Q3 2021 STAAR Surgical Co Earnings Call
Good day, ladies and gentlemen, thank you for standing by.
Welcome to the stall such Coke, that's cool to financial results Conference call.
During todays presentation, all parties will be in a listen only mode.
Following the presentation the call will be opened for questions.
If you have a question. Please press star followed by one on your telephone keypad.
If you were using speaker equipment today, please lift the handset before making go to section. This call is being recorded today Wednesday November <unk> 2021.
At this time I would like to turn the conference over to Mr. Brian Moore, Vice President Investor Media Relations and corporate development. The STAAR surgical Brian. Please proceed.
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 third quarter ended October one 2021.
On the call today are Caren Mason, President and Chief Executive Officer, and Patrick Williams, Chief Financial Officer.
The press release of our third quarter results was issued just after four P. M. Eastern time and is now available on staar's website at Www Dot Star 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 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.
The risks and uncertainties associated with the forward looking statements made in this conference call and webcast are described in the Safe Harbor statement in today's press release as.
As well as staar's public periodic filings with the S E C.
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.
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 line to 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 <unk>.
President and CEO of STAAR.
Thank you Brian Good afternoon, everyone and thank you for joining us on today's call.
I am pleased to report that we experienced outstanding demand for our ICL during the third quarter and achieved net sales above the high end of our previously provided outlook.
Enthusiasm for our implantable column or lenses continues to grow and has never been higher in fact orders for ICL outstripped, our supply of lenses in the quarter.
With China being our largest market our distributors' inventory levels in China were drawn down to historically low levels to meet surgeon and patient demand.
We were able to meet 35% growth levels to the surgeon and patient community from our distributors inventory, we were only able to ship units equaling 19% growth to our distributor.
Event related employment production output and modest supply chain challenges impacted the quarter and resulted in a backlog of over 20000 lenses at the end of the third quarter, representing several million dollars of orders in house.
As many of you are aware, we have typically been able to meet the vast majority of demand for our spherical lenses and I touched him toric lenses through real time production and finished goods inventory on hand at star within a few days of receiving an order.
Continued strong demand combined with the aforementioned production challenges resulted in what we believe is a temporary longer than usual delay in lens order fulfillment during the third quarter, which we are addressing and aim to fully resolved in the coming quarters.
With regard to China I am pleased to report that our Evo ICL momentum in China continues unabated, we continue to increase our refractive market share projections for China next year and beyond.
Overall, we achieved strong year over year of global ICL unit growth of 29% in the third quarter of 2021 as compared to a significant achievement in the third quarter of 2020, where we met our pre COVID-19 growth projections ICL unit growth by.
Geography for Q3 included Japan up, 44%, South Korea up 21%.
India up 338%, Germany up 25% European distributor markets up 22%, the middle East and North Africa up 242% and the U S up 66% all as compared to the pre.
Here year quarter.
I would also like to highlight the exciting levels of growth and distributor markets, where we have recently made significant investments to convert to a hybrid market structure in several countries.
As many of you know we have star personnel working alongside our distributors and hybrid markets, leading the important commercial clinical and practice development work with our surgeon customers.
In Belgium, the Netherlands, France, and Italy, we achieved 32% ICL unit growth in aggregate year over year in the third quarter of 2021 as compared to 20% in the year ago quarter, and just 10% in the third quarter of 2000.
19.
We are continuing to expand our plans for more distributor markets to move to the hybrid model in 2022 and 2023.
Turning now to our strategic imperatives, and the drivers of growth for star in the fourth quarter and beyond.
In the U S. Our submission of clinical data for Staar's Evo family of Myopia lenses remains under customary interactive F. D. A review.
While our expectation of pre Covid approval timelines by the F. D. A has now passed we remain confident regarding an approval of our PMA supplement we will provide further comment on the process and our interactions with the FDA when permitted and.
Spread to do so.
We are laying the foundation for growth in the U S, which represents a tremendous market share opportunity for star as the U S is the second largest refractive market in the world.
During the third quarter, we made incremental marketing investments in several key U S cities with customers, who have demonstrated a commitment to offering the ICL as a premium and primary refractive option through alliance agreements, which in other markets have resulted in meaningful.
Increased levels of ICL unit growth.
Investments include social media patient education training and targeted digital marketing.
Upon FDA approval, we will add at least one additional major metropolitan market to our advertising program and in 2020 to markedly increase our consumer advertising investment related to celebrities social media and digital campaigns designed to.
<unk> brand awareness and drive consumer desirability for our premium lens based refractive vision correction procedure.
We are also continuing our increased engagement with existing surgeons and potential new surgeon customers in the U S.
We currently plan to hold our second U S. Surgeons Council summit next month in Dallas the goal of our surgeon summit is to educate surgeons on our products through clinical presentations and highlight the patient clinical and revenue opportunity for surgeons by presentations.
From U S and O U S surgeons, who are already transitioning to Atlanta space future of refractive vision correction with our implantable column or lenses.
Surgeon interest in next month's summit has been robust and we anticipate a strong presence of leading surgeons from across the U S.
Additionally to further engage the U S surgeon community. We are in the process of building an ICL experience center at our California, Our corporate headquarters in Lake Forest.
First of its kind for star the ICL experience center will offer surgeons and their staff in person didactic training surgical simulation and marketing education and training.
The center will feature stars next generation ICL planning ecosystem, which connects and integrates with the diagnostic equipment Surgeons currently used for case management.
We plan to open that U S. ICL experience center in the first half of 2022.
Given the outstanding demand for our ICL, 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.
For a year.
We are also reaffirming our previously communicated pre COVID-19 three year outlook for 25% plus compound annual sales growth for fiscal 'twenty 'twenty through 2022 despite the 'twenty 'twenty COVID-19 impacted growth rate of 9%.
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 Q3, 21 were $58 $4 million up 24% as compared to the $47 $1 million of net sales in Q3 2020 and above the outlook. We provided to you in August for the third quarter net sales in the range of 57 million to $58 million.
The year over year increase in net sales for Q3, 'twenty, one was attributable to global ICL sales growth up 31%.
We now anticipate robust levels of ICL unit growth in Q4 that will exceed 40% year over year that when combined with our strong results for the first three quarters of 2021 informs our raised outlook for full year fiscal 2021 that Karen just outlined.
In terms of product mix ICL sales represented 93% of total company net sales for the third quarter of 2021 and other products represented 7%.
We continue to anticipate a similar sales mix in the fourth quarter and then other product sales will be approximately $15 million for the full year 2021.
Gross profit for Q3, 'twenty, one was $45 $3 million or 77, 6% of net sales as compared to gross profit of $34 $9 million or 71% of net sales for Q3 2020 and.
$49 $2 million or 78, 9% of net sales for Q2 2021.
The year over year increase in gross margin was due to the higher mix of ICL, which command a higher margin than our other product business, partially offset by increased period costs associated with manufacturing projects.
The sequential decrease in gross margin for the third quarter was due to a lower mix of ICL and increased period costs associate with manufacturing projects.
For the fourth quarter and full year 2021, we now expect gross margin would be towards the higher end of the 75% to 77% range. We previously provided.
Moving down the income statement total operating expenses for Q3, 2021 with $37 $5 million or 64, 2% of net sales as compared to $30 million or 63, 7% of net sales in Q3 2020 and.
$38 $6 million or 61, 8% of net sales for Q2 2021.
Taking a closer look at the components of operating expenses general administrative expenses for Q3, 'twenty, one was $11 million compared to $8 6 million for Q3 2020.
At $11 4 million for Q2, 2021.
The year over year increase in G&A was due to compensation related expenses and outside services you.
The sequential decrease in G&A expenses was primarily due to lower payroll taxes related to fewer stock options being exercised.
We expect fourth quarter G&A to now be approximately $12 million.
Selling and marketing expense was $18 $2 million for Q3, 2021 compared to a $12 $6 million for Q3, 2020, and $18 9 million for Q2 2021.
The increase in selling and marketing expense from the prior year was due to advertising and promotional activities compensation related expenses and trade shows.
The sequential decrease from Q2, 'twenty, one was due to lower payroll taxes related to fewer stock options being exercised.
We expect fourth quarter, selling and marketing to be approximately $17 million and trend higher in 2022 is the company increases investments and the Evo ICL brand building initiatives Caren mentioned earlier.
Research and development expense was $8 $3 million in Q3, 2021 compared to $8 $8 million for Q3, 2020 and flat with the $8 3 million for Q2 2021.
The year over year decrease in research and development expenses was primarily due to lower expenses associated with our Evo clinical trial in the U S and timing related to new head count.
We expect R&D for fourth quarter 2021 to be approximately $9 million.
Operating income in Q3, 2021 was $7 $8 million of 13, 4% of net sales as compared to operating income of $4 $9 million or 10, 4% of net sales for Q3 2020.
The improvement in operating income is due to higher sales and leverage on fixed and variable operating expense during the quarter.
Net income in Q3, 2021 was $6 million or 12 cents per diluted share compared to net income of $3 9 million or eight cents per share in Q3 2020.
The company's effective tax rate for the nine months ended October 1st 2021 was approximately 20%.
For the fourth quarter, we expect our effective tax rate to be approximately 30%.
On a non-GAAP basis adjusted net income for Q3, 2021 was $10 $3 million.21 per diluted share compared to adjusted net income of $6 7 million or 14 cents per diluted share in Q3 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 October one 2021 totaled $196 $2 million up $43 8 million compared to $152 $5 million at the end of the fourth quarter of 2020.
The increase in cash in the fourth quarter is primarily attributable to $35 $5 million in cash generated from operations and $18 $3 million in proceeds from the exercise of stock options, partially offset by $9 million and capital expenditures.
For the full year 2021, we continue to anticipate total capital expenditures to be in the range of $15 billion to $20 million as we continue to expand our global manufacturing capacity and footprint.
Finally started management will be participating in several upcoming investor events, including.
The Canaccord Genuity virtual Med Tech and diagnostics Forum on November 18th.
The Stephens investment conference on November 29.
And the William Blair hosted C suite call on December seven.
This concludes our prepared remarks, operator, we are now ready to take questions.
Of course.
If you would like to ask a question. Please press star followed by one on your telephone keypad.
If you change your mind, please questions Stoffel each party.
When preparing to ask your question patient show your phone is on mute locally has some rumblings that DOCSIS staff, all age, but I'm actually quite well.
Our first question comes from Anthony Petrone from Jefferies <unk> Company. Your line is now a pen.
Oh, Thanks, and good afternoon, everyone I hope everyone's doing well and congrats here on our strong performance in a difficult quarter.
Maybe Karen to start with the comments on on China, and the supply chain headwinds specifically is the read through here that the 20000 lenses that you referenced in backlog in the prepared comments and in the press release.
Is that all related to China, a and then b.
If there were no supply chain headwinds would that have been realized in the quarter.
Then the last one on on that specifically is you know what is the dollar value.
On that $11 million that we should be thinking about and I'll have one follow up.
Okay. Thank you very much Anthony we appreciate it yeah. We are very pleased with the quarter and we are working on what we believe is a very short list situation that occurred in Q3 with regard to available lenses for shipment.
So the 20000 lenses would have been shipped in the quarter the majority of them to China.
We Havent really released a range in terms of the dollars, but if you do the math on the low end it would be at least 65 million in revenue for the quarter had we been able to ship.
But you know, we're not going to get down to too many specifics here, but it definitely would have been a record quarter for STAAR.
Yeah. That's helpful and then I guess maybe timing.
On you know what.
When the distributor could restock it just sits.
I would imagine they can't run at this low level of inventory for <unk>.
An extensive amount of time and then.
Quickly on F D a.
I understand your comments should we be reading the comments on timing that the delay is specifically around just COVID-19 constraints in agency.
Dealing with the backlog of clearances elsewhere. Thanks, again will hop back in queue.
So with regard to China, we are already replenishing inventory in China, we definitely will be prepared for the next big season, which begins in January.
So our replenishment is already underway.
With regard to the MTA, we continue to be in customary review.
We have no other comment at that time, what we did when we talked about hoping to have an answer by the end of October we were basing that on pre Covid guidelines.
Which due to COVID-19 the F. D. A has been a bit challenged and we more than accept and understand that and we're continuing to be an active and are faced with the FTA and I'm looking forward to a resolution.
Thank you.
Our next question comes from Chris Cooley from Stephens, Chris. Please proceed.
Good afternoon, and let me Echo Anthonys cinema to them for a great quarter I'm, just maybe two quick ones for me if I may.
When we think about the restocking efforts on these 20000 units with 20000 lenses.
Or what are you doing for from your commentary the.
<unk>.
Should all ship out.
During the fourth quarter.
I'm curious with that kind of a significant channel fill can you still keep pace Ah.
I guess, what I'm trying to get a very simply as you catch up in the fourth quarter or is this a phenomenon that carries over a little bit into the first half of next year and then I've got a follow up.
So thank you very much Chris.
In terms of catching up.
You expect a catch up in fourth quarter and Q1 of 2022.
Our made to order custom lenses a little later in the year that are supplied shuriken track lenses for sure by the end of Q1 2022.
Super and then just maybe it was just a quick clarification on that same point.
It sounds like the issues, which you faced during the third quarter from a supply chain standpoint.
Have been addressed I just wanted to clarify does your own Nicole.
You aren't under any kind of backlog in terms of raw material purchases.
They're not necessarily seen outsized delays in shipping just net net it was very very strong demand there during the quarterly period.
These headwinds that exist in the marketplace you just couldnt keep pace, if I am I interpreting that correctly.
Yes, really COVID-19 related employment means that we did have individuals.
Who either didn't return to work or chose to leave for other opportunities, which meant that we would bring and other individuals.
We did update and modify our pay rates, we did whole job fairs that we have to train all of these new individuals and that's about a six to eight week process. So there was a little bit of production output that you know was impacted by the training schedule.
We then had some production challenges in a particular area and that are being addressed at this time, which are not concerning.
And the modern supply chain challenges have been rectified already.
So we are feeling very good at them already dug into that 20000 loads backup.
In Q4 in the first month in terms of a good percentage of it having shut down.
I think Chris you hit it on the head there and you said.
It's less about supply and where the demand was just so strong for us and we just felt it was good for us to outline it as caren did in.
The demand is there and we're working through it and we will continue to work through it and.
I think the Capex that we laid out there for people that we've done now for the last year is clearly about expanding our capacity and everything else and so.
We're feeling good about where we're at and moving into next year.
Super and if I could just squeeze one other quickie and then I'll get back in queue.
Well I'd love to ask about the FDA I think I'll focus more so just in terms of rollout plans in the U S really excited about the new ICL experience center, just kind of curious when I think about that as well as your step up in DTC efforts.
Can you provide us any parameters about initially you know post approval you hope to be an ex major markets X number of surgeons trained in the U S. Obviously those efforts are under way now, but just trying to think about some some metrics that we can maybe look towards in terms of kind of gating the rollout in 2022.
Thanks, so much.
So Chris I appreciate the question, but I think we're going to wait to answer that until we get FDA approval.
Bottom line is that.
We just don't want to be in a situation, where misperceived as pre marketing here in terms of because we're not doing that.
But I can tell you that you know as we said in our prepared remarks. These are several cities.
And you know, we're ready and Raring to go so we'll give you all the detail when we can.
Thank you.
Thank you Chris.
Yeah.
Our next question comes from Andrew <unk> from William Blair I'm Sorry. Please go ahead.
Hi, good afternoon, thanks for taking the questions.
So maybe just one on the U S here and I certainly understand all the enthusiasm around the U S launch, especially given the strength of that demographic that you're initially targeting but maybe here is we think a couple of years out in the future can you maybe just sort of talk about the playbook that you intend to use to move down the diopter curve and sort of target those people in that moderate.
Okay. Thanks.
Thank you Andrew and.
You get a great survey.
So many compliments for the work that you did a lot of us learned from your work. So thank you for that in terms of lower diopter opportunity for us we've learned in China and in Europe that when surgeons get really comfortable and confident with the tougher cases.
They then start to realize that all of the benefits of our.
The labs are good for patients below minus five and so we are keeping track of what our average diopter correction range is on a quarterly basis and it is getting better.
And so our focus in the U S. In the next couple of years is going to be all of the advantages of the land them.
For minus three and above not shows minus five six or seven.
But the surgeons really began offering patients the choice of ICL with all its inherent benefits and then we start to see way more work down the diopter curve. So it pretty much self itself with the enthusiasm.
Don't forget the lens early another social media and the interest begins to build an individual's who have much lower correction one all the advantages and visual freedom the lens offers.
And if I could add something on that.
Andrew as you survey the Tam is just so large and I think a few quarters ago, we talked about the fact that we've now moved slightly below the minus 10, specifically in China, where we saw them buying more minus 10 and below versus above.
But I think one of the things to remember is that you don't need large moves letter where all average if we were to move slightly down on our overall average diopter use let's say minus 10 to minus 95 minus 9% minus eight and a half on average there is a huge tam available there for us and so I think people should be very.
People should understand it if they are trying to say that we need to get all the way down to a minus three in order to have a big revenue.
It's not the case at all.
There's a there's a lot of business out there with people that are in those minus 7% minus eight minus nine that's what they did is showing us today.
That's great. Thanks for that Karen Thanks for the compliments on the survey.
Maybe just going back to your comments on the 25% growth CAGR from 2019 through 2022 I just wanted to check I think that's why it's just over $290 million for revenue for 2022, but maybe as it relates to sort of your expectations there.
And we're extremely confident to pre call 2022 at the same time that even though we had only 9% growth last year, which was great because of the mileage. He was down 11%, but email is at 9% a year or two of the three year plan, we're still making the objective because the growth is so strong.
And so we're staying over 40% this year and then on top of that another very strong roads next year. So.
We're super excited and I'm really looking forward.
To you know.
Really improving.
Where patients their choices in terms of refractive care.
Great. Thanks for your questions.
Thank you.
We now have a question from William play can make some kind of code what again your line is not wait 10.
Good afternoon, everybody. This was real hold on for Bill.
I just had a question on the details regarding the limited market release of evil Viva in Europe could.
Could you provide some revenues number of countries you know somebody's gonna be two clans homa.
Okay.
We're going to officially roll out to everyone. All surgeons in all improved Sammy Mark countries in September of 2022, we have not at this point release.
That plan will be or what the revenue attributable to the Evo Viva product will be.
We'll start to give those details in the January February timeframe.
Next year.
Okay perfect.
And it maybe maybe one for you Patrick Uhm, if you could provide the break out of the revenues from domestic Japan and China in this last quarter.
Let me make sure I understand the question again.
Maybe one more time, you say domestic demand in China, I'm going to make sure I understand that.
No the breakout of revenues and China, Japan, and other in the last quarter.
Yes, we have it in our queue. So it's probably better for me just to point you to that we do call out China and Japan in there for.
For Japan, I would recommend that you remember that our IOL business also flows into the Japan from a geography standpoint, but I can certainly pull it up real hunting site. It but I think it's better just we just filed our queue. So it's out there you can get all that detail.
Cool thank you.
Mhm.
Next question comes from the line of Steve <unk>, Steve Your line is that way <unk>.
Hi, This is actually David all for Steve Thanks for taking our questions.
Maybe starting off or just wondering if you saw any COVID-19 impact during the quarter, particularly with a girl covariance was there any month that you saw when you were impacted that man.
So we keep track of all the major markets around the world, where we obviously work with refractive surgeons to deliver our ICL.
And in this past quarter in Q3, there has been limited concern and almost every market around the world. There have been some late comers at least with late Latin America was kind of late coming in to their own.
More issue can see from the growth rate for example.
In Q3 was much higher.
So I would say with the exception of a couple of those markets a little bit in a smaller countries in Asia pack.
The majority almost all the markets, where we are very active.
They are managing Covid Avenue down to various very well.
Okay, Great appreciate the color and just one more I was wondering if you could provide any details on.
In terms of the growth you're seeing how much of that is being driven by overall growth of their respective market purses conversions of a place of procedures.
The refractive market grows on average in the mid single digits.
As you can see our growth rate is at least 25% plus.
So we are growing faster than the market and we are taking sure.
Okay.
Got it thanks.
You're welcome.
Next question comes from Brian <unk> from C. T. I G. Brian Your line is not wait 10.
Good afternoon. Thanks for taking my questions Caren, if I could just ask a little bit about the supply issues in China, a little further I mean, I guess I'm curious if you can try one more time.
Why where the supply issue exclusively impacting China, but not other markets because production supply chain dynamics are all kind of U S space.
Issues that you guys are now is colver unemployment's all USA. So why was it so I'm like China and not some of the dynamics, we saw and say, Japan or Korea.
Well I think I don't want to give the impression that the 20000 lenses were exclusively China majority, where China. What we did was the right thing to do we took a look at what our book of business was we took a look at where the demand was and then we'd properly move lenses to where the need for is great.
When we look to China, we recognize that we had enough inventory.
In stock to be able to meet the majority of the critical demand. So it allowed us to work very successfully with our country manager.
And with our important or to properly take care of the majority of the business that was necessary.
So obviously with China being 50% plus for our business you're gonna have.
More product. There then you then you have anywhere else in a single.
Place. So bottom line is we very effectively managed it and customer satisfaction is strong.
Okay got it and then the 20th Stalin and orders.
I think some of those are our call someone and so.
How are you thinking about kind of the rest.
Grasp the cancellation of the procedures.
Oh is that hardly distributors coming up with that number does that fast I'm kind of a scheduled surgery right.
It was kind of looking at maybe a quarter or two.
So when we look at then normally stocked inventory and this figure akins torok sizes.
We're trying very hard to make sure that our recovery in that area, it's very swift and it's already underway.
Because that is an area, where you do have options as a patient. If you are a patient who is someone getting a made to order trek Lynch you probably have marginal to know options related that doesn't make you are needed furnish or freedom any less but it does mean, you're more willing to.
Wait because the only real opportunity for excellent digital freedom for you.
As a made to order to our patient is what we deliver.
So you know we never ever want to be in a situation, where we disappoint anyone in terms of time to delivery.
But we expect that by midnight last year at the latest April may timeframe. This will all be back to normal which is six to eight week lead time.
Mhm, Okay got it and then just last one for me.
Trying to think.
Maybe some some other investors that you guys have kind of talk about your expectations for penetration of the U S refractive market and and so you know I love just understand kind of I think some others I've been asking about this too, but you know what percentage of the U S. Refractive market do you think you could potentially one.
A call at 12, K two months post launch and and how are you thinking about your launch now given the timelines or.
Or the impact timeline from the F. D. A thank you for taking my questions.
Yeah.
Cherokee grab this would be the FDA I think there's obviously some sensitivity in our side and a lot of it's good to know that solid caren.
Take it from here.
Yeah.
That we have an evo product in the United States. Our goal is to get to at least 20% sure as soon as possible our track record in other markets, where we have had approval and have begun their business model and clinical model that has been so successful <unk>.
Where is.
Is that we can do that in two to three years time.
Okay.
Thank you.
Thank you.
We now have a question Jim <unk> from 618 company Gym. Please go ahead.
Hi, good afternoon, thanks for taking my questions.
Okay, I just want to be clear.
<unk> supply chain manufacturing issues like that you said you had in the quarter do you think there's any racist issues.
Issues would prevent you from growing your historical 20, 25% annually over the next few years.
No we've been investing in expanding our production and ensure aware and we've been investing in advanced manufacturing to expand the productivity and the amount of throughput that we have on our Monrovia facility. We're also opening.
Reopening are neato facility in Switzerland.
And we also have expanded a manufacturing for our call them or buttons here in California.
We're looking at millions of lenses of production capability over the next two to three years.
Yeah.
Kind of.
Recalibrate here, we've overperformed of what we said we were gonna do in two three and we just raised guidance in queue for and reaffirm our growth going into 2022. So.
This is caren is described and you can look at our financial statements, you'll see that our inventory levels have gone down the last couple of quarters as a percentage of sales represented Cogs or if you want to look at it and so.
We're just building that backed up because demand has just been that robust so.
We just felt that it was important that we outline this because I think people have looked at the company is expected very big things in those big things are there and they're coming still and we're very happy with the quarter of the guidance that we gave for the rest of the year.
Okay and then my second question is in regard to to.
Let's see.
Sales and marketing and you know what you've done in other areas to increase your brand awareness places like Japan and Korea.
Is that primarily.
Where to market and they're pretty good primarily social media billboards.
Anything that you're doing too I'm, just trying to get a handle on what to expect when you do once the product.
<unk>.
Yeah, and there is outdoor advertising Perez digital marketing there is social media there is celebrity influencers.
There is co marketing.
With customers and their strategic agreements, where they update and upgrade their websites.
We do a lot of dark finder monitoring we do a lot of.
Digital marketing work to make sure that we have access to searches on Google.
So our search engine marketing is very strong so we do all of the above and it is very successful.
Yeah. It sure seems like the news.
Going forward to to see what happens when you do get to you as a poodle.
Thank you Jim.
Mhm.
[noise] Oh, that's question comes from the line of Bruce Jackson from the Benchmark Company priest. Please go ahead.
Hi, Good afternoon. Another manufacturing question just to follow up on your <unk>. Your comments, you've been working on getting Switzerland reopened is it actually fully reopened right now and you said when if it's not open when will it be and production.
Right.
Were looking at Switzerland in the fourth quarter of 2022.
And you know at that point in time.
We will be manufacturing the majority of demand for China added that facility.
Okay, and then not the Slogged the supply chain issue too hard do you believe that when you do have that facility. Open then that's didn't give you some flexibility in terms of being able to meet the demand in 2022.
Okay.
Yeah, I think supply chain as I said was modest we had a couple.
Mm manufacturing challenges associated with supplier changeover in one case in another we wanted a changeover and there with limited supply for a short while so these are not the kind of issues that you read about in the news related to.
Semi conductors and fabrication required units that are sitting in cargo ships in long Beach, where we're in a situation where he had a few local supplier issues that really did slowest down more than we would have liked that they have been rectified yeah.
And just to reiterate on the needle.
We have enough capacity and we are actively expanding our southern California capacity, regardless of needle coming online and so the lenses that we need over the next several quarters or.
Are not dependent on <unk> is all about scaling up beyond that I'm going into 2023 into 2024. So we're we're in good shape right now and machines are coming online and I just come back to what I said before which is we're making those investments as we said we still tend to make a significant investment in queue foreign Capex, which will report in 92.
<unk>.
Okay, Great. That's very helpful. Thank you.
Thank you bird.
Okay.
Thank you for your comments patient on our phone call.
Call today.
We look forward to speaking with many of you in the days and weeks ahead. We appreciate your interest and your investment in star skirt surgical.
This concludes today's coast. Thank you for joining my hope you have a lovely rest of your day you may now disconnect two lines.
[music].