STAAR Surgical Reports Record Second Quarter Net Sales of $62.4 Million Up 77% Y/Y and Increases Outlook for 2021

STAAR Surgical Company (NASDAQ: STAA), a leading developer, manufacturer and marketer of implantable lenses and companion delivery systems for the eye, today reported financial results for the second quarter ended July 2, 2021.

Second Quarter 2021 Overview

• Record Quarterly Net Sales of $62.4 Million Up 77% from the Prior Year Quarter
• Record Quarterly ICL Sales of $59.2 Million Up 93% from the Prior Year Quarter
• Record Quarterly ICL Units, Up 79% from the Prior Year Quarter
• Gross Margin at 78.9% vs. 69.4% in the Prior Year Quarter
• Net Income of $0.17 per Share vs. Prior Year Quarter Net Loss of ($0.03) per Share
• Cash and Cash Equivalents Ended the Quarter at $173.1 Million Up from $152.5 Million in Q4 2020

“STAAR’s second quarter results reflect the accelerating sales momentum and significant opportunity for our vision correction lenses. Global ICL unit growth increased 79% over the prior year quarter and we achieved positive sales and unit growth in all of our major markets. Asia, Europe, and the U.S. led our outperformance during the quarter. The Middle East, North Africa, and India, even harder hit by the pandemic than most of our developed major markets in 2020, rebounded strongly,” said Caren Mason, President and CEO of STAAR Surgical. “Following our achievement of record breaking first half 2021 results and with increasing visibility into key second half growth drivers for our business, we are today raising our outlook for full year fiscal 2021 net sales to a range of $227 million to $230 million, up from our previously provided outlook of $215 million to $217 million that we shared on May 5th. At the mid-point, our increased sales outlook for the fiscal year 2021 represents approximately 40% growth year over year.”

“Standout ICL unit growth in the second quarter, year over year, included China up 65%, Japan up 95%, Korea up 57%, Rest of Asia Pacific up 88%, Spain up 118%, Germany up 65%, Distributor Markets in Europe up 81%, and the U.S. up 255%. In China we kicked off the busy implant season with a new advertising campaign and several new and exciting marketing programs. In Spain, our ICL benefited from proprietary and premium positioning as we continued to gain market share despite increased price discounting for certain femtosecond refractive laser vision procedures. In the U.S., we sold more ICLs in the second quarter of 2021 than the entire first half of 2020. Clinical trial data for our EVO family of myopia lenses is under customary interactive review by the FDA and our goal remains to bring EVO to the U.S. market later this year. Finally, in-person ophthalmic industry sales meetings and trade shows resumed in earnest last month, including the American-European Congress of Ophthalmic Surgery (AECOS) meeting in Deer Valley, UT, and the American Society of Cataract and Refractive Surgeons (ASCRS) Annual Meeting, in Las Vegas, NV. ASCRS was preceded by Eyecelerator, a meeting dedicated to showcasing and advancing ophthalmic innovations. Our proprietary Implantable Collamer Lenses were prominently and positively showcased at all three meetings, and more so than at any point in the past, as further evidence of a coming lens-based future for refractive vision correction,” concluded Ms. Mason.

Financial Overview – Q2 2021

Net sales were $62.4 million for the second quarter of 2021, up 77% compared to $35.2 million reported in the prior year quarter. The sales increase was driven by ICL net sales and unit growth up 93% and 79%, respectively, as compared to the prior year period. ICL net sales were 95% of total net sales for the second quarter of 2021. Other Product Sales were $3.1 million, representing 5% of total net sales and decreased 30% compared to the prior year quarter due primarily to lower sales of low margin injector parts.

Gross profit margin for the second quarter of 2021 was 78.9% compared to the prior year period of 69.4%. Factors positively impacting gross margin in the second quarter of 2021, as compared to the prior year period, include geographic sales mix and a decreased mix of injector part sales which carry a lower margin, and for the three months ended July 3, 2020, there were period costs recorded as a result of COVID-19 and the resulting voluntary manufacturing pause which concluded on April 26, 2020.

Operating expenses for the second quarter of 2021 were $38.6 million compared to the prior year quarter of $25.5 million. General and administrative expenses were $11.4 million compared to the prior year quarter of $7.8 million. The increase in general and administrative expenses was due to increased compensation-related expenses, corporate insurance and facilities costs. Selling and marketing expenses were $18.9 million compared to the prior year quarter of $10.3 million. The increase in selling and marketing expenses is due to increased compensation-related expenses, advertising and promotional activities, trade show expenses and travel expenses. Research and development expenses were $8.3 million compared to the prior year quarter of $7.3 million. The increase in research and development expenses is primarily due to increased compensation-related expenses, partially offset by lower expenses associated with the EVO clinical trial in the U.S.

Net income for the second quarter of 2021 was $8.6 million or $0.17 per diluted share compared with net loss of ($1.2) million or ($0.03) per diluted share for the prior year quarter. Adjusted Net Income for the second quarter of 2021 was $13.5 million or $0.27 per diluted share compared to $1.4 million or $0.03 per diluted share for the prior year quarter. The reconciliation between GAAP and non-GAAP financial information is provided in the financial tables included with this release.

Cash and cash equivalents at July 2, 2021 totaled $173.1 million compared to $152.5 million at January 1, 2021.

Conference Call

The Company will host a conference call and webcast today, Wednesday, August 4 at 4:30 p.m. Eastern / 1:30 p.m. Pacific to discuss its financial results and operational progress. To access the conference call (Conference ID 6090849), please dial 866-209-9722 for domestic participants and 825-312-2235 for international participants. The live webcast can be accessed from the investor relations section of the STAAR website at www.staar.com.

A taped replay of the conference call (Conference ID 6090849) will be available beginning approximately one hour after the call’s conclusion for seven days. This replay can be accessed by dialing 800-585-8367 for domestic callers and 416-621-4642 for international callers. An archived webcast will also be available at www.staar.com.

Use of Non-GAAP Financial Measures

This press release includes supplemental non-GAAP financial information, which STAAR believes investors will find helpful in understanding its operating performance. “Adjusted Net Income” excludes the following items that are included in “Net Income” as calculated in accordance with U.S. generally accepted accounting principles (“GAAP”): gain or loss on foreign currency transactions, stock-based compensation expenses, and valuation allowance adjustments. Management believes that “Adjusted Net Income” is useful to investors in gauging the outcome of the key drivers of the business performance: the ability to increase sales revenue and our ability to increase profit margin by improving the mix of high value products while reducing the costs over which management has control.

Management has also excluded gains and losses on foreign currency transactions because of the significant fluctuations that can result from period to period as a result of market driven factors. Stock-based compensation expenses consist of expenses for stock options and restricted stock under the Financial Accounting Standards Board’s Accounting Standards Codification (ASC) 718. Valuation allowance adjustments can occur from time to time based on forecasted changes in operating results until all net operating loss carryforwards are fully utilized. In calculating Adjusted Net Income, STAAR excludes these expenses because they are non-cash expenses and because of the considerable judgment involved in calculating their values. In addition, these expenses tend to be driven by fluctuations in the price of our stock and not by the same factors that generally affect our other business expenses.

The Company also uses Constant Currency as a Non-GAAP financial measure to exclude the effects of currency fluctuations on net sales. The Company conducts a significant part of its activities outside the U.S. It receives sales revenue and pays expenses principally in U.S. dollars, Swiss francs, Japanese yen and euros. The exchange rates between dollars and non-U.S. currencies can fluctuate greatly and can have a significant effect on the Company’s results when reported in U.S. dollars. In order to compare the Company's performance from period to period without the effect of currency, the Company will apply the same average exchange rate applicable in the prior period, or the "constant currency" rate to sales or expenses in the current period as well. Because changes in currency are outside of the control of the Company and its managers, management finds this non-GAAP measure useful in determining the long-term progress of its initiatives and determining whether its managers are achieving their performance goals. The Company believes that the non-GAAP constant-currency sales results measures provided in this press release are similarly useful to investors to give insight on long term trends in the Company's performance without the external effect of changes in relative currency values. The table below shows sales results calculated in accordance with GAAP, the effect of currency, and the resulting non-GAAP measure expressed in constant currency.

About STAAR Surgical

STAAR, which has been dedicated solely to ophthalmic surgery for over 30 years, designs, develops, manufactures and markets implantable lenses for the eye with companion delivery systems. These lenses are intended to provide visual freedom for patients, lessening or eliminating the reliance on glasses or contact lenses. All of these lenses are foldable, which permits the surgeon to insert them through a small incision. STAAR’s lens used in refractive surgery is called an Implantable Collamer Lens or “ICL”, which includes the EVO Visian ICL product line. More than 1,000,000 Visian ICLs have been implanted to date and STAAR markets these lenses in over 75 countries. To learn more about the ICL go to: www.discovericl.com. Headquartered in Lake Forest, CA, the company operates manufacturing and packaging facilities in Aliso Viejo, CA, Monrovia, CA and Nidau, Switzerland. For more information, please visit the Company’s website at www.staar.com.

Safe Harbor

All statements that are not statements of historical fact are forward-looking statements, including statements about any of the following: any financial projections (including sales), plans, strategies, and objectives of management for 2021 or prospects for achieving such plans, expectations for sales, revenue, margin, expenses or earnings, the expected impact of the COVID-19 pandemic and related public health measures (including but not limited to its impact on sales, operations or clinical trials globally), product safety or effectiveness, the status of our pipeline of ICL products with regulators, including our EVO family of lenses in the U.S., and any statements of assumptions underlying any of the foregoing, including those relating to our product pipeline and market expansion activities. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include risks and uncertainties related to the COVID-19 pandemic and related public health measures, as well as the factors set forth in the Company’s Annual Report on Form 10-K for the year ended January 1, 2021 under the caption “Risk Factors,” which is on file with the Securities and Exchange Commission and available in the “Investor Information” section of the company’s website under the heading “SEC Filings.” We disclaim any intention or obligation to update or revise any financial projections or forward-looking statement due to new information or events. These statements are based on expectations and assumptions as of the date of this press release and are subject to numerous risks and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements. The risks and uncertainties include the following: global economic conditions; the impact of the COVID-19 pandemic on markets; the discretion of regulatory agencies to approve or reject existing, new or improved products, or to require additional actions before approval, or to take enforcement action; international trade disputes; and the willingness of surgeons and patients to adopt a new or improved product and procedure. The EVO version of our ICL lens is not yet approved for sale in the United States.

Consolidated Balance Sheets
(in 000's)
Unaudited
		July 2, 2021				January 1, 2021
ASSETS
Current assets:
Cash and cash equivalents		$	173,083			$	152,453
Accounts receivable trade, net			48,647				35,229
Inventories, net			15,590				18,111
Prepayments, deposits, and other current assets			10,797				10,625
Total current assets			248,117				216,418
Property, plant, and equipment, net			28,616				24,030
Finance lease right-of-use assets, net			59				596
Operating lease right-of-use assets, net			11,243				8,764
Intangible assets, net			239				270
Goodwill			1,786				1,786
Deferred income taxes			3,720				4,944
Other assets			658				608
Total assets		$	294,438			$	257,416
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit		$	1,280			$	1,379
Accounts payable			7,579				7,874
Obligations under finance leases			85				360
Obligations under operating leases			2,765				2,485
Allowance for sales returns			5,429				4,532
Other current liabilities			24,663				24,606
Total current liabilities			41,801				41,236
Obligations under finance leases			25				38
Obligations under operating leases			8,654				6,537
Deferred income taxes			222				222
Asset retirement obligations			205				221
Pension liability			8,909				11,940
Total liabilities			59,816				60,194
Stockholders' equity:
Common stock			474				464
Additional paid-in capital			360,316				338,194
Accumulated other comprehensive loss			(3,836	)			(5,545	)
Accumulated deficit			(122,332	)			(135,891	)
Total stockholders' equity			234,622				197,222
Total liabilities and stockholders' equity		$	294,438			$	257,416

Consolidated Statements of Operations
(In 000's except for per share data)
Unaudited
		Three Months Ended																					Six Months Ended
		% of			July 2, 2021				% of			July 3, 2020				Fav (Unfav)							% of			July 2, 2021				% of			July 3, 2020				Fav (Unfav)
		Sales							Sales							Amount				%			Sales							Sales							Amount				%
Net sales		100.0	%		$	62,367			100.0	%		$	35,194			$	27,173			77.2	%		100.0	%		$	113,119			100.0	%		$	70,381			$	42,738			60.7	%
Cost of sales		21.1	%			13,164			30.6	%			10,764				(2,400	)		-22.3	%		21.9	%			24,774			30.1	%			21,191				(3,583	)		-16.9	%
Gross profit		78.9	%			49,203			69.4	%			24,430				24,773			101.4	%		78.1	%			88,345			69.9	%			49,190				39,155			79.6	%
Selling, general and administrative expenses:
General and administrative		18.4	%			11,441			22.3	%			7,848				(3,593	)		-45.8	%		19.1	%			21,653			22.5	%			15,817				(5,836	)		-36.9	%
Selling and marketing		30.2	%			18,853			29.3	%			10,326				(8,527	)		-82.6	%		28.4	%			32,054			30.3	%			21,354				(10,700	)		-50.1	%
Research and development		13.2	%			8,260			20.8	%			7,311				(949	)		-13.0	%		14.6	%			16,519			20.2	%			14,209				(2,310	)		-16.3	%
Total selling, general, and administrative expenses		61.8	%			38,554			72.4	%			25,485				(13,069	)		-51.3	%		62.1	%			70,226			73.0	%			51,380				(18,846	)		-36.7	%
Operating income (loss)		17.1	%			10,649			-3.0	%			(1,055	)			11,704			1109.4	%		16.0	%			18,119			-3.1	%			(2,190	)			20,309			927.4	%
Other expense:
Interest income (expense), net		0.0	%			(5	)		0.1	%			20				(25	)		-125.0	%		0.0	%			(12	)		0.3	%			236				(248	)		-105.1	%
Gain (loss) on foreign currency transactions		-0.2	%			(131	)		1.1	%			388				(519	)		-133.8	%		-1.3	%			(1,430	)		-0.1	%			(80	)			(1,350	)		-1687.5	%
Royalty income		0.2	%			151			0.1	%			52				99			190.4	%		0.3	%			311			0.2	%			146				165			113.0	%
Other income (expense), net		0.1	%			51			-0.1	%			(21	)			72			342.9	%		0.0	%			(34	)		0.0	%			(20	)			(14	)		-70.0	%
Total other income (expense), net		0.1	%			66			1.2	%			439				(373	)		-85.0	%		-1.0	%			(1,165	)		0.4	%			282				(1,447	)		-513.1	%
Income (loss) before provision (benefit) for income taxes		17.2	%			10,715			-1.8	%			(616	)			11,331			1839.4	%		15.0	%			16,954			-2.7	%			(1,908	)			18,862			988.6	%
Provision (benefit) for income taxes		3.5	%			2,148			1.5	%			556				(1,592	)		-286.3	%		3.0	%			3,395			-0.8	%			(602	)			(3,997	)		-664.0	%
Net income (loss)		13.7	%		$	8,567			-3.3	%		$	(1,172	)		$	9,739			831.0	%		12.0	%		$	13,559			-1.9	%		$	(1,306	)		$	14,865			1138.2	%
Net income (loss) per share - basic					$	0.18						$	(0.03	)												$	0.29						$	(0.03	)
Net income (loss) per share - diluted					$	0.17						$	(0.03	)												$	0.27						$	(0.03	)
Weighted average shares outstanding - basic						47,099							45,354														46,858							45,152
Weighted average shares outstanding - diluted						49,491							45,354														49,373							45,152

Consolidated Statements of Cash Flows
(in 000's)
Unaudited
		Three Months Ended								Six Months Ended
		July 2, 2021				July 3, 2020				July 2, 2021				July 3, 2020
Cash flows from operating activities:
Net income (loss)		$	8,567			$	(1,172	)		$	13,559			$	(1,306	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation of property and equipment			889				752				1,754				1,518
Amortization of long-lived intangibles			8				8				17				17
Deferred income taxes			845				-				845				(1,369	)
Change in net pension liability			(154	)			203				(27	)			376
Stock-based compensation expense			3,992				2,918				7,322				5,839
Loss on disposal of property and equipment			-				-				2				3
Provision for sales returns and bad debts			829				525				932				605
Inventory provision			313				480				697				816
Changes in working capital:
Accounts receivable			(14,935	)			(4,947	)			(13,797	)			(8,409	)
Inventories			1,254				(441	)			2,238				(932	)
Prepayments, deposits and other current assets			(164	)			274				(307	)			(2,172	)
Accounts payable			131				(610	)			(268	)			297
Other current liabilities			4,807				1,993				181				(3,471	)
Net cash provided by (used in) operating activities			6,382				(17	)			13,148				(8,188	)
Cash flows from investing activities:
Acquisition of property and equipment			(3,524	)			(2,025	)			(5,683	)			(4,210	)
Net cash used in investing activities			(3,524	)			(2,025	)			(5,683	)			(4,210	)
Cash flows from financing activities:
Repayment on line of credit			-				(3	)			-				(508	)
Repayment of finance lease obligations			(43	)			(110	)			(278	)			(346	)
Proceeds from vested restricted stock and exercise of stock options			7,876				7,553				14,111				9,558
Net cash provided by financing activities			7,833				7,440				13,833				8,704
Effect of exchange rate changes on cash and cash equivalents			48				66				(668	)			41
Increase (decrease) in cash and cash equivalents			10,739				5,464				20,630				(3,653	)
Cash and cash equivalents, at beginning of the period			162,344				110,851				152,453				119,968
Cash and cash equivalents, at end of the period		$	173,083			$	116,315			$	173,083			$	116,315

Reconciliation of Non-GAAP Financial Measure
Adjusted Net Income (Loss) and Net Income (Loss) Per Share
(in 000's)
Unaudited		Three Months Ended						Six Months Ended
		July 2, 2021		July 3, 2020				July 2, 2021		July 3, 2020
Net income (loss) (as reported)		$	8,567	$	(1,172	)		$	13,559	$	(1,306	)
Less:
Foreign currency impact			131		(388	)			1,430		80
Stock-based compensation expense			3,992		2,918				7,322		5,839
Valuation allowance adjustment			845		-				845		(1,369	)
Net income (adjusted)		$	13,535	$	1,358			$	23,156	$	3,244
Net income (loss) per share, basic (as reported)		$	0.18	$	(0.03	)		$	0.29	$	(0.03	)
Foreign currency impact			-		-				0.03		-
Stock-based compensation expense			0.09		0.06				0.15		0.13
Valuation allowance adjustment			0.02		-				0.02		(0.03	)
Net income per share, basic (adjusted)		$	0.29	$	0.03			$	0.49	$	0.07
Net income (loss) per share, diluted (as reported)		$	0.17	$	(0.03	)		$	0.27	$	(0.03	)
Foreign currency impact			-		-				0.03		-
Stock-based compensation expense			0.08		0.06				0.15		0.12
Valuation allowance adjustment			0.02		-				0.02		(0.02	)
Net income per share, diluted (adjusted)		$	0.27	$	0.03			$	0.47	$	0.07
Weighted average shares outstanding - Basic			47,099		45,354				46,858		45,152
Weighted average shares outstanding - Diluted			49,491		47,546				49,373		47,328
Note: Net income per share (adjusted), basic and diluted, may not add due to rounding

STAAR Surgical Company
Reconciliation of Non-GAAP Financial Measure
Constant Currency Sales
(in 000's)
Unaudited
	Three Months Ended
	July 2, 2021		Effect of			Constant			July 3, 2020			As Reported						Constant Currency
Sales			Currency			Currency						$ Change			% Change			$ Change			% Change
ICL	$	59,235	$	(738	)	$	58,497		$	30,728		$	28,507		92.8	%		$	27,769		90.4	%
IOL		3,074		(58	)		3,016			2,561			513		20.0	%			455		17.8	%
Other		58		20			78			1,905			(1,847	)	-97.0	%			(1,827	)	-95.9	%
Other Products		3,132		(38	)		3,094			4,466			(1,334	)	-29.9	%			(1,372	)	-30.7	%
Total Sales	$	62,367	$	(776	)	$	61,591		$	35,194		$	27,173		77.2	%		$	26,397		75.0	%
	Six Months Ended
	July 2, 2021		Effect of			Constant			July 3, 2020			As Reported						Constant Currency
Sales			Currency			Currency						$ Change			% Change			$ Change			% Change
ICL	$	105,736	$	(1,722	)	$	104,014		$	60,068		$	45,668		76.0	%		$	43,946		73.2	%
IOL		6,799		(232	)		6,567			6,555			244		3.7	%			12		0.2	%
Other		584		11			595			3,758			(3,174	)	-84.5	%			(3,163	)	-84.2	%
Other Products		7,383		(221	)		7,162			10,313			(2,930	)	-28.4	%			(3,151	)	-30.6	%
Total Sales	$	113,119	$	(1,943	)	$	111,176		$	70,381		$	42,738		60.7	%		$	40,795		58.0	%

 

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