Q2 2024 Earnings Summary
- Strong growth in the U.S. market driven by new strategic alliances and increased adoption of EVO ICL: STAAR Surgical has signed 9 new agreements in the U.S., up from 6 agreements previously, against a target list of about 15, indicating accelerated momentum in securing key accounts. They are experiencing a "halo effect", with other accounts approaching them, showing growing interest and demand. Within the Highway 93 initiative, they are seeing 29% growth in these accounts, outpacing the 19% growth in non-Highway 93 accounts. This demonstrates strong traction and potential for continued growth in the U.S. market.
- Raised fiscal 2024 sales and earnings outlook reflecting confidence in business momentum: The company increased its fiscal 2024 sales outlook by $5 million to a range of $340 million to $345 million, citing industry-leading growth in all key markets. They also raised their full-year adjusted EBITDA by approximately $3 million to $42 million for fiscal 2024. This reflects the company's strong performance in Q2, where they achieved record sales of $99 million, and their confidence in continued growth and margin expansion.
- Continued growth and market share gains in China despite macroeconomic concerns: STAAR Surgical continues to grow in China, taking market share in a declining market. They have smoothly integrated their two distributors, improving efficiency and getting inventory closer to customers. Additionally, potential government stimulus in China could positively impact consumer spending in the back half of the year and beyond, further supporting growth in this key market.
- Economic headwinds in China may limit $STAA's growth in a key market. The company acknowledges that "We know there's some headwinds out there... But as we look at our business... we're taking market share, and we feel good about our business, not only today but for tomorrow." Despite optimism, broader economic challenges could impact consumer spending on elective procedures.
- Price competition in China from laser vision correction procedures could pressure $STAA's market share and pricing. Competitors have reduced prices to be more competitive: "SMILE has lowered their price... to be maybe a little bit more competitive with LASIK." This may make alternative procedures more attractive to consumers, potentially affecting $STAA's growth.
- Slower-than-expected adoption in the U.S. market may delay $STAA's growth objectives. When asked about significant sequential increases in U.S. traction, the company stated: "We crawled. We're starting to walk. We might start to jog by the end of the year, and we'll be running in 2025." This suggests meaningful acceleration may not occur until 2025, which could impact near-term growth projections.
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2025 Growth Acceleration
Q: Are you comfortable with 15% revenue growth in 2025?
A: Management is not providing 2025 guidance but mentioned their Vision 2026 plan targets a 15%-20% three-year CAGR. They feel good about being 6-7 months into a 36-month plan and expect double-digit to mid-teen revenue growth in the second half of 2024. They believe initiatives will lead to quicker adoption globally, giving them conviction about achieving Vision 2026. -
M&A Rumors
Q: Why consider M&A now given low stock price?
A: Management stated they are focused on executing their business plan and growing globally. They downplayed the M&A rumors, emphasizing that they are concentrating on their business and not on potential acquisitions or being acquired. -
China Growth Outlook
Q: What's driving mid-teens China growth in H2?
A: Despite economic headwinds, management feels good about their position in China. In a declining market, they continue to grow and take market share. They see minimal impact from issues like competition, anticorruption, and PPP. -
U.S. Growth and Guidance
Q: When will U.S. growth accelerate significantly?
A: Management feels positive about U.S. progress, indicating they're moving from crawling to walking and expect to start jogging by year-end and running in 2025. Initiatives and contracts are well-received, setting up sustainable near- and long-term growth. They aim to be balanced and prudent in guidance. -
Aier Partnership Impact
Q: Has Aier's pricing move affected your volumes?
A: Management clarified that SMILE, not LASIK, lowered prices within Aier to compete with LASIK. Their relationship with Aier is strong; they continue to grow EVO implants within Aier hospitals and feel good about their growth strategy with Aier through 2025 and beyond. They continue to take market share despite pricing changes in laser vision correction. -
Chinese Distributors and Pricing
Q: What's the impact of the second distributor in China?
A: Integration with both distributors, Lansheng and HTDK, is positive, improving outreach and inventory availability. Both are working well, but in terms of top-line revenue, it's a push. There's no new pricing tailwind in China; prior 300 basis points of pricing improvement from new distributor deals is already factored in. -
Drivers of Highway 93 Growth
Q: What's driving growth in Highway 93 accounts?
A: Growth is due to redirected marketing efforts to the practice level, increased surgeon confidence, and EVO adoption rising as practices adjust pricing closer to laser vision correction levels. The diopter curve is moving down faster, with higher adoption rates, indicating that surgeon confidence leads to growth. -
U.S. Strategic Alliances
Q: Have you added more fast lane accounts?
A: They've signed 9 new agreements in the U.S. this year against a target of 15, up from 6 last quarter. There's a halo effect with accounts approaching them, indicating increasing interest and momentum. -
Growth Outside Highway 93
Q: What's driving growth outside Highway 93?
A: Growth outside Highway 93 is 19%, notable since the U.S. refractive market declined 15%-17% in Q2. Initiatives like deploying clinical data to the sales team are expected to further drive growth. Happy patients lead to practice growth and greater EVO adoption. -
Guidance and Revenue Acceleration
Q: Is Q3 guidance conservative given acceleration in Q4?
A: Management aims to be balanced. They acknowledge reacceleration of revenue growth in Q3, with approximately $87 million expected, leading to strong growth in Q4 as well. They have momentum, beating and raising guidance multiple quarters, setting up for a strong second half.
Research analysts covering STAAR SURGICAL.