STAAR Surgical Company

Good day, ladies and gentlemen. Thank you for standing by. Welcome to STAR Surgical First Quarter Financial Results Conference Call. During today's presentation, all parties will be in listen-only mode. Following the presentation, the call will be open for questions. If you have a question, please press the star followed by the one on the touch-tone phone. If you are using speaker equipment today, please lift the handset before making your selection. This call is being recorded today, Wednesday, May 4th, 2022. At this time, I would like to turn the conference over to Mr. Brian Moore, Vice President, Investor Media Relations and Corporate Development at Star Surgical. Please go ahead.

Thank you, operator, and good afternoon, everyone. Thank you for joining us on the Star Surgical conference call this afternoon to discuss the company's financial results for the first quarter ended April 1, 2022. On the call today are Karen 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 p.m. Eastern Time and is now available on STAR's website at www.star.com. Before we begin, let me quickly remind you that during the course of this conference call, the company will make forward-looking statements. We caution you that any statement that is not a statement of historical fact is a forward-looking statement. This includes remarks about the company's projections, expectations, plans, beliefs and prospects. These statements are based on judgment and analysis as of the date of this conference call and are subject to numerous important risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The risk and uncertainties associated with the forward-looking statements made in this conference call and webcast are described in the Safe Harbor Statement in today's press release, as well as SAR's public periodic filings with the SEC. Except as required by law, SAR assumes no obligation to update these forward-looking statements to reflect future events or actual outcomes and does not intend to do so. In addition, To supplement the GAAP numbers we have provided non-GAAP adjusted net income and adjusted earnings per share and sales in constant currency. We believe that these non-GAAP numbers provide meaningful supplemental information and are helpful in assessing our historical and future performance. A table reconciling the GAAP information to the non-GAAP information is included in today's press release. Following our prepared remarks, we will open the line to questions from publishing analysts. We ask analysts limit themselves to two initial questions, then recue with any follow-ups. We thank everyone in advance for their cooperation with this process. And with that, I would now like to turn the call over to Karen Mason, President and CEO of STAR.

Thank you, Brian. Good afternoon, everyone, and thank you for joining us on today's call. The first quarter results we reported today represent another quarter of record sales, record ICL units, and profitable growth as we successfully raise awareness and enthusiasm for the visual freedom provided by our EVO family of lenses. We're particularly excited about the enthusiastic adoption by surgeons first to be trained in the U.S. following recent FDA approval of our EVO family of lenses for myopia. The first U.S. EVO patient implants occurred within days after approval. We enjoyed a strong commercial introduction of our EVO lenses less than two weeks ago at the largest industry trade show in the US, ASCRS. At ASCRS, we shared for the first time the safety and effectiveness of the EVO lenses achieved during the pivotal trial. Surgeon enthusiasm throughout the trade show was palpable. The case for EVO and STAR as the first choice for refractive vision correction by our surgeon customers consumer patience, and investors continues to grow stronger. For the first quarter of 2022, global ICL unit growth was up 26% year over year. By geography, we achieved strong ICL unit growth in China, up 37%, Japan, up 35%, India, up 34%, Asia-Pacific distributor markets up 43% and Latin America up 41%, all as compared to the prior year quarter. At the end of March and subsequent to the end of the first quarter, China, the largest refractive market globally and also our largest market, began to implement COVID-related lockdowns in multiple cities resulting in a delay of refractive surgeries in various provider locations in China. In other parts of China, refractive surgeries have continued. Overall, shipments of EVO lenses to China have remained robust as our distributor seeks to build inventory in anticipation of the peak summer implant season. Our China Star team continues their work in person where possible and virtually in cities that are locked down. As some of you may recall, we and our surgeon customers have demonstrated flexibility and the ability to successfully navigate previous COVID-related pauses, which is also our goal during this current period. Based on our global demand forecast, including projected release of remaining backlog lenses, we are today reaffirming our previously provided outlook for annual sales. For fiscal 2022, we continue to anticipate approximately $295 million in net sales, which represents year-over-year growth of 28%. Turning to the U.S., The data from our EVO prospective pivotal trial supported the clinical evidence and clinical experience surgeons have reported globally. As previously announced in March, we are absolutely thrilled. We achieved FDA approval for our EVO family of myopia lenses for the U.S. Our team is energized by refractive surgeon enthusiasm in anticipation of offering the EVO lenses to their patients. For example, one prominent surgeon in the U.S. complimented our team at the recently held ASCRS Congress in Washington, D.C. He practices in a very large market in the U.S. and credited our consumer patient outreach for his upcoming surgery schedule consisting of 50% of his procedures being Evo versus laser vision correction. He was amazed by this early uptake. As this is just the beginning of a multi-pronged approach to properly attracting patients to surgeons offering our EVO lenses, we believe it does bode very well for our ability to reach patients in the second largest refractive surgery market in the world. Our medical monitor for the US EVO pivotal trial, Dr. Mark Packer, recently presented the clinical trial data at the American Society of Cataract and Refractive Surgery annual meeting in Washington, D.C. Key findings from 629 eyes of 327 subjects implanted with EVO lenses in the trial were as follows. With regard to safety, no eyes experienced pupillary block, and there were no instances of anterior subcapsular cataract. Conclusion, the central port design of EVO lenses functions effectively to allow physiologic flow of aqueous and prevent pupillary block, thus eliminating the requirement for preoperative peripheral iridotomies. With regard to effectiveness, outcomes at six months postoperatively were as follows. 98.9% of eyes were within plus or minus one diopter of target. 98.5% of eyes achieved postoperative corrected distance visual acuity, CDVA, at six months equal to or better than preoperative CDVA. We believe, based on the data from our US clinical trial, and more than 100 clinical papers supporting the safety and or efficacy of Evo lenses, and the commercial success of the now more than 1.5 million Evo lenses implanted outside the US, that Evo is a phenomenal, game-changing product. Evo lenses offer patients visual freedom from glasses and contact lenses, excellent vision day and night, no dry eye syndrome, no corneal reshaping, and are removable, if desired, along with other benefits. For our surgeon customers, particularly in countries such as the U.S., where laser vision correction has declined, EVO lenses offer the opportunity to grow the number of refractive procedures to previous peak levels and beyond with high levels of patient satisfaction and minimal investment. We believe STARS investments in clinical evidence, consumer awareness, and customer partnerships in the U.S. will continue the elevation of EVO to a premium and primary refractive vision correction solution for a wide range of patients as it has successfully demonstrated in leading refractive markets globally. With the approval of our EVO family of myopia lenses in the U.S., an estimated 100 million U.S. adults ages 21 to 45 with myopia in the range of minus 3 diopters and minus 20 diopters are now potential candidates for EVO. A few highlights from the initial few weeks of our U.S. EVO commercial launch include EVO surgeon training and certification has already been completed for more than 100 doctors. New practice support tools are in the hands of certified surgeons and their staff. New and exciting patient consult tools and brochures have been distributed. And a new EVO website in the U.S. was launched on April 18th. The initial stages of a growing multi-city, multi-channel digital advertising and public relations campaign are underway with the goal of increasing Evo awareness and driving consumer desirability. The campaign will include Evo display, search engine marketing, Instagram, YouTube, Facebook, TikTok, Snapchat, connected streaming TV, and audio podcasts. In the near future, our first US celebrity EVO brand ambassador will be implanted with EVO lenses. The STAR team globally is focused on making fiscal 2022 another year of record commercial and financial progress. We are particularly proud that we are continuing to achieve high levels of sales growth while also growing our company in a responsible manner with profitability and as a good corporate citizen. We recently issued our third annual sustainability report in April. The report highlights our commitments to a culture of quality, employee well-being, diversity and inclusion, our growing philanthropy and community service efforts and partnerships, and our efforts to reduce our impact on the environment. The case for STAR and Evo as the first choice refractive vision correction by our surgeon customers, consumer patients, and investors is indeed growing stronger. Patrick?