STAAR Surgical Company
Q1 2021 Earnings Call Transcript

Published: 6 May 2021

[Operator:]

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the STAAR Surgical First Quarter Financial Results Conference Call. This call is being recorded today, Wednesday, May 5, 2021. At this time, I would like to turn the conference over to Mr. Brian Moore, Vice President, Investor Media Relations and Corporate Development for STAAR Surgical. Sir, the floor is yours.

[Brian Moore:]

Thank you, operator, and good afternoon, everyone. Thank you for joining us on the STAAR Surgical conference call this afternoon to discuss the Company's financial results for the first quarter ended April 2, 2021. On the call today are Caren Mason, President and Chief Executive Officer; and Patrick Williams, Chief Financial Officer. The press release of our first quarter results was issued just after 4

[Caren Mason:]

Thank you, Brian. Good afternoon, everyone, and thank you for joining us on today's call. The record results for the first quarter of 2021 demonstrate that the promise for a lens-based future of refractive vision correction is accelerating, led by STAAR's EVO Visian family of implantable Collamer lenses. STAAR's imperatives around surgeon training and partnership, clinical support, and extraordinary customer outreach continue to be the underpinnings of our excellent results. We achieved strong and significant ICL unit growth globally, including China, up 63%, Japan, up 72%, South Korea, up 29%, Asia-Pacific distributor markets, up 63%, India, up 67%, Spain, up 42%, Germany, up 48%, European distributor markets up 54%, and the US, up 46%; all as compared to the prior year quarter. All told, global ICL unit growth for the first quarter of 2021 was up 54% year-over-year. Strong ICL unit growth drove company net sales growth of 44% year-over-year to $50.8 million in the first quarter of 2021. This impressive level of growth exceeds the aggressive 2020 to 2022, three-year plan growth we outlined for you in November 2019, for year two of the plan. We are pleased to report that our sales momentum is accelerating in 2021 as we are successfully addressing the unique and large addressable market opportunity for our EVO Visian ICL family of lenses. STAAR's track record as the fastest-growing US publicly traded Ophthalmology Company also continues. The underpinnings of our success are the delighted patients who achieve visual freedom with our lenses, broadening support from the refractive surgeon community as the patient satisfaction and wow factor expressed by patients. It's a significant win for our surgeon partners and their staff. This positive outcome is supported by effective direct-to-consumer outreach that resonates with patients seeking to free themselves from the hassles of glasses and contact lenses. Our direct-to-consumer multi-faceted communications are designed to build awareness of our EVO Visian ICL family of lenses, highlighting the advantages of our lenses and differentiating our premium lenses from other refractive options. Our goals are to drive patients to surgeon offices, build surgeon and patient preference for our lenses, and win refractive vision correction market share. Last month, in Japan, we kicked off an exciting new advertising campaign featuring Japanese celebrity, Mayuko Kawakita, who will be featured in ICL digital banner ads, YouTube video ads, social media ads on Instagram and Twitter, and train advertising on routes through Tokyo, Nagoya, and other major routes most frequented by our target audience. Mayuko is a celebrity active in TV and fashion in Japan, who has achieved visual freedom through ICL and is our newest ICL brand ambassador. Mayuko is typically on local TV every few days in Japan and has over 1.6 million followers on Instagram. I must say that part of the excitement at STAAR is being an internationally immersed Company as we build our direct-to-consumer campaigns to be suited specifically for local taste and patient decision-making.

[Patrick Williams:]

Thank you, Caren, and good afternoon, everyone. Total net sales for Q1 2021 were $50.8 million, up 44% as compared to the $35.2 million of net sales in Q1 2020 and at 10% on a sequential basis from Q4 2020. The year-over-year increase in net sales was attributable to the growth Caren highlighted earlier and the sequential increase in sales was due to the increasing momentum in our business. As we enter our seasonally higher sales quarters in Q2 and Q3 and prepare for the busy implants, using the key markets like China, we anticipate Q2 2021 net sales to be higher in Q1 2021, which we currently expect would represent approximately 50% year-over-year revenue growth in Q2. In terms of product mix, ICL sales represented 93% of total company net sales for Q1 2021, and other products represent 8%. As a reminder, our other product sales primarily consist of Phakic or cataract IOLs and injectors' business, which serve only certain markets globally. The mix of ICL for Q1 was higher than recent trends due to higher ICL sales, and approximately $1.6 million lower other Product Sales, specifically, injectors as compared to Q1 2020. The lower injector sales were the result of a product yield issue from our third-party manufacturer, which thereby limited our supply available for sale during Q1 2021. Our third-party manufacturer is in the process of reworking materials and we anticipate our supply will return to normal by the end of Q2 2021. We now anticipate total other Product sales will be approximately $50 million for the full year 2021, which is contemplated in our full year sales outlook, and which speaks to the strength in our core higher growth and higher margin ICL business. Gross profit for Q1 2021 was $39.1 million or 77.1% of net sales as compared to gross profit of $24.8 million or 70.4% of net sales for Q1 2020. And $34.3 million or 74.6% of net sales for Q4 2020. The year-over-year and sequential increase in gross margin is due to geographic sales mix and a lower mix of injector sales, which carry a lower margin than our ICL. In addition to the year-over-year comparison, there were $150,000 of period costs recorded in Q1 2020 as a result of a COVID-19 related manufacturing pause, which began on March 17, 2020, and did not occur in Q1 2021. We expect gross margin to continue to be in the mid-70% range for Q2 and fiscal year 2021, which will remain highly dependent on geographic and product sales mix.

[Operator:]

Our first question comes from the line of Anthony Petrone from Jefferies.

[Anthony Petrone:]

Good afternoon, everyone, and congratulations on really a breakout quarter year. And hope everyone's doing well. I'm going to keep it brief with two quick questions. And want us to just get an idea of the source of the break out in growth and sort of awareness, sort of quantify what is catch-up in these numbers versus sustainable growth drivers? Or just underlying demand starting to really kick in the gear here? And then, the follow-up would be, specifically, on the US and EU implant numbers. Obviously, much higher than what we expected. Are you seeing any buy-in of legacy products ahead of a full-scale Viva launch in Europe, for instance, and the potential launch of EVO Visian in the US? Thanks, and congratulations again.

[Caren Mason:]

Thanks very much, Anthony. We appreciate you joining us. And in terms of your first question, no, we don't see this as a catch-up; we see this as a continuation of the great momentum pre-COVID that began at the end of 2019 into the first couple of months of 2020. And if you remember, last year, Europe and the US, North America, were not really impacted much in Q1. It was mostly China, as a matter of fact, Korea and Japan through much of the pandemic continued to see patients successfully for vision correction with our EVO lenses. So, what we see this is as a return to pre-COVID levels with great momentum, going into the rest of the year. With regard to the wonderful uptake that we were seeing in Europe, for example, we believe that a lot of the work that we've done with regards to getting the word out on EVO, over the last few years, is paying off handsomely. And so, when we look at the number of referrals to doctors, many of them come from the patients now, and there are a number of social media channels that patients themselves are so enthusiastic, telling their stories.

[Operator:]

All right, presenters, there seems to be no questions. I'll turn it over now to Ms. Caren Mason for closing remarks.

[Caren Mason:]

Well, thank you very much. We really appreciate participation on our call today. We look forward to speaking with many of you in the days and weeks ahead. We always appreciate your interest and investment in STAAR Surgical. So excited to deliver the great results we did today. Please take good care. All the best to all of you.

[Operator:]

All right. This concludes today's conference call. Thank you for participating. You may now disconnect.