STAAR Surgical Company (NASDAQ:STAA) Q4 2019 Earnings Conference Call - Final Transcript

Feb 26, 2020 • 04:30 pm ET

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STAAR Surgical Company (NASDAQ:STAA) Q4 2019 Earnings Conference Call - Final Transcript

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Presentation
Executive
Deborah Andrews

line results and then provide more detail down the income statement. STAAR reported net sales of $38.9 million in the fourth quarter of 2019, an increase of 25% over the $31.2 million reported in the year-ago period. The foreign currency headwinds, primarily the euro was just $20,000 for the fourth quarter as compared to approximately $1.3 million for the full fiscal year in 2019. Strong top line growth was driven by ICL unit and revenue growth of 27%. ICL sales represented 86% of total Company sales for both the fourth quarter and fiscal year of 2019.

Moving down the income statement, our gross profit margin for the fourth quarter was 74.1%, up 40 basis points as compared to 73.7% in the prior-year quarter. Gross margin in the fourth quarter increased due to improved unit costs, partially offset by period costs associated with the project to resume manufacturing in Switzerland. Gross margin on our ICL product lines remains in the 80% to 85% range and we continue to anticipate total Company gross margin above 80% by the end of the three-year 2020 to 2022 planning period. Approximately half of the anticipated margin improvement to come from manufacturing cost reductions and half from continued mix shift to our higher margin ICL business. Total operating expenses for the fourth quarter were $26.5 million, an increase of 21% compared to the prior-year quarter of $21.8 million.

Taking a closer look at the components of operating expenses, G&A expense in the fourth quarter was $7.9 million, compared to the prior-year quarter of $6.2 million. The increase in G&A expense was due to increased headcount and salary and related expenses, including stock-based compensation, increased travel expenses, increased insurance expense, and increased audit and tax consulting costs. Marketing and selling expenses were $11.2 million compared to the prior-year quarter of $9.9 million. The increase in marketing and selling expense was due to increased headcount and salary-related expenses, including stock-based compensation and investments in digital marketing, advertising and promotions and trade shows.

Research and development expenses were $7.4 million, compared to the prior-year quarter of $5.7 million. The increase in research and development expenses was due to an increase in headcount and salary-related expenses, including stock-based compensation and increased clinical expenses associated with our EVO clinical trial in the US. We generated operating income of approximately $2.3 million during the fourth quarter as compared to operating income of $1.2 million in the year-ago quarter. Fourth quarter operating margin was 6% as compared to 3.8% for the year-ago period. For the full year 2019, operating margin was 7.9%, up 260 basis points over the prior year. Net income for the fourth quarter was $6.4 million or approximately $0.14 per diluted share as compared to the year ago net income of $1.1 million or $0.02 per diluted share.

The fourth quarter of 2019 included an approximate $3.4 million or $0.07 per share income tax benefit. On a non-GAAP basis, adjusted net income for the fourth quarter was $5.5 million or