STAAR Surgical Company (NASDAQ:STAA) Q3 2023 Earnings Call Transcript

Xuyang Li: Thank you. It’s very helpful. Maybe to follow up or a second question on the China business. I wanted to hear a little bit more detail on the strength and the resilience of the consumer there. We see some of the same headlines that you do on the macro data luxury sales et cetera. But what are you seeing from Tier 1, Tier 2 cities versus some of the lower-tier cities? What are you seeing from some of your larger customers?

Tom Frinzi: Sure, Yang. Let me take a stab at it and certainly Patrick can add any color he would like. I think, again, we’re certainly monitoring the macroeconomic environment closely. We read the same newspapers you read. So I think our year is certainly to the ground as well as talking to our people as we do on a routine basis. But I will tell you certainly in the Tier 1, Tier 2 cities, we’re very pleased with end market sales. They continue to be strong in the month of October. And on a year-over-year basis we expect to deliver certainly north of 25% growth for Q4 sales in China. So we have to be mindful of the trends, but we certainly like what we hear and like what we continue to see in market.

Xuyang Li: Thank you very much.

Operator: Thank you. Your next question comes from David Saxon of Needham. Your line is already open.

Unidentified Analyst: Hi. This is Joseph on for David. Maybe moving to operating margin. Could you maybe discuss some of the cadence improvement that you guys are expecting through 2026 to get to that 12% to 16% range? Maybe how much of that is leveraging from increased revenues versus maybe moderating some of the commercial investments?

Patrick Williams: Yes. This is Patrick, of course. As we outlined on our IR Day and the deck is still on the website so people can certainly reference that. We did talk about a pretty good expansion up to 1,000 basis points over time. So we said we would hit 12% to 16% in 2026. One should expect that as revenue goes operating margin expansion will go. So we talked about a 15% to 20% CAGR. As a reminder, what we said in the IR Day hopes today. We expect the growth as we move from 25 years to 26 years will certainly be higher than probably in the near years of 23% to 24%, 24% to 25%. And that has a lot to do with all the initiatives we’re putting in place the structures that we’re putting in place and just getting more traction as we move down the diopter curve and increase our brand awareness as we get the practices set up.

So we’re confident about the expansion in the operating margin. It just comes down to where do we want to continue to make investments to build out what we see as a strong franchise and really take more and more market share and eventually build the overall market as well.

Unidentified Analyst: Okay. Great. And then just one more from us. I just package it into one. Could you maybe discuss some of the progress you guys have made on getting the delivery times down? I guess how big of an issue is that for adoption in the US currently? Just maybe on the sales force in the US, are you guys happy with the current size? Or are you looking to more to add more people in the sales force? I don’t know if you mentioned that in the comments. I might have missed that.

Tom Frinzi: No. I think certainly from an ability to meet the demand of the customer in terms of timing of product. inventory levels or such yields are up. And we certainly are meeting most orders right from inventory. And then, in terms of customizing, particularly on the Toric side, we’re within a six-week period of time, which is our stated goal and that’s always improving. Relative to what we’re doing in the US from a structure point of view, Warren Foust, our Chief Operating Officer is taking much more of an active involvement with our US team as we certainly implemented across the US Highway 93 initiative. And I think keeping his here to the ground and bringing his wealth is experience and leadership, will only help as we continue to gain momentum in the second biggest refractive market in the world.