STAAR Surgical Company Form 10-Q Summary
Reporting period: The provided filing is for the quarter ended July 1, 2022, with comparative periods ended July 2, 2021. The request metadata identifies “2021 Q2,” but the filing itself is a 2022 second-quarter report. Results are unaudited and presented under U.S. GAAP.
Business Context
STAAR designs, manufactures, and sells implantable ophthalmic lenses and delivery systems. Its principal products are implantable Collamer lenses (ICLs) for refractive surgery and intraocular lenses (IOLs) for cataract surgery. The company operates as one ophthalmic surgical products segment, manufactures in the United States, and sells in more than 75 countries.
Key Financial Metrics
| Metric | Three Months Ended July 1, 2022 | Three Months Ended July 2, 2021 | Six Months Ended July 1, 2022 | Six Months Ended July 2, 2021 |
|---|---|---|---|---|
| Net sales | $81.1 million | $62.4 million | $144.3 million | $113.1 million |
| Gross profit | $63.9 million | $49.2 million | $113.1 million | $88.3 million |
| Gross margin | 78.8% | 78.9% | 78.4% | 78.1% |
| Operating income | $17.0 million | $10.6 million | $29.1 million | $18.1 million |
| Operating margin | 21.0% | 17.1% | 20.2% | 16.0% |
| Net income | $13.0 million | $8.6 million | $22.6 million | $13.6 million |
| Diluted EPS | $0.26 | $0.17 | $0.46 | $0.27 |
- ICL sales were $77.9 million in the second quarter and $136.6 million for the first six months, representing approximately 96% and 95% of total sales, respectively.
- Second-quarter ICL unit volume increased 42%; total ICL sales increased 32%.
- Six-month operating cash flow was $8.6 million, compared with $13.1 million in the prior-year period.
- Capital expenditures were $7.8 million, primarily for manufacturing facilities, compared with $5.7 million in the prior-year period.
- Cash and cash equivalents were $202.5 million at July 1, 2022, versus $199.7 million at December 31, 2021. Working capital was $250.0 million.
- The filing does not report conventional funded debt; liabilities primarily comprise operating and finance lease obligations. Total lease liabilities were $31.0 million at July 1, 2022.
- Total assets were $376.0 million and total stockholders’ equity was $299.3 million at July 1, 2022.
Material Changes Versus the Prior Comparable Period
- Second-quarter net sales increased 30.0%, while six-month sales increased 27.6%, driven primarily by higher ICL sales.
- Second-quarter ICL unit growth was particularly strong in China, the United States, Japan, India, and other Asia-Pacific markets. Management reported quarterly unit growth of 45% in China, 36% in the United States, 41% in Japan, 181% in India, and 66% in other Asia-Pacific markets.
- Foreign-currency movements reduced second-quarter sales by approximately $3.1 million and six-month sales by approximately $5.0 million.
- Operating margin improved materially as sales growth exceeded the increase in operating expenses. Selling and marketing expense increased 28.5% in the quarter, while research and development expense increased 4.6%.
- Gross margin was broadly stable in the quarter and increased modestly for the six-month period. Inventory reserves related to discontinuation of the older-generation Visian ICL in the United States and manufacturing project costs partially offset favorable product and geographic mix.
- Net other expense increased to $1.6 million in the quarter and $2.1 million for the six-month period, primarily because of foreign-exchange losses, compared with net other income in the prior-year quarter.
- Operating cash flow declined despite higher net income, largely because of working-capital investment, including a $20.1 million increase in accounts receivable and a $1.8 million increase in inventories.
- One Chinese distributor represented 57% of second-quarter sales, 52% of six-month sales, and 60% of trade receivables at July 1, 2022, creating significant customer and geographic concentration.
Guidance, Outlook, Risks, and Unusual Items
- Management reaffirmed fiscal 2022 net-sales guidance of approximately $295 million. The outlook incorporates currency headwinds and continued COVID-19-related challenges in China and elsewhere, offset by stronger-than-expected global demand for EVO lenses.
- The U.S. commercial launch of the EVO Visian ICL family began in late March 2022. STAAR continued marketing activity, including a global campaign involving Joe Jonas and other paid ambassadors.
- COVID-19 variants and related public-health measures may reduce elective surgeries, disrupt operations, or adversely affect sales. Management stated that the commercial and operational impact remains uncertain.
- Global inflation may adversely affect future financial results if it persists.
- Foreign-exchange exposure, particularly involving the euro and other currencies, materially affected reported results during the period.
- The company stated that current cash and expected operating cash flow should be sufficient to meet anticipated needs, including working capital, capital expenditures, and contractual obligations, for at least 12 months from issuance of the financial statements.
- Routine litigation and claims may include contractual, employment, and product-liability matters. Management does not believe known matters are likely to have a material adverse effect, but unexpected outcomes could cause significant financial harm.
- Stock-based compensation expense was $9.6 million for the first six months, compared with $7.3 million in the prior-year period.
- Management reported effective disclosure controls and no material changes in internal control over financial reporting during the quarter.
Investor Verification Checklist
- Verify the filing period, because the supplied metadata says 2021 Q2 while the filing covers the quarter ended July 1, 2022.
- Assess the sustainability of ICL volume growth and the commercial adoption of EVO, particularly in China and the United States.
- Reconcile fiscal 2022 sales guidance of approximately $295 million with reported year-to-date sales of $144.3 million and current market conditions.
- Monitor the concentration risk associated with the Chinese distributor and the related accounts receivable balance.
- Evaluate the impact of currency movements, COVID-19 restrictions, inflation, and elective-surgery trends on sales and margins.
- Review working-capital requirements, including receivables, inventories, sales returns, and the relatively low conversion of net income into operating cash flow.
- Review capital spending plans and the expansion of manufacturing capacity, including construction in process of $26.8 million at July 1, 2022.