STAA
$16.35
Staar Surgical
$.05
.31%
Earnings Details
3rd Quarter September 2017
Wednesday, November 8, 2017 4:01:00 PM
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Summary

Staar Surgical (STAA) Recent Earnings

Staar Surgical (STAA) reported 3rd Quarter September 2017 earnings of $0.02 per share on revenue of $23.5 million. The consensus earnings estimate was $0.02 per share. Revenue grew 17.1% on a year-over-year basis.

STAAR Surgical designs, develops, manufactures and sells implantable lenses for the eye. The Company is a maker of lenses used in corrective surgery, and it also makes lenses for use in surgery that treats cataracts.

Results
Reported Earnings
$0.02
Earnings Whisper
-
Consensus Estimate
$0.02
Reported Revenue
$23.5 Mil
Revenue Estimate
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

STAAR Surgical Reports Third Quarter 2017 Results

STAAR Surgical Company (STAA), a leading developer, manufacturer and marketer of implantable lenses and companion delivery systems for the eye today reported financial results for the third quarter ended September 29, 2017.

Third Quarter 2017 Overview

-- Quarterly Net Sales of $23.5 Million Up 17% from the Prior Year Quarter

-- ICL Sales Up 22% and Units Up 18% from the Prior Year Quarter

-- IOL Sales Down 16% and Units Down 6% from the Prior Year Quarter

Gross Margin at 71.8% of Sales from 74.2% of Sales in the Prior Year Quarter due to Larger Volume of Lower Margin Injector Sales

Quarterly Net Earnings per Share of $0.03 vs. Prior Year Quarter Net Loss of ($0.04) per Share

-- Cash, Cash Equivalents and Restricted Cash Ended the Quarter at $16.3 Million

Signed New and Extended Existing Strategic Agreements with Providers in China, Korea, Europe

Continued First-in-Man Clinical Evaluation of EVO Visian (TM) Implantable Collamer Lenses with EDOF for Presbyopia Correction - EU Clinical Study to Commence in Q1 2018

"During Q3, we achieved a number of milestones for the company. We were pleased to deliver a profitable quarter with $0.03 positive earnings per share and approximately $3.1 million in positive cash flow from operations. We achieved record revenue and gross profit for the quarter while benefiting from planned expense management and a shift in marketing expense for our Experts Meeting and ESCRS to the fourth quarter. Top line results include record ICL sales and record ICL units with Canada units up 200%, China units up 76%, Japan units up 48%, Germany units up 28% and Global Distributors units up 22% over the prior year quarter. China’s demand was especially strong as the third quarter encompasses the largest procedure volume of the year. As we have expanded our business substantially in China, the largest refractive surgery market globally, we now will be planning for greater revenue in Q3 in future years than in previous years," said Caren Mason, President and CEO.

"Our first-in-man clinical trial for the next generation ICL with EDOF optic is nearly finished and the results continue to meet intended outcomes. We plan to begin our pivotal clinical trial during the first quarter of 2018 to evaluate the performance of an EDOF optic design to treat Presbyopia on the approved EVO Visian Implantable Collamer Lens platform. With regard to FDA remediation, we completed our internal work in the first quarter of 2017 and notified the FDA in March that we are ready for inspection," added Ms. Mason.

Financial Overview

Net sales were $23.5 million for the third quarter of 2017, up 17% compared to $20.1 million reported in the prior year quarter. The sales increase was driven by ICL revenue and unit growth of 22% and 18%, respectively, and strong injector part sales. Sales of IOLs decreased 16% compared to the prior year quarter.

Gross profit margin for the third quarter of 2017, was 71.8% compared to the prior year period of 74.2%. The decrease in gross margin for the quarter is due to unfavorable product mix due to increased sales of low margin injector parts, increased inventory provisions due to timing, and an increase in ICL unit costs, partially offset by an increased sales mix of Toric ICLs.

Operating expenses for the quarter were $15.8 million compared to the prior year quarter of $16.6 million. The decrease in operating expenses for the quarter was due to planned expense management and the timing of our Experts Meeting and the ESCRS, which were held and expensed in the third quarter of 2016 versus being held and expensed in the fourth quarter of 2017.

Net income for the third quarter of 2017 was $1.2 million or approximately $0.03 per diluted share compared with a net loss of $1.8 million or $0.04 per share for the prior year quarter.

Adjusted Net Income for the third quarter of 2017 was $1.5 million or $0.04 per diluted share, compared with an Adjusted Net Loss of $0.9 million or $0.02 per 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, cash equivalents and restricted cash at September 29, 2017 totaled $16.3 million, compared to $14.1 million at the end of the fourth quarter of 2016 and $14.4 million at the end of the third quarter of 2016. Continued focus on optimizing the Company’s cash position through revenue growth, expense mitigation, and working capital management enabled the Company to effectively increase its cash balances.

Conference Call

The Company will host a conference call and webcast on Wednesday, November 8, 2017 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 6998278), please dial 855-765-5684 for domestic participants and 262-912-6252 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 6998278) will be available beginning approximately one hour after the call’s conclusion for seven days. This replay can be accessed by dialing 855-859-2056 for domestic callers and 404-537-3406 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 (Loss)" and "Adjusted Net Income (Loss) Per Share" exclude the following items that are included in "Net Income (Loss)" as calculated in accordance with U.S. generally accepted accounting principles ("GAAP"): gain or loss on foreign currency transactions, stock-based compensation expenses, and quality remediation expenses. Management believes that "Adjusted Net Income (Loss)" and "Adjusted Net Income (Loss) Per Share" are 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 excluded quality remediation expenses because their inclusion may mask underlying trends in our business performance.

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. In calculating Adjusted Net Income (Loss) and Adjusted Net Income (Loss) Per Share, STAAR excludes these expenses because they are non-cash expenses and because of the complexity and 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.

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(TM) product line. More than 700,000 Visian ICLs have been implanted to date. To learn more about the ICL go to: www.discovericl.com. STAAR has approximately 340 full-time equivalent employees and markets lenses in over 60 countries. Headquartered in Monrovia, CA, the company operates manufacturing facilities in Aliso Viejo, CA and Monrovia, CA. For more information, please visit the Company’s website at www.staar.com.

Safe Harbor

All statements in this press release that are not statements of historical fact are forward-looking statements, including statements about any of the following: any financial projections, including those relating to the plans, strategies, and objectives of management for future operations or prospects for achieving such plans, expectations for sales, revenue, earnings, marketing and clinical initiatives, completion of remediation or other expense, or expense timing, success and timing of new or improved products, clinical trials, research and development activities, investment imperatives, and any statements of assumptions underlying any of the foregoing. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are set forth in the Company’s Annual Report on Form 10-K for the year ended December 30, 2016 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: our limited capital resources and limited access to financing; global economic conditions; changes in currency exchange rates; the discretion of regulatory agencies to approve or reject existing, new or improved products, or to require additional actions before approval (including but not limited to FDA requirements regarding the Visian Toric ICL and/or actions related to the FDA Warning Letter and Form FDA-483s), or to take enforcement action; research and development efforts; the purchasing patterns of our distributors carrying inventory in the market; and the willingness of surgeons and patients to adopt a new or improved product and procedure. The Visian Toric ICL and the Visian ICL with CentraFLOW, now known as EVO Visian ICL, are not yet approved for sale in the United States.

CONTACT: Investors & Media
EVC Group
Brian Moore, 310-579-6199
Doug Sherk, 415-652-9100
STAAR Surgical Company
Consolidated Balance Sheets
(in 000’s)
Unaudited
September 29,
December 30,
ASSETS
2017
2016
Current assets:
Cash and cash equivalents
$
16,133
$
13,999
Accounts receivable trade, net
16,237
16,344
Inventories, net
13,274
14,825
Insurance receivable
7,000
--
Prepayments, deposits, and other current assets
4,936
4,349
Total current assets
57,580
49,517
Property, plant, and equipment, net
10,999
11,790
Intangible assets, net
326
473
Goodwill
1,786
1,786
Deferred income taxes
1,043
1,105
Other assets
969
772
Total assets
$
72,703
$
65,443
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Line of credit
$
4,442
$
4,283
Accounts payable
5,734
8,311
Obligations under capital leases
1,269
1,198
Litigation settlement obligation
7,000
--
Other current liabilities
7,253
7,275
Total current liabilities
25,698
21,067
Obligations under capital leases
834
1,339
Deferred income taxes
984
881
Asset retirement obligations
203
195
Deferred rent
184
59
Pension liability
4,138
3,997
Total liabilities
32,041
27,538
Stockholders’ equity:
Common stock
412
407
Additional paid-in capital
202,148
197,657
Accumulated other comprehensive loss
(788)
(1,050)
Accumulated deficit
(161,110)
(159,109)
Total stockholders’ equity
40,662
37,905
Total liabilities and stockholders’ equity
$
72,703
$
65,443
STAAR Surgical Company
Consolidated Statements of Operations
(In 000’s except for per share data)
Unaudited
Three Months Ended
Nine Months Ended
% of
September 29,
% of
September 30,
Fav (Unfav)
% of
September 29,
% of
September 30,
Fav (Unfav)
Sales
2017
Sales
2016
Amount
%
Sales
2017
Sales
2016
Amount
%
Net sales
100.0% $
23,473
100.0% $
20,052
$
3,421
17.1%
100.0% $
65,759
100.0% $
60,295
$
5,464
9.1%
Cost of sales
28.2%
6,624
25.8%
5,180
(1,444)
-27.9%
28.7%
18,859
29.5%
17,804
(1,055)
-5.9%
Gross profit
71.8%
16,849
74.2%
14,872
1,977
13.3%
71.3%
46,900
70.5%
42,491
4,409
10.4%
Selling, general and administrative expenses:
General and administrative
21.1%
4,946
24.9%
4,985
39
0.8%
22.9%
15,065
30.5%
18,378
3,313
18.0%
Marketing and selling
27.4%
6,431
35.7%
7,149
718
10.0%
30.8%
20,282
36.5%
22,006
1,724
7.8%
Research and development
18.9%
4,429
22.2%
4,453
24
0.5%
21.2%
13,924
26.6%
16,018
2,094
13.1%
Total selling, general, and administrative expenses
67.4%
15,806
82.8%
16,587
781
4.7%
74.9%
49,271
93.6%
56,402
7,131
12.6%
Operating income (loss)
4.4%
1,043
-8.6%
(1,715)
2,758
160.8%
-3.6%
(2,371)
-23.1% (13,911)
11,540
83.0%
Other income (expense):
Interest expense, net
-0.1%
(27)
-0.1%
(29)
2
6.9%
-0.1%
(88)
-0.1%
(85)
(3)
-3.5%
Gain (loss) on foreign currency transactions
1.9%
444
-0.1%
(29)
473
--
1.1%
738
0.0%
13
725
--
Royalty income
0.6%
141
0.7%
134
7
5.2%
0.6%
400
0.8%
507
(107)
-21.1%
Other income (expense), net
-0.1%
(19)
-0.3%
(68)
49
--
0.0%
17
-0.2%
(150)
167
--
Total other income, net
2.3%
539
0.2%
8
531
--
1.6%
1,067
0.5%
285
782
274.4%
Income (loss) before provision (benefit) for income taxes
6.7%
1,582
-8.4%
(1,707)
3,289
192.7%
-2.0%
(1,304)
-22.6% (13,626)
12,322
90.4%
Provision (benefit) for income taxes
1.7%
409
0.4%
71
(338)
--
1.1%
697
-2.8%
(1,664)
2,361
--
Net income (loss)
5.0%
$
1,173
-8.8%
$
(1,778)
$
2,951
166.0%
-3.1%
$
(2,001)
-19.8% $
(11,962)
$
9,961
83.3%
Net income (loss) per share - basic
$
0.03
$
(0.04)
$
(0.05)
$
(0.30)
Net income (loss) per share - diluted
$
0.03
$
(0.04)
$
(0.05)
$
(0.30)
Weighted average shares outstanding - basic
41,110
40,486
40,939
40,227
Weighted average shares outstanding - diluted
42,104
40,486
40,939
40,227
STAAR Surgical Company
Consolidated Statements of Cash Flows
(in 000’s)
Unaudited
Three Months Ended
Nine Months Ended
September 29,
September 30,
September 29,
September 30,
2017
2016
2017
2016
Cash flows from operating activities:
Net income (loss)
$
1,173
$
(1,778)
$
(2,001)
$
(11,962)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation of property and equipment
796
696
2,344
1,933
Amortization of long-lived intangibles
56
60
166
171
Deferred income taxes
155
(4)
164
(1,806)
Change in net pension liability
65
170
95
390
Stock-based compensation expense
807
385
2,185
8,143
Loss on disposal of property and equipment
22
48
22
65
Provision for sales returns and bad debts
120
10
186
99
Inventory provision
478
197
1,267
1,379
Changes in working capital:
Accounts receivable
62
1,772
41
1,707
Inventories
(183)
(209)
725
222
Prepayments, deposits and other current assets
(486)
(700)
(764)
(1,118)
Accounts payable
(984)
(688)
(2,751)
594
Other current liabilities
1,023
1,428
62
1,104
Net cash provided by operating activities
3,104
1,387
1,741
921
Cash flows from investing activities:
Acquisition of property and equipment
(345)
(718)
(969)
(2,709)
Net cash used in investing activities
(345)
(718)
(969)
(2,709)
Cash flows from financing activities:
Repayment of capital lease obligations
(323)
(118)
(984)
(302)
Proceeds from sale-leaseback transactions
-
-
-
1,154
Repurchase of employee common stock for taxes withheld
-
-
(234)
(611)
Proceeds from vested resricted stock and exercise of stock options
313
915
2,276
1,652
Net cash provided by (used in) financing activities
(10)
797
1,058
1,893
Effect of exchange rate changes on cash, cash equivalents and restricted cash
(54)
130
305
777
Increase in cash, cash equivalents and restricted cash
2,695
1,596
2,135
882
Cash, cash equivalents and restricted cash, at beginning of the period
13,558
12,807
14,118
13,521
Cash, cash equivalents and restricted cash, at end of the period
$
16,253
$
14,403
$
16,253
$
14,403
STAAR Surgical Company
Global Sales
(in 000’s)
Unaudited
Three Months Ended
Nine Months Ended
September 29,
September 30,
% Change
September 29,
September 30,
% Change
Sales by Region
2017
2016
Fav (Unfav)
2017
2016
Fav (Unfav)
North America
9.3%
$
2,192 12.5%
$
2,502
-12.4%
10.3%
$
6,786 12.8%
$
7,726
-12.2%
Europe, Middle East, Africa, Latin America 27.4%
6,441
29.8%
5,985
7.6%
30.5%
20,033
31.1%
18,764
6.8%
Asia Pacific
63.3%
14,840
57.7%
11,565
28.3%
59.2%
38,940
56.1%
33,805
15.2%
Total Sales
100.0% $
23,473
100.0% $
20,052
17.1%
100.0% $
65,759
100.0% $
60,295
9.1%
Product Sales
ICLs
77.2%
$
18,110
73.8%
$
14,801
22.4%
75.6%
$
49,698
72.0%
$
43,389
14.5%
IOLs
16.6%
3,892
23.2%
4,649
-16.3%
19.6%
12,875
24.5%
14,783
-12.9%
Other
6.2%
1,471
3.0%
602
144.4%
4.8%
3,186
3.5%
2,123
50.1%
Total Sales
100.0% $
23,473
100.0% $
20,052
17.1%
100.0% $
65,759
100.0% $
60,295
9.1%
STAAR Surgical Company
Reconciliation of Non-GAAP Financial Measure
(in 000’s)
Unaudited
Three Months Ended
Nine Months Ended
September 29,
September 30,
September 29,
September 30,
2017
2016
2017
2016
Net income (loss) - (as reported)
$
1,173
$
(1,778)
$
(2,001)
$
(11,962)
Less:
Foreign currency impact
(444)
29
(738)
(13)
Stock-based compensation expense
807
385
2,185
8,143
Quality remediation expense
-
485
210
1,484
Net income (loss) - (adjusted)
$
1,536
$
(879)
$
(344) $
(2,348)
Net income (loss) per share, basic - (as reported)
$
0.03 $
(0.04)
$
(0.05) $
(0.30)
Foreign currency impact
(0.01)
0.00
(0.02)
(0.00)
Stock-based compensation expense
$
0.02 0.01
0.05
0.20
Quality remediation expense
-
0.01
0.01
0.04
Net income (loss) per share, basic - (adjusted)
$
0.04 $
(0.02)
$
(0.01) $
(0.06)
Net income (loss) per share, diluted - (as reported)
$
0.03 $
(0.04)
$
(0.05) $
(0.30)
Foreign currency impact
(0.01)
0.00
(0.02)
(0.00)
Stock-based compensation expense
0.02
0.01
0.05
0.20
Quality remediation expense
-
0.01
0.01
0.04
Net income (loss) per share, diluted - (adjusted)
$
0.04 $
(0.02)
$
(0.01) $
(0.06)
Weighted average shares outstanding - Basic
41,110
40,486
40,939
40,227
Weighted average shares outstanding - Diluted
42,104
40,486
40,939
40,227
Note:
Net income (loss) per share (adjusted), basic and diluted, may not add due to rounding

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SOURCE STAAR Surgical Company

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