Slide 1: Q2 2014 Results – Investor Presentation
1 NASDAQ: STAA Q2 2014 Results – Investor Presentation July 31, 2014
Slide 2: Forward-Looking Statements
Forward - Looking Statements 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 projections of earnings, revenue, sales, profit margins, cash, effective tax rate or any other financial
Slide 3: Agenda
Agenda 2014 Annual Objectives Barry G. Caldwell Chief Executive Officer Q2 & YTD Key Financial Results Steve Brown Chief Financial Officer Operational Updates Barry G. Caldwell Chief Executive Officer 3 Q&A Session Your Questions
Slide 4: Key Operating Metrics for 2014 Annual Objectives
Key Operating Metrics for 2014 Annual Objectives • Annual Key Operating Metrics established at the beginning of 2014 are Annual Objectives to Which We Report Our Progress Quarterly – Revenue Growth of 8% to 10% – ICL Revenue Growth of 20% – Gross Margin Expansion of 300 bps – GAAP Profitable Full Ye
Slide 5: 2014 Annual Objectives Report: Revenue Growth
2014 Annual Objectives Report Revenue Growth • Q2 Revenue Growth of 10% to $20.0M – $20.1M in Constant Currency (CC )/+11% – Value in Q2 2013 was 99.4 yen to USD/Q2 2014 was 101.9 • Visian ICL Revenue 60.7% of Total vs. 62.0%, IOL 32.1% vs. 32.3% • Other Low Margin Sales increased 39% • 7.2% of Reve
Slide 6: 2014 Annual Objectives Report: Revenue Growth (IOL Growth)
2014 Annual Objectives Report Revenue Growth (IOL Growth) • Q2 Sales Were $ 6.4M, Increase of $0.6M or 10% – Driven by 117% Increase in Europe, 65% Increase in China • IOL Units Increased 17% during the Quarter – Driven by 99% Unit Increase in Europe, 70% in China • Approximately $ 0.2M Backorders R
Slide 7: Q2 IOL Revenue and Unit Growth
Japan EMEA U.S. China Total Revenue in CC +$609k with Unit Increase of 17% 2014 Annual Objectives Report Q2 IOL Revenue and Unit Growth - 10% / - 9% - 11% +117% +65% +10% - 11% +99% - 12% +70% +17% Japan EMEA U.S. China Total Q2 14 Q2 13 Revenue Growth of 10% Unit Growth of 17%
Slide 8: Q2 ICL Growth
Visian ICL Revenue & Procedures Increase in 9 of 12 Key Markets 2014 Annual Objectives Report Q2 ICL Growth (Continue to Gain Share Globally) APAC EMEA NA Total APAC EMEA NA Total Q2 14 Q2 13 Revenue Growth of 8% APAC +2% EMEA +22% NA (1%) Procedure Growth of 5% APAC +1% EMEA +16% NA (7%)
Slide 9: H1 ICL Growth
Visian ICL Revenue & Procedures Increase in 10 of 12 Key Markets 2014 Annual Objectives Report H1 ICL Growth (Continue to Gain Share Globally) APAC EMEA NA Total APAC EMEA NA Total Q2 14 Q2 13 Revenue Growth of 12% APAC +9% EMEA +24% NA (8%) Procedure Growth of 9% APAC +8% EMEA +20% NA (13%)
Slide 10: Gross Margin Expansion for Full Year
2014 Annual Objectives Report Gross Margin Expansion of 300 bps for Full Year • Headwinds Continue in Three Areas: • Geographic Mix of IOL Sales • Start up Costs for ICL in U.S. Higher • Increased Sales of Lower Margin IOL Injectors • Do Not Expect to Make up H1 Shortfalls in Gross Margin unless Som
Slide 11: GAAP Profitable for Full Year
2014 Annual Objectives Report GAAP Profitable for Full Year • Not Profitable in Q2 or H1 • Investment Spending in R&D and Sales and Marketing • Higher Expenses in General and Administrative • H2 Expect Higher Sales with Lower Operating Expenses due mainly to FDA Panel Expenses H1 offset to Some Degr
Slide 12: Manufacturing Consolidation
2014 Annual Objectives Report Manufacturing Consolidation • Approximately 77% of ICLs Manufactured during Q2 Manufactured in U.S. – Excluding the over 6,500 TICLs Manufactured for U.S. in Switzerland • Last Production in Switzerland was Completed before the end of June • ICL Inventory 33% higher tha
Slide 13: Q2 Adds to Solid Start; Puts and Takes for H2
Q2 Adds to Solid Start to 2 014 Puts and Takes for H2 • Revenue Growth Exceeded Expectations for the Q2 & H1 – See Opportunities to Expand During H2 – KS - IOL Supply Appears to be Getting Stronger • Enhanced ICL Growth to be Driven by Penetration of New ICL Products • Expect to See Gross Margin Imp
Slide 14: Q2 Key Financial Results
Q2 Key Financial Results Topics to Discuss • GAAP and non - GAAP P&L • Gross Margin Expansion Plan • Operating Expenses • Tax Provisions for the Year 14
Slide 15: Q2 Key Financial Results (GAAP)
Q2 Key Financial Results 15 Q2 2014 Q2 2013 Change Revenue $20,048 $18,164 +$1,884/+10% Gross Profit $13,667 $12,620 +$1,047/+8% Gross Profit Margin 68.2% 69.5% (130bps) Operating Expenses $15,057 $11,926 +$3,131/+26% Income Before Taxes $(1,422) $ 877 $(2,299) Income Taxes $ 367 $ 599 $ 232 Net Inc
Slide 16: Q2 2014 Non-GAAP Measures
Q2 Key Financial Results 2014 Non - GAAP Measures ($ 000’s, except per share ) 16 Measure Q2 2014 Q2 2013 GAAP Net Income (loss) $(1,789) $278 Mfg. Consolidation Expenses $165 $613 Spain Distribution Transition Cost ---- ---- Foreign Currency Impact $134 $(77) Adjustment of Warrant Value ---- -----
Slide 17: H1 Key Financial Results (GAAP)
H1 Key Financial Results 17 H1 2014 H1 2013 Change Revenue $40,226 $36,165 +$4,061/+11% Gross Profit $27,551 $25,274 +$2,277/+9% Gross Profit Margin 68.5% 69.9% (140bps) Operating Expenses $30,283 $23,496 +$6,787/+29% Income Before Taxes $(2,532) $ 1,663 $(4,225) Income Taxes $ 586 $ 914 $ 328 Net I
Slide 18: H1 2014 Non-GAAP Measures
H1 Key Financial Results 2014 Non - GAAP Measures ($000’s, except per share ) 18 Measure H1 2014 H1 2013 GAAP Net Income (loss) $(3,148) $749 Mfg. Consolidation Expenses $334 $1,514 Spain Distribution Transition Cost ---- $442 Foreign Currency Impact $68 $264 Adjustment of Warrant Value ---- $ (27)
Slide 19: Gross Margin Expansion Opportunities and Headwinds
Gross Margin Expansion Opportunities and Headwinds • Three Headwinds to Gross Margin Totaled Negative Impact of 450 BPS • The Geographic Mix of Increased KS - IOL Sales • Negative Impact of 230 bps during Q2, Expect to Improve H2 • Increase of Lower Gross Margin IOL Injectors • Negative Impact of 8
Slide 20: Operating Expenses
Operating Expenses Q2 Expenses • R&D Increased by $0.8M • Consultant expenses for Regulatory Approvals and Response to FDA Warning Letter • C osts to complete the Preloaded ICL & get V6a ICL to initial Clinical Evaluations • Sales and Marketing Increased by $1.4M • Some of Increase Related to Antici
Slide 21: Tax Provisions for 2014
Tax Provisions for 2014 How the Year Has Progressed • Income Tax Provision of $367k for Q2 2014 vs. $599k for Q2 2013 • Effective Tax Rate of 26% for Q2 • H1 Tax Provision of $586k vs. $914k in PY H1 • Effective Tax Rate of 23% for H1 • Profitability in Certain Regions Generate a Tax Liability thoug
Slide 22: 2014 Key Financial Results Outlook
2014 Key Financial Results Outlook • Gross Margin Expected to Show Recovery • H2 Should provide Expansion due to Consolidation • Increased Supply of the KS IOLs should Drive Sales into Higher Gross Margin Markets • Gross Margins should Benefit from the Commercialization of New Product Approvals • Lo
Slide 23: Operational Updates: Opportunities and Challenges H2
Operational Updates Opportunities and Challenges H2 • Warning Letter • Preloaded ICL Approval in Europe and Launch Plans • V6a ICL Plans for H2 • Regulatory Approvals in Process • ESCRS Plans 23
Slide 24: FDA GMP Inspections Past Years at STAAR Facilities
Operational Updates FDA GMP Inspections Past 8 Years at STAAR Facilities Year Monrovia Nidau Aliso Viejo 2006 August ( No Observations ) Sept. ( No Observations ) August ( No Observations ) 2007 2008 2009 Feb. (3 Observations) June (2 Observations) 2010 Nov. ( No Observations ) 2011 2012 Jan. ( No O
Slide 25: Inspection Resulted in Warning Letter
2/10 Inspection 3/21 483 Issued 4/11 Initial Response to 483 5/12 1 st Monthly Update 5/27 WL Received 6/13 2 nd Update, 483 & WL Data 7/18 3 rd Update + 483 & WL Data Operational Updates Inspection February 10 to March 21 Resulted in Warning Letter • We Take this Seriously and Diligently Working to
Slide 26: Preloaded ICL Eliminates Multiple Steps during Procedure
® Operational Updates Preloaded ICL Eliminates Multiple Steps during Procedure
Slide 27: Preloaded ICL Launch Plan in European Markets
Operational Updates Preloaded ICL Launch Plan in European Markets 27 • Preloaded ICL with Enhanced Optics – Saves Procedure Time – Learning Curve Shortened – More Consistent Delivery – Enhanced Optic Design Increases Useful Optical Zone to Benefit Patients with Larger Pupils • New IP around Product
Slide 28: V6a ICL Plans for H2
Operational Updates V6a ICL Plans for H2 28 • Differentiates ICL for Myopic Patients Nearing Age 40 Who Will Need Near & Intermediate Adds • Goal To Add Near - Vision Enhancement Capability – Treats the Early Onset and Progression of Presbyopia – Adds ≈2.0 Diopters of Near While Providing Good Inter
Slide 29: Regulatory Approvals in Process
Operational Updates Regulatory Approvals in Process 29 • ICL with CentraFLOW in China – Positive Experts Panel Meeting on May 15 th – Response Prepared for Follow up Questions from CFDA – Decision Expected within 105 Working Days • TICL in U.S. – Have Provided Data to Agency since Favorable Advisory
Slide 30: ESCRS Plans (Visian ICL Experts Meeting)
Operational Updates ESCRS Plans (Visian ICL Experts Meeting) 30 • Goal is for 300 Attending ICL Surgeons – Nearly Double of Attendance in 2013 – Over 240 currently Confirmed Attendance • Key Topics for Meeting – Success of ICL with CentraFLOW – Surgeon Experience with the Preloaded ICL – Plan for so
Slide 31: ESCRS Plans
Operational Updates ESCRS Plans 31 • Largest Exhibit Presence in our History at ESCRS • Focused Products will be Preloaded ICL and nanoFLEX Toric IOL • Planned Booth Presentations – Featuring Preloaded ICL Experience, CentraFLOW Experience and Early Experience with the V6a ICL • Lunch Symposium on I
Slide 32: Upcoming STAAR Catalysts
• Expanded ICL with CentraFLOW approvals to Key Markets – Japan March 3 rd Approval – China May Experts Panel Meeting May 15 th Positive • CE Mark Approval of Preloaded ICL at End of June, Launch at ESCRS Meeting • Have Provided Additional Information, as Requested, to FDA after Favorable Vote at FD
Slide 33: Upcoming Investor Meetings
Upcoming Investor Meetings • August 12 th at Wedbush Healthcare Conference in New York City • August 13 th at Canaccord Genuity Conference in Boston • Planned Investor Road Show August 19 th & 20 th • ICL Experts Meeting in London September 11 th & 12 th Pre - ESCRS • Investor Breakfast at AAO on Sa
Slide 34: Thank You
Thank You YOUR QUESTIONS PLEASE 34
Slide 35: Q2 2014 Results
35 NASDAQ: STAA Q2 2014 Results – Investor Presentation July 31, 2014