# Staar Surgical Co: Form 10-Q for the period ended Mar 29, 2024

- Company: [Staar Surgical Co](/companies/staa.md) (CIK 718937)
- Form: 10-Q
- Filed: 2024-05-07
- Accepted by EDGAR: May 7, 2024, 16:11 ET
- Period: 2024-03-29
- Accession: 0000950170-24-054488
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/718937/000095017024054488/staa-20240329.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/718937/000095017024054488/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-29.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-12-30 to 2024-03-29 | $77.4m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2023-12-30 to 2024-03-29 | $16.3m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2023-12-30 to 2024-03-29 | $61.0m | us-gaap:GrossProfit |
| Research and development | 3 months, 2023-12-30 to 2024-03-29 | $13.4m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2023-12-30 to 2024-03-29 | $63.3m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-12-30 to 2024-03-29 | −$2.3m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-12-30 to 2024-03-29 | $1.1m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-12-30 to 2024-03-29 | −$3.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-12-30 to 2024-03-29 | −$0.07 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-12-30 to 2024-03-29 | −$0.07 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-12-30 to 2024-03-29 | 48,907,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2023-12-30 to 2024-03-29 | $21.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2023-12-30 to 2024-03-29 | $5.2m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2024-03-29 | $224.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-03-29 | $365.7m | us-gaap:AssetsCurrent |
| Total assets | at 2024-03-29 | $492.5m | us-gaap:Assets |
| Current liabilities | at 2024-03-29 | $62.7m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-03-29 | $99.7m | us-gaap:Liabilities |
| Shareholders' equity | at 2024-03-29 | $392.8m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 19,094 characters.

*The matters addressed in this Item 2 that are not historical information constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”), and the Private Securities Litigation Reform Act of 1995, and is subject to the safe harbor created therein. In some cases readers can recognize forward-looking statements by the use of words like “anticipate,” “estimate,” “expect,” “project,” “intend,” “may,” “plan,” “believe,” “will,” “should,” “could,” “forecast,” “potential,” “continue,” “ongoing” (or the negative of those words and similar words or expressions), although not all forward-looking statements contain these words. In particular, these include statements regarding the intent, belief or current expectations of the Company and its management regarding any of the following: any projections of or guidance as to future earnings, revenue, sales, profit margins, expense rate, cash, effective tax rate, product mix, capital expense or any other financial items; the expected impact of the COVID-19 pandemic and related public health measures (including but not limited to their impact on sales, operations or clinical trials globally); the plans, strategies, and objectives of management for future operations or prospects for achieving such plans; statements regarding new, existing, or improved products, including but not limited to, expectations for success of new, existing, and improved products in the U.S. or international markets or government approval of a new or improved products; commercialization of new or improved products; future economic conditions or size of market opportunities; expected costs of operations; statements of belief, including as to achieving business plans for 2024 and beyond; expected regulatory activities and approvals, product launches, and any statements of assumptions underlying any of the foregoing.*

*Although we believe that the expectations reflected in these forward-looking statements are reasonable, we caution investors and prospective investors that any such forward-looking statements are not guarantees of future performance and involve risks, uncertainties, assumptions and other factors, which if they do not materialize or prove correct, could cause actual results to differ materially from those expressed or implied by such forward-looking statements. We caution you not to place undue reliance on these forward-looking statements and to note they speak only as of the date hereof. Factors that could cause actual results to differ materially from those set forth in the forward-looking statements include, without limitation, those described in our Annual Report on Form 10-K in “Item 1A. Risk Factors” filed on February 27, 2024. We disclaim any intention or obligation to update or review these financial projections or forward-looking statements due to new information or other events except as required by law.*

*The following discussion should be read in conjunction with the Company’s unaudited Condensed Consolidated Financial Statements, including the related notes, provided in this report.*

*We intend to use our website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Such disclosures will be included on our website in the ‘Investor Relations’ sections. Accordingly, investors should monitor such portions of our website, in addition to following our press releases, SEC filings and public conference calls and webcasts.*

### Overview

STAAR Surgical Company designs, develops, manufactures, and sells implantable lenses for the eye and accessory delivery systems used to deliver the lenses into the eye. We are the leading manufacturer of phakic implantable lenses used worldwide in corrective or “refractive” surgery. We have been dedicated solely to ophthalmic surgery for over 40 years. Our goal is to position our refractive lenses throughout the world as primary and premium solutions for patients seeking visual freedom from wearing eyeglasses or contact lenses while achieving excellent visual acuity through refractive vision correction. We generate worldwide revenue almost exclusively from sales of our implantable Collamer® lenses, or “ICLs.” Our ICLs are made from Collamer, which is a proprietary collagen copolymer material created and exclusively used by STAAR to make our lenses soft, flexible and biocompatible with the eye. Our ICLs are phakic lenses, meaning that they are implanted into the eye without removing the eye’s natural crystalline lens. This distinguishes an ICL procedure from other refractive procedures, as it does not involve the removal of corneal eye tissue. All of our ICLs are foldable, which allows the surgeon to insert them into the eye through a small incision during minimally invasive surgery. Further, while ICLs are intended to be permanent, our ICLs are reversible lens implants, meaning they can be removed by a doctor if desired.

STAAR employs a commercialization strategy that strives for sustainable profitable growth. Our growth strategy includes making our complete ICL product line available in our existing geographic markets and expanding into attractive markets where we do not sell our products today. In addition, we are focused on driving awareness of the ICL procedure and the clinical benefits of our ICLs, and providing surgeon training, support and education, particularly in our newer markets.

### Critical Accounting Estimates

This Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses and analyzes data in our unaudited Condensed Consolidated Financial Statements provided in this report, which we have prepared in accordance with U.S. generally accepted accounting principles. Preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Senior management has discussed the development, selection and disclosure of these estimates with the Audit Committee of our Board of Directors. Actual conditions may differ from our assumptions and actual results may differ from our estimates.

Management believes that there have been no significant changes during the three months ended March 29, 2024 to the items that we disclosed as our critical accounting estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 29, 2023.

### Results of Operations

The following table shows the percentage of our total sales represented by certain items reflected in our Condensed Consolidated Statements of Income for the periods indicated.

|  | Percentage of Net Sales for Three Months March 29, 2024 | March 31, 2023 |
| --- | ---: | ---: |
| Net sales | 100.0% | 100.0% |
| Cost of sales | 21.1% | 21.7% |
| Gross profit | 78.9% | 78.3% |
| General and administrative | 30.0% | 24.7% |
| Selling and marketing | 34.5% | 35.8% |
| Research and development | 17.3% | 14.0% |
| Total selling, general and administrative | 81.8% | 74.5% |
| Operating income (loss) | (2.9)% | 3.8% |
| Total other income, net | 0.1% | 2.6% |
| Income (loss) before income taxes | (2.8)% | 6.4% |
| Provision for income taxes | 1.5% | 2.7% |
| Net income (loss) | (4.3)% | 3.7% |

### Net Sales

The following table presents our net sales, by product (dollars in thousands):

|  | Three Months Ended March 29, 2024 | March 31, 2023 | Percentage Change 2024 vs. 2023 |
| --- | ---: | ---: | ---: |
| ICLs | $77,151 | $70,625 | 9.2% |
| Other product sales: |  |  |  |
| Cataract IOLs | — | 1,476 | (100.0)% |
| Other surgical products | 205 | 1,427 | (85.6)% |
| Total other product sales | 205 | 2,903 | (92.9)% |
| Net sales | $77,356 | $73,528 | 5.2% |

Net sales for the three months ended March 29, 2024 increased 5% from the same period of 2023. The increase in net sales was primarily due to increased ICL sales of $6.5 million, slightly offset by decreased other product sales of $2.7 million. Changes in foreign currency unfavorably impacted net sales by $1.0 million.

Total ICL sales for the three months ended March 29, 2024 increased 9% from the same period of 2023, with unit increase of 2%. The APAC region sales increased by 9%, with unit decrease of 1%, due to sales growth in India up 10%, Japan up 11% and China up 10%. The EMEA region sales increased 11% with unit growth up 22%, due to sales increases in our distributor markets up 35%, partially offset by direct markets down 5%. The Americas region sales increased 12%, with unit growth up

11%, primarily due to sales growth in the U.S. up 15% and Canada up 11%. Changes in foreign currency unfavorably impacted ICL sales by $1.0 million for the three months ended March 29, 2024. ICL sales represented 99.7% and 96.1% of our total sales for the three months ended March 29, 2024 and March 31, 2023, respectively.

Other product sales, includes cataract intraocular lenses (“IOLs”), delivery systems and normal recurring sales adjustments such as sales return allowances. As a result of third-party materials and supply chain challenges that affected our cataract IOLs and associated delivery devices, we have phased out sales of our cataract IOLs as we focus on growing our ICL business. During 2023, we stopped manufacturing cataract IOLs, and we do not plan to sell cataract IOLs in 2024. We do not expect this decision to have a significant impact to revenue growth in future years. Other product sales for the three months ended March 29, 2024, decreased 93% from the same period of 2023, due primarily to a reduction in cataract IOL sales and decreased sales of cataract IOL injector parts. Other product sales represented 0.3% and 3.9% of our total sales for the three months ended March 29, 2024 and March 31, 2023, respectively.

### Gross Profit

The following table presents our gross profit and gross profit margin (dollars in thousands):

|  | Three Months Ended March 29, 2024 | March 31, 2023 | Percentage Change 2024 vs. 2023 |
| --- | ---: | ---: | ---: |
| Gross profit | $61,035 | $57,562 | 6.0% |
| Gross margin | 78.9% | 78.3% |  |

Gross profit for the three months ended March 29, 2024 increased 6.0%, from the same period of 2023. Gross profit margin increased to 78.9% of revenue for the three months ended March 29, 2024 compared to 78.3% of revenue for the three months ended March 31, 2023, due primarily to product and country mix of ICL sales.

### General and Administrative Expense

The following table presents our general and administrative expenses (dollars in thousands):

|  | Three Months Ended March 29, 2024 | March 31, 2023 | Percentage Change 2024 vs. 2023 |
| --- | ---: | ---: | ---: |
| General and administrative expense | $23,228 | $18,098 | 28.3% |
| Percentage of sales | 30.0% | 24.7% |  |

General and administrative expenses for the three months ended March 29, 2024 increased 28.3% from the same period of 2023 due to increased outside services, facility costs and salary-related and payroll tax expenses.

### Selling and Marketing Expense

The following table presents our selling and marketing expenses (dollars in thousands):

|  | Three Months Ended March 29, 2024 | March 31, 2023 | Percentage Change 2024 vs. 2023 |
| --- | ---: | ---: | ---: |
| Selling and marketing expense | $26,708 | $26,354 | 1.3% |
| Percentage of sales | 34.5% | 35.8% |  |

Selling and marketing expenses for the three months ended March 29, 2024 increased 1.3% from the same period of 2023 due to increased salary-related and payroll tax expenses, trade shows and sales meetings expenses and bonus and stock-based compensation expenses, offset by decreased advertising and promotional activities and commission expenses.

### Research and Development Expense

The following table presents our research and development expenses (dollars in thousands):

|  | Three Months Ended March 29, 2024 | March 31, 2023 | Percentage Change 2024 vs. 2023 |
| --- | ---: | ---: | ---: |
| Research and development expense | $13,380 | $10,310 | 29.8% |
| Percentage of sales | 17.3% | 14.0% |  |

Research and development expenses for the three months ended March 29, 2024 increased 29.8% from the same period of 2023, due mainly to increased salary-related and payroll tax expenses and bonus and stock-based compensation expenses.

### Other Expense, Net

The following table presents our other expenses, net (dollars in thousands):

|  | Three Months Ended March 29, 2024 | March 31, 2023 | Percentage Change 2024 vs. 2023 |
| --- | ---: | ---: | ---: |
| Other income, net | $70 | $1,919 | (96.4)% |
| Percentage of sales | 0.1% | 2.6% |  |

The decrease in other income, net for the three months ended March 29, 2024 and March 31, 2023, respectively, was due mainly to higher foreign exchange losses.

### Income Taxes

The following table presents our income tax provision (dollars in thousands):

|  | Three Months Ended March 29, 2024 | March 31, 2023 | Percentage Change 2024 vs. 2023 |
| --- | ---: | ---: | ---: |
| Income tax provision | $1,128 | $2,009 | (43.9)% |

The effective tax rates for the three months ended March 29, 2024 and March 31, 2023 were (51.0)% and 42.6%, respectively. Our effective tax rates differ from the U.S. federal statutory rate of 21%, primarily due to the income tax expense generated in foreign jurisdictions.

Our future effective income tax rate depends on various factors, such as changes in tax laws, regulations, accounting principles, or interpretations thereof, and the geographic composition of our pre-tax income. We carefully monitor these factors and adjust our effective income tax rate accordingly.

### Liquidity and Capital Resources

Our principal sources of liquidity are cash, cash equivalents, investments available for sale (“AFS”) and cash flow from operating activities. We believe these sources of liquidity will be sufficient to meet our anticipated cash needs, including working capital needs, capital expenditures and contractual obligations for at least 12 months from the issuance date of the financial statements. We expect that cash flow from operating activities may fluctuate in future periods as a result of a number of factors, including fluctuations in our operating results, working capital needs, capital expenditures, and capital deployment decisions. In addition, future capital requirements will depend on many factors including our growth rate in net sales, the timing and extent of spending to support our growth strategy, the expansion of selling and marketing activities, the timing of introductions of new products, as well as global macroeconomic factors. Our financial condition at March 29, 2024 and December 29, 2023 included the following (in thousands):

|  | March 29, 2024 | December 29, 2023 | 2024 vs. 2023 |
| --- | ---: | ---: | ---: |
| Cash and cash equivalents | $224,024 | $183,038 | $40,986 |
| Investments available for sale | 28,088 | 49,391 | (21,303) |
| Total | $252,112 | $232,429 | $19,683 |
| Current assets | $365,715 | $365,269 | $446 |
| Current liabilities | 62,674 | 65,036 | (2,362) |
| Working capital | $303,041 | $300,233 | $2,808 |

Cash and cash equivalents include cash and balances in deposits and money market accounts held at banks and financial institutions. Our investment policy primary objective is capital preservation while maximizing our return on investment. Investments available for sale may include U.S. government and corporate debt securities, commercial paper, certain certificates deposit and related security types, that are rated by two nationally recognized statistical rating organizations with minimum investment grade ratings of AAA to A-/A-1+ to A-2, or the equivalent. The maturity of individual investments may not extend 24 months from the date of purchase. There are also limits to the amount of credit exposure in any given security type. We do not have any off-balance sheet arrangements.

A summary of cash flows for the three months ended March 29, 2024 and March 31, 2023 was as follows (in thousands):

| Cash flows from: | Three Months Ended March 29, 2024 | March 31, 2023 |
| --- | ---: | ---: |
| Operating activities | $21,680 | $(5,094) |
| Investing activities | 16,187 | 9,933 |
| Financing activities | 4,056 | (1,361) |
| Effect of exchange rate changes | (937) | 10 |
| Net increase in cash and cash equivalents | 40,986 | 3,488 |
| Cash and cash equivalents, at beginning of year | 183,038 | 86,480 |
| Cash and cash equivalents, at end of year | $224,024 | $89,968 |

For the three months ended March 29, 2024 net cash provided by operating activities consisted of $16.8 million in working-capital changes and $8.2 million in non-cash items, partially offset by the net loss of $3.3 million. For the three months ended March 31, 2023 net cash used in operating activities consisted of $14.3 million in working-capital changes, partially offset by $6.5 million in non-cash items and net income of $2.7 million.

For the three months ended March 29, 2024, net cash provided by investment activities was $16.2 million which consisted of $21.4 million of proceeds from the sale or maturity of investments AFS, partially offset by $5.2 million in purchases of property, plant and equipment. For the three months ended March 31, 2023, net cash provided by investment activity was $9.9 million which consisted of $40.3 million of proceeds from the sale or maturity of investments AFS, partially offset by $27.4 million in purchases of investments AFS and $2.9 million in purchases of property, plant and equipment.

Net cash provided by financing activities for the three months ended March 29, 2024 was $4.1 million which consisted of $5.3 million of proceeds from the exercise of stock options, partially offset by $1.2 million to repurchase of employee common stock for taxes withheld. For the three months ended March 31, 2023, net cash used in financing activities was $1.4 million which consisted of $1.8 million to repurchase of employee common stock for taxes withheld.

### Commitments

#### Employment Agreements

The Company’s Chief Executive Officer entered into an employment agreement with the Company, effective January 1, 2023. He and certain officers have as provisions of their agreements certain rights, including continuance of cash compensation and benefits, upon a “change in control,” which may include an acquisition of substantially all of its assets, or termination “without cause or for good reason” as defined in the employment agreements.

## Market risk

As filed, 242 characters.

During the three months ended March 29, 2024, there have been no material changes in the Company’s qualitative and quantitative market risk since the disclosure in the Company’s Annual Report on Form 10-K for the year ended December 29, 2023.

## Controls and procedures

As filed, 3,362 characters.

### Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our CEO and CFO, of the effectiveness of the design and operation of the disclosure controls and procedures of the Company. Based on that evaluation, our CEO and CFO concluded, as of the end of the period covered by this quarterly report on Form 10-Q, that our disclosure controls and procedures were effective. For purposes of this statement, the term “disclosure controls and procedures” means controls and other procedures of the Company that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act (15 U.S.C. 78a et seq.) is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Our management, including the CEO and the CFO, do not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud or material errors. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations on all internal control systems, our internal control system can provide only reasonable assurance of achieving its objectives and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of internal control is also based in part upon certain assumptions about the likelihood of future events, and can provide only reasonable, not absolute, assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in circumstances, or the degree of compliance with the policies and procedures may deteriorate.

### Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended March 29, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 452 characters.

Our short and long-term success is subject to many factors that are beyond our control. Investors and prospective investors should consider carefully information contained in this report and the risks and uncertainties described in “Part I—Item 1A—Risk Factors” of the Company’s Form 10-K for the fiscal year ended December 29, 2023. Such risks and uncertainties could materially adversely affect our business, financial condition or operating results.

Filed May 7, 2024.
Source: SEC EDGAR, the filing index for accession 0000950170-24-054488. Last ingested by Listed: Nov 4, 2026, 17:00 ET. No prices; not investment advice.