Brian Moore STAAR Surgical Company - VP of Investor, Media Relations & Corporate Development - Form 8-K

Brian MooreSTAAR Surgical Company - VP of Investor, Media Relations & Corporate Development

Caren L. MasonSTAAR Surgical Company - CEO, President & Director

Patrick F. WilliamsSTAAR Surgical Company - CFO

CONFERENCECALLPARTICIPANTS

Andrew Frederick BrackmannWilliam Blair & Company L.L.C., Research Division - Associate

Anthony Charles PetroneJefferies LLC, Research Division - Healthcare Analyst

Bruce David JacksonThe Benchmark Company, LLC, Research Division - Senior Equity Analyst

Christopher Cook CooleyStephens Inc., Research Division - MD

David KuangOppenheimer & Co. Inc., Research Division - Research Analyst

James Philip SidotiSidoti & Company, LLC - Research Analyst

Ryan Benjamin ZimmermanBTIG, LLC, Research Division - MD & Medical Technology Analyst

PRESENTATION

Operator

Goodday,ladiesandgentlemen.Thankyouforstandingby.WelcometotheSTAARSurgicalThirdQuarterFinancialResultsConferenceCall.(OperatorInstructions)Thiscallisbeingrecordedtoday,Wednesday,November3,2021.Atthistime,IwouldliketoturntheconferenceovertoMr. Brian Moore, Vice President, Investor, Media Relations and Corporate Development for STAAR Surgical. Brian, please proceed.

Brian Moore- STAAR Surgical Company - VP of Investor, Media Relations & Corporate Development

Thankyou,operator,andgoodafternoon,everyone.ThankyouforjoiningusontheSTAARSurgicalConferenceCallThisafternoontodiscussthecompany's financial results for the third quarter ended October 1, 2021. On the call today are Caren Mason, President and Chief Executive Officer;andPatrickWilliams,ChiefFinancialOfficer.Thepressreleaseofourthirdquarterresultswasissuedjustafter4:00p.m.Easterntimeandisnowavailable on STAAR's website at www.staar.com.

Beforewebegin,letmequicklyremindyouthatduringthecourseofthisconferencecall,thecompanywillmakeforward-lookingstatements.Wecautionyouthatanystatementthatisnotastatementofhistoricalfactisaforward-lookingstatement.Thisincludesremarksaboutthecompany'sprojections,expectations,plans,beliefsandprospects.Thesestatementsarebasedonjudgmentandanalysisasofthedateofthisconferencecallandaresubjecttonumerousimportantrisksanduncertaintiesthatcouldcauseactualresultstodiffermateriallyfromthosedescribedintheforward-looking statements.

Therisksanduncertaintiesassociatedwiththeforward-lookingstatementsmadeinthisconferencecallandwebcastaredescribedinthesafeharborstatementintoday'spressreleaseaswellasSTAAR'spublicperiodicfilingswiththeSEC.Exceptasrequiredbylaw,STAARassumesnoobligation to update these forward-looking statements to reflect future events or actual outcomes and does not intend to do so.

Inaddition,tosupplementtheGAAPnumbers,wehaveprovidednon-GAAPadjustednetincomeandadjustedearningspershareandsalesinconstantcurrency.Webelievethatthesenon-GAAPnumbersprovidemeaningfulsupplementalinformationandarehelpfulinassessingourhistorical and future performance. A table reconciling the GAAP information to the non-GAAP information is included in today's press release.

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NOVEMBER 03, 2021 / 8:30PM, STAA.OQ - Q3 2021 STAAR Surgical Co Earnings Call

Followingourpreparedremarks,wewillopenthelinetoquestionsfrompublishinganalysts.(OperatorInstructions)Wethankeveryoneinadvancefor their cooperation with this process. And with that, I would now like to turn the call over to Caren Mason, President and CEO of STAAR.

Caren L. Mason- STAAR Surgical Company - CEO, President & Director

Thankyou,Brian.Goodafternoon,everyone,andthankyouforjoiningusontoday'scall.IampleasedtoreportthatweexperiencedoutstandingdemandforourICLsduringthethirdquarterandachievednetsalesabovethehighendofourpreviouslyprovidedoutlook.Enthusiasmforourimplantable Collamer lenses continues to grow and has never been higher. In fact, orders for ICLs outstripped our supply of lenses in the quarter.

WithChinabeingourlargestmarket,ourdistributors'inventorylevelsinChinaweredrawndowntohistoricallylowlevelstomeetsurgeonandpatientdemand.Whilewewereabletomeet35%growthlevelstothesurgeonandpatientcommunityfromourdistributors'inventory,wewereonlyabletoshipunitsequaling19%growthtoourdistributor.COVID-relatedemployment,productionoutputandmodestsupplychainchallengesimpacted the quarter and resulted in a backlog of over 20,000 lenses at the end of the third quarter, representing several million dollars of ordersin-house.

Asmanyofyouareaware,wehavetypicallybeenabletomeetthevastmajorityofdemandforoursphericallensesandnon-customtoriclensesthroughreal-timeproductionandfinishedgoodsinventoryonhandatSTAARwithinafewdaysofreceivinganorder.Continuedstrongdemandcombinedwiththeaforementionedproductionchallengesresultedinwhatwebelieveisatemporarylonger-than-usualdelayinlensorderfulfillment during the third quarter, which we are addressing and aim to fully resolve in the coming quarters.

WithregardtoChina,IampleasedtoreportthatourEVOICLmomentuminChinacontinuesunabated.WecontinuetoincreaseourrefractivemarketshareprojectionsforChinanextyearandbeyond.Overall,weachievedstrongyear-over-yearglobalICLunitgrowthof29%inthethirdquarterof2021ascomparedtoasignificantachievementinthethirdquarterof2020,wherewemetourpre-COVIDgrowthprojections.ICLunitgrowthbygeographyforQ3included:Japan,up44%;SouthKorea,up21%;India,up338%;Germany,up25%;Europeandistributormarkets,up22%; the Middle East and North Africa, up 242%; and the U.S., up 66%, all as compared to the prior year quarter.

I would also like to highlight the exciting levels of growth in distributor markets where we have recently made significant investments to converttoahybridmarketstructureinseveralcountries.Asmanyofyouknow,wehaveSTAARpersonnelworkingalongsideourdistributorsinhybridmarkets,leadingtheimportantcommercial,clinicalandpracticedevelopmentworkwithoursurgeoncustomers.InBelgium,theNetherlands,FranceandItaly,weachieved32%ICLunitgrowthinaggregateyear-over-yearinthethirdquarterof2021ascomparedto20%intheyear-agoquarterandjust10%inthethirdquarterof2019.Wearecontinuingtoexpandourplansformoredistributormarketstomovetothehybridmodelin 2022 and 2023.

TurningnowtoourstrategicimperativesandthedriversofgrowthforSTAARinthefourthquarterandbeyond.IntheU.S.,oursubmissionofclinicaldataforSTAAR'sEVOfamilyofmyopialensesremainsundercustomaryinteractiveFDAreview.Whileourexpectationofpre-COVIDapprovaltimelinesbytheFDAhasnowpassed,weremainconfidentregardinganapprovalofourPMAsupplement.Wewillprovidefurthercommentonthe process and our interactions with the FDA when permitted and appropriate to do so.

We are laying the foundation for growth in the U.S., which represents a tremendous market share opportunity for STAAR as the U.S. is the secondlargestrefractivemarketintheworld.Duringthethirdquarter,wemadeincrementalmarketinginvestmentsinseveralkeyU.S.citieswithcustomerswhohavedemonstratedourcommitmenttoofferingtheICLasapremiumandprimaryrefractiveoptionthroughallianceagreements,whichinother markets have resulted in meaningful increased levels of ICL unit growth.

Investmentsinclude:Socialmedia,patienteducation,trainingandtargeteddigitalmarketing.UponFDAapproval,wewilladdatleastoneadditionalmajormetropolitanmarkettoouradvertisingprogramand,in2022,markedlyincreaseourconsumeradvertisinginvestmentrelatedtocelebritysocialmediaanddigitalcampaignsdesignedtoincreasebrandawarenessanddriveconsumerdesirabilityforourpremium,lens-basedrefractivevision correction procedure.

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NOVEMBER 03, 2021 / 8:30PM, STAA.OQ - Q3 2021 STAAR Surgical Co Earnings Call

WearealsocontinuingourincreasedengagementwithexistingsurgeonsandpotentialnewsurgeoncustomersintheU.S.WecurrentlyplantoholdoursecondU.S.SurgeonsCouncilSummitnextmonthinDallas.Thegoalofoursurgeonsummitistoeducatesurgeonsonourproductsthroughclinicalpresentations,andhighlightsthepatient,clinicalandrevenueopportunityforsurgeonsbypresentationsfromU.S.andOUSsurgeons,whoarealreadytransitioningtoalens-basedfutureofrefractivevisioncorrectionwithourimplantableCollamerlenses.Surgeoninterestin next month's summit has been robust, and we anticipate a strong presence of leading surgeons from across the U.S.

Additionally,tofurtherengagetheU.S.surgeoncommunity,weareintheprocessofbuildinganICLExperienceCenteratourCaliforniacorporateheadquartersinLakeForest.AfirstofitskindforSTAAR,theICLExperienceCenterwilloffersurgeonsandtheirstaffin-persondidactictraining,surgicalsimulationandmarketingeducationandtraining.ThecenterwillfeatureSTAAR'snext-generationICLplanningecosystem,whichconnectsandintegrateswiththediagnosticequipmentsurgeonscurrentlyuseforcasemanagement.WeplantoopentheU.S.ICLExperienceCenterinthefirst half of 2022.

GiventheoutstandingdemandforourICLs,wearetodayraisingouroutlookforfullyearfiscal2021netsalestoarangeof$230millionto$231million,whichrepresentsgrowthofover40%year-over-year.Wearealsoreaffirmingourpreviouslycommunicatedpre-COVID3-yearoutlookfor25%-plus compound annual sales growth for fiscal 2020 through 2022 despite the 2020 COVID impacted growth rate of 9%.

I will now turn the call over to Patrick to discuss our financial performance in more detail. Patrick?

Patrick F. Williams- STAAR Surgical Company - CFO

Thankyou,Caren,andgoodafternoon,everyone.TotalnetsalesforQ3'21were$58.4million,up24%ascomparedtothe$47.1millionofnetsalesinQ32020andabovetheoutlookweprovidedtoyouinAugustforthethirdquarternetsalesintherangeof$57millionto$58million.Theyear-over-yearincreaseinnetsalesforQ3'21wasattributabletoglobalICLsalesgrowth,up31%.WenowanticipaterobustlevelsofICLunitgrowthinQ4thatwillexceed40%year-over-yearthatwhencombinedwithourstrongresultsforthefirst3quartersof2021informsourraisedoutlook for full year fiscal 2021 that Caren just outlined.

Intermsofproductmix,ICLsalesrepresented93%oftotalcompanynetsalesforthethirdquarterof2021,andotherproductsrepresented7%. Wecontinuetoanticipateasimilarsalesmixinthefourthquarterandthatotherproductsaleswillbeapproximately$15millionforthefullyear

2021.

GrossprofitforQ3'21was$45.3millionor77.6%ofnetsalesascomparedtogrossprofitof$34.9millionor74.1%ofnetsalesforQ32020,and$49.2millionor78.9%ofnetsalesforQ22021.Theyear-over-yearincreaseingrossmarginwasduetothehighermixofICL,whichcommandahighermarginthanourotherproductbusiness,partiallyoffsetbyincreasedperiodcostsassociatedwithmanufacturingprojects.ThesequentialdecreaseingrossmarginforthethirdquarterwasduetoalowermixofICLandincreasedperiodcostsassociatedwithmanufacturingprojects.Forthefourthquarterandfullyear2021,wenowexpectgrossmargintobetowardsthehigherendofthe75%to77%rangewepreviouslyprovided.

Movingdowntheincomestatement,totaloperatingexpensesforQ32021were$37.5millionor64.2%ofnetsalesascomparedto$30millionor

63.7%ofnetsalesinQ32020and$38.6millionor61.8%ofnetsalesforQ22021.Takingacloserlookatthecomponentsofoperatingexpenses,generalandadministrativeexpensesforQ3'21was$11millioncomparedto$8.6millionforQ32020and$11.4millionforQ22021.Theyear-over-yearincreaseinG&Awasduetocompensation-relatedexpensesandoutsideservices.ThesequentialdecreaseinG&Aexpenseswasprimarilyduetolower payroll taxes related to fewer stock options being exercised. We expect fourth quarter G&A to now be approximately $12 million.

Sellingandmarketingexpensewas$18.2millionforQ32021comparedto$12.6millionforQ32020and$18.9millionforQ22021.Theincreaseinsellingandmarketingexpensefromtheprioryearwasduetoadvertisingandpromotionalactivities,compensation-relatedexpensesandtradeshows.ThesequentialdecreasefromQ2'21wasduetolowerpayrolltaxesrelatedtofewerstockoptionsbeingexercised.Weexpectfourthquartersellingandmarketingtobeapproximately$17millionandtrendhigherin2022asthecompanyincreasesinvestmentsintheEVOICLbrand-buildinginitiatives Caren mentioned earlier.

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NOVEMBER 03, 2021 / 8:30PM, STAA.OQ - Q3 2021 STAAR Surgical Co Earnings Call

Researchanddevelopmentexpensewas$8.3millioninQ32021comparedto$8.8millionforQ32020andflatwiththe$8.3millionforQ22021.Theyear-over-yeardecreaseinresearchanddevelopmentexpenseswasprimarilyduetolowerexpensesassociatedwithourEVOclinicaltrialinthe U.S. and timing related to new headcount. We expect R&D for fourth quarter 2021 to be approximately $9 million.

OperatingincomeinQ32021was$7.8millionor13.4%ofnetsalesascomparedtooperatingincomeof$4.9millionor10.4%ofnetsalesforQ3

2020. The improvement in operating income is due to higher sales and leverage on fixed and variable operating expense during the quarter.

NetincomeinQ32021was$6millionor$0.12perdilutedsharecomparedtonetincomeof$3.9millionor$0.08pershareinQ32020.Thecompany'seffectivetaxrateforthe9monthsendedOctober1,2021wasapproximately20%.Forthefourthquarter,weexpectoureffectivetaxratetobeapproximately30%.Onanon-GAAPbasis,adjustednetincomeforQ32021was$10.3millionor$0.21perdilutedshare,comparedtoadjustednetincomeof$6.7millionor$0.14perdilutedshareinQ32020.AtablereconcilingtheGAAPinformationtothenon-GAAPinformationisincludedin today's financial release.

Turningnowtoourbalancesheet.OurcashandcashequivalentsasofOctober1,2021totaled$196.2million,up$43.8millioncomparedto$152.5millionattheendofthefourthquarterof2020.Theincreaseincashfromthefourthquarterisprimarilyattributableto$35.5millionincashgeneratedfromoperationsand$18.3millioninproceedsfromtheexerciseofstockoptions,partiallyoffsetby$9millionincapitalexpenditures.Forthefullyear2021,wecontinuetoanticipatetotalcapitalexpenditurestobeintherangeof$15millionto$20millionaswecontinuetoexpandour global manufacturing capacity and footprint.

Finally,STAARmanagementwillbeparticipatinginseveralupcominginvestorevents,includingtheCanaccordGenuityVirtualMedTechandDiagnosticsForumonNovember18;theStephensInvestmentConferenceonNovember29;andtheWilliamBlairhostedC-suiteCallonDecember

7. This concludes our prepared remarks.

Operator, we are now ready to take questions.

QUESTIONSANDANSWERS

Operator

(Operator Instructions)

Our first question comes from Anthony Petrone from Jefferies.

Anthony Charles Petrone- Jefferies LLC, Research Division - Healthcare Analyst

Congratshereonastrongperformanceinadifficultquarter.Maybe,Caren,tostartwiththecommentsonChinaandthesupplychainheadwindsspecifically.Istheread-throughherethatthe20,000lensesthatyoureferencedinbackloginthepreparedcommentsandinthepressrelease,isthatallrelatedtoChina,A?AndthenB,iftherewerenosupplychainheadwindswouldthathavebeenrealizedinthequarter?Andthenthelastone on that specifically is what is the dollar value on that $11 million that we should be thinking about? And I have one follow-up.

Caren L. Mason- STAAR Surgical Company - CEO, President & Director

Okay.Thankyouverymuch,Anthony,weappreciateit.Yes,weareverypleasedwiththequarter,andweareworkingonwhatwebelieveisaveryshort-lived situation that occurred in Q3 with regard to available lenses for shipment.

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NOVEMBER 03, 2021 / 8:30PM, STAA.OQ - Q3 2021 STAAR Surgical Co Earnings Call

Sothe20,000lenseswouldhavebeenshippedinthequarter,themajorityofthemtoChina.Wehaven'treallyreleasedarangeintermsofthedollars.Butifyoudothemathonthelowend,it'dbeatleast$65millioninrevenueforthequarter,hadwebeenabletoship.Butwe'renotgoingto get down to too many specifics here, but definitely would have been a record quarter for STAAR.

Anthony Charles Petrone- Jefferies LLC, Research Division - Healthcare Analyst

Yes,that'shelpful.Andthen,Iguess,maybetimingonwhenthedistributorcouldrestockit.Just--Iwouldimaginetheycan'trunatthislowlevelofinventoryforanextensiveamountoftime.AndthenquicklyonFDA,Iunderstandyourcomments,shouldwebereadingthecommentsontiming that the delay is specifically around just COVID constraints and agency dealing with the backlog of clearances elsewhere?

Caren L. Mason- STAAR Surgical Company - CEO, President & Director

SowithregardtoChina,wearealreadyreplenishinginventoryinChina.Wedefinitelywillbepreparedforthenextbigseason,whichbeginsinJanuary. So our replenishment is already underway.

WithregardtotheFDA,wecontinuetobeincustomaryreview.Wehavenoothercommentatthattime.Whatwedidwhenwetalkedabout,hopingtohaveananswerbytheendofOctober,wewerebasingthatonpre-COVIDguidelines,whichduetoCOVID,theFDAhasbeenabitchallenged.Andwemorethanacceptandunderstandthat,andwe'recontinuingtobeinactiveinterfacewiththeFDAandlookingforwardtoaresolution.

Operator

Our next question comes from Chris Cooley from Stephens.

Christopher Cook Cooley- Stephens Inc., Research Division - MD

LetmeechoAnthony'ssentimentstoo,itwasagreatquarter.Justmaybe2quickonesforme,ifImay.Whenwethinkabouttherestockingeffortsonthese20,000unitsor20,000lenses,arewetoinferfromyourcommentarythat,infact,thatshouldallshipoutduringthefourthquarter?AndI'mcurious,withthatkindofasignificantchannelfill,canyoustillkeeppace?IguesswhatI'mtryingtogetatverysimplyisdoyoucatchupinthefourth quarter, or is this a phenomenon that carries over a little bit into the first half of next year? And then I've got a follow-up.

Caren L. Mason- STAAR Surgical Company - CEO, President & Director

Sothankyouverymuch,Chris.Intermsofcatchingup,weexpecttocatchupinfourthquarterandQ1of2022.Ourmade-to-ordercustomlensesa little later in the year, but our supplied spheric and toric lenses, for sure, by the end of Q1 2022.

Christopher Cook Cooley- Stephens Inc., Research Division - MD

Super.Andthenjust--maybejustaquickclarificationonthatsamepoint.Itsoundsliketheissueswhichyoufacedduringthethirdquarter,fromasupplychainstandpoint,havebeenaddressed.Ijustwanttoclarifythathereonthecall.Youaren'tunderanykindofbacklogintermsofrawmaterialpurchasesandyou'renotnecessarilyseeingoutsizeddelaysinshipping.Justnet-net,itwasvery,verystrongdemandthereduringthequarterly period and with these headwinds that existed in the marketplace, you just couldn't keep pace. Am I interpreting that correctly?

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NOVEMBER 03, 2021 / 8:30PM, STAA.OQ - Q3 2021 STAAR Surgical Co Earnings Call

Caren L. Mason- STAAR Surgical Company - CEO, President & Director

Yes.Really,COVID-relatedemploymentmeansthatwedidhaveindividualswhoeitherdidn'treturntoworkorchosetoleaveforotheropportunities,whichmeantthatwewouldbringinotherindividuals.Wedidupdateandmodifyourpayrates.Wedidholdjobfairs,butwehavetotrainallofthese new individuals, and that's about a 6- to 8-week process.

Sotherewasalittlebitofproductionoutputthatwasimpactedbythosesaidtrainingschedule.Wethenhadsomeproductionchallengesintheparticularareathatarebeingaddressedatthistime,whicharenotconcerning.Andthemodestsupplychainchallengeshavebeenrectifiedalready.Sowearefeelingverygoodandhavealreadydugintothat20,000lensbackupinQ4inthefirstmonth,intermsofagoodpercentageofithavingshipped out.

Patrick F. Williams- STAAR Surgical Company - CFO

Yes.Ithink,Chris,youhititontheheadthereattheend,yousaidit'slessaboutsupplyandmorethatthedemandwasjustsostrongforus,andwejustfeltitwasgoodforustooutlineitasCarendid.Andthedemandisthere,andwe'reworkingthroughit,andwewillcontinuetoworkthroughit.AndIthinktheCapExthatwelaidoutthereforpeoplethatwe'vedonenowforthelastyearisclearlyaboutexpandingourcapacityand everything else. And so we're feeling good about where we're at and moving into next year.

Christopher Cook Cooley- Stephens Inc., Research Division - MD

Super.AndifIcouldjustsqueezeoneotherquickinandthenI'llgetbackinqueue.Well,I'dlovetoaskabouttheFDA.IthinkI'llfocusmoreso.JustintermsofrolloutplansintheU.S.,reallyexcitedaboutthenewICLExperienceCenter.Justkindofcurious,whenIthinkaboutthataswellasyourstep-upinDTCefforts,have--canyouprovideusanyparametersaboutinitiallypost-approval,youhopetobeinXmajormarkets,XnumberofsurgeonstrainedintheU.S.Obviously,thoseeffortsareunderwaynow,butjusttryingtothinkaboutsomemetricsthatwecan,maybe,looktowards in terms of kind of gating the rollout in 2022.

Caren L. Mason- STAAR Surgical Company - CEO, President & Director

SoChris,Iappreciatethequestion.ButIthinkwe'regoingtowaittoanswerituntilwegetFDAapproval.Bottomlineisthatwejustdon'twanttobe in a situation where we're misperceived as premarketing here in terms -- because we're not doing that. But I can tell you that, as we said in theprepared remarks, these are several cities, and we're ready and raring to go. So we'll give you all the details when we can.

Operator

Our next question comes from Andrew Brackmann from William Blair.

Andrew Frederick Brackmann- William Blair & Company L.L.C., Research Division - Associate

SomaybejustoneontheU.S.here,andIcertainlyunderstandalltheenthusiasmaroundtheU.S.launch,especiallygiventhestrengthofthatdemographicthatyou'reinitiallytargeting.Butmaybehere,aswethinkacoupleofyearsoutinthefuture,canyoumaybejustsortoftalkabouttheplaybookthatyouintendtousetomovedownthedioptercurve,andsortoftargetthosepeopleinthatmoderate,sortof,bucketofmyopes?

Caren L. Mason- STAAR Surgical Company - CEO, President & Director

Thank you, Andrew, and you did a great survey. So many compliments for the work that you did. A lot of us learned from your work, so thank youforthat.Intermsoflowerdiopteropportunityforus,we'velearnedinChinaandinEuropethatwhensurgeonsgetreallycomfortableandconfidentwith the tougher cases, they then start to realize that all of the benefits of the lens are good for patients below minus 5.

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NOVEMBER 03, 2021 / 8:30PM, STAA.OQ - Q3 2021 STAAR Surgical Co Earnings Call

Andsowearekeepingtrackofwhatouraveragedioptercorrectionrangeisonaquarterlybasis,anditisgettingbetter.AndsoourfocusintheU.S.,inthenextcoupleofyears,isgoingtobealloftheadvantagesofthelensforminus3andabove,notjustminus5,6or7.Butthesurgeonsreally begin offering patients the choice of ICL with all its inherent benefits, and then we start to see way more work down the diopter curve.

Soitprettymuchsolvesitselfwiththeenthusiasmofthosewhogetthelensearlyandthenthesocialmediaandtheinterestbeginstobuild,andindividuals who have much lower correction want all the advantages, the visual freedom the lens offers.

Patrick F. Williams- STAAR Surgical Company - CFO

AndifIcouldaddsomethingonit,Ithink,Andrew,withyoursurvey,theTAMisjustsolarge.AndIthinkafewquartersago,wetalkedaboutthefactthatwe'venowmovedslightlybelowtheminus10,specificallyinChina,wherewesawthembuyingmoreminus10sandbelowversusabove.ButIthinkoneofthethingstorememberisthatyoudon'tneedlargemovesinthatoverallaverage.Ifweweretomoveslightlydownonouroverall average diopter uses, let's say, minus 10 to minus 9.5, minus 9 to minus 8.5 on average, there is a huge TAM available there for us.

AndsoIthinkpeopleshouldbevery--peopleshouldunderstandthatifthey'retryingtosaythatweneedtogetallthewaydowntoaminus3inordertohaveabigrevenue,that'snotthecaseatall.There'salotofbusinessouttherewithpeoplethereinthoseminus7,minus8andminus9and that's what the data is showing us today.

Andrew Frederick Brackmann- William Blair & Company L.L.C., Research Division - Associate

That'sgreat.Caren,thanksforthecomplimentsonthesurvey.Maybejustgoingbacktoyourcommentsonthe25%growthCAGRfrom2019to

2022. I just want to check, I think that implies just over $290 million for revenue for 2022.

Butmaybeasitrelatestosortofyourexpectationsthere,yougavethatpre-COVID.NowthatCOVIDhashappened,canyoumaybejustsortoftalkabout how some of the buildup of that has changed, if at all? Has the geographic sort of mix change as it relates to pre-COVID to now?

Caren L. Mason- STAAR Surgical Company - CEO, President & Director

Thankyou.Ithinkthatthemomentumthatwasbuildingpre-COVIDhascomebackroaring.AndduringCOVID,especiallysinceweprettymuchfullyrecoveredinQ3andQ4of2020,wenowhavereally5quartersofwhatwewouldcallmorenormalgrowthexpectationachievementsregardlessof COVID. So I think the bottom line for us is as we look to next year, we're looking at very high growth rates to achieve beyond the $290 million.

Ourfocusistoreally,withastrongkickoffhopefully,intheU.S.marketaswellascontinuingverystrongtrending,forexample,inChina,35%-plusgrowth to the surgeon and patient community from the distributor, and that's just huge and it's continuing. So you take that and you take all theother growth statistics that I talked about earlier. And we're extremely confident to pre-call 2022, at the same time that even though we had only9%growthlastyear,whichwasgreatbecauseophthalmologywasdown11%.Butevenwiththat9%inyear2ofthis3-yearplan,we'restillmakingtheobjectivebecausethegrowthissostrong,verystronggrowthnextyear.Sowe'resuperexcitedandreallylookingforwardtoreallyimprovingfor patients, their choices in terms of refractive care.

Operator

We now have a question from William Planovic from Canaccord.

Unidentified Analyst

Goodafternoon.Thisis[Rohan]onforBill.IjusthadaquestiononthedetailsregardingthelimitedmarketreleaseofEVOVivainEurope.Couldyou provide some revenues, number of countries, 2022 plans on that?

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NOVEMBER 03, 2021 / 8:30PM, STAA.OQ - Q3 2021 STAAR Surgical Co Earnings Call

Caren L. Mason- STAAR Surgical Company - CEO, President & Director

Wearegoingtoofficiallyrollouttoeveryone--allsurgeonsinallapprovedCMEmarkedcountriesinSeptemberof2022.Wehavenot,atthispoint,releasedwhatthatplanwillbeorwhattherevenueattributabletotheEVOVivaproductwillbe.We'llstarttogivethosedetailsintheJanuary,February time frame next year.

Unidentified Analyst

Okay.Perfect.Andmaybeoneforyou,Patrick.IfyoucouldprovidethebreakoutoftherevenuesfromdomesticJapanandChinainthislastquarter?

Patrick F. Williams- STAAR Surgical Company - CFO

LetmemakesureIunderstandthequestionagain.Maybeaskonemoretime,yousaydomesticdemandinChina.IwanttomakesureIunderstandthat.

Unidentified Analyst

No. The breakout of revenues in China, Japan and other in the last quarter.

Patrick F. Williams- STAAR Surgical Company - CFO

Yes,wehaveitinourQ.Soit'sprobablybetterformejusttopointyoutothat.WedocalloutChinaandJapaninthere.ForJapan,IwouldrecommendthatyourememberthatourIOLbusinessalsoflowsintotheJapanfromageographystandpoint.ButIcancertainlypullitup,Rohan,andciteit,but I think it's better just -- we just filed our Q. So it's out there, you can get all that detail.

Operator

Our next question comes from the line of Steve Lichtman from Oppenheimer.

David Kuang- Oppenheimer & Co. Inc., Research Division - Research Analyst

ThisisactuallyDavidonforSteve.Maybestartingoff,IwasjustwonderingifyousawanyCOVIDimpactduringthequarter,particularlywiththeDelta variant. Was there any month that you saw that was more impacted, or that impacted demand?

Caren L. Mason- STAAR Surgical Company - CEO, President & Director

SowekeeptrackofallthemajormarketsaroundtheworldwhereweobviouslyworkwithrefractorysurgeonstodeliverourICL.AndinthispastquarterinQ3,therehasbeenlimitedconcerninalmosteverymarketaroundtheworld.Therehavebeensomelatecomers,MiddleEastwaslate,Latin America was kind of late. Coming into their own more as you can see from the growth rate, for example, in Q3 was much higher.

SoIwouldsaywiththeexceptionofacoupleofthosemarkets,alittlebitinthesmallercountriesofAsiaPac,themajority,almostallthemarketswhere we are very active, they are managing COVID and the Delta variant very well.

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NOVEMBER 03, 2021 / 8:30PM, STAA.OQ - Q3 2021 STAAR Surgical Co Earnings Call

David Kuang- Oppenheimer & Co. Inc., Research Division - Research Analyst

Okay.Great.Appreciatethecolor.Andjustonemore.Iwaswonderingifyoucouldprovideanydetailsonintermsofthegrowthyou'reseeing,how much of that is being driven by overall growth of the refractive market versus conversions of laser procedures?

Caren L. Mason- STAAR Surgical Company - CEO, President & Director

Therefractivemarketgrows,onaverage,inthemid-singledigits.Asyoucansee,ourgrowthrateisatleast25%plus.Sowearegrowingfasterthan the market and we are taking share.

Operator

Our next question comes from Ryan Zimmerman from BTIG.

Ryan Benjamin Zimmerman- BTIG, LLC, Research Division - MD & Medical Technology Analyst

Caren,ifIcouldjustaskalittlebitaboutthesupplyissuesinChinaalittlefurther.Imean,IguessI'mcuriousifyoucouldprovidealittlemorecolorjust--whywerethesupplyissuesexclusivelyimpactingChina,butnotothermarkets?Becauseproduction,supplychaindynamics,they'reallkindofU.S.-basedissuesthatyouguysaredealingwith,COVID-relatedemployment,allU.S.-based.SowhywasitspecificallyChinaandnotsomeofthe dynamics we saw in, say, Japan or Korea?

Caren L. Mason- STAAR Surgical Company - CEO, President & Director

Well,IthinkIdon'twanttogivetheimpressionthatthe20,000lenseswereexclusivelyChina,themajoritywereChina.Whatwedidwastherightthingtodo.Wetookalookatwhatourbookofbusinesswas.Wetookalookatwherethedemandwas,andthenweproperlymovelensestowhere the need was greatest.

WhenwelookedatChina,werecognizedthatwehadenoughinventoryinstocktobeabletomeetthemajorityofthecriticaldemand.Soitallowedustoworkverysuccessfullywithourcountrymanager,andwithourimporter,toproperlytakecareofthemajorityofthebusinessthatwasnecessary.Soobviously,withChinabeing50%-plusofourbusiness,you'regoingtohavemoreproducttherethanyouhaveanywhereelseinasingle place. So bottom line is we very effectively managed it and customer satisfaction is strong.

Ryan Benjamin Zimmerman- BTIG, LLC, Research Division - MD & Medical Technology Analyst

Okay.Gotit.Andthenthe20,000orders,Ithinksomeofthosearecustomlenses.Sohowareyouthinkingaboutkindoftheriskofcancellationoftheprocedures?Orhowisthe--howarethedistributorscomingupwiththatnumber?Isthatbasedonkindofascheduledsurgeryratethatyouhad kind of looking out maybe a quarter or 2?

Caren L. Mason- STAAR Surgical Company - CEO, President & Director

Sowhenwelookatthenormallystockedinventoryinthesphericandtoricsizes,we'retryingveryhardtomakesurethatourrecoveryinthatareais very swift and it's already underway, because that is an area where you do have options as a patient.

Ifyouareapatientwhoissomeonegettingamade-to-ordertoriclens,youprobablyhavemarginaltonooptionsrelated.Thatdoesn'tmakeyourneed for visual freedom any less, but it does mean you're more willing to wait. Because the only real opportunity for excellent digital freedom foryouasamade-to-ordertoricpatientiswhatwedeliver.Sowenevereverwanttobeinasituationwherewedisappointanyoneintermsoftime

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NOVEMBER 03, 2021 / 8:30PM, STAA.OQ - Q3 2021 STAAR Surgical Co Earnings Call

todelivery.Butweexpectthatbymidnextyearatthelatest,orliketheApril,Maytimeframe,thiswillallbebacktonormal,whichisa6-to8-weeklead time.

Ryan Benjamin Zimmerman- BTIG, LLC, Research Division - MD & Medical Technology Analyst

Okay.Gotit.Andthenjustlastoneforme.Patrick,IthinkI'veheardmaybefromsomeotherinvestorsthatyouguyshavekindoftalkaboutyourexpectationsforpenetrationintheU.S.refractivemarket.AndsoI'dlovetojustunderstandkindof--Ithinksomeothershavebeenaskingaboutthis,too.ButwhatpercentageoftheU.S.refractorymarket,doyouthinkyoucouldpotentiallyown,callit,12to18monthspost-launch?Andhoware you thinking about your launch now given the time lines or the impact time lines from the FDA?

Patrick F. Williams- STAAR Surgical Company - CFO

Yes.CarencangrabthisonewiththeFDA,Ithinkthere'sobviouslysomesensitivityonoursideandalotofitiscontingentonthat.SoI'llletCarentake it from here.

Caren L. Mason- STAAR Surgical Company - CEO, President & Director

Yes.AssumingthatwehaveanEVOproductintheUnitedStates,ourgoalistogettoatleast20%shareassoonaspossible.Ourtrackrecordinothermarketswherewehavehadapprovalandhavebegunthebusinessmodelandclinicalmodelthat'sbeensosuccessfulelsewhere,isthatwecan do that in 2 to 3 years' time.

Operator

We now have a question from Jim Sidoti from Sidoti & Company.

James Philip Sidoti- Sidoti & Company, LLC - Research Analyst

Ijustwanttobeclear,thissupplychainmanufacturingissuesthatyousaidyouhadinthequarter,doyouthinkthere'sanyriskthattheseissueswould prevent you from growing your historical 20%, 25% annually over the next few years?

Caren L. Mason- STAAR Surgical Company - CEO, President & Director

No,Jim,we'vebeeninvestingandexpandingourproduction.Andasyou'reaware,we'vebeeninvestinginadvancedmanufacturingtoexpandtheproductivityandtheamountofthroughputthatwehaveatourMonroviafacility.We'realsoopening--reopeningourNidaufacilityinSwitzerland.AndwealsohaveexpandedthemanufacturingforourCollamerbuttonshereinCalifornia.We'relookingatmillionsoflensesofproductioncapability over the next 2 to 3 years.

Patrick F. Williams- STAAR Surgical Company - CFO

Yes,andlet'skindofrecalibratehere.WeoverperformedwhatwesaidweweregoingtodoinQ3,andwejustraisedguidanceinQ4andreaffirmedourgrowthgoinginto2022.Sothisis,asCarenhasdescribed,whenyoucanlookatourfinancialstatements,you'llseethatourinventorylevelshave gone down the last couple of quarters as a percent of sales or percent of cost, however you want to look at it.

Andsowe'rejustbuildingthatbackupbecausedemandhasjustbeenthatrobust.Sowejustfeltthatitwasimportantthatweoutlinedthis,becauseIthinkpeoplehavelookedatthecompanyandexpectedverybigthings.Andthosebigthingsarethereandthey'recomingstill.Andwe're very happy with the quarter and the guidance that we gave for the rest of the year.

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NOVEMBER 03, 2021 / 8:30PM, STAA.OQ - Q3 2021 STAAR Surgical Co Earnings Call

James Philip Sidoti- Sidoti & Company, LLC - Research Analyst

Okay.Andthenmysecondquestionisinregardtosalesandmarketing.Andwhatyou'vedoneinotherareastoincreaseyourbrandawareness,placeslikeJapanandKorea,isthatprimarily--thatdirect-to-marketingeffort,isthatprimarilysocialmedia?Isitbillboard?Orarethereotherthingsthat you're doing? I'm just trying to get a handle on what to expect when you do launch the product in the United States.

Caren L. Mason- STAAR Surgical Company - CEO, President & Director

Yes.Thereisoutdooradvertising.Thereisdigitalmarketing.Thereissocialmedia.Thereiscelebrityinfluencers.Thereisco-marketingwithcustomersintheirstrategicagreementswheretheyupdateandupgradetheirwebsite.WedoalotofDocFindermonitoring.WedoalotofdigitalmarketingworktomakesurethatwehaveaccesstosearchesonGoogle.Sooursearchenginemarketingisverystrong.Sowedoalloftheabove,anditisvery successful.

James Philip Sidoti- Sidoti & Company, LLC - Research Analyst

Yes, it sure seems like it is. Looking forward to see what happens when you do get the U.S. approval.

Operator

Our next question comes from the line of Bruce Jackson from The Benchmark company.

Bruce David Jackson- The Benchmark Company, LLC, Research Division - Senior Equity Analyst

Anothermanufacturingquestion,justtofollowuponyourearliercomments.You'vebeenworkingongettingSwitzerlandreopened.Isitactuallyfully reopened right now? And is it when -- if it's not open, when will it be in production?

Caren L. Mason- STAAR Surgical Company - CEO, President & Director

We'relookingatSwitzerlandinthefourthquarterof2022.Andatthatpointintime,wewillbemanufacturingthemajorityofdemandforChinaat an (inaudible) facility.

Bruce David Jackson- The Benchmark Company, LLC, Research Division - Senior Equity Analyst

Okay.Andthennottoflogthesupplychainissuetoohard,butpresumablythen,whenyoudohavethatfacilityopen,thenthat'sgoingtogiveyou some flexibility in terms of being able to meet the demand in 2022.

Caren L. Mason- STAAR Surgical Company - CEO, President & Director

Yes.Ithinksupplychain,asIsaid,wasmodest.Wehadacoupleofmanufacturingchallengesassociatedwithsupplierchangeoverinonecaseandanotherwewantedachangeover,andtherewaslimitedsupplyforashortwhile.Sothesearenotthekindofissuesthatyoureadaboutinthenewsrelatedtosemiconductorsandfabrication-requiredunitsthataresittingincargoshipsinLongBeach.We'reinasituationwherewehadafew local supplier issues that really did slow us down more than we would have liked, but they have been rectified.

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NOVEMBER 03, 2021 / 8:30PM, STAA.OQ - Q3 2021 STAAR Surgical Co Earnings Call

Patrick F. Williams- STAAR Surgical Company - CFO

Yes.AndjusttoreiterateontheNidau,that'snot--wehaveenoughcapacity,andweareactivelyexpandingourSouthernCaliforniacapacityregardlessofNidaucomingonline.AndsothelensesthatweneedoverthenextseveralquartersarenotdependentonNidau.Nidauisallaboutscaling up beyond that, going into 2023, into 2024.

Sowe'reingoodshaperightnowandmachinesarecomingonline.AndI'lljustcomebacktowhatIsaidbefore,whichiswe'remakingthoseinvestments as we said. We still plan to make a significant investment in Q4 in CapEx, which we'll report in 90 days.

Caren L. Mason- STAAR Surgical Company - CEO, President & Director

Thankyouforyourparticipationonourcalltoday.Welookforwardtospeakingwithmanyofyouinthedaysandweeksahead.Weappreciateyour interest and your investment in STAAR Surgical.

Operator

This concludes today's call. Thank you for joining, and I hope you have a lovely rest of your day. You may now disconnect your lines.

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