STAAR Surgical Company — Form 10-Q Summary
Business context and reporting period
STAAR Surgical designs, manufactures, and sells implantable lenses and delivery systems, primarily implantable Collamer lenses (ICLs) for refractive surgery and intraocular lenses (IOLs) for cataract surgery. The filing covers the 13-week quarter ended April 1, 2022, compared with April 2, 2021. The requested metadata identifies “2021 Q1,” but the filing is for the first quarter of 2022.
Key financial metrics
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Net sales | $63.2 million | $50.8 million | 24.5% increase |
| Gross profit | $49.3 million | $39.1 million | 25.9% increase |
| Gross margin | 77.9% | 77.1% | 80 basis-point increase |
| Operating income | $12.1 million | $7.5 million | 62.1% increase |
| Operating margin | 19.1% | 14.7% | 440 basis-point increase |
| Net income | $9.6 million | $5.0 million | 92.3% increase |
| Diluted EPS | $0.19 | $0.10 | Increase |
| Cash flow from operations | $(4.6) million | $6.8 million | Decline |
| Capital expenditures | $2.5 million | $2.2 million | Increase |
ICL sales were $58.7 million, up 26.2%, and represented 92.8% of total sales. ICL units increased 29%. Cataract IOL sales declined 22.1%, while other surgical product sales increased substantially from a smaller base.
Cash and cash equivalents were $193.1 million at April 1, 2022, compared with $199.7 million at December 31, 2021. Working capital was $232.7 million, up from $222.6 million. The company reported no conventional borrowings; lease liabilities totaled $31.9 million for operating leases and $0.5 million for finance leases. Management stated that existing cash and expected operating cash flow should cover anticipated needs for at least 12 months.
Material changes versus the prior comparable period
- Revenue growth was driven primarily by higher ICL sales, including strong growth in the APAC region.
- Foreign currency movements reduced reported sales by approximately $1.9 million and ICL sales by approximately $1.4 million.
- Gross margin improved due mainly to product and geographic mix and lower manufacturing project costs.
- Selling and marketing expense increased 30.8% to $17.3 million because of higher advertising, promotional, salary, and payroll-tax costs.
- General and administrative expense increased 16.9% to $11.9 million, while research and development expense decreased 3.9% to $7.9 million, primarily because of lower EVO clinical-trial costs.
- Other expense improved to $0.6 million from $1.2 million, mainly because of lower foreign-exchange losses.
- Operating cash flow turned negative, largely because of $19.3 million of working-capital outflows, including increases in receivables, inventories, and prepayments and a decrease in other current liabilities.
- Property, plant and equipment increased to $39.6 million from $35.9 million, reflecting increased investment in manufacturing facilities.
Guidance, outlook, risks, and unusual items
- Management reaffirmed fiscal 2022 net sales guidance of approximately $295 million, representing expected year-over-year growth of 28%.
- The FDA approved the EVO Visian ICL family of myopia lenses for U.S. sale, and commercialization was underway in multiple U.S. cities.
- Management reported robust shipments of EVO lenses to China despite COVID-19 lockdowns in multiple cities and anticipated demand for the summer implant season.
- COVID-19 variants and related restrictions may adversely affect elective surgeries, sales, operations, and financial results. Global inflation may also increase future costs.
- Customer concentration is significant: a Chinese distributor represented 45% of quarterly sales and 50% of trade receivables at April 1, 2022.
- Sales are highly international, with foreign sales representing approximately 95.8% of quarterly revenue; China accounted for $28.2 million and Japan for $11.6 million.
- The company is exposed to foreign-exchange volatility, regulatory approvals, product liability claims, supply and manufacturing risks, and changes in demand for elective ophthalmic procedures.
- The company disclosed routine litigation and claims, including potential product-liability matters, but does not believe known matters are likely to materially affect financial condition or results. Unexpected outcomes could nevertheless cause significant harm.
- Stock-based compensation expense was $3.9 million for the quarter, with gross stock-based compensation of $4.3 million including amounts capitalized into inventory.
Facts investors should verify
- Whether the company achieves the approximately $295 million fiscal 2022 sales outlook amid COVID-19 restrictions and currency headwinds.
- The sustainability of ICL unit growth and the commercial adoption of EVO in the United States and China.
- The effect of Chinese distributor concentration on revenue, receivables, collections, and customer risk.
- Whether negative operating cash flow is temporary working-capital timing or develops into a recurring pattern.
- Progress and spending on manufacturing capacity and related capital projects.
- Foreign-exchange effects, inflationary pressures, and any resulting impact on margins.
- Regulatory, product-liability, litigation, and elective-surgery volume risks described in the filing and the 2021 Form 10-K.
- The filing states that disclosure controls were effective and that no material changes occurred in internal control over financial reporting during the quarter.