Q1 2021 STAAR Surgical Co Earnings Call
Good day, ladies and gentlemen, thank you for standing by welcome to the STAAR surgical first quarter financial results Conference call.
During todays presentation, all parties will be in a listen only mode. Following the presentation. The call will be open for questions. If you have questions. Please press star followed by one on your Touchtone phone. If you are using speaker equipment today, please lift handset before making your selection.
This call is being recorded today Wednesday may five 2021 at this time I would like to turn the conference over to Mr. Brian Moore, Vice President Investor Media Relations and corporate development for STAAR surgical Sir the floor is yours.
Thank you operator, and good afternoon, everyone.
Thank you for joining us on the STAAR surgical conference call. This afternoon to discuss the company's financial results for the first quarter ended April <unk> 2021.
On the call today are Caren Mason, President and Chief Executive Officer, and Patrick Williams, Chief Financial Officer.
The press release of our first quarter results was issued just after four P. M. Eastern time and is now available on staar's website at Www Dot STAAR Dot com.
Before we begin let me quickly remind you that during the course of this conference call. The company will make forward looking statements. We caution you that any statement that is not a statement of historical fact is a forward looking statement. This.
This includes remarks about the company's projections expectations plans beliefs and prospects.
These statements are based on judgment and analysis as of the date of this conference call.
And are subject to numerous important risks and uncertainties that could cause actual results to differ materially from those described in the forward looking statements.
The risks and uncertainties with the forward looking statements made on this conference call and webcast are described in the Safe Harbor statement in today's press release as well as staar's public periodic filings with the SEC.
Except as required by law STAAR assumes no obligation to update these forward looking statements to reflect future events or actual outcomes and does not intend to do so.
In addition to supplement the GAAP numbers, we have provided non-GAAP adjusted net income and adjusted earnings per share and sales in constant currency.
We believe that these non-GAAP numbers provide meaningful supplemental information and are helpful in assessing our historical and future performance.
A table reconciling the GAAP information to the non-GAAP information is included in today's press release.
Following our prepared remarks, we will open the lines for questions from publishing analysts.
We ask analysts limit themselves to two initial questions then re queue with any follow ups.
We thank everyone in advance for their cooperation with this process.
And with that I would now like to turn the call over to Caren Mason, President and CEO of STAAR.
Thank you Brian Good afternoon, everyone and thank you for joining us on today's call. The record results for the first quarter of 2021 demonstrates that the promise for our lens based future of refractive vision correction is accelerating led by Staar's Evo.
The <unk> family of implantable column of our lenses Starz imperatives surround the surgeon training and partnership clinical support and extraordinary customer outreach continue to be the underpinnings of our excellent results.
We achieved strong and significant ICL unit growth globally, including China of 63%, Japan up 72%, South Korea up 29%.
Oh of Pacific distributor markets up 63%, India of 67%.
<unk> up 42%, Germany of 48% European distributor markets of 54% and the U S of 46% all of us compared to the prior year quarter.
All told global ICL unit growth for the first quarter of 2021 was up 54% year over year.
Strong of ICL unit growth drove the company net sales growth of 44% year over year.
58 million in the first quarter of 2021.
This impressive level of growth exceeds the aggressive 2020 to 2022 three year plan growth. We outlined for you in November 2019 for year two of the plan.
We are pleased to report that our sales momentum is accelerating in 2021 as we are successfully addressing the unique and large addressable market opportunity for evil vision ICL family of lenses Starz track record as the fastest growing U S publicly traded.
Allergy Company also continues the.
Underpinning of our success are the delighted patients who achieve visual freedom with our lenses broadening support from the refractive surgeon community as the patient satisfaction and wild factor of expressed by patients is a significant win for our surgeon partners and their staffs.
This positive outcome is supported by effective direct to consumer outreach that resonates with patients seeking to free themselves from the hassles of glasses and contact lenses.
Our direct to consumer multifaceted communications are designed to build awareness of our Evo vision of ICL family of lenses, highlighting the advantages of our lenses and differentiating our premium lenses from other refractive options.
Our goals are to drive patients to the surgeon offices, bill surgeon and patient preference for our lenses and win refractive vision correction market share.
Last month in Japan, we kicked off for an exciting new advertising campaign, featuring Japanese celebrity May also cause of Kita, who will be featured in ICL digital banner ads Youtube video ads, social media ads on Instagram and Twitter and train ads.
The timing on routes through Tokyo, Nagoya and other major routes most frequented by our target audience may Yoko is the celebrity active in television and fashion in Japan, who has achieved visual freedom through Icl's and as our newest ICL brand of that.
It's at or May Alco, it's typically on local television every few days in Japan and has over 1.6 million followers on Instagram.
I must say that part of the excitement at STAAR is being on internationally immersed company as we build our direct to consumer campaigns to be suited specifically for local taste and patient decision making.
Patient education information has taken over the homepage of the dedicated ICL consumer website in Japan as part of the campaign featuring Mayo kind of.
The link to the consumer website as provided in my quote in today's earnings press release investors and analysts May also of your videos from the campaign launch on the global consumer marketing section of our Investor website at investors Dot STAAR Dot com the.
The videos are informative and entertaining.
At one point during the video viewers will female pose the old glasses or contact lenses case and old eyedrops animated and trying to get her attention because she is no longer using them in response Mayo co smiles and points to her icl's and the visual freedom fish.
He now enjoys.
New and exciting advertising campaigns will also be starting in other major global markets in the coming weeks and months featuring celebrity Evo Vivien ICL brand ambassadors, who are delighted with her icl's.
Turning to our near term pipeline of new product introductions, we are continuing the controlled rollout of our evil veeva of presbyopia lenses in Europe, adding surgeons and refining the Evo Veeva playbook on best practices.
We will share with certified surgeons the.
Of the Evo Veeva lenses designed to delight. The early Presbyopia ages 45 to 55 seeking visual freedom at near intermediate and far distances. We continue to plan for inexpensive commercial kickoff of our Evo Veeva lens when we can run it in person event.
And our experts meeting format in Europe.
We have not solidified the date, yet as society meetings continue to pushback virtual and in person the hybrid meetings, let alone all in person meetings, we should know more by summer.
In late April of the FTA received our clinical data for our Evo family of myopia lenses with the goal of bringing Evo to the U S. Market. Later this year, we will provide an update on the status of our submission when appropriate and permitted the.
The us as the number two market in the world for refractive procedures is a market, where we have been laying the groundwork for our evo family of lenses for some time.
Our work in further preparing the U S market for our breakthrough Evo family of lenses began with the initial rounds of hiring of key North America personnel and.
As the leadership expanded so did the quality and quantity of exceptional ophthalmology experienced commercial executives.
Alright outreach also included our inaugural U S. Surgeons console meeting, where we hosted dozens of U S surgeons and ophthalmic business leaders to hear about the successful integration of Evo lenses and practices outside the U S in markets, such as China, Japan and Europe.
Since 2019, we have signed dozens of alliance agreements in 2020 in response to COVID-19, we introduced the program to build the ICL awareness and volumes in the U S. While also enhancing surgeon economics.
Refractive re look at Star Usda's latest promotion.
The refractive Re-look encourages ICL surgeons to take another look at their vision of ICL prescription patterns and encourage the surgeons to use more of lenses down the diopter curve between minus three and minus eight diopters as a result, we are pleased to report.
For a terrific ICL unit growth for the first quarter of 2021 up 46 per cent in the U S year over year per.
Ending FTA approval, we look forward to introducing our evo lenses to the U S market in the fourth quarter of this year.
Given the momentum in our business and the increased visibility in our key markets. We are today able to introduce the topline sales outlook for.
For the full year fiscal 2021 we anticipate net sales of approximately $215 million to $217 million, which represents a robust growth rate that exceeds 30% year over year, even taking into it.
Count the strong performance in the second half of 'twenty 'twenty.
I will now turn the call over to Patrick to discuss our financial performance in more detail Patrick.
Thank you Karen and good afternoon, everyone.
Total net sales for Q1 2021 for $58 million up.
44% as compared to the $35 $2 million of net sales in Q1, 2020 and up 10% on a sequential basis from Q4 2020.
The year over year increase of net sales was attributable to the growth Caren pilots earlier and the sequential increase in sales was due to the increasing momentum in our business.
As we enter our seasonally highest sales quarters in Q2, and Q3 and prepare for the busy implant season in key markets like China. We anticipate Q2 2021 net sales to be higher than Q1, 2020 one.
Which we currently expect would represent approximately 50% year over year revenue growth in Q2.
In terms of product mix ICL sales represented 92 per cent of total company net sales for Q1 2021 and other products represented 8%.
As a reminder, our other product sales primarily consists of our basic or cataract I O LS and injectors business, which serve only certain markets globally. The miss.
Icl's for Q1 was higher than recent trends due to higher ICL sales and approximately $1 $6 million lower other party sales, specifically injectors as compared to Q1 2020.
The lower injector sales of the results of the product yield issue from our third party manufacturer, which thereby limited our supply of available for sale during Q1 2021.
Our third party manufacturer is in the process of reworking the materials and we anticipate our supply will return to normal by the end of Q2 2021.
We now anticipate total of other product sales will be approximately $50 million for the full year 2021.
Which is contemplated in our full year sales outlook, and which speaks to the strength from the core higher growth and higher margin ICL business.
Gross profit for Q1, 2021 was $39 $1 million for $77 one per cent of net sales as compared to gross profit of $24 8 million or <unk> 74 per cent of net sales for Q1 2020.
And $34 3 million or $74 six per cent of net sales for Q4 2020.
The year over year and sequential increase in gross margin is due to geographic sales mix and a lower mix of injector sales, which carry a lower margin than our ICL and.
In addition for the year over year comparison, there were $150000 of period costs recorded in Q1 2020 as a result of of COVID-19 related manufacturing pause, which began on March 17, 2020 and did not occur in Q1 2021.
We expect gross margin to continue to be in the mid 70 per cent range for Q2 and fiscal year 2021.
Which will remain highly dependent on geographic and product sales mix.
Moving down the income statement total operating expenses for Q1, 2021 with $31 $7 million as compared to $25 9 million in Q1, 2020, and $30 2 million for Q4 of 2020.
Taking a closer look at the components of operating expenses.
G&A expense for Q1, 2021 was $10 $2 million compared to $8 million for Q1, 2020, and $9 5 million for Q4 2020.
The year over year increase in G&A is due to increased variable compensation salary related expenses facility costs and corporate insurance, partially offset by decreased tax consulting costs.
The sequential increase in G&A expense was due to increased salary related expenses consulting expenses facility costs and corporate insurance.
We expect quarterly G&A to continue the trend at a level similar to Q1 2021 in absolute dollars for the balance of the year.
Selling and marketing expense was $13 2 million for Q1 2021 compared to $11 million for Q1, 2020% of 11 eight for Q4 2020.
The increase in sales and marketing expense from the prior year was due to increased salary related expenses.
The compensation advertising and promotional activities slightly offset by travel expenses.
The sequential increase from Q4 2020 was due to increased advertising and promotional activity salary related expenses and variable compensation.
Q1 sales and marketing expense was slightly lower than expected due to the timing of some marketing spend across a few areas, including our digital marketing efforts on rescheduling of certain meetings and trade shows due to COVID-19.
We expect to see of significant absolute dollar increase in sales and marketing for the second quarter as we prepare for our busy season.
Still we continue to expect sales and marketing as a percentage of sales to represent approximately 33% of sales for the full year 2021.
The company makes the appropriate investments in scaling the company and optimism built that the late season sales meetings and trade shows due to the COVID-19 will resume.
Research and development expense was $8 $3 million in Q1, 'twenty, one compared to $6 9 million for Q1, 2020, and 9 million for two for 2020.
The increase in R&D expenses compared to the prior year quarter was primarily due to increased variable compensation clinical expenses associated with the Evo clinical trial for the U S and salary related expenses and.
The sequential decrease in R&D expenses were due to decreased expenses related to clinical expenses associated with the Evo clinical trial in the U S, partially offset by an increase in salary related costs.
We expect R&D for 2021 to be in the nine to $9 $5 million range per quarter for the balance of the year.
Operating income in Q1, 2021 was $7 $5 million of 14, 7% of net sales as compared to operating loss of $1 1 million for Q1 2020.
The improvement in operating income is due to higher sales and leverage on fixed and variable operating expenses during the quarter.
Net income in Q1, 2021 was $5 million or 10 cents per diluted share compared to a net loss of $134000 were essentially breakeven per share in Q1 2020.
The company's effective tax rate for Q1, 2021 was approximately 20%.
We expect our effective tax rate for the full year of fiscal 2021 will be approximately 30%.
On a GAAP basis adjusted net income for the Q1 2021 was $9 6 million or 20 cents per diluted share compared to adjusted income of $1 9 million or four cents per diluted share in Q1 2020.
A table reconciling the GAAP information to the non-GAAP information is included in today's financial release.
Turning now to our balance sheet, our cash and cash equivalents as of April 2nd 2021 totaled $162 3 million up $9 8 million compared to $152 5 million at the end of the fourth quarter 2020.
The sequential increase from the fourth quarter is attributable to net $6 $2 million in cash generated from operations and $6 $8 million in proceeds from the exercise of stock options, partially offset by $2 $2 million of capital expenditures.
For the full year 2021, we continue to expect total capex spending to be in the range of 15 million to $20 million as we make investments consistent with scaling the company and our large addressable market opportunity.
This will include investment in expanding on manufacturing capacity footprint scaling production for our new Evo Veeva lands and infrastructure scalability.
Finally star will be participating in the following events the.
And hymer Med Tech tools and diagnostics summit on May 26.
The William Blair growth stock Conference on June 1st and the Jefferies Health Conference on June 2nd.
We look forward to speaking with many of you at these events and this concludes our prepared remarks, operator, we are now ready to take questions.
Thank you Sir as a reminder to ask the question you will need to press star one on your telephone keypad.
Again that is star one to ask the question.
Our first question comes from the lineup Anthony Petrone from Jefferies. Your line is open.
Good afternoon, everyone and congratulations on on a really.
It really of breakout quarter here on <unk>.
Everyone's doing well on.
I'm going to keep it brief just two quick questions.
And wanted to just get an idea of the source of the break out.
And growth and so is there a weight of sort of quantify what is catch up in these numbers.
Versus sustainable growth drivers.
The other words, just underlying demand starting to really kicking the gear here and then the <unk>.
Follow up would be specifically on the U S and EU implant numbers, obviously much higher than what we expected are you seeing any volume of legacy products.
Ahead of our full scale vivo launch in Europe for instance, and the potential launch of the evil busy in the U S. Thanks, and congratulations again.
Thanks, very much Anthony we appreciate you joining on and in terms of your first question.
No we don't see this as a catch up we see this as a continuation of the great momentum pre COVID-19 that began at the end of 2019 into the first couple of months of 'twenty 'twenty.
And if you remember last year.
And the U S North America, where.
We're not really impacted much in the Q1 it was mostly in China as a matter of fact Korea and Japan true much of the pandemic continued to see patients successfully for vision correction with our Evo lenses. So what we see this is as they return.
On to pre COVID-19 levels with great momentum going into the rest of the year.
With regard to the wonderful uptake that.
And that we were seeing in Europe for example.
We believe that a lot of the work that we've done.
With regard to getting the word out on Evo over the last few years is paying off handsomely and so when we look at the number of referrals to doctors many of them coming from the patients now and there are a number of social media channels that patients themselves.
So enthusiastic on telling their stories. So in Europe. There is definitely also a renewed appreciation of the value of having a great.
Patient satisfaction rate and an outstanding business model, where profitability per eye for the Evo lens is highest in the practice of separate factor of surgery. So with all of that great stuff going on we expect more and better in the coming quarters.
Okay.
Thanks Thats helpful.
Thanks Anthony.
Once again, if you have questions over the phone you May press star one.
Again that the star one to ask the question.
Once again, if you have questions.
The press Star one.
All of our per centers are there seems to be no questions.
I'll turn it on I'll turn it over now to MS Caren Mason for closing remarks.
Well. Thank you very much we really appreciate purchase of patient on our call. Today, we look forward to speaking with many of you in the days of weeks ahead. We always appreciate your interest in investing in the STAAR surgical so excited to deliver the great results. We did today. Please take good care all of the best of all of you.
Yes.
Alright. This concludes today's conference call. Thank you for participating you may now disconnect.
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