STAAR Surgical Company

Hello all and thank you for standing by. Welcome to the Star Surgical second quarter financial results conference call. During today's presentation, all parties will be in a listen only mode. Following the presentation, the call will be open for questions. If you have a question, please press star followed by the number one on your touchtone phone. If you're using speaker equipment today, please lift the handset before making your selection. This call is being recorded today, Wednesday, August 10th, 2022. At this time, I'd like to turn the conference over to Mr. Brian Moore, Vice President, Investor Media Relations and Corporate Development for 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 second quarter ended July 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 second 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 STARS public periodic filings with the SEC. Except as required by law, STARS seems 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 second quarter results we reported today represent a record level of quarterly sales per star at $81.1 million, which represents 30% year-over-year sales growth and considerable progress in advancing our EVO-ICL family of lenses. Considerable progress in the quarter includes a fantastic start in introducing our game-changing EVO lenses to the US market, the second largest market for refractive vision correction. We could not be more thrilled to announce today, in a separate press release, our partnership with musician Joe Jonas, who will drive awareness of EVO and the visual freedom possible with our lenses among the millions who suffer from myopia globally. I will touch on the partnership more shortly. For the second quarter, we achieved record results despite COVID-19-related challenges and foreign currency headwinds. We also held fast to our culture of quality and manufacturing excellence in generating the second quarter results. Last month, on July 15th, we received our official five-year MDR certification from our European Notified Body, DECRA. As many of you know, MDR certification is a change to the regulatory framework, and recent data suggests fewer than 25% of medical device companies have received MDR certification. My thanks to the STAR teams involved in this milestone accomplishment, and particularly the regulatory and quality teams, which further demonstrates our commitment to STAR's culture of quality imperative. For the second quarter of 2022, global ICL unit growth was up 42% year over year, despite some ongoing softness in Europe, which we attribute to macroeconomic factors. By geography, we achieved strong ICL unit growth. In China, up 45%. The United States, up 36%. Japan, up 41%. India, up 181%. And Asia-Pacific distributor markets, up 66%. all as compared to the prior year quarter. In China, the peak summer implant season for EVO procedures is well underway. As we talked about on our last call, China began implementing COVID-19 related lockdowns in multiple cities associated with the zero tolerance policy at the end of March. While refractive surgeries were temporarily halted, in various provider locations in China. In other parts of China, refractive surgeries continued. SARS China team and our customers have been extremely agile in responding to the lockdowns. In some hospitals and clinics, our surgeon customers continue to perform refractive surgeries seven days per week. Lockdowns in China are also currently below the peak levels we saw during the second quarter. We expect to successfully navigate the current COVID-19 related challenges and meet anticipated levels of future demand. In the U.S., the commercial introduction of our Evo family of myopia lenses is off to a strong start. Each day seemingly represents a new and exciting moment or milestones for STAR and Evo in the US, including the announcement of our partnership today with singer, songwriter, and actor Joe Jonas. With tens of millions of followers on social media, Joe Jonas is now our most recognizable Evo ambassador globally. Importantly, Joe Jonas is an actual Evo patient and not simply a spokesperson. This is the case for all of our EVO ambassadors. Joe needed EVO lenses below minus five diopters, which once again illustrates that EVO lenses are suitable as a vision correction solution for a wide range of patients in myopia, low, mid, and high. Joe Jonas was a great candidate for EVO and is thrilled to have his EVOs. Beginning next month, he will begin sharing more details of his visual freedom with Evo via a global advertising, marketing, and social media campaign. We are inspired by Joe's personal story and appreciate his willingness to share his Evo journey with millions of others who could also benefit from living a life with visual freedom. Enthusiasm and adoption of Evo by US refractive surgeons is also growing. Many of our surgeon customers and their staff are actively on social media, LinkedIn, and in local market media providing positive EVO testimonies. We remain on track to train and certify at least 600 US surgeons on EVO by the end of this year, with already more than 400 surgeons trained and certified today. Existing and potential U.S. surgeon customers tell us they are excited about the EVO surgeon experience when they speak to their peers outside the U.S., when they consider the EVO opportunity here, and when they review EVO safety and efficacy data from our U.S. clinical trial. In addition to the paper available on STARS Investor website, published by our medical monitor, Dr. Mark Packer, discussing the US EVO clinical trial. Data from our US clinical trial has also now been updated on clinicaltrials.gov. We invite investors and analysts to review key findings from the 629 eyes of 327 subjects implanted with EVO lenses in the trial. Next month in September, We will showcase our entire evil family of lenses at our experts meeting and the 40th Annual Congress of the European Society of Cataract and Refractive Surgeons in Milan, Italy. We will feature VIVA, our innovative lens for presbyopia, at both our experts meeting and ESCRS. We will also begin commercialization of VIVA to certified surgeons where approved which is CE mark countries and geographies recognizing the CE mark. Looking ahead to future surgeon customer engagement, we plan to host our second US Surgeons Council meeting in San Antonio, Texas in November. Looking at full year fiscal 2022, in today's earnings release, we reaffirmed our previously provided outlook for fiscal 2022 net sales of approximately $295 million, which takes into account the significant currency headwinds and a continuation of the current level of COVID-19 related challenges in China and elsewhere, offset by stronger than expected global demand for our EVO lenses, which continued through the beginning of the third quarter. Organizational energy and enthusiasm at STAR is especially exciting. In addition to the surgeon engagement and other activities I just shared, we have a planned lineup of additional Evo Ambassador influencers in the US, including an NBA player and a Gen Z actress, model, and style icon. We are also introducing new ambassadors and campaigns outside the US including Japan and South Korea. Like Joe Jonas, all of our EVO ambassadors have had or will soon have the EVO procedure. Our EVO ambassadors will begin sharing their journeys in the coming months. It took over 22 years for STAR to sell the first one million ICLs and just about three years to sell the second one million lenses. a milestone we achieved in June of 2022. Now and in the future, Star aims to be the visual freedom company. For those who want to experience an active and fulfilling life free from contact lenses and glasses, the choice is evil. Patrick?