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STAA Staar Surgical

Participants
Brian Moore IR
Caren Mason CEO, President and Director
Deborah Andrews CFO
Andrew Brackmann William Blair
James Sidoti Sidoti & Company
Cecilia FurlongJason Canaccord Genuity Limited
Raymond Myers The Benchmark Company
Call transcript
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Operator

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the STAAR Surgical First Quarter 2018 Financial Results Conference Call. [Operator Instructions] This call is being recorded today, Wednesday, May 2, 2018. At this time, I would like to turn the conference over to Mr. group. EVC with Moore Brian

Brian Moore

first Thank you, joining this Thank for for afternoon, to XX, on XXXX. and on the good the results us financial call the everyone. which STAAR ended review March you company's Jiji, quarter, Surgical afternoon conference

today now Mason, just first the is the Time on Company; was CEO issued Surgical X:XX at President quarter of p.m. www.staar.com. and of call On Deborah The Andrews, release and STAAR's website STAAR after Eastern and available Chief are Caren Financial Officer. results

Before webcast or company's the we that well so. quickly safe outcomes statement obligation do make SEC. remind cause the statements. actual forward-looking projections, during fact is events based from STAAR described numerous of described this materially periodic and those results made with subject about that forward-looking to remarks call important to differ the forward-looking this you to the statements to as in in expectations, assumes statements beliefs conference this a statement does are statement will intend any update and release, could uncertainties actual of conference in and prospects. statements of begin, includes risk today's in filings the press let a harbor company as future reflect no This public you and not STAAR's The me with judgment the conference the these that historical forward-looking associated not are uncertainties statement. course caution on that the and statements. are We to risks of call, analysis These and as date and plans, call forward-looking is

the numbers, we future information our information. believe and non-GAAP the that reconciling non-GAAP non-GAAP supplement in provide GAAP to helpful A and or or numbers is these in have performance. and loss provided historical share net We release. addition, and information per included financial information are meaningful income to assessing In supplemental the table net income adjusted, GAAP today's

the analysts. we questions with remarks, for We prepared publishing their to call thank will from our process. Instructions] Following this open everyone in cooperation advance [Operator

to STAAR Executive Now the to and of Officer like turn Caren call Chief Surgical. President Mason, I'd over

Caren Mason

afternoon, before of Brian, you, on begin will our the overview your questions. will Deborah good start key and will you outlook with we everyone. XXXX, our call the year. I for Thank first of for open discussion and remainder the our then financial strong update results quarter review an

for to STAAR company our at compelling that business a and business team ophthalmic model to a surgeons Our their Surgical patients. visual shareholders focused generating returns freedom by upon provides building model has the compelling to

believe STAAR on Furthermore, business million that quarter depending momentum for first of we was our The and based number than we continued to fiscal evidence we more building our continuing. produce to product plan progress results since of Today to enhance When our this quarter on EVO end that patients. line growing to leads our first surgeons and of $XXX in and profitability us noted that are you is that executing momentum talked last financial February, with illustrates late vision. our objectives the the in their their a XXXX revenues. happiest generate the are one

XXXX. double-digit the closer to are low We sales from bar XX% raising on the target over to XXXX growth

year. operations to the increase the though we cash growth are seeing for does investments maintain increased based to and international momentum our Also contribution XXXX, even previous beyond full the markets incremental continuing include any we solely we trajectory, growth emerging increase as on our required compared forecasts. to is in Our outlook not to US sales expect improvement from are profitability and

with at currently to trial. new expanded and was as consumer This effort rate cash over XXXX. EDOF of by enrolling $X.X prospect today's this And increasing to To the IP in As comfortable release, The fees. reiterate, XXst, of to variations lead we in position pivotal and by submission study but to $X.XX to on multi-site cost are overall are operating studies increase other EVO we of presbyopia year's end. regulatory profitability last breakeven and in therefore Commercial XXXX, results to clinical improvement slightly XXXX as year the certainly material clinical are able increase European build we and were negative of growth noted compared an getting to our below first protection In projection earnings an from delivering patients conduct compared increased rate, Collamer infrastructure prior approximately and periods. EDOF spending not for time, XX%, million EPS earnings significantly first will more the this quarter. outreach products. quarter modifying of our expenses profitable December our and growth around quarter achieve expansion top-line our

go While there in offer. few the like are highlights through Deborah will to a I'd more that numbers detail,

quarter ICL and net other product segment our sales grew by and XX% includes which units for parts the were and XX%. ICL XX% grew driven First, grew IOLs XX% our revenue injector growth.

China we dip XX sales, while actually injector our that strong margin due pleased during the exceptional the quarter leading Second, parts the grew XX% report to to our in with unit XXXX first ICL slightly with expect ICL growth. performance, to points way we are strong first gross growth. margin to the international basis gross percentage STAAR's to once key contributed again quarter due markets

strategic than STAAR a and number providers. And and partners We to International and Annual their ICL strategic Surgery now STAAR largest of second personnel growing features they traveling Meeting. more continue and with be will Refractive partner EVO at as China combined our XX experience servicing investments make their distributor dedicated Hospital Group positive Visian China, to in IRI have Surgical

happy behind unit market. the solidified the our new year. commitments with first XX% also also quarter we growth, marketing marketing ICL partner, term the in In Japan during increasing that factors at and Japan, near plus celebrity growth to Korea XX% renewed and you social We and status. our last expand and grew from recently are market growth. solid including the growth media compared Japan with first Twitter plan We and with digital with strong and turnaround, by and Instagram confidence postings contributed quarter introducing our partnerships, Middle East market to of that distributor in that digital benefiting Germany partnerships, addressed, ICL XX% to growth unit XX% challenges strategic STAAR meet were patients Facebook, the units recent strong Korean campaigns EVO is unit as very markets and in media expressed strategic in another XX%. to to demand key fueled Key from support. and international our our some with being team is Other the significant

Our North quarter, Canada results consumer our American well development disciplined building of approach to interest as outreach. in practice from in certification the are the surgeons in benefiting first EVO growth as with XX% unit and

and these positioning We enjoy relationships are committed largest to we markets. our ensuring in provide primary the outstanding international that premium

North way are America, demonstrating with partners. is the ICL in can we We perceived the Asia and the and change in right as Europe that we have marketed

year-end, a by compliance achieving the QSI States continue prepare dependent ICL and upon to rating launch for Toric in FDA. Visian We possible in by the United

approval. and picture of around satisfaction reporting patient family globe, In are present clinical positive effectiveness EVO a addition registry recent with next US for steady ICL from patient on we product lenses safety the the we Visian footing of data and the to believe very of our targeted as and family

registry now grown again. patients patient XX.X% post implementation would reporting ICL surveyed the surgery they nearly, has Our with XXXX to have

Turning now to our audit quality system updates.

Brazil, XXXX products processes. XXXX an of and audit Most notably to our device in of the European by person which global completed A MD auditing to Japan certifying of the single the resulted are many we regulatory is Australia, The in a assessment and upgrade result the certification ISO outcome, SAP system latest program the device program facilities, five and positive certification by STAAR of for countries. known an recognized quality is countries, XX requirements these XXXX, markets anticipate the medical and results standard the near more in system And including body Union. are XXXX bodies quality conformance audit the future. series QX, system days ISO US. quality During audit Canada, medical audits. used as of single the audits extensive of ISO of XXXX the

a XXth, In warning these re-inspection of in on the audits addition facility commenced Monrovia our relation XXXX FDA letter. the to to April

I'd Deborah. the appropriate update quick the We when call permitted to two I and will to completed. like inspection have is provide updates before turning share after over an

hired and manufacturing First, equipment STAAR office Revision its closed tools, operations which from furnishing equipment and recently Optics lab doors. and leadership has event purchased

manufacturing Forest a and in we south office and addition, In five-year lease. space of secured us Orange on their County Lake

and are XXXX We site. at designing and the intent our engineering operations improvements including upon precision building foundations manufacturing

EVO for in myopia developed will Our Monrovia automation Lake manufacturing cataract for and in and should IOL the benefit our from and facility, remain manufacturing care the improvements ICL precision Forest.

manufacturing Lake ICL our considering for EVO are as the well. facility We Forest lenses in presbyopia

effective backup specialization significant is packaging well selected operations shipping to in facilities and mitigate achieving with global manufacturing, achieving Our risk, underway. goal while of locations designed

STAAR's reimbursement with medical is Advamed ICO bring industry vision mid-April, is leaders to the device regulatory intellectual platform The of Advamed. with special to enthusiasm global prominent and finally over that assure the the view. representing a of markets. The the headquartered and protocol members international with the association ophthalmic in I'm markets family the call areas with and including profitability and our team's globe. timeline XXX ophthalmic Washington, new strong of regulatory strong leading committed and met a are collaboration and standards, life possible. reimbursement competitive DC the product sector to over for to turn to conference possible. international now recent with vision initiatives rapid as that lenses We And as I best access promotes I key a Markets submission, family Chair surgeon surgeons expressed policies validated feedback from the exciting. a property, Chair industry a strong on surgeons the and ethical I'll that And were our together significant satisfaction. engagement, markets U.S. be the have uniformed as patient Advamed at as contributor soon from Second, EVO EVO from been US STAAR ASCRS to lenses Global selected in and outreach of bringing to and business of the Deborah. for adhering to products, the opportunity key and anticipation care trade was surgeons the for with of capability in several members. recognizing the significant responding appropriate and industry pleased trade interest, to highest model, for leaders for the our of team met very around ICL's very Many foster business practice to the our The create and approvals, interest their agency met to guiding and share EVO

Deborah Andrews

of of Thank provide financial QX then of and sequential you, by the a growth. in overview start Caren. X%, market. $XX.X results, fourth point quarter and with the XXXX, will summary the over Good rate sequential in everyone. million quarter of of first reported the $XX.X quarter product afternoon, was was an consecutive more growth for net and the I reported million sales details sales increase sales STAAR net The of first XXXX. XX% top-line

Caren XX%. with of growth the strong XX% top-line was increase driven growth As revenue of ICL unit mentioned, by

presentation strategic and parts with of addition, IOL today's products into sales sales that ICL In combining focus. another other injector reporting, reflect STAAR category the we beginning better product are

our The first approximately during and quarter grew net sales. sales XXXX, for other of category in $XX.X million accounted XX% product of the XX%

ICL, ICL in growth during unit the quarter strong on driven Focusing the the was XX% growth revenue company's by first markets. key

Germany. For XX% in the Latin China, America in East XX% XX% in generated XX% Korea, Japan, both XX% Middle we in unit and growth instance, in and

the our to prior compared statement, basis resulted margins costs. injector unit impact the from TICL XX.X first margin XX XX.X%. income margin the gross quarter gross increase higher slight and growth, and IOL to points %, up offset The sales the margin of profit mix, down which than period ICL revenue gross strong improved Moving quarter more for increased was in negative profit year the the parts for

throughout rate we ICL for forecasted compared growth that higher we slight due originally first declining XXXX increase XXXX. margin injector While gross as the maintain of to mix a the had gross if we quarter achieved XXXX, during part lower now margins will sales, believe margins to

optic, $X.X prior million. $X.X increased compared first digital, to $X.X closer due development last For prior net prior the $X.XX margin share. commercial million $X.X period. adjusted and increased expense year the the of Total the partially over marketing basis, in income net of We was the or income to a the per expenses the year share, an quarter first increased the $X.XX Sales $XX.X $XXX,XXX, trial $X.X million, expense G&A of $XX.X year, R&D were clinical for $X.X compared with million. million million with approximately during expenses million clinical compared an our first of as first and Net the a quarter. net and compared EDOF quarter quality and per XX% in the as same during increased headcount with $XXX,XXX our quarter by quarter operating quarter were with a first components offset we or income for next remediation And operating compared to decreased investment increased Taking the a expenses, infrastructure. $XX.X period of or non-GAAP XXXX, million meaningful adjusted a as compared with first reported was XXXX expenses. to increase consumer the XX% million, expenses dollars or look share, generation as spending, to $X.XX of ICL approximately with for compensation. marketing improvement due loss the diluted a to quarter project $X.X as was generated of million, associated loss gross during at $X.XX $X quarter million, for of million, On of operating $X.X diluted year

balance now Turning to sheet. our

in $XX.X and as quarter the in from first That equivalents XXXX December restricted At questions. concludes time, March of XXXX. of marks. $XX.X million XXXX. for opens operator generated million please million, cash cash total with The operating cash, company activities at XXst, Our XXth, cash compared $X.X prepared our the this line

Operator

[Operator Instructions] William question is our Weinstein Brian first Blair. from from And

is Your now line open.

Andrew Brackmann

some Andrew the it balance to for cash $X.X you. Obviously with I Brian the thank Great, is anticipated? this kind investment help bring States to into having This growing this bit up today. urge cash And year. than of investments United bring start little in bring any million plan forward wanted was you your this a of does on forward sequentially, in the quarter. quicker you

Caren Mason

markets our engineering opportunity. being definitely Well, as revision I always see opportunistic we When is do support to those systems opportunity into will we well think manufacturing, precision as spending in automation. really that with optics us getting were we're and definitely further equipment resources and us in plans and there we the invest are XXXX increase have to for -- opportunity. with greatest where Also the we foundation

try your manage break-even expenses make accelerate also will to better definitely that end. opportunistic the So, continue get investments or and appropriately, hopefully great to to by and we yes, be top-line,

Andrew Brackmann

Great, clinical patients done remind think us thanks presbyopia when trial. the markets? approval on you expect and And to that you when on they're the Could you in be that? going larger enrolling Thanks. then

Caren Mason

well for Okay, the details the study. really protocol we the haven't given of

patients. We progress are we're making with enrolling the pleased

will is be the tomorrow. able at this expect as by first We up year end study implants our wind we our hope And that early as to latest.

Operator

you. Thank

is Our Sidoti from Co. James next from question & Sidoti

Your is line open. now

James Sidoti

you regarding little inspection? about the talk Well the a FDA a the bit Can bit more me? Can afternoon. your Good quarter. in comments quite hear you and

Caren Mason

can all the I the press well The script made I cannot. No. in we say. that reading, as are during really release as comments

James Sidoti

Okay. what you just then? said you repeat Can

Caren Mason

facility of relation permitted inspection warning commenced to. happy and The an Monrovia We'll be to Sure XXth. update provide April the re-inspection XXXX our in after appropriate completed/ is letter on the when

James Sidoti

Okay.

I to think that. while Congratulations. waiting been a everybody's hear

Caren Mason

We're happy, yes. it started,

James Sidoti

when a we the talk you Investor third Day? leased you facility, you Can R&D so said the Okay. where in had maintain the the You facilities? facility about

Caren Mason

Yes.

This precision So transferred manufactured presbyopia Viejo appropriate automation and growth the strong a are and so Forest. the that sure processes necessary also Most us production as that's weighing remain Lake the where risk appropriate for excellence really development and Lake lenses Technology ability the in be to to gives there we Forest will engineering for of especially management in now an Forest, maximize center duplicity, the have development. opportunity the Lake is our we of and as Aliso underway. specializing specializing and testing capacity Monrovia Monrovia in will on and of presbyopia right strongly in then as myopia and Center, here facility benefits trajectory that having to facility now have care systems necessary making in cataract the and our

James Sidoti

the increase balance and assume PP&E on $X related million leasing Okay that's sheet of the in I facility. the to this

Caren Mason

as as part, the well US in investments Yes primarily. other in

James Sidoti

repeat China you you what in said Can the quarter? about

Caren Mason

Sure.

So units. China the was XX% in in up quarter

have strong We China. in momentum very

between are We the our our we of now that in the XX quarter established STAAR employees first distributor XXXX. model and individuals employees have dedicated business supporting

very we momentum So excited are the about continuing there.

as to company. primary IR and mid a high to We that multiple and private for There will second Hospital agreements will well, very places China, where is group's enthusiastic entities but we ranges. the headline be diopter we procedure going premium a Annual both Symposium International as attendance have companies to us other within refract in and strategic in Refractive about be team partake IR a over positioning are China public at

James Sidoti

you fair direct marketing marketing Japan China, Okay in electronic the right it's programs say and to consumer programs, and have now? Korea

Caren Mason

That is correct.

James Sidoti

show. questions two my exhausted I've sure I'm Well, Okay.

Operator

is Canaccord Jason question Mills Genuity. from next our And from

open. now is line Your

Cecilia Furlong

okay? and progress great and on on Can ICL's great I in it to But color hear. for trend, to effect, just share played where line Furlong was the take thanks Good, out lower that's additional just this how could a quarter? and grab actually the Cecilia STAAR this quarter, can and strategy continuing capture Hi, you your around you pricing unit date, wondering you meaningful of provide Jason. have volume Lasik terms and earning congrats me some is diopter in just Just share. hear seen on to really

Caren Mason

Okay.

for the diopter why reasons we ranges right cetera pricing And with is we the mid our best regard the lower it pricing the consumer that there but especially where also that a the consumer with know pricing give terms important to diopter, patients outreach of patient as et that the really higher to being because for does Lasik believe way or to reshaping than down Lasik always find less of we in the diopter ICL go mid and is that more all other we have patient So strategy, the range difference procedure we in in requirement does astigmatism works. a no for ends choice, up selection choice.

do So usually go to but a XX% bottom question make line to patient's huge not always is, ICL. range XX% a yes, supporting if that please? in to usually, decision pricing lower second in repeat of could you impact a does your we And

Cecilia Furlong

result just you're I in pricing changes? terms Lasik just as a of in grabbing seeing of guess terms share of your what

Caren Mason

been of share And we to will start year about time last between are high growth. diopter. that we quarter initiative will this it that a this was talking talked do about the third markets gaining -- mid today years since that at really have because have especially very lower Well, it started we that fall actually in we we know

increase is. to volume obviously is share really the we'll growth So market start at that we've solidify point significant that reported. It the from what

Cecilia Furlong

basis? a and of this is and about thanks trends your far then the you're more what of know line growth expectations great, XXXX? Korean out Okay, positive in color the could talk bit I the so you just on thinking market in expected little for a kind ahead go-forward of just but

Caren Mason

Yes.

a that beginning from restart. strong cetera. first programs, consumer really outreach I really lenses, of I toric especially with number seeing we're major of et the a Korea in nice increase. quarter think believe a strategic benefited partnerships, The the marketing of inclusion

be And always the based then quarters But So expect gearing strong will on we a and a expect for for as initiatives. Korea quarters is few not year us very that these significant see probably Korea double-digit, some are QX. component as higher we significant but Korea growth we'll back maybe for as in year. the up,

Operator

Thank you.

from Our is Myers next question Benchmark. Raymond from

Your is open. line now

Raymond Myers

potential other Thank in you and years. over the congratulations. question some The the is partnerships Japan executed is say describe first perhaps and where me market let STAAR markets the of marketing ICL

Caren Mason

Okay.

market. the we're in ICL Japan So building really

years. We terms where major Japan in perhaps major and for strong we the think had of building And are ICL business many IOL story. company sole the have we

Japan. We we to have adding team to there digital enough consumer us confidence Japan dollars. significant market in for a we in what that invest And we're target outreach doing marketing made are in our

of going the total We have not sure growth what sized target terms XX% Japan also is range exactly for in it but XX%- for in the would be, year.

Raymond Myers

regions good. or sounds or products world you planning excited over horizon? about about are second two which a question my And three-year is most Okay,

Caren Mason

the surgeons as still say would hoping as market on we clamor after quickly refractive the then business us. have are and Presby of the lenses the opportunity. EU. are that opportunity starting where is the I more I more talking from in we the ICL optic And about of on our as had hopefully with lenses as market really model increase And of models to that surface I'm have and We're presbyopia their of excited in freedom market, are US presbyopia from to EVO the obviously of really are possible course who the toric spoken US the so globally US, indicated a building in business family say terms such bringing for script with United myopia then there that the I markets about bringing the associated with In most positive in way, Okay very States. excited would as are big terms picture big we outcomes we X% where myopic their levels we eyes We eyes high. believe see technology. opportunity going more introducing we're surgeons patient about think with forward have way by great a of terms million X.X and that do ICL. satisfaction what we million of a We procedures think can as refractive just bringing X.X where building very we got very take driven, the visual million possible We've and X.X additional well this in that annually, performed. to tremendous got the contacted

Raymond Myers

That you. sounds thank Well, exciting.

Caren Mason

you Ray coverage right. and Okay, really appreciate Thank of very support company. much. the your We

Operator

Thank further showing I you. the remarks. time, and President for I'm Caren to call like would back At this no closing CEO questions. to turn Mason, over

Caren Mason

thanks the your and Las we everyone Thank you the the appreciate to call in We'll today. Merrill visiting in in and and Philadelphia road Vegas. interest on We'll area. with much have Lynch company. be as your We DC, best be May Conference recently community Healthcare Washington all again of investment of very XXth our coming on America participation in Bank Delaware All financial the in weeks on for the the at our you.

Operator

your Ladies and concludes the today's participation conference. gentlemen, thank This in you program. for

may disconnect. You now