenue growth of 6%.  These increases were partially offset by planned lower sales of injector parts in the third quarter and a delay in orders from Canadian surgeons awaiting EVO Toric lens approval, which occurred on September 21, 2016.  For the first nine months of 2016, ICL revenue and units increased 16% and 11%, respectively.

For the third quarter of 2016, gross profit margin was 74.2% compared to the prior year period of 68.3%.  An increased mix of higher margin ICL units, lower ICL unit costs, higher average selling prices, and lower inventory reserves combined to improve gross margin by approximately 5.9 points.

Operating expenses for the quarter increased $1.8 million to $16.6 million compared to the prior year quarter primarily due to costs related to quality system improvements and investments made in the international selling and marketing organizations.  General and administrative expense was $5.0 million and the change from the prior year quarter was not material.  Marketing and selling expense was $7.1 million, $0.9 million higher than the prior year quarter due to the re-branding efforts and international selling and promotional costs.  Research and development expense was $4.5 million, an increase of $0.8 million due to investments in quality system improvements, clinical affairs, and project-related spending, partially offset by lower FDA remediation expenses.  Remediation expense for the quarter was on budget. 

The net loss for the third quarter of 2016 was $1.8 million or $0.04 per share compared with a net loss of $1.8 million or $0.04 per share for the prior year quarter.

The adjusted net loss for the third quarter of 2016 was $0.9 million or $0.02 per share, compared with an adjusted net loss of approximately breakeven and breakeven per share for the prior year quarter.  The reconciliation between GAAP and non-GAAP financial information is provided in the financial tables included with this release.

Cash and cash equivalents at September 30, 2016 totaled $14.3 million, compared to $16.1 million at the end of the third quarter of 2015 and $12.7 million at the end of the second quarter of 2016.  Continued focus on optimizing the Company's cash position through revenue growth, expense mitigation, working capital management, and equipment leasing generated the increase in cash from the second quarter of 2016 to the third quarter of 2016.  The Company has generated $0.9 million in cash from operating activities during the first nine months of the year.

Conference Call

The Company will host a conference call and webcast on Thursday, 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 (Conference ID 97993546), 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 97993546) 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 (or Loss)" excludes the following items that are included in "Net Income (or 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 (or Loss)" and "Adjusted Net Income (or Loss) 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 (or Loss) 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".  More than 600,000 Visian ICLs have been implanted to date.  To learn more about the ICL go to: www.discovericl.com.  STAAR has approximately 360 employees and markets lenses in over 60 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 future operations or prospects for achieving such plans, expectations for sales, marketing and clinical initiatives, investment imperatives, and any statements of assumptions underlying any of the foregoing.  Important additional 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 January 1, 2016 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: our limited capital resources and limited access to financing; the negative effect of unstable global economic conditions on sales of products, especially products such as the ICL used in non-reimbursed elective procedures; changes in currency exchange rates; the discretion of regulatory agencies to approve or reject existing, new or improved products, or to require additional actions before approval (including but not limited to FDA requirements regarding the Visian Toric ICL and/or actions related to the FDA Warning Letter and Form FDA-483s), or to take enforcement action; research and development efforts may not be successful or may be delayed in delivering products for launch or may exceed anticipated costs; the purchasing patterns of our distributors carrying inventory in the market; the willingness of surgeons and patients to adopt a new or improved product and procedure; and patterns of Visian ICL use that have typically limited our penetration of the refractive procedure market.  The Visian Toric ICL and the Visian ICL with CentraFLOW, now known as EVO Visian ICL, are not yet approved for sale in the United States.

CONTACT:

Investors & Media


EVC Group


Brian Moore, 310-579-6199


Doug Sherk, 415-652-9100

 

STAAR Surgical Company

Consolidated Balance Sheets

(in 000's)

Unaudited








September 30,


January 1,

ASSETS


2016


2016






Current assets:





Cash and cash equivalents


$          14,284


$   13,402

Accounts receivable trade, net


14,372


15,675

Inventories, net


15,895


15,921

Prepayments, deposits, and other current assets


4,649


3,636

Deferred income taxes


518


439

   Total current assets


49,718


49,073

Property, plant, and equipment, net


11,718


10,095

Intangible assets, net


607


666

Goodwill


1,786


1,786

Deferred income taxes


1,670


717

Other assets


835


617

   Total assets


$          66,334


$   62,954






LIABILITIES AND STOCKHOLDERS' EQUITY





Current liabilities:





Line of credit


$           4,941


$     4,159

Accounts payable


7,973


6,691

Deferred income taxes


370


370

Obligations under capital leases 


398


362

Other current liabilities


7,568


6,305

   Total current liabilities


21,250


17,887

Obligations under capital leases 


1,676


204

Deferred income taxes


1,005


1,888

Asset retirement obligations


225


156

Deferred rent


68


87

Pension liability


4,380


3,886

   Total liabilities


28,604


24,108
















Stockholders' equity:





Common stock


406


399

Additional paid-in capital


196,411


187,007

Accumulated other comprehensive loss


(145)


(1,580)

Accumulated deficit


(158,942)


(146,980)

   Total stockholders' equity


37,730


38,846

   Total liabilities and stockholders' equity


$          66,334


$   62,954

 

STAAR Surgical Company

Consolidated Statements of Operations

(In 000's except for per share data)

Unaudited













































Three Months Ended


Nine Months Ended



% of

September 30,


% of

October 2,


Fav (Unfav)


% of

September 30,


% of

October 2,


Fav (Unfav)



Sales

2016


Sales

2015


Amount


%


Sales

2016


Sales

2015


Amount


%






















Net sales


100.0%

$                20,052


100.0%

$        18,750


$    1,302


6.9%


100.0%

$                60,295


100.0%

$        56,264


$    4,031


7.2%






















Cost of sales


25.8%

5,180


31.7%

5,951


771


13.0%


29.5%

17,804


32.4%

18,206


402


2.2%






















Gross profit


74.2%

14,872


68.3%

12,799


2,073


16.2%


70.5%

42,491


67.6%

38,058


4,433


11.6%






















Selling, general and administrative expenses:





















  General and administrative


24.9%

4,985


25.9%

4,853


(132)


-2.7%


30.5%

18,378


26.2%

14,748


(3,630)


-24.6%

  Marketing and selling


35.7%

7,149


33.5%

6,284


(865)


-13.8%


36.5%

22,006


31.6%

17,784


(4,222)


-23.7%

  Research and development


22.2%

4,453


19.6%

3,684


(769)


-20.9%


26.6%

16,018


19.2%

10,800


(5,218)


-48.3%

    Total selling, general, and administrative expenses


82.8%

16,587


79.0%

14,821


(1,766)


-11.9%


93.6%

56,402


77.0%

43,332


(13,070)


-30.2%






















Operating loss 


-8.6%

(1,715)


-10.7%

(2,022)


307


15.2%


-23.2%

(13,911)


-9.4%

(5,274)


(8,637)


-163.8%






















Other income (expense):





















  Interest income


0.0%

0


0.0%

1


(1)


-100.0%


0.0%

1


0.1%

50


(49)


-98.0%

  Interest expense


-0.1%

(29)


-0.2%

(29)


-


0.0%


-0.1%

(86)


-0.2%

(97)


11


11.3%

  Gain (loss) on foreign currency transactions


-0.1%

(29)


0.1%

20


(49)



0.0%

13


-1.2%

(692)


705


  Royalty income


0.7%

134


1.2%

224


(90)


-40.2%


0.8%

507


0.7%

375


132


35.2%

  Other income (expense), net


-0.3%

(68)


0.2%

43


(111)



-0.2%

(150)


0.1%

62


(212)


    Total other income (expense), net


0.2%

8


1.3%

259


(251)


-96.9%


0.5%

285


-0.5%

(302)


587























Loss before provision (benefit) for income taxes


-8.4%

(1,707)


-9.4%

(1,763)


56


3.2%


-22.7%

(13,626)


-9.9%

(5,576)


(8,050)


-144.4%






















Provision (benefit) for income taxes


0.4%

71


-0.1%

(11)


(82)



-2.8%

(1,664)


0.2%

114


(1,778)























Net loss


-8.8%

$                (1,778)


-9.3%

$         (1,752)


$       (26)


-1.5%


-19.9%

$               (11,962)


-10.1%

$         (5,690)


$   (6,272)


-110.2%











































Net loss per share - basic and diluted



$                  (0.04)



$           (0.04)







$                  (0.30)



$           (0.14)





Weighted average shares outstanding - basic and diluted



40,486



39,727







40,227



39,409





 

STAAR Surgical Company

Consolidated Statements of Cash Flows

(in 000's)

Unaudited




Three Months Ended


Nine Months Ended




September 30,


October 2,


September 30,


October 2,




2016


2015


2016


2015

Cash flows from operating activities:









   Net loss 


$           (1,778)


$    (1,752)


$         (11,962)


$    (5,690)

   Adjustments to reconcile net loss to net cash provided by (used in) operating activities:










Depreciation of property and equipment


696


567


1,933


1,563


Amortization of intangibles


60


51


171


154


Deferred income taxes


(4)


(113)


(1,806)


(148)


Change in net pension liability


170


41


390


136


Stock-based compensation expense


385


924


8,143


2,747


Provision for sales returns and bad debts


10


88


99


331

   Changes in working capital:










Accounts receivable 


1,772


(308)


1,707


(2,040)


Inventories, net


(12)


(172)


1,601


1,497


Prepayments, deposits and other current assets


(700)


131


(1,118)


737


Accounts payable


(688)


1,003


594


(991)


Other current liabilities


1,428


628


1,104


1,387


      Net cash provided by (used in) operating activities


1,339


1,088


856


(317)











Cash flows from investing activities:










Acquisition of property and equipment


(718)


(582)


(2,709)


(1,283)


Cash proceeds from sale of property, plant, and equipment


48


-


65


2


      Net cash used in investing activities


(670)


(582)


(2,644)


(1,281)











Cash flows from financing activities:










Repayment of capital lease lines of credit


(118)


(96)


(302)


(306)


Proceeds from sale-leaseback transactions


-


-


1,154


-


Repurchase of employee common stock for taxes withheld


-


-


(611)


-


Proceeds from the exercise of stock options


915


253


1,652


2,149


Proceed from the exercise of warrants


-


-


-


2,800


      Net cash provided by financing activities


797


157


1,893


4,643











Effect of exchange rate changes on cash and cash equivalents


130


83


777


23











Increase in cash and cash equivalents


1,596


746


882


3,068

Cash and cash equivalents, at beginning of the period


12,688


15,335


13,402


13,013

Cash and cash equivalents, at end of the period


$          14,284


$   16,081


$          14,284


$   16,081

 

STAAR Surgical Company

Global Sales

(in 000's)

Unaudited






























Three Months Ended


Nine Months Ended



September 30,


October 2,


% Change



September 30,


October 2,


% Change

Sales by Region


2016


2015


Fav (Unfav)



2016


2015


Fav (Unfav)

North America

12.5%

$           2,502

16.3%

$     3,053


-18.1%


12.8%

$           7,726

15.9%

$     8,954


-13.7%

Europe, Middle East, Africa, Latin America

29.8%

5,985

28.8%

5,393


11.0%


31.1%

18,764

29.8%

16,779


11.8%

Asia Pacific

57.7%

11,565

55.0%

10,304


12.2%


56.1%

33,805

54.3%

30,531


10.7%

    Total Sales

100.0%

$          20,052

100.0%

$   18,750


6.9%


100.0%

$          60,295

100.0%

$   56,264


7.2%





























Product Sales














ICLs

73.8%

$          14,801

68.8%

$   12,907


14.7%


72.0%

$          43,389

66.5%

$   37,396


16.0%

IOLs

23.2%

4,649

23.4%

4,390


5.9%


24.5%

14,783

26.6%

14,952


-1.1%

Other

3.0%

602

7.8%

1,453


-58.6%


3.5%

2,123

7.0%

3,916


-45.8%

    Total Sales

100.0%

$          20,052

100.0%

$   18,750


6.9%


100.0%

$          60,295

100.0%

$   56,264


7.2%

 

STAAR Surgical Company

Reconciliation of Non-GAAP Financial Measure

(in 000's)

Unaudited


Three Months Ended


Nine Months Ended



September 30,

October 2,


September 30,

October 2,



2016

2015


2016

2015

Net loss - (as reported)


$          (1,778)

$    (1,752)


$         (11,962)

$    (5,690)

Less:







  Foreign currency impact


29

(20)


(13)

692

  Stock-based compensation expense


385

924


8,143

2,747

  FDA panel/remediation expense


485

809


1,484

3,367

Net income (loss) - (adjusted)


$             (879)

$        (39)


$          (2,348)

$     1,116








Net income (loss) per share, basic - (as reported)


$            (0.04)

$     (0.04)


$            (0.30)

$     (0.14)

  Foreign currency impact


0.00

(0.00)


(0.00)

0.02

  Stock-based compensation expense


0.01

0.02


0.20

0.07

  FDA panel/remediation expense


0.01

0.02


0.04

0.09

Net income (loss) per share, basic - (adjusted)


$            (0.02)

$     (0.00)


$            (0.06)

$      0.03








Net income (loss) per share, diluted - (as reported)


$            (0.04)

$     (0.04)


$            (0.30)

$     (0.14)

  Foreign currency impact


0.00

(0.00)


(0.00)

0.02

  Stock-based compensation expense


0.01

0.02


0.20

0.07

  FDA panel/remediation expense


0.01

0.02


0.04

0.08

Net income (loss) per share, diluted - (adjusted)


$            (0.02)

$     (0.00)


$            (0.06)

$      0.03








Weighted average shares outstanding - Basic 


40,486

39,727


40,227

39,409

Weighted average shares outstanding - Diluted


40,486

39,727


40,227

40,628








Note:  Net income (loss) per share (adjusted), basic and diluted, may not add due to rounding


 

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SOURCE STAAR Surgical Company