STAAR Surgical Company

Welcome to the Star Surgical first quarter 2024 earnings call and webcast. 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 the star key followed by one on your phone. Please note this call is being recorded today, Tuesday, May 7th, 2024. I would now like to turn the call over to Brian Moore, Vice President of Investor Relations of Star Surgical. Please go ahead.

Thank you, Operator. Good afternoon, everyone, and thank you for joining us to discuss the company's financial results for the first quarter end at March 29, 2024. On the call today are Tom Frenzy, 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. We have posted the earnings release and our earnings presentation supplement to the investor relations section of STAR's website at www.star.com. Before we begin, let me quickly remind you that the company comments during this call will include 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 expressed or implied by such forward-looking statements. The risk and uncertainties associated with these forward-looking statements 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, on this call and in the press release, we discussed certain non-GAAP financial measures, including adjusted EBITDA and adjusted EBITDA per share. We also provide sales data in constant currency, Definitions and reconciliations to GAAP are included in today's press release. For brevity, unless otherwise specified, all comparisons on today's call will be on a year-over-year basis versus the relevant period. Following our prepared remarks, we will open the call to questions from publishing analysts. We ask analysts limit themselves to two questions, then re-queue with any follow-ups. Finally, 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 section. Accordingly, investors should monitor our investor website in addition to following our press releases, SEC filings, and public conference calls and webcasts. And with that, I would now like to turn the call over to Tom Frenzy. Tom?

Thank you, Brian, and good afternoon, everyone. I'm pleased to report STAR generated net sales of 77.4 million for the first quarter of 2024, which exceeded our outlook. Our enhanced commercial focus is yielding positive results, and our proprietary EVO-ICL lens-based technology again delivered above market rates of growth across all key geographies. We exceeded our original expectations for the quarter even in a down market for the predominant procedure in our industry, laser vision correction. Evo is taking market share, building the channel for refractive vision correction, and our momentum is growing. We are proud to report multiple business and execution milestones in the first few months of 2024, including today's announcement of the largest commitment ever to Evo ICL in the US, a strategic agreement with Dr. Robert Lin and IQ Laser Vision as part of our US Highway 93 go-to-market program. Thus far in 2024, we generated 21% sequential sales growth in the US, achieving record quarterly US ICL sales of 5 million. We believe this represents a new base level of quarterly sales in the United States. Our agreement with Dr. Lin is the largest ever commitment to EvoICL in the US to date and follows on the agreement we announced with Sharp Vision also in the first quarter. We have qualified a dozen US Highway 93 Evo ready customers to move into the fast lane, if you will, and signed agreements with HAF since the program launched in the fourth quarter of 2023. These fast lane customers believe in the merits of EvoICL and are increasingly recommending the EVO procedure to their patients. They are committed to growing EVO as a percentage of the refractive procedure mix, initially targeting 15 to 30%. Dr. Lin has implanted over 1,000 ICLs in the prior 12 months, and his initial target under our new strategic agreement is 1,500 ICLs, representing significant growth over the prior year period. Last month, we engaged hundreds of surgeons at the ASCRS, the American Society of Cataract and Refractive Surgery's annual meeting in Boston, where ICL was featured in 44 poster and paper presentations during scientific sessions at the meeting. At least two papers were presented that we believe will meaningfully increase surgeon confidence in the measurement of the eye and ICL lens size selection. We also launched STAR Universities, our medical science website at ASCRS for surgeons and other healthcare professionals. STAR University will feature clinical data and research, including the papers I just discussed. And work is underway to further expand STAR University's features, including videos and a surgeon training portal. We also introduced our Stella ordering and planning system at ASCRS. Stella will enhance surgeon efficiency and practice flow and is the initial step towards a comprehensive EVO-ICL ecosystem. We have drawn a line in the sand to be the choice for minus six and above as our next step in moving down the diopter curve, which represents a significant growth opportunity. When we surveyed surgeons with our clinical data at both ASCRS and our recent Asia Pacific Expert Summit, 93% of those surveyed agreed or strongly agreed that based on the data presented, They were more comfortable recommending Evo ICL for patients minus six and above. And finally, in the first quarter, we reached and celebrated 3 million total implantable columnar lenses sold. Half of those ICLs were sold in just the last three years. Turning my attention now to our regional results for the first quarter of 2024, we generated ICL sales growth of 9% in the Asia Pacific region, including 10% growth in China. In the first quarter of 2024, the APAC region outperformed our full year of fiscal 2024 outlook of 7%. And China growth in the first quarter was ahead of our expectations, despite a tough comp in the year-ago quarter, which reflected pent-up demand following the removal of COVID-19 restrictions in the fourth quarter of 2023. We generated 11% sales growth in the EMEA region, which exceeded our outlook for flat sales growth for the full year fiscal 2024. Growth was driven by the Middle East and our European distributor markets, which includes newer hybrid markets such as Belgium and the Netherlands, where we began investing just a few years ago and now have reached approximately 20% share in each market. In our Americas region, we generated sales growth of 12%, including 15% sales growth in the U.S., which also grew 21% sequentially. Our results in the U.S. outperformed our outlook for flat growth in the first half, and once again, we believe we have achieved a new base level of U.S. quarterly sales. We saw returns on our strategic investments in 2023 during the first quarter of 2024. As many of you may recall, It was just about a year ago when we began making critical investments to drive our business forward. In April 2023, we made an investment in people, adding a chief operating officer and a chief clinical regulatory medical affairs officer to our leadership team. In the third and fourth quarter, we added three new customer facing vice presidents. And last week, we announced our new general counsel and chief marketing officer. These individuals are already having a positive impact on our business and will further accelerate EVO-ICL uptake, our market share capture, and innovation. We have invested in our field organizations globally with new hires in both large and emerging markets, including China, the US, India, and Brazil. In China, for example, we expect to end the year with more than 100 star employees as we lean into the growth opportunity in the largest market for refractive vision correction. We aim to continue the strong business momentum we have achieved against the headwind of lower consumer discretionary spending. We have been disciplined in our investments and as a result have built a record level of cash on our balance sheet. We are confident that our business model is structured to continue to generate and build cash based on current trends, we are reiterating our fiscal 2024 net sales outlook range of $335 million to $340 million. We acknowledge the challenging and dynamic macroeconomic and geopolitical environment, but based on our stronger than expected first quarter results, we expect to be at the higher end of the range. Patrick?