Q3 2024 STAAR Surgical Co Earnings Call

Greetings and welcome to the STAAR surgical third quarter 2024 earnings webcast.

Operator: Greetings, and welcome to the STAAR Surgical 3rd Quarter 2024 Earnings Webcast. As a reminder, this event is being recorded today, Wednesday, October 30th, 2024. During today's presentation, all parties will be in a listen-only mode.

As a reminder, this event is being recorded today Wednesday October 30th 'twenty 'twenty four.

During todays presentation, all parties will be in a listen only mode.

Operator: Following the presentation, the call will be open for questions. If you have a question, please press the star key followed by 1 on your touchtone phone. If you are using speaker equipment today, please lift the handset before making your selection.

Following the presentation the call will be open for questions.

If you have a question. Please press the Starkey followed by one on your Touchtone phone.

If you are using speaker equipment today, please lift the handset before making your selection.

Speaker Change: I would now like to introduce your host Brian Moore, Vice President of Investor Relations with STAAR surgical. Please go ahead.

Brian Moore: I would now like to introduce your host, Brian Moore, Vice President of Investor Relations with STAAR Surgical. Please go ahead.

Brian Moore: Thank you operator, good afternoon, everyone and thank you for joining us to discuss the company's financial results third quarter ended September 27 2024.

Brian Moore: Thank you, operator. Good afternoon, everyone. And thank you for joining us to discuss the company's financial results for the third quarter, and it's September 27, 2024.

Brian Moore: Today's speakers are Tom Frinzi, Chair of the Board, President and CEO. and Patrick Williams, Chief Financial Officer. The press release of our third-quarter results was issued just after 4 p.m. Eastern Time. We have posted copies of today's earnings release and earnings presentation to the Investor Relations section of STAAR's website at investors.staar.com.

Brian Moore: Today's speakers are Tom Frenzy chair of the board President and CEO.

Brian Moore: And Patrick Williams, Chief Financial Officer.

Brian Moore: The press release of our third quarter results was issued just after four P. M. Eastern time, you have posted copies of today's earnings release and earnings presentation to the Investor Relations section of <unk> website at investors don't start.

Speaker Change: Before we begin let me quickly remind you that the company comments. During this call will include forward looking statements.

Brian Moore: Before we begin, let me quickly remind you that the company comments during this call will include 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 different materially from those expressed or implied by such forward-looking statements. The risks and uncertainties associated with these forward-looking statements are described in the Safe Harbor Statement in today's press release, as well as STAAR's public periodic filings with the SEC.

Speaker Change: Caution you that any statement that is not a statement of historical fact is a forward looking statement.

Speaker Change: This includes remarks about the company's projections expectations plans beliefs and prospects.

Speaker Change: Statements are based on judgments and analysis as of the date of this conference call and are subject to numerous important risks and uncertainties.

Speaker Change: Cause actual results to differ materially from those expressed or implied by such forward looking statements.

Speaker Change: The risks and uncertainties associated with these forward looking statements are described in the Safe Harbor statement in today's press release.

Speaker Change: As well as staar's public periodic filings with the SEC.

Brian Moore: 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.

Speaker Change: Except as required by law STAAR assumes no obligation to update these forward looking statements to reflect future events or actual outcomes.

Speaker Change: And does not intend to do so.

Speaker Change: In addition on this call and in the press release can you discuss certain non-GAAP financial measures, including adjusted EBITDA and adjusted EBITDA per share.

Brian Moore: In addition, on this call and in the press release, we discussed certain non-gap financial measures, including adjusted EBITDA and adjusted EBITDA first share. We also provide sales data in constant currency, definitions and reconciliations to GAAP are included in today's press release. For brevity, unless otherwise specified, all comparisons on today's call will be on a year-over-year basis versus the relevant period.

Speaker Change: We also provide sales data in constant currency definitions and reconciliations to GAAP are included in today's press release.

Speaker Change: For brevity, unless otherwise specified all comparisons on today's call will be on a year over year basis.

Speaker Change: First is the relevant period.

Speaker Change: Following our prepared remarks, we will open the webcast questions from publishing analysts published.

Brian Moore: Following our prepared remarks, we will open the webcast to questions from publishing and Publishing analysts, please ask your initial two questions when your line is unmuted, then repeat with any follow-up.

Speaker Change: Publishing analysts. Please ask your initial two questions. When your line is on mute too.

Speaker Change: And then re queue with any follow ups.

Brian Moore: Finally, we intend to use our website as a means of disclosing material, non-public information, and for complying with our disclosure obligations under Regulation FD. Such disclosure will be included on our website in the investor relations section. Accordingly, investors should monitor our investor website in addition to following our press releases, SEC filings, and public conference calls and webcasts.

Finally, we intend to use our website as a means of disclosing material nonpublic information and for complying with disclosure obligations under regulation FD.

Speaker Change: Such disclosures will be included on our website in the Investor Relations section Accordingly investors should monitor our Investor Web site. In addition to following our press releases SEC filings and public conference calls and webcast.

Brian Moore: And with that, I would now like to turn the presentation over to Tom Frinzi. Tom.

Speaker Change: And with that I would now like to turn the presentation over to Tom frenzy.

Speaker Change: Tom.

Tom Frenzy: Thank you, Brian and good afternoon to everyone in the third quarter, we achieved net sales of $88 $6 million and double digit sales growth against the macroeconomic environment and softened in the second half of the quarter, particularly in China. Our results reflect the increased global adoption and market share gains.

Tom Frinzi: Thank you, Brian, and good afternoon, everyone. In the third quarter, we achieved net sales of $88.6 million in double-digit sales growth against the macroeconomic environment that softened in the second half of the quarter, particularly in China. Our results reflect the increased global adoption and market share gains of Evo ICL lenses, the positive returns on our investments in commercial programs, our customer-focused initiatives, and the global diversity of our business.

Tom Frenzy: Of Evo ICL lenses are positive returns on our investments and commercial programs, our customer focused initiatives and the global diversity of our business.

For fiscal year 2024, we are maintaining our financial outlook and continue to anticipate net sales of approximately $340 million with $345 million.

Tom Frinzi: For fiscal year 2024, we are maintaining our financial outlook and continue to anticipate net sales of approximately $340 million to $345 million. During the third quarter, we celebrated the grand opening of our new Evo ICL Experience Center at our Lake Forest, Southern California headquarters. Importantly, this new center includes cutting-edge technology and workstations for approximately 60 individuals, nearly 10 times the capacity of our previous center. Designed as a state-of-the-art learning environment for surgeons, healthcare staff, and STAAR employees, our goal is for the center to help facilitate practice efficiencies, enhance patient care, and increase ICL adoption. We will be offering a number of training and education programs, including lens size selection and preoperative case management, patient acquisition and practice development with capabilities to live stream surgeries from key sites.

Tom Frenzy: During the third quarter, we celebrated the Grand opening of our new Evo ICL experience center at our Lake Forest Southern California Headquarters Importantly, this new center includes cutting edge technology and workstations for approximately 60 individuals' nearly 10 times the capacity of our previous center design.

<unk> is a state of the art learning environment for Surgeons healthcare staff and store employees. Our goal is for the center to help facilitate practice efficiencies enhanced patient care and increase ICL adoption, we will be offering a number of training and education programs, including lend size selection and.

Tom Frenzy: Preoperative case management patient acquisition with practice development with capabilities to live stream surgeries from key sites.

Tom Frinzi: In October alone, our teams hosted a getting started program as a comprehensive ICO boot camp for newly trained surgeons in the US and Canada, a group of surgeons from Japan and a summit for approximately two dozen optometrists employed within our US Highway 93 customers. By year end, we will launch at least 10 programs at this new center of excellence.

October alone our teams hosted and getting started program is a comprehensive ICL bootcamp for newly trained surgeons in the U S and Canada, a group of surgeons from Japan, and the summit through approximately two dozen optometrist employed within our U S Highway 93 customers a.

Speaker Change: By year end, we will launch at least 10 programs at this new center of excellence.

Tom Frinzi: Earlier in the quarter, we attended the 42nd Annual Congress of the European Society of Cataract Refractive Surgeons, ESCRS, in Barcelona, Spain, a key meeting attended by leading surgeons from around the world. We were encouraged by the more than 80 papers and presentations that were presented relating to ICL technology, and even more pleased to find that a number of surgeons shared that they view EVO-ICL as the choice for minus six diopters and above. This increased confidence is a direct reflection of the investments we have made throughout 2024 to advance the education, training, and ICL understanding of our surgeon customers.

Earlier in the quarter, we intended to 42nd annual Congress of the European Society of Cataract refractive Surgeons Es Crs in Barcelona, Spain, a key meeting attended by leading surgeons from around the World. We were encouraged by the more than 80 papers and presentations that were presented relating to ICL technology and even more pleased with.

Speaker Change: Find the number of surgeons shared that they view Evo ICL as the choice for minus six diopters and above.

This increased confidence is a direct reflection of the investments we have made throughout 2024 to advance the education training and ICL understanding of our surgeon customers. We are confident that this positive feedback from surgeons will help position ICL as the preferred choice among patients, especially.

Tom Frinzi: We are confident that this positive feedback from surgeons will help position ICL as the preferred choice among patients, especially as we advance our lower diopter strategies to expand our total addressable market.

As we advance our lower diopter strategies to expand our total addressable market.

Tom Frinzi: Now turning to our performance by region. In the Americas, we generated sales growth of 14% in the third quarter. U.S. refractive market was much more challenging than we anticipated in the quarter, down 18% year-over-year. STAAR significantly outpaced the market, growing U.S. sales 16% year-over-year. In the third quarter, we signed three additional fast lane agreements as part of our U.S. Highway 93 commercial strategy. We now have 12 fast lane customers, and these fast lane customers commit, on average, 23% of their refractive procedure mix in the first year of the agreement. For the third quarter of 2024, the eight fast lane customers, with at least one full quarter of sales under their belt, delivered 61% ICL sales growth.

Speaker Change: Now turning to our performance by region in the Americas, we generated sales growth of 14% in the third quarter.

Speaker Change: U S refractive market was much more challenging than we anticipated in the quarter down 18% year over year.

Speaker Change: Star significantly outpaced the market growing U S sales, 16% year over year in the third quarter, we signed three additional fast lane agreements as part of our U S. Highway 93 commercial strategy. We now have 12 fast lane customers in these fast lane customers commit on average.

23% of the refractive procedure mix in the first year of the agreement for the third quarter of 2024, the eight fast lane customers with at least one full quarter of sales under their belt.

Speaker Change: Delivered 61% ICL sales growth.

Tom Frinzi: In EMEA, we generated 12% sales growth in the quarter, driven primarily by the Middle East and European distributor markets. We are energized by the outperformance of our EMEA region. This year in particular relative to our initial outlook and believe we will continue to benefit from our investments in this important market.

In EMEA, we generated 12% sales growth in the quarter, driven primarily by the middle East and European distributor markets were energized by the outperformance of our EMEA region.

This year in particular relative to our initial outlook and believe we will continue to benefit from our investments in this important market.

Tom Frinzi: In APAC, the largest market in the world for refractive procedures, and our largest region for sales, we generated sales growth of 9% in the third quarter. China sales were up 7% and ICL unit growth was positive. However, the high season started strong, but the macroeconomic climate in China declined following our Q2 earnings report in August. We continue to outpace the market and deliver sales and unit growth in this key market, but the momentum that we saw early in the quarter certainly tapered as we moved through Q3. Turning to Japan, we continue to gain share with sales growth of 15 percent.

In APAC the largest market in the world for refractive procedures in our largest region for sales we generated sales growth of 9% in the third quarter.

<unk> sales were up 7% and ICL unit growth was positive. However, the high season started strong but the macroeconomic climate in China declined following our Q2 earnings report in August we continued to outpace the market and deliver sales and unit growth in this key market, but the <unk>.

<unk> that we saw early in the quarter certainly tapered as we move through Q3.

Turning to Japan, we continue to gain share with sales growth of 15%, our Japan business has generated double digit unit growth in 32 of the last 35 quarters, which we believe is a testament not only to the talent of our team, but the support we continue to receive from key opinion leader.

Tom Frinzi: Our Japan business has generated double-digit unit growth in 32 of the last 35 quarters, which we believe is a testament not only to the talent of our team, but the support we continue to receive from key opinion leaders in the region. In South Korea, we generated 11% sales growth in the third quarter, boosted by the strength of South Korea's first ICL-only clinic, which is on track to implant over 2,000 lenses this year.

Speaker Change: As in the region.

In South Korea, we generated 11% sales growth in the third quarter boosted by the strength of South Korea's first ICL only clinics, which is on track to implant over 2000 lenses. This year.

I would now like to turn the call over to Patrick to review our financial results. After Patrick discusses the financials I will update you on our additional growth initiatives and outlook Patrick.

Patrick Williams: I would now like to turn the call over to Patrick to review our financial results. After Patrick discusses the financials, I will update you on our additional growth initiatives and outlook, Patrick.

Patrick Williams: Thank you, Tom, and good afternoon, everyone. Total net sales for Q3 2024 increased 10% to $88.6 million, up from $80.3 million in the prior year quarter. This $8.3 million increase is largely attributable to the $8 million or 10% increase in ICL sales and $0.2 million decrease in other products. Constant currency net sales for Q3 2024 were $88.9 million, also up 10% as compared to prior year period. For Q3 2024, gross profit was $68.5 million, or 77.3% of net sales, as compared to $63.6 million, or 79.2% of net sales in the year-ago period.

Patrick Williams: Thank you Tom and good afternoon, everyone.

Total net sales for Q3, 2024 increased 10% to $88 $6 million up.

From $83 million in the prior year quarter.

Speaker Change: This $8 $3 million increase is largely attributable to the $8 million or 10% increase in ICL sales and zero point $2 million decrease in other products.

Constant currency net sales for Q3 2024 were $88 9 million also up 10% as compared to prior year period.

For Q3, 2024 gross profit was $68 5 million or 77, 3% of net sales as compared to $63 6 million or <unk> 79, 2% of net sales in the year ago period.

Patrick Williams: The year-over-year decrease in gross margin was primarily due to reduced unit production that resulted in less absorption of fixed overhead. For the full year, we now expect gross profit margin to be approximately 79% down one point from our previous estimate. Moving down the income statement, total operating expenses for Q3 2024 increased 10% to $62.8 million, up from $57.3 million in Q3 2023, and down from $66.5 million in Q2 2024.

The year over year decrease in gross margin was primarily due to reduced unit production that resulted in less absorption of fixed overhead.

Speaker Change: For the full year, we now expect gross profit margin to be approximately 79% down one point from our previous estimate.

Moving down the income statement total operating expenses for Q3, 2024 increased 10% to $62 8 million up from $57 $3 million in Q3, 2023 and down from $66 5 million in Q2 2024.

Patrick Williams: The sequential decrease in operating expenses reflects a shift in the timing of some spend that we now expect to occur in 2-4-2024. Taking a closer look at the components of operating expenses, G&A expense for Q3 2024 was $21.7 million, up from $19.3 million in the prior year quarter, and down from $23.6 million in Q2 2024. This year-over-year increase is primarily due to increased facilities costs and compensation-related expenses. For Q4 2024, we continue to expect G&A expense to be approximately $24 million. Selling and marketing expense was $26.6 million for both Q3 2024 and the prior year quarter, down from $28.8 million in Q2 2024.

The sequential decrease in operating expenses reflects a shift in the timing of some spend that we now expect to occur in Q4 2024.

Speaker Change: Taking a closer look at the components of operating expenses G&A expense for Q3, 2024 was $21 7 million up from $19 $3 million in the prior year quarter and down from $23 $6 million in Q2 2024.

Speaker Change: This year over year increase was primarily due to increased facilities costs and compensation related expenses.

For Q4, 2024, we continue to expect G&A expense to be approximately $24 million.

Selling and marketing expense was $26 $6 million for both Q3 2024, and the prior year quarter down from $28 $8 million in Q2 2024.

Patrick Williams: The lower than planned selling and marketing in the quarter was due to timing of marketing, promotion, and advertising activities, most of which we expect to carry over to Q4.

The lower than planned selling and marketing in the quarter was due to timing of marketing promotion and advertising activities most of which we expect to carryover to Q4.

Patrick Williams: We also incurred a $1.6 million non-cash write-off related to our former EVO experience. For Q4 2024, we now expect selling and marketing expense to be approximately $32 million. Research and development expense was $14.5 million for Q3 2024, up from $11.5 million in the prior year quarter, and up from $14.1 million in Q2 2024. This year-over-year increase in R&D is primarily due to purchases of in-process R&D related to external AI tools for measurement and lens size selection, as well as compensation-related expenses which were partially offset by lower clinical trial costs. For Q4 2024, we continue to expect R&D expense to be approximately $15 million.

We also incurred a $1 $6 million noncash write off related to our former Evo experience center.

For Q4, 2024, we now expect selling and marketing expense to be approximately $32 million.

Speaker Change: Research and development expense was $14 5 million for Q3, 2024 up from $11 5 million in the prior year quarter and up from $14 $1 million in Q2 2024.

Speaker Change: This year over year increase in R&D is primarily due to purchases of in process R&D related to external AI tools for measurement and land site selection as well as compensation related expenses, which were partially offset by lower clinical trial costs.

For Q4, 2024, we continue to expect R&D expense to be approximately $15 million.

For Q3, 2024, GAAP net income was $10 million or 20, <unk> earnings per diluted share up from $4 8 million or <unk> <unk> earnings per diluted share in the prior year quarter the.

Patrick Williams: For Q3 2024, GAAP net income was $10 million, or $0.20 earnings per diluted share up from $4.8 million, or $0.10 earnings per diluted share in the prior year quarter. The increase in net income was primarily attributable to higher sales and a gain on foreign currency transactions, partially offset by higher operating expenses. Suggested EBITDA for Q3 2024 was $16.2 million or $0.33 per diluted share as compared to $16.5 million or $0.33 per diluted share in the prior quarter. Turning now to our balance sheet, at the end of the third quarter, our cash, cash equivalents and investments available for sale were $236 million, up from $232.4 million in December 2023, giving STAAR significant flexibility to make a range of capital allocation decisions.

The increase in net income was primarily attributable to higher sales and a gain on foreign currency transactions.

Fully offset by higher operating expense.

Adjusted EBITDA for Q3, 2024 was $16 2 million or <unk> 33 per diluted share as compared to $16 5 million or <unk> 33 per diluted share in the prior year quarter.

Turning now to our balance sheet at the end of the third quarter, our cash cash equivalents and investments available for sale were $236 million up from $232 $4 million in December 2023.

Starz significant flexibility to make a range of capital allocation decisions.

Patrick Williams: We also have significant future cash receipts as shown in our accounts receivable balance. In fact, as of this week, our accounts receivable balance is already down to approximately $85 million, and moving forward, we expect our DSO to moderate around 90 days. For fiscal 2024, we continue to expect CapEx of approximately $30 million for the full year, which includes approximately $10 million of ERP related projects, which is currently recorded as other assets on our cash flow statement. As Tom said, we are maintaining both our fiscal 2024 sales outlook and adjusted EBITDA outlook. A reconciliation of non-GAAP financial measures is shown in today's earnings press release and earnings presentation.

He also has significant future cash receipts as shown in our accounts receivable balance.

Speaker Change: In fact as of this week, our accounts receivable balance is already down to approximately $85 million and moving forward, we expect our DSO to moderate around 90 days.

For fiscal 2024, we continue to expect Capex of approximately $30 million for the full year, which includes approximately $10 million of ERP related projects, which is currently recorded as other assets on our cash flow statement.

Speaker Change: As Tom said, we are maintaining both our fiscal 2024 sales outlook and adjusted EBITDA outlook.

Reconciliation of non-GAAP financial measures is shown in today's earnings press release and earnings presentation.

Patrick Williams: For modeling purposes, please refer to slide 16 of this earnings presentation for additional detail and specific line item updates.

For modeling purposes. Please refer to slide 16 of this earnings presentation for additional detail and specific line item updates.

We look forward to meeting many of you in the days and weeks ahead, a list of upcoming investor meetings and activities can be found on our investor website under upcoming events.

Patrick Williams: We look forward to meeting many of you in the days and weeks ahead. A list of upcoming investor meetings and activities can be found on our investor website under Upcoming Events.

Tom Frinzi: And now, back to Tom. Thank you, Patrick. As I noted at the top of the call, I am incredibly proud of the progress we made in the third quarter to advance our market building initiatives, drive Evo ICO uptake, and reinforce the significant opportunity in front of us. Every day, we actively respond to the market, our customers, and the growing need for myopia solutions. As I mentioned earlier, we are maintaining our fiscal 2024 outlook. You will note the composition of our sales outlook has changed, which reflects both the dynamic macroeconomic environment and the growing global diversity of our business.

Speaker Change: And now back to Tom.

Thank you Patrick as I noted at the top of the call I am incredibly proud of the progress we made in the third quarter to advance our market building initiatives drive Evo ICL uptake and reinforced the significant opportunity in front of US every day, we actively respond to the market our customers and the <unk>.

Growing need for myopia solutions.

As I mentioned earlier, we are maintaining our fiscal 2024 outlook you will note. The composition of our sales outlook has changed which reflects both the dynamic macroeconomic environment and the growing global diversity of our business are set forth in today's press release and the earnings presentation slides some region.

Tom Frinzi: set forth in today's press release in the earnings presentation slides. Some regions are growing more than anticipated, while growth expectations for other regions have softened. The macroeconomic landscape in China is particularly dynamic right now. which we believe is transitory. We are encouraged by the recent shift in China's fiscal policy and announced stimulus, and we will continue to closely monitor the potential impact on consumer sentiment and our sales. For example, we saw a positive uplift in the ICL in-market sales, our proxy for implant procedures during Golden Week in early October, following the stimulus announcement on September 24th.

<unk> are growing more than anticipated while growth expectations for other regions have softened.

The macroeconomic landscape in China is particularly dynamic right now, which we believe.

Speaker Change: It is transitory we are encouraged by the recent shift in China's fiscal policy and announced stimulus and we will continue to closely monitor the potential impact on consumer sentiment and ourselves.

Speaker Change: For example, we saw a positive uplift in the ICL in market sales are proxy for implant procedures during Golden week in early October following the stimulus announcement on September 24.

<unk> is well positioned to weather the current market dynamics, we remain profitable backed by a strong balance sheet.

Tom Frinzi: STAAR is well-positioned to weather the current market dynamics. We remain profitable, backed by a strong balance.

Tom Frinzi: While we are not providing 2025 outlook today, we remain confident in STAAR's long-term growth and the tremendous opportunity for EVA. STAAR's columnar material continues to be unique and well-positioned with very high levels of surgeon and patient satisfaction. Additionally, our total addressable market is only increasing as myopia is a growing healthcare issue and is certainly not going away. We continue to build surgeon confidence in measurement and lens size selection. And as that surge in confidence builds, their commitment to EVO, as well as their commitment to coming down the diopter curve, increases, which is consistent with our stated goal of being the choice for minus six diopters and above.

While we are not providing 2025 outlook today, we remain confident as far as long term growth and the tremendous opportunity for Evo.

<unk> column or material continues to be unique and well positioned with very high levels of surgeon and patient satisfaction. Additionally, our total addressable market is only increasing as myopia is a growing health care issue and is certainly not going away.

We continue to build surging confidence in measurement and lend size selection.

Speaker Change: And as that surging confidence builds their commitment to evo as well as the commitment to coming down the diopter curve increases, which is consistent with our stated goal of being the choice for minus six diopters and above.

Tom Frinzi: And finally, we're in the process of rebuilding our pipeline to deliver next generation technology that will continue to provide the quality as well as quantity of vision our demographic demands. STAAR is laying the foundation for growth to create not only a good company today, but a great company for tomorrow.

And finally, we are in the process of rebuilding our pipeline to deliver next generation technology that will continue to provide the quality as well as quantity of vision or demographic demands.

Star is laying the foundation for growth to create not only a good company today, but a great company for tomorrow and with that operator, we'll now take questions.

Operator: And with that, Operator, we'll now take questions. We will now begin the question and answer session. To ask a question, you may press STAAR, then 1 on your touchtone phone.

We will now begin the question and answer session.

To ask a question you May Press Star then one on your Touchtone phone.

Operator: If you are using a speakerphone, please pick up your handset before pressing the If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster.

If youre using a speakerphone please pick up your handset before pressing the keys.

Thomas Stephan: The first question today comes from Tom Stephan with Stiefel. Please go ahead. Great, hey guys, thanks for the questions. Maybe I'll start with 2025, you know, when I look at street numbers, their modeling, I think low- growth next year. So, you know, obviously a lot of very fluid macro dynamics. But, you know, when I look at the midpoint of this year's guide, it implies maybe low single digit growth in the fourth quarter.

Tom Frinzi: So, Tom, I know you said you're not going to be providing guidance, but can you just help us think about what 2025 growth should look like, either relative to that 4Q exit, and or maybe the mid to high single digit growth that you're tracking toward for the full year in 24, and then I have a follow-up. Sure, thanks, Tom, and appreciate the question.

For the full year and 24.

I have a follow up.

Speaker Change: Sure Thanks, Tom and I appreciate the question.

Tom Frinzi: You know, look, I think it'd be premature, as we said in the prepared comments, to comment on 2025 Outlook at this time. But as you know, we have a history of outpacing the market and continue to feel confident in our ability to do so. We have been and will continue to be a growth-oriented company with a strong track record, and are exceptionally pleased with our performance to date. Got it, that's fair.

Speaker Change: It would be premature as we said in the prepared comments to comment on 2025 outlook at this time, but as you know we have a history of outpacing the market and continue to feel confident in our ability to do so we have been and will continue to be a growth oriented company with a strong track record and our exceptionally pleased with our performance to date.

Got it that's fair and then.

Tom Frinzi: And then maybe to zero in on China, you know, I think the updated guidance implies, hopefully my math here is right, but you know, roughly down 10 to 15 percent growth in the fourth quarter. Can you just elaborate on the trends you're seeing, what kind of transpired, let's call it intra quarter, and then, you know, I guess maybe some of the, I guess, 4Q to D trends. Yeah, sure, Tom. Again, appreciate the question. And consistent with what you heard in our prepared remarks, the second half of the high season certainly changed. Sales tapered off following the Q2 earnings call in early August.

Speaker Change: Maybe to zero in on China, I think the updated guidance implies hopefully my math is right but.

Roughly down 10% to 15% growth in the fourth quarter can you just elaborate on the trends youre seeing what kind of transpired, let's call it intra quarter.

Speaker Change: And then I.

Speaker Change: Guess, maybe some of the.

I guess for Q D.

Trends thanks.

Yes, sure Tom again I appreciate your question and consistent with what you've heard in our prepared remarks, the second half of the high season, certainly change sales tapered off following the Q2 earnings call in early August.

Tom Frinzi: You know, and I think August and September were challenging, but we continue, even in that environment, to gain market share and outpace the market. You know, again, we believe these headwinds are transitory, and we're encouraged by the stimulus and economic packages that the China government is speaking about. And we're monitoring Got it. Thanks.

And I think August and September were challenging, but we continue even in that environment to gain market share and outpace the market.

Speaker Change: Again, we believe these headwinds are transitory and we are encouraged by the stimulus and economic packages that the China government is speaking about and we're monitoring that closely.

Speaker Change: Got it thanks Tom.

The next question comes from Ryan Zimmerman with B P. I G. Please go ahead.

Ryan Zimmerman: The next question comes from Ryan Zimmerman with BTIG. Please go ahead. Good afternoon. Thanks for taking our question. I want to ask on the U.S. first, actually, if I look at, you know, numbers for your U.S. business relative to laser vision correction, it was really steady to 2Q at about 4%, you know, penetration by our estimates. grow in the last six quarters prior.

Good afternoon, thanks for taking our questions and I appreciate all the disclosures it's very helpful.

Speaker Change: I wanted to ask on the U S first actually.

If I look at numbers for your U S business relative to laser vision correction. It was really steady to <unk> at about 4% penetration by our estimates.

Tom Frinzi: So, you know, Tom, I'm just wondering if there's anything to call out here. Would you expect that to keep growing, you know, given that you did take down the U.S. guidance and just how to think about that trajectory, particularly in the U.S. Well, look, you know, as we stated, Ryan, you know, we're pleased with what is happening in the US market. When you think of laser vision correction, normally defined being down 18%, and in the quarter, we grew 16%. You know, we're very pleased with that type of performance. In particular, within our Highway 93 initiative, you know, we signed a couple of new fast lane accounts.

Tom Frinzi: And when we look at those accounts that have had a full quarter under their belt, and the fact again, as we said, in our prepared remarks, we see really nice growth within those accounts. It certainly encourages us that we are taking share, we're outpacing the market. And we're well positioned to have continued sustainable growth in this second largest market in refractive surgery around the world.

Ryan Zimmerman: Okay, and then, you know, just to follow up on your comments, Tom, you said you were confident in the long-term growth outlook. Are we to read that as kind of reaffirming your long-range plans that you laid out at your Capital Markets Day last year?

Tom Frinzi: And just, I'm curious what you're assuming, either from a timing standpoint, or a contribution from stimulus in China, if you have any thoughts. You know, look, Ryan, I appreciate the question of trying to get me to comment on something that I've said, you know, is probably premature for us to comment. So look, I'm encouraged by what we're hearing on the ground from our people in China. Golden Week was a nice opportunity to see some uptick in consumer spending. So stimulus is beginning to have an impact. We've indicated that we think those issues are transitory. And look, we have a history, whether you go back to 2021, 2023, that the China market can turn very quickly.

So stimulus is beginning to have an impact we've indicated that we think those issues are transitory and look at we have a history, whether you go back to 2021 2023 that the China market can turn very quickly and we continue to believe we're well positioned in that market.

Tom Frinzi: And, you know, we continue to believe we're well positioned in that market, we're well respected in that market. And as it. We are in a great position to take advantage of it and continue to grow and outpace the market.

Well within that market and as it is.

Speaker Change: We are in a great position to take advantage of it and continue to grow and outpace the market.

Speaker Change: Thank you Tom.

Thank you Ryan.

Anthony Petrone: Thank you, Ryan. The next question comes from Anthony Petrone with Mizzouho. Please go ahead.

Speaker Change: The next question comes from Anthony Petrone with Mizuho. Please go ahead.

Hey, guys. This is dmitry, it's all one for Anthony.

Dimitri Dall: Hey guys, this is Dimitri Dall, I'm sorry I have to leave. is jumping around at the conference, going and playing, but I just wanted to ask again, a little touch on China. I'd like to ask on all of the trends for distributed stocking in China are looking and If we can look at the schedule and volumes at the ear group. And for a follow-up, what's the U.S. outlook for when the underlying refractive market can stabilize? Do we see it maybe returning to mid-single-digit growth next year? Yeah, if I understand the nature of the question, you know, again, I refer you back to our preferred comments, we certainly indicated that the high season did slow down in China, as we exited August and September.

The jumping around on the conference going plain Budd.

Speaker Change: Just wanted to ask again, who will touch on China.

Speaker Change: Ask them Oh.

Speaker Change: Although the trends for the distributor stocking in China are looking.

Speaker Change: Anna.

Anna: We can.

Look at the schedule and volumes at the Air Group.

Speaker Change: And for a follow up is the.

What's the U S outlook for Wendy underlying refractive market can stabilize.

Do we see it maybe returning to mid single digit growth next year.

Yes, I understand the nature of the question again I'd refer you back to our prepared comments, we certainly indicated that the high season did slow down in China as we exited August and September So we do have.

Tom Frinzi: So we do have, you know, slightly more inventory in the channel, because of that downturn, but we think it's an appropriate level. And as that market turns, we believe that'll get pulled through at the appropriate level.

Speaker Change: Slightly more inventory in the channel because of that downturn, but we think it's an appropriate level and as that market turns we believe that'll be a pull through at the appropriate level.

And then a question on U S related assumptions Youre lie volume look we've contemplated it clearly Q3 was down again.

Tom Frinzi: Then the question on U.S. related to our assumptions, relying volume look, you know, we've contemplated that clearly Q3 was down again. And what you see reflected in our guidance that we spoke about of reducing the full year to 20% contemplates a bit of a continued downturn in the overall laser vision correction. But as we said, we continue to take market share and grow and Evo's doing an amazing job out there. And if anything, we're expanding the TAM with our doctors and we're getting more and more on board.

Tom Frinzi: Okay, thanks a lot.

Patrick Wood: The next question comes from Patrick Wood with Morgan Stanley. Please go ahead. Perfect, thank you. Just one quick one. I guess, you know, for China where the volumes have been a bit slower, what do you think has happened to these patients? And the reason I ask is, is there an effect where, you know, they've delayed having a procedure, they're waiting, and then if, let's just say, the stimulus comes back, you get an effect of, I don't want to say a bolus of volumes, but, you know, is that a way to think about it? Did that happen in the U.S.?

Patrick Wood: Historically, I know, last week was a little bit different, after 8, but is there an effect of delayed patients that come through in a lump, or do you think that they've just gone up and treated or just decided not to go for a refractomy?

Tom Frinzi: Hey, Patrick. Yeah, I again, I think it's a it's a great question. And I think those patients are still there. And as I said earlier, you know, look at we've seen in the past, China demand can come back very quickly. Fiscal year 21, first quarter 23, following stimulus type activity, the market returned pretty quickly. So I think those patients are there. And as consumer sentiment changes, again, as I said, our, we're very well respected in that market. I think we're very well positioned in that market. We have a lot of surge in support. And as that economy turns, I think it's reasonable to assume volumes pick back up rather quickly.

Patrick Wood: Love it.

Patrick Wood: Thanks.

The next question comes from Matthew O'brien with Piper Sandler. Please go ahead.

Matthew O'brien: The next question comes from Matthew O'Brien with Piper Sandler. Please go ahead. Okay, this is Phil on for Matt. Thanks for taking our questions. Just wanted to start with EMEA, where you brought up sales guidance to 10% from six, which is really outstanding given this backdrop. Any specific countries of strength to call out? And any commentary on why the refractive market growth in these countries might be a little bit different than what we're seeing domestically and over in China? Yeah, look at that. Thank you for recognizing the strong performance by our EMEA team. You know, as we set our prepared marks, certainly our distributor markets in Middle East, we're very strong, but we've also seen nice work in the UK, in Spain, in Germany, where we're direct, and we're really encouraged.

Hi, This is Joe on for Matt. Thanks for taking our questions. Just wanted to start with EMEA, where you brought up sales guidance to 10% from six which is really outstanding given this backdrop any specific country the strength to call out and any commentary on why the refractive market growth in these <unk>.

It might be a little bit different than what we're seeing domestically in over in China.

Yes, thank you for recognizing the strong performance by our team.

Speaker Change: We said in our prepared remarks, certainly our distributor markets in Middle East were very strong, but we've also seen nice work in the U K in Spain in Germany, where we're direct and we're really encouraged much like we have a highway 93 initiative in the U S. We have what our team they're referred to as <unk>.

Tom Frinzi: Much like we have a Highway 93 initiative in the US, we have what our team there refers to as an Autobahn 50. And certainly within those targeted customers, you know, we have an all hands on deck type approach, and we're seeing nice growth there and very pleased with our performance in what has been a very nice market for us. That's helpful.

All our bonds 50, and certainly within those targeted customers.

We have an all hands on deck type approach and we're seeing nice growth there and very pleased with our performance in <unk>.

Speaker Change: It's been a very nice market for us.

Speaker Change: That's helpful. And then one follow up on China, and I know, we've talked a lot about it today, but just an update on the competitive landscape over there in both the implantable lens category that you play in it as well as other laser based procedure offerings.

Tom Frinzi: And then one follow-up on China, and I know we talked a lot about it today, but just an update on the competitive landscape over there in both, you know, the implantable lens category that you play in, as well as other laser-based procedure offerings. More specifically, are you seeing any pressure due to the Smile price adjustment? Thank you. Yeah, I think again, good questions embedded in there. And as I've said, in the past, I think competition is a healthy thing. It certainly validates the market. You know, imitation is the highest form of flattery. So certainly, we're aware of competition coming.

More specifically are you seeing any pressure due to the smile price adjustment. Thank you.

Yeah, I think again good questions embedded in there and as I've said in the past I think competition's a healthy thing it certainly validates the market.

Speaker Change: Imitation is the highest form of flattery so.

Certainly we're aware of competition coming.

Tom Frinzi: We welcome the opportunity, because I think all votes rise, it validates the market, will help grow the market as more people are out there talking about it. But we think we're very well positioned. You know, Eyebrite is probably a company closest to come to the market in China. We think, you know, based upon what they've said publicly, you know, probably sometime in 2025, they'll hit the market. But again, their material, acrylic versus our polymer material, we think we have an advantage, the fact that they won't have a torque version. And we do, I think, another advantage to us, but we're keeping our ears and eyes open and certainly will be prepared, particularly as we introduce our V5 technology in that market.

Tom Frinzi: Probably by mid 2025, we think if price becomes an issue in the market, we have a real stratification opportunity, both by customer and by product to compete favorably. But in general, the latter part of your question about laser vision correction, yeah, we've seen it, particularly in China, that there has been some price compression on the LDC side. But again, we believe our product should maintain a premium because we produce a premium outcome. One could argue, how great of a premium? And what we've seen in reality is somewhere in the $1,500 to $2,000 per eye premium is appropriate for the outcome we produce from a quality of vision and quantity of vision point of view, and customers are inclined to step up to that extra premium.

Tom Frinzi: And where that's taken place, we've seen uptick in volume.

Tom Frinzi: Helpful. Thanks so much.

Tom Frinzi: Thank you.

Operator: As a reminder, if you would like to ask a question, please press star, then 1 to be joined into the question queue.

Operator: The next question.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Speaker Change: [music].