STAAR Surgical Company

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the STAR Surgical Third 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 1 on your touchtone phone. If you're using speaker equipment today, please lift the handset before making your selection. We will have approximately 45 minutes for today's call. This call is being recorded today, Wednesday, November 2, 2022. At this time, I would like to turn the conference over to Mr. Brian Moore, Vice President, Investor Media Relations and Corporate Development for Star Surgical. Please proceed.

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 third quarter ended September 30, 2022, On the call today are Karen Mason, President and Chief Executive Officer, and Patrick William, Chief Financial Officer. The press release of our third 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 risks 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. Star achieved 30% net sales growth in the third quarter, which reflects strong Evo ICO unit growth in APAC and strong accelerating growth in the U.S. despite constant currency challenges and in Europe, macroeconomic headwinds. In the third quarter, global ICL unit growth was up 40% year over year. We advanced our patient awareness, engagement, and market-building initiatives for Evo in the U.S. during and subsequent to the third quarter, highlighted by media campaigns with global entertainment celebrity Joe Jonas and NBA player Max Struess, and introduced our presbyopia lens, EvoViva, to surgeons at our experts meeting preceding the annual Congress of the European Society of Cataract and Refractive Surgeons. In China, we concluded another successful peak busy season that put EVO on track to exceed a 25% share of refractive surgery market units by year end. However, due to tighter COVID restrictions in China, resulting in expected delayed demand in the fourth quarter, ongoing headwinds in Europe, weakness in the yen and euro, and lower other product sales, we now anticipate total net sales will be approximately $285 million for fiscal 2022, which represents $300 million adjusted for constant currency. Our fiscal 2022 outlook includes ICL sales of approximately $272 million, representing 28% year-over-year growth, and other product sales of approximately $13 million. As you know, today it is vital that STAR focus on the significant growth opportunities we have with our premium EVO products. At the same time, our low-margin other products business which represents approximately 5% of sales and consists of cataract IOLs, IOL injectors and injector parts, has faced increasing supply chain challenges. As a result of third-party materials and supply chain challenges that only affect our other products business, we will no longer be able to support other products as we have historically. We will continue to support customers of other products through the end of 2023. As we look to fiscal 2023, despite the aforementioned challenges, we expect to achieve approximately 30% ICL sales growth year-over-year to approximately $355 million in total company net sales, which contemplates limited sales from other products. We see tremendous growth potential for our EVO family of lenses globally and look forward to continuing our focus, efforts, and resources on especially large growth opportunities in the U.S. and Asia in 2023. Turning back to the third quarter of 2022, for the third quarter, global ICL unit growth was up 40% year over year. By geography, we achieved strong ICL unit growth. In China, up 52%. The United States, up 63%. Japan, up 40%. South Korea, up 49%. And APAC distributor markets, up 47%, all as compared to the prior year quarter. In the US, we are pleased with our progress in advancing the adoption of EVO lenses through patient awareness and surgeon engagement. After our August partnership announcement with singer, songwriter, and actor, Joe Jonas, we launched EVO brand advertising featuring Joe in the US on September 26th. The campaign included targeted geographic and multi-channel advertising to our core 21 to 35 year old target population on YouTube, Instagram, Snapchat, TikTok, display advertising, and search engine marketing. Last month, we announced our partnership with NBA player Max Strews, a sharpshooter for the Miami Heat. Max is another example of a person with a myopia prescription of less than minus five diopters who had evil lenses implanted and is now thrilled with his new 2010 vision, which is better than 2020. Max joins other Evo brand ambassadors in the US, including a top model, a TV chef, a style expert and blogger, a fitness and wellness coach, and others who are helping to inform potential patients about the benefits of Evo based on their own Evo experiences. Each of our ambassadors speaks to potential Evo patients with a unique voice that we believe will continue to build momentum and contribute to Evo's broad success in the US. YouTube is the second most popular search engine for our target audience. In August, we launched our EvoICL educational series on YouTube, which has now expanded to eight videos as we added individual videos about Joe and Max's decision to choose Evo. The EvoICL channel on YouTube is now approaching 6 million video views. Going forward, we will continue to partner with new micro, macro, and celebrity EVO brand ambassadors in the U.S. since we have experienced through our earlier partnerships that we can successfully expand our engagement with potential patients. We are also engaging with U.S. refractive surgeons. Our goal is to accelerate education of our lens so that surgeons may increasingly transition the mix of vision correction options or entire practices to lens-based solutions with our EVO family of lenses. As of today, we have trained and certified over 550 US surgeons on EVO since FDA approval approximately seven months ago. We remain on track to meet or exceed our goal of training and certifying 600 U.S. surgeons on EVO in 2022. Please take note that, quote, the number of surgeons trained, unquote, is just one of the metrics we establish, manage, and measure for surgeon and patient engagement. Our U.S. commercial organization and star management is working diligently to assist patients in their journey for visual freedom from glasses and contact lenses and and to assist surgeons in their confidence and desire to offer the EVO lens-based solution to appropriate patients seeking visual freedom. We're focused on transforming the refractive industry for qualified patients to an EVO lens-based industry. We are pleased to report accelerating unit growth in the U.S. of 63% year over year in the third quarter, and up from 36% in Q2. We anticipate unit growth in the U.S. will further accelerate in the fourth quarter to approximately 100% year over year. Innovation and strengthening the moat around our business remains a strategic imperative for STAR. This includes potential expansion and enhancements of our EVO lenses to new indications and execution of other R&D, clinical and regulatory pathways to get our existing and next generation products to market and to certified surgeons. As we look to fiscal 2023, our outlook is for a strong trajectory of growth for EVO-ICL, continued market share gains, prudent investment, growing earnings, and many happy new EVO ICL Patients and Surgeons.

Patrick? Thank you, Karen, and good afternoon, everyone. Total net sales for Q3 2022 were $76 million, up 30% as compared to $58.4 million of net sales in Q3 2021. The 30% year-over increase in Q3 2022 net sales is attributable to a 33% increase in ICL sales, which represented 95% of total company net sales in the quarter. On a sequential basis, Q3 2022 sales were down 6% from Q2 2022, which is similar to the year-ago stepdown in sales from Q2 to Q3. Q3 2022 reported net sales includes an approximate $4 million negative currency impact as compared to the prior year quarter due to changes in constant currency, primarily the Japanese yen and the euro. In constant currency, net sales for Q3 2022 would have been approximately $80 million, up 37% year-over-year. For the nine months ended September 30, 2022, reported net sales include the $9 million negative impact from changes in constant currency, as outlined in the constant currency table in today's earnings relief. We currently anticipate approximately $65 million in net sales for Q4 2022, which contemplates tighter COVID restrictions in certain cities in China, resulting in an expected delayed demand in the fourth quarter of approximately $5 million. ongoing headwinds in Europe of approximately $2 million, weakness in the yen and euro since our August 10th Q2 earnings call of approximately $1.5 million, and lower other product sales of approximately $1.5 million. Turning back to Q3, gross profit was $60.5 million, or 79.5% of net sales, as compared to gross profit of $45.3 million, or 77.6% of net sales for Q3 2021. and $63.9 million, or 78.8% of net sales for Q2 2022. The 190 basis point year-over-year increase in gross margin is due mainly to geographic and product mix, partially offset by increased period costs associated with manufacturing projects. The sequential increase in gross margin of 70 basis points from Q2 2022 is primarily due to geographic and product mix, and decreased inventory reserves partially offset by increased period costs associated with manufacturing projects. For Q4 2022, we now expect gross margin will be approximately 80% of net sales. Moving down the income statement, total operating expense for Q3 2022 was $46.8 million as compared to $37.5 million in Q3 2021, and $46.9 million for Q2 2022. Taking a closer look at the components of operating expenses, G&A expense for Q3 2022 was $14 million compared to $11 million for Q3 2021 and $14 million for Q2 2022. The year-over-year increase in G&A is due to increased compensation-related expenses, facility costs, and outside services. We continue to expect G&A expense will be approximately $15 million for Q4 2022. Selling and marketing expense was $23.1 million for Q3 2022 compared to $18.2 million for Q3 2021 and $24.2 million for Q2 2022. The increase in selling and marketing expense from the prior year is due to increased trade shows and sales meetings, advertising and promotional activities, travel expenses and compensation related expenses. The sequential decrease in selling and marketing expense from Q2 2022 is due to decreased marketing, promotion, and advertising expense, partially offset by increased trade shows, sales meetings, compensation, and travel expenses. We now expect selling and marketing expense as a percent of sales will be approximately 35 to 40% for Q4 2022. Research and development expense was $9.6 million in Q3 2022 compared to $8.3 million for Q3 2021 and $8.6 million for Q2 2022. The year-over-year increase in R&D is due to increased compensation-related expenses. The sequential increase in R&D from Q2 2022 is partially due to increased post-approval study clinical trial expenses. We now expect R&D expense will be approximately $10 million for Q4 2022. Operating income in Q3 2022 was $13.7 million, or 18% of net sales, as compared to 7.8 million or 13.4% of net sales for Q3 2021. We continue to expect operating margins for fiscal year 2022 will be approximately 15%. The STAR team continues to be proud of our ability to drive very high levels of sales growth while expanding profitability. For Q3 2022, net income was $10.3 million or 21 cents per diluted share compared to net income of $6 million or 12 cents per diluted share for Q3 2021. On a non-GAAP basis, adjusted net income for Q3 2022 was $18.1 million, or $0.37 per diluted share, compared to adjusted net income of $10.3 million, or $0.21 per diluted share for Q3 2021. A table reconciling the GAAP information to the non-GAAP information is included in today's financial relief. We now expect our fourth quarter effective tax rate will be approximately 20%, subject to no change in our valuation allowance. Turning now to our balance sheet, we implemented an investment policy for a portion of the growing cash on our balance sheet. The primary objective of our investment policy is capital preservation while maximizing return on investments through AAA to A-minus investments discussed further in today's 10Q. The investment policy resulted in Star shifting a portion of our cash to high-quality U.S. treasuries and commercial paper with shorter maturities. This did result in additional gains in interest income in Q3 2022. Thus, our cash, cash equivalents, and investments available for sale total $224.7 million as of September 30, 2022, as compared to $202.5 million at the end of Q2 2022. In Q3 2022, we generated $24.1 million in cash from operations and invested $6.3 million in property and equipment. We remain on track to invest approximately $20 million for the full year fiscal 2022 on CapEx, primarily to support manufacturing capacity expansion. We also continue to anticipate generating positive cash from operations in Q4 2022 and ending the year with a higher cash, cash equivalents and investment balance than fiscal 2021. With regard to foreign exchange rate headwinds, when compared to our initial fiscal 2022 full year revenue guidance in January of this year, we now estimate an approximate $15 million negative impact on full-year fiscal 2022 net sales. Normalizing for these FX headwinds results in constant currency net sales of approximately $300 million. For fiscal 2023, as we complete our initial planning and budgeting, we currently believe we can achieve ICL net sales growth of approximately 30% year-over-year, which contemplates a continuing challenging macroeconomic environment in Europe, a lessening impact of COVID, no significant changes to foreign exchange rates, and little to no sales from our other product business, which is more than offset by a strong trajectory of growth in the Asia and U.S. markets. Finally, STAR will be participating in several investor conferences and events in the coming weeks, including the Stevens Annual Investment Conference in Nashville, Tennessee on November 17th, VTIG's Virtual Ophthalmology Day on November 29th, and the Stiefel Investor Bus Tour in Newport Coast, California on December 13th. We look forward to meeting with many of you at these events. This now concludes our prepared remarks. Operator, we are now ready to take questions.

Absolutely. We will now begin the Q&A session. If you would like to ask a question, again, it is star 1 on your telephone keypad and star 2 to remove that question. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. Our first question today comes from the line of Anthony Petroni with Mizuho Group. Anthony, your line is now open.

Thanks, and I hope everyone's doing well. I'll keep my two questions to the 4Q implied outlook as well as some of the statistics that were thrown out there for 2023. So when we look at the implied ICL guide for 4Q, it looks like 63 to 64 million is implied, and there were several headwinds. you know, called out currency delays in China shipments, maybe to just, you know, provide a little bit more color on how those headwinds are broken out. And then in terms of, you know, the implied U.S. outlook, you called out 100 percent growth in units. But, you know, we're missing sort of how we should translate that in the dollars. And then I'll have one quick follow up on twenty three.

Hello. This is Patrick Anthony. Why don't I kick off? I think Karen might be on having some connection issues at the moment. So to answer your question, and Karen, if you get on there, please jump in. To answer your question, I try to highlight in my prepared comments. So you are right. What we talked about and what you described is generally in the right direction. We got it to $65 million, very little contribution from the other products, which is our IOL legacy business. And then I did highlight in my prepared comments, we saw about $5 million of what we think is delayed revenue related to the tighter COVID lockdowns in China, a couple million dollars related to European macroeconomic factors, a million and a half on the FX side since our August 10th earnings call in Q2, and then another million and a half related to the IOL. So we try to bridge that gap and provide as much transparency as we could on

And then just the follow-up would be as we bridge it to 23 at 355 million, predominantly mostly ICL, certainly calls for healthy growth year over year. Just wondering if you can provide a little bit more color geographically, what is contemplated in there for China growth, for instance, assuming we still have some lingering headwinds from COVID into 23? And then when we think about the rest of the geographies, of course, US is in the launch phase. And then we also have headwinds in Europe. So just how should we be thinking about the geographic makeup in 2023?

Hi, Anthony. This is Karen. I'm happy to be with you today. I had a little bit of connection issue. So with regard to looking into, thank you, looking into 2023, We believe that growth in China will still, on a unit basis, exceed the 30% range. We believe, as Patrick stated, this is delayed demand largely due to the fact that the recent election has, for a number of individuals, provided some concern about how COVID would be handled. It seems to be a problem a perception that COVID might in fact, the lockdowns might in fact be a little more challenging. So I think what we're hearing is that our big customers, our hospitals, our clinics are very, very much looking forward to 2023. There is a belief it's on social media, hasn't been validated yet. that in fact, the COVID lockdown principle will be changed and more favorable in terms of freedom of movement within China. So I think bottom line, we can look in 2023 for a resumption of great demand. With regard to the US, we're talking about, you know, very strong growth. We're talking way above this year's growth in terms of percentages. We expect that within 18 months that the U.S. market will also be able to perform similar to China in terms of market share wins. With regard to Europe, we think that's a little foggier in terms of when we expect Europe to really get out of a predicted recession, which seems to have a little bit of challenge. But again, I want to stipulate that we are in a growth mode in every market. We are stagnant nowhere. It's just when is demand going to be at its greatest in light of the macroeconomic trends, some of the political challenges, et cetera. But overall, we see nothing but blue sky ahead.

Thank you very much. I'll get in the queue. Thank you.

Thank you, Anthony.

Our next question today comes from the line of Margaret Kotcher with William Blair. Margaret, your line is now open.

Hey, good afternoon, everyone, and thanks for taking the question. I wanted to follow up just to start on the China comments. You know, it could be wrong, but it seems like that's just the first time that at least I've seen you guys kind of mention the COVID lockdowns in the three years. Maybe it isn't the presidential election, but You know, maybe any other commentary you could provide on what it could indicate for 2023? Is it pulling back, you know, and not only delaying, but what's the base that we should look at, I guess, for that 30% growth?

Thank you, Margaret, for joining us today. The basis for the 30% growth is built on what we know already contractually with strategic agreements. as well as focus of the team on all the critical accounts in the major markets. The fact that we are preparing with the appropriate amount of what are our TORAC lenses, which continue to grow in demand even above our seric growth. We already are aware where the hospitals and clinics are planning for 2023 as we plan along with them. The reason why the fourth quarter has a question mark is because right after the election over the last week to week and a half, there have been behaviors by consumers and employees such as you saw, may have read about Foxconn, which is making people a little hesitant about how the government may react to the freedom around COVID and what can happen if you happen to be in the wrong place at the wrong time with an outbreak. Will I end up not being able to make it home? These kinds of concerns are different than what we experienced in the other COVID challenges throughout the last two and a half years. So we've decided rightfully to be prudent, to ship the right amount of inventory to prepare for a strong 2023. Okay, great.

I appreciate that color. And then, you know, let's maybe shift to the U.S. The 550 surgeons that are trained at this point, obviously a very good number. It seems like maybe you're pointing towards more of an inflection in the back half of the year. And so maybe you can tell me whether I'm right or wrong on that. And then, you know, any color on the profile of the 550 of the practices that they are in and whether or not they're planning on converting maybe a large portion of patients to EVO. or just adding it as an option for those that aren't eligible for LASIK or SMILE. Thanks.

So in the United States, we believe that the enthusiasm for this expansion of the U.S. market, which we believe will happen with EVO lens-based technology, is just beginning. So we are training the most interested surgeons first, obviously the ones who have committed from the very beginning to sign a strategic agreement with STAR and want to get started as soon as possible. Just a personal note, the other day, my husband and I went to an outstanding surgeon in San Diego, Dr. Sandy Feldman, and it was fun because when we got to the door, there was the major Joe Jonas poster, floor to ceiling, with people gathered around it, and I do not exaggerate. A lot of enthusiasm by her entire team. And this was just on my personal visit. You can imagine that this is being replicated around the United States. And so in terms of moving the business model in the right direction, that takes a little while because you're going from a LASIK-based practice to a lens-based practice. And as a result of that, when we talk about training surgeons and how quickly they're going to move their business over to lens-based EVO, you know, it varies. But we've found everywhere else, including our largest markets around the world, that within 12 to 18 months, you start to see some really strong movement by some of the largest providers around those major markets. So our expectation is in 2023, we'll have really, really strong growth. We still want to be 10% of the market by the end of next year. going into 2024 and 20% by 2025. So these are big numbers, but we believe we're going to meet them. And we think that, you know, the rollout as it has been over the last several weeks especially continues to be very strong.

Thanks, guys.

Thank you. Our next question is from the line of Bill Plavonic with Canaccord. Bill, your line is open.

Hi, Karen and Patrick. It's John. I'm for Bill tonight. Thanks for asking our question. I kind of actually want to follow up on Margaret's question. Could you talk about this early US users? Have you been able to convert any exclusive laser only clinicians? And do you see practices today, especially those laser-only users, do they have the infrastructure and facilities today to support doing the procedure, or do they need to build those out still? Thanks.

Thank you, John. So it really depends on the practice in terms of whether or not they have a strong cataract practice, if they're doing freemium cataract lenses, assuming they've never done evo lenses even in the previous vision type of lens so let's say that you are not doing a lot of intraocular procedures it's probably going to take you a little longer to move your practice model and your clinical confidence then it will be for those surgeons who are very comfortable in the eye either having used our evo lenses known as vision before and or they're very good at refractive lens exchange premium cataract lenses etc so it you know it varies but there are a number of surgeons who are moving aggressively to go from maybe not all lasik based to all lens based that quickly but certainly from a mix of procedures to way more evo so that i would say would identify probably the greatest pickup and the greatest users we currently have.

That's really helpful. Thank you. As you're thinking about Q4 and when you've spoken about China and the softness there and setting up for 23, are there any updates to the backlog that was existing? And how can you use this period to be able to catch up by year end?

Yes, so first of all, I just, and I appreciate because we've, you know, we're reporting 40% growth quite often that it appears that Q4 is soft. It's not soft. We're still looking at China at 22 to 25% growth of units. It's just not going to be 30 to 35 in the fourth quarter while we're delayed as people are trying to figure out how this COVID challenge plays out. in terms of, you know, what we expect going forward, it is that these strong growth numbers will continue.

Okay, thank you. And then just to sneak one last one in, too, the other product discontinuation, I know that product line was important to some KOL surgeons, OUS. Do you expect any impact to ICL use because of that phase-out? Thanks again for taking all of our questions.

No, we do not. The users of our IOLs and injectors and injector parts, they are at this point very happy with Star's lens, but we are going to make sure as we have, as we moved out of the IOL business and other markets, that there's a long lead time and that we're very supportive to provide inventory until they find alternative sources. for their Iowa lenses and injector parts. We're really talking about two markets and really our hope is that the ICL business will be even stronger in conversation in those markets where IOL business has really been not a focus for us for a long time, a bit of a downward cycle. So we're only gonna be talking positives going forward and we see our ICL business picking up just fine in those markets as well.

Thanks, Karen.

Thank you. Our next question is from the line of Zach Weiner with Jefferies. Zach, your line is open.

Hey, everyone. Thanks for taking the question. I just want to touch on the U.S. market. It looks like, looking at the queue that was released, it looks like U.S. was flat sequentially this quarter. Can you just give some color on performance in the quarter in the U.S. and how we should be thinking about it in the fourth quarter?

So Patrick, why don't you take that one? I do not believe it was flat sequentially.

You are correct. So let me go pull up, maybe see what you're seeing, Zach. But no, we were up actually on revenue closer to 75% year over year. I need to go look at the sequential again to double check that. But as Karen said in her prepared comments, we expect unit growth to be going from 66% year-over-year in Q3 to 100% in Q4. And then, as she said, even as we go through 2023, continue to see even larger market share gains as we move through 2023. Apologies.

I must be looking at the wrong thing. I guess just looking at the China performance, how do you look at it? procedure volumes through the quarter and how should we think about it through 2023? Thanks.

So as I said, we expect that procedure volumes in China in the fourth quarter will be from a growth trajectory, 22 to 25%, and then 2022 to 2023, 30% plus. So, you know, that we consider that strong, healthy growth.

Thanks for taking the question.

Thank you. Our next question comes from the line of Ryan Zimmerman with VTIG. Ryan, your line is open.

Good evening. Thanks for taking the questions. Just to follow up on the last question, a point of clarification. I think your revenue in second quarter was 3.872 based on the Q, and you guys did 3.873 in the U.S. Maybe some of that's injector sales. and appreciate that the units are up. But I guess, you know, the question goes to just the fact that U.S. growth sequentially on the EVO launch. You know, Karen, if you could just speak to that. And I think implied with the 100% unit growth, I'm coming out to about 5.3 million for the U.S. in fourth quarter. And just, you know, want to check my math on that and see if that's what you're kind of expecting for the U.S. in fourth quarter.

Yeah, so if you're checking math, I turn it over to the greatest guy in finance, and that's Patrick. Patrick?

Yeah, so there's a little bit of noise in there on the domestic side related to perhaps some Canadian in North America, so you can't quite get apples to apples on that one. In terms of your math of looking at Q4, I would say directionally, you're headed in the right direction. As Karen has said, we expect to get greater market share gains as the product is in the market longer. As a reminder, the fourth quarter that we're currently in, this is only the third quarter of commercialization. And so as we've been very consistently saying, we expect to see bigger gains as we move through 2023 and certainly as we exit 2023 in terms of contribution from U.S.

Okay. Appreciate that color and the clarifications. You know, On the Sears number, the 355, I would appreciate your thoughts, either Patrick or Karen, around just the impact of units versus price and how much price you expect to pick up maybe next year as the U.S. becomes a larger proportion of sales relative to the unit expectations that you're guiding to on an underlying basis.

Patrick? Sure.

So on that one, what I would say is that we have a very healthy ASP in the U.S. In terms of our ASP, we don't see a lot of pressure on ASPs at all because of the nature of our strategic alliances globally. We know exactly what we're going to get in terms of pricing, and that's set for the forthcoming year. Where we do see a mix in ASP is going to really come from either product mix, which where we see more toric or spheric, toric being a higher ASP, and then, of course, the geography mix, which is what your question was on the direct side for the U.S. Still, the U.S. is a relatively small piece of the revenue contribution, so it's really not going to move the needle that much. In fact, if you look at our revenue in the U.S., as we said, we were 66% on units and actually higher on revenue growth year over year because of the higher ASP. Hopefully that answers your question, Ryan. I think we're, as we said, it's still a relatively small piece of the contribution, but as we move through 2023, then I think those questions will be a lot more viable in terms of modeling.

So just a clarification then, the 355 and the implied 30% growth essentially equates to 30% unit growth, or there is some price impact in there as the other sales diminish?

Yeah, we would expect a slightly higher unit growth, but I think to your point, as the U.S. is starting to come on board with a higher ASP, that differential is perhaps not as great as it's been in the past when we were more concentrated with lower Asia market pricing, such as China.

Okay. Appreciate the call. Thanks for taking the question.

Of course. Thank you, Ryan. We are showing no more questions in queue, so I would like to now turn the call back over to Karen for closing remarks.

She might have dropped off with some connectivity, so I will chime in and appreciate everyone's participation today. We look forward to seeing you at these upcoming conferences, and we appreciate your interest and investment in Star Surgical, and the best to everyone.

That concludes today's call. Thank you for your participation. You may now disconnect your lines.