Q1 2024 Earnings Summary
- Strong U.S. Growth Driven by Strategic Initiatives: STAAR Surgical is experiencing significant early momentum in the U.S. market with their EVO ICL products, achieving record quarterly U.S. ICL sales of $5 million, establishing a new base level of quarterly sales. The company's Highway 93 program is performing better than non-Highway 93 accounts, indicating successful execution and growing surgeon confidence. They believe lens-based refractive surgery is becoming more meaningful in practices, even as the laser vision correction market is declining ,.
- Positive Outlook in China Supported by Stimulus and Resilience to Competition: Despite macroeconomic headwinds, STAAR Surgical achieved 10% growth in China in Q1, ahead of expectations ,. The company anticipates that the Chinese government's stimulus program will have a positive impact on the second half of the year. Additionally, they are confident in facing potential local competition, noting that their EVO ICL product offers advantages such as toric lenses, which represent 50% of their revenue, and superior lens material ,.
- Expansion of Successful U.S. Initiatives Internationally: The company is leveraging successful U.S. commercial initiatives, like focusing on surgeon confidence and targeted programs, to drive growth in international markets such as Europe (EMEA). They have implemented a similar program called Autoline 50 in EMEA, seeing nice growth in those select accounts. This strategy could further accelerate international adoption and growth.
- The company reported a net loss of $3.3 million in Q1 2024, compared to net income in the prior year quarter, due to increased operating expenses, which could be a concern for profitability.
- Macroeconomic headwinds, particularly in China, have led to a slowdown in growth in March and early April, which may impact future performance in this key market.
- Potential local competition in China, with local lens manufacturers expected to enter the market in the second half of the year or early next year, which could pose a risk to market share and pricing.
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China Sales and Outlook
Q: How did China perform, and what's the outlook?
A: China saw 10% growth in Q1, exceeding expectations despite a choppy economic environment. Early in the quarter was strong, with some slowdown in March, but recent upticks in late April and May are encouraging. Customers are optimistic about the impact of stimulus programs, and we continue to expect growth in the second half of the year. We're investing in expanding our team from 80 to over 100 employees on the ground. -
U.S. Growth Strategy
Q: What's driving U.S. growth, and how is the Highway 93 initiative performing?
A: We're pleased with U.S. results, establishing a new baseline of $5 million per quarter. The Highway 93 initiative is bearing fruit, with 10–20% of those accounts embracing our technology. Surgeon confidence is increasing, supported by published papers and improved tools. We're focusing on practices set up for success and seeing momentum as more agreements are signed. -
Guidance and Revenue Expectations
Q: Why didn't guidance increase more after the Q1 beat?
A: While we outperformed in Q1, we're being prudent and cautiously optimistic due to macroeconomic headwinds. We prefer to see how Q2 unfolds before adjusting guidance further. We've provided guidance of approximately $95 million for Q2, based on current trends. -
Sales Growth vs Unit Growth
Q: Why is sales growth outpacing unit growth, and how does it affect margins?
A: The difference between revenue and units is driven by better economics in China, contributing to the 9% sales growth versus 2% unit growth. There were some inventory adjustments impacting gross margin, but we expect this gap to narrow as we move forward. We haven't taken a cost increase in some time, which is under consideration. -
Competition in China
Q: How is local competition affecting the China market?
A: Local competition may enter the market in the second half or early next year. We view competition as validating the market opportunity. The competing product uses an acryl material, which hasn't been successful before, and lacks toric options, which represent about 50% of our revenue. We have strategies in place to continue our momentum even with new entrants. -
Marketing Initiatives Shift
Q: What's the status of the U.S. call center and marketing efforts?
A: After a pilot program with the call center, we've decided to pivot and redirect those funds downstream to provide more effective support to our practices. The pilot educated us, but investing directly in customer support is yielding better results. -
Expansion in China Tier 3 and 4 Cities
Q: What's the growth expectation in Tier 3 and 4 cities in China?
A: While our 10% growth focus is on Tier 1 and 2 cities this year, we see opportunity beyond this year in Tier 3 and 4 cities. Adding a second distributor enhances our efficiency and reach into these areas, positioning us for future growth. -
Global Application of U.S. Strategies
Q: Are U.S. initiatives being applied globally, especially in EMEA?
A: Yes, we're applying successful U.S. strategies like focusing on surgeon confidence globally. In EMEA, we have a program called "Autoline 50" similar to Highway 93. This has contributed to double-digit growth in a relatively flat market. Our approach includes global collaboration on research and best practices.
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