STAAR Surgical : Third Quarter 2023 Transcript

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported): November 1, 2023

STAAR Surgical Company

	(Exact Name of Registrant as Specified in Charter)
Delaware	0-11634	95-3797439
(State or Other Jurisdiction		(IRS Employer
of Incorporation)	(Commission File Number)	Identification No.)
25651 Atlantic Ocean Drive
Lake Forest, California		92630
(Address of Principal Executive Offices)		(Zip Code)

Registrant's Telephone Number, Including Area Code: 626-303-7902

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

• Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
• Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
• Pre-commencementcommunication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
• Pre-commencementcommunication pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common	STAA	NASDAQ

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1 933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 7.01 Regulation FD Disclosure.

On November 1, 2023, the Company held a conference call to discuss the financial results for the quarter ended September 29, 2023. A transcript of the conference call is furnished as Exhibit 99.1 to this report and is incorporated herein by this reference.

The information furnished herewith pursuant to Item 7.01 of this Current Report, including Exhibit 99.1, shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section. The information in Item 7.01 of this Current Report, and Exhibit 99.1, shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date of this Current Report, regardless of any general incorporation language in the filing.

Item 9.01 Financial Statements and Exhibits

Exhibit No.	Description
99.1	Transcript of conference call of the Company held on November 1, 2023.
104	Cover Page Interactive Data File (embedded within the Inline XBRL document).

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

STAAR Surgical Company

November 2, 2023	By: /s/ Tom Frinzi
	Thomas G. Frinzi
	President and Chief Executive Officer

Exhibit 99.1

NOVEMBER 01, 2023 / 8:30PM, STAA.OQ - Q3 2023 STAAR Surgical Co Earnings Call

COR PORATE PARTICIPANTS

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

Patrick F. WilliamsSTAAR Surgical Company - CFO

Thomas G. FrinziSTAAR Surgical Company - President, CEO & Chairman

CONFERENCE CALL PARTICIPANTS

AnthonyCharlesPetroneMizuhoSecuritesUSALLC,ResearchDivision-MD&SeniorMedicalDevices,DiagnostcsandTherapeutcsEquityResearchAnalystGeorge Stone SellersStephens Inc., Research Division - Research Analyst

John Edward YoungCanaccord Genuity Corp., Research Division - Associate

Malgorzata Maria Kaczor AndrewWilliam Blair & Company L.L.C., Research Division - Partner & Research Analyst Steven Michael LichtmanOppenheimer & Co. Inc., Research Division - MD & Senior Analyst

Xuyang LiJeferies LLC, Research Division - Equity Analyst

PRESENTATION

Operator

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the STAAR Surgical Third Quarter Financial Results Conference Call. During today's presentaton, all partes will be in listen-only mode (Operator Instructons) This call is being recorded today, Wednesday, November 1, 2023. At this tme, I would like to turn the conference over to Mr. Brian Moore, Vice President, Investor Relatons and Corporate Development for STAAR Surgical.

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

Thank you, operator, and good afernoon, everyone. Thank you for joining us on the STAAR Surgical conference call this afernoon to discuss the company's fnancial results for the third quarter ended September 29, 2023.

On the call today are Tom Frinzi, President and Chief Executve Ofcer; and Patrick Williams, Chief Financial Ofcer. The press release of our third quarter results was issued just afer 4:00 p.m. Eastern Time and is now available on STAAR's website at www.staar.com.

Before we begin, let me quickly remind you that during the course of this conference call, the company will make forward-looking statements. We cauton you that any statement that is not a statement of historical fact is a forward-looking statement. This includes remarks about the company's projectons, expectatons, plans, beliefs and prospects. These statements are based on judgment and analysis as of the date of this conference call and are subject to numerous important risks and uncertaintes that could cause actual results to difer materially from those described in the forward-looking statements. The risks and uncertaintes associated with the forward-looking statements made in this conference call and webcast are described in the safe harbor statement in today's press release as well as STAAR's public periodic flings with the SEC. Except as required by law, STAAR assumes no obligaton to update these forward-looking statements to refect future events or actual outcomes and does not intend to be so.

In additon, to supplement the GAAP numbers, we have provided non-GAAP adjusted net income, adjusted income for ICL, the corresponding adjusted earnings per share and sales in constant currency. We believe that these non-GAAP and adjusted numbers provide meaningful supplemental informaton and are helpful in assessing our historic and future performance. A table reconciling the GAAP informaton to the non-GAAP informaton is included in today's press release. For brevity, all references to growth rates on today's call refer to year-over-year growth unless otherwise stated. Earnings Call

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Exhibit 99.1

NOVEMBER 01, 2023 / 8:30PM, STAA.OQ - Q3 2023 STAAR Surgical Co Earnings Call

Following our prepared remarks, we will open the line to questons from publishing analysts. We ask analysts limit themselves to 2 inital questons, then re-queue with any follow-ups. Finally, we intend to use our website as a means of disclosing material nonpublic informaton and for complying with our disclosure obligatons under Regulaton FD. Such disclosures will be included on our website in the Investor Relatons secton. Accordingly, investors should monitor our investor website in additon to following our press releases, SEC flings and public conference calls and webcast.

And with that, I would now like to turn the call over to Tom Frinzi, President and CEO of STAAR.

Thomas G. Frinzi - STAAR Surgical Company - President, CEO & Chairman

Thank you, Brian. Good afernoon, everyone, and thank you for joining us on today's call. For the third quarter, we achieved net sales of $80.3 million and ICL sales growth of 13%, which was consistent with the outlook we provided on our last earnings call, despite a declining market for refractve peers. We are also reportng another quarter of positve earnings for STAAR, which puts us on track in 2023 for our sixth straight year of double-digit ICL sales growth and GAAP earnings proftability. We're also on the path to deliver 15% to 20% compound annual growth over the next 3 years. The combinaton of high growth and proftability is a rarity for medtech companies our size.

We contnue to engage our surgeon customers and prospects, raise ICL consumer awareness and make progress on the initatves I spoke to you about on our last earnings call and at our recent Investor Day. As you will have seen in our earnings release, we now expect to come in at the low end of our previously provided fscal 2023 outlook for ICL sales of $320 million to $325 million due to macroeconomic weakness in certain regions and potental disrupton to our sales in the Middle East. The Middle East represents sales of approximately $2 million in the fourth quarter.

Returning to our fnancial results. For the third quarter of 2023, ICL units globally were up 14% and global ICL sales of $81.1 million were up 13% as reported and 13% in constant currency. By region, APAC ICL sales were up 13%. EMEA ICL sales were up 14%. And in the Americas region, ICL sales were up 5%. India, which overtook China earlier this year as the world's most populous country was a standout market for us in the third quarter. Currently, India represents less than 3% of our global ICL sales, but it is a market where we are making investments in both resources and distributon and one which we believe represents an atractve opportunity for our future growth. In Europe, where the refractve market is down, our 2 largest markets, Spain and Germany grew 9% and 8%, respectvely.

Turning to the 2 largest refractve markets. In China, ICL sales grew 14% in the third quarter. We remain confdent in our long-term growth prospects in China bolstered by comments at our Investor Day from our largest customers Chief Medicine Ofcer that EVO ICL has a long runway for growth. Recent actons by the Chinese government, including additonal (inaudible) should support consumer demand as well. In the U.S., Refractve Surgery Council reports that industry procedure volumes declined 15% in the third quarter, contnuing an 8-quarter negatve trend. Our ICL sales in the U.S. grew ahead of the market, up 6% in the third quarter. EVO ICL was launched in the U.S. in the second quarter of 2022. On an apples-to-apples basis, U.S. EVO ICL sales growth totaled 13% for Q2 and Q3 2023 compared to a 15% decline in refracted industry procedures for that same period. Year-to-date, industry procedures are down 13 per se. All told, we are achieving solid growth despite a less certain economic and geopolitcal environment. The pace of our growth is well ahead of the industry due to our market-building initatves, including elevatng ICL awareness, and we are taking share as a result of our best-in-classlens-based technology and its benefts, including removability, no dry eye syndrome, and excellent night vision that ICL surgeons and their patents tell us they greatly value.

I talked to you on our last earnings call about my current state assessment of our business and the actons we have been taking to accelerate EVO adopton. We shared more details in September at our Investor Day. And today, I am pleased to report additonal progress. First, with respect to making our company even easier to do business with, we are in the fnal stages of developing the EVO standard, which is a comprehensive set of enhanced training, educaton, and practce development tools and processes that we will use to support our surgeon customers and their staf. We are also supportng several investgator-initated studies designed to increase surgeon comfort and confdence in measurement and lens size selecton. The frst study is nearing completon, and we antcipate the study will be published in a peer-reviewed journal in the frst quarter of 2024. Second, we are introducing and advancing new and novel products. We received 510(k) clearance from FDA in late September for the (inaudible) single-use injector for our EVO family of lenses in the U.S. The new customized user loaded injector for EVO is designed to increase ease of use and efciency. We are introducing this delivery device to a subset of surgeon customers through the end of the year and antcipate making it more broadly available in the U.S. and other markets beginning in 2024.

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Exhibit 99.1

NOVEMBER 01, 2023 / 8:30PM, STAA.OQ - Q3 2023 STAAR Surgical Co Earnings Call

Turning to our extended depth of focus lens, EVO Viva, for the early presbyopia with myopia ages 45 to 55. We are expanding the rollout of the product following the Annual Meetng of the European Society of Cataract and Refractve Surgeons in September. We have identfed protocols to assist with surgeon and patent satsfacton, and we are supportng our Viva surgeons to help set proper patent selecton, expectatons and outcomes. Third, we are leveraging new analytc tools implemented in 2023. In conjuncton with our new organizatonal structure and leadership in the U.S., we have segmented our U.S. customers and identfed one group we were calling U.S. Highway 93. U.S. Highway 93 is a group of 93 U.S. practces, approximately 20% of our total practces and 50% of our U.S. sales that have favorable parameters for EVO adopton and where we will focus our eforts on driving growth through tailored programs. One early example of our success is a new alliance agreement with a multcenter practce in the Southeast. We signed the agreement in September, and the customer is moving quickly down the diopter curve with utlizaton of lower diopter lenses between minus 3 diopters and minus 6 diopters up 300% compared to his prior year-to-date utlizaton and also compared to all customers in the U.S. The alliance agreement ofers atractve pricing and support to the customer while maintaining solid gross margins for STAAR. U.S. Highway 93 is consistent with our stated goal of going deeper with our existng customer base, alliance agreements with other U.S. Highway 93 customers are in process.

And fnally, we launched the patent call center partnership linked to our Doctor Finder in 2 cites in October. The call center is intended for surgeon referral and EVO patent educaton. Today, we expanded our call center to several additonal cites, including Los Angeles, Chicago and Boston. While stll in the early stages, we have a lot of enthusiasm around our ability to answer patent questons and create a closed loop process for our Doc Finder website aimed at increasing the return on our sales and marketng investments. Patrick?

Patrick F. Williams - STAAR Surgical Company - CFO

Thank you, Tom, and good afernoon, everyone. As a reminder, all of my references to growth and comparisons will refer to year-over-year growth relatve to the prior year period, unless otherwise stated. Also, please note that we have provided a geographic sales table with today's press release to match the 3 major regions we showed during our September Investor Day and also provide key country breakout of our ICL business. Total net sales for Q3 2023 were $80.3 million, up 6% compared to net sales of $76.1 million a year ago. The increase in net sales was atributable to a $9.1 million or 13% increase in ICL sales, which was mostly ofset by a $4.9 million decrease in other product sales. We are nearing completon of the previously announced exitng of our low-margin noncore other products Cataract IOL business. Gross proft for Q3 2023 was $63.6 million or 79.2% of net sales compared to gross proft of $60.5 million or 79.5% of net sales a year ago and $70.7 million or 76.6% of net sales for Q2 2023. The 30 basis point decrease in gross margin as compared to Q3 2022 is primarily due to increased sales return reserves and period costs associated with manufacturing projects, partally ofset by product and geographic sales mix. The 260 basis point sequental increase in gross margin from the second quarter is due to an other products Cataract IOL reserve that did not recur in the third quarter. Normalizing our Q2 2023 gross margin results in a 60 basis point decrease sequentally for the third quarter, which is related to geographic and product mix. We contnue to expect gross margin will be approximately 79% for Q4 and approximately 78% for the full year.

Moving down the income statement. Total operatng expenses for Q3 2023 were $57.3 million, up from $46.8 million in the year ago quarter and down sequentally from $62.1 million in Q2 2023. The components of total operatng expenses were as follows: G&A expense for Q3 2023 was $19.3 million compared to $14 million a year ago and $18.1 million for Q2 2023. The year-over-year increase in G&A is due to increased compensaton-related expenses, outside services and facility costs as we positon the company for future growth. For fscal 2023, we contnue to expect G&A expense will be approximately $19 million in the fourth quarter.

Selling and marketng expense was $26.6 million for Q3 2023, up from $23.1 million a year ago and down from $32.3 million in Q2 2023. The increase in selling and marketng expense for the prior year was due to increased advertsing and promotonal expenses and compensaton-related expenses, partally ofset by lower trade show costs. The sequental decrease in selling and marketng expense was due to decreased marketng, promoton and advertsing expenses, trade shows and meetngs and tming. We now expect approximately $1.5 million of expense will shif to Q4 due to tming of investments, resultng in approximately $28.5 million of selling and marketng expense in Q4. Research and development expense was $11.5 million in Q3 2023 compared to $9.6 million a year ago and $11.8 million for Q2 2023. The year-over-year increase in R&D is due to increased compensaton-related expenses and U.S. EVO post-approval clinical trial expenses associated with the 3-year study. For Q4, we contnue to expect R&D expense will be approximately $12 million. Operatng income in Q3 2023 was $6.3 million or 7.8% of net sales as compared to $13.7 million or 18% of net sales for Q3 2022.

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Exhibit 99.1

NOVEMBER 01, 2023 / 8:30PM, STAA.OQ - Q3 2023 STAAR Surgical Co Earnings Call

For fscal year 2023, we contnue to expect operatng margin will be approximately 5%, and we antcipate expanding operatng margins in future years while contnuing to make investments across the business in order to support the 15% to 20% 3-year sales CAGR outlined at our Vision 2026 Investor Day in September. Net income in Q3 2023 was $4.8 million or $0.10 per diluted share compared to net income of $10.3 million or $0.21 per share in Q3 2022. On a non-GAAP basis, adjusted net income for Q3 2023 was $15 million or $0.30 per diluted share compared to adjusted net income of $18.1 million or $0.37 per diluted share in Q3 2022. A table reconciling the GAAP informaton to the non-GAAP informaton is included in today's fnancial release. We contnue to expect our efectve tax rate will be approximately 35% in Q4, subject to no signifcant change in our valuaton allowance.

Turning now to our balance sheet. Our cash, cash equivalents and investments available for sale as of September 29, 2023, totaled $201.7 million as compared to $225.5 million at the end of the fourth quarter of 2022. The decrease in overall cash is due to the tming of accounts receivable. Based on current forecasted payments, we do expect our AR balance to move down by year-end to our Q2 2023 levels and even further down in Q1 2024. We invested $9.2 million in CapEx during the third quarter and $15.1 million total year-to-date through the end of the third quarter. We now expect full year fscal 2023 CapEx will be approximately $21 million, down from our previous $26 million estmate due to manufacturing projects, which will move into 2024.

As Tom said, due to the economic environment in certain geographies and recent world events, we now expect to be at the low end of our previously announced revenue range, which would result in net sales of approximately $74 million in the fourth quarter. One additonal item. On October 25, we began a voluntary recall of approximately 300 EVO and EVO+ lenses distributed in the U.S. beginning of September 2022, with a measurement deviatng plus or minus half a diopter from the ad labeled power. We have identfed and fxed the problem, and we do not expect any material operatonal costs related to this mater. STAAR will be atending the Stephens Conference on November 16 in Nashville and BTIG's virtual Ophthalmology Day on November 27. We will also be conductng in-person investor meetngs in New York, Boston and Hong Kong with Mizuho, William Blair and Jeferies respectvely, in November and December. Tom?

Thomas G. Frinzi - STAAR Surgical Company - President, CEO & Chairman

Thank you, Patrick. 10 months in the Chair of Chief Executve Ofcer, I can tell you the world has changed. The war in Europe contnues. Infaton and higher interest rates are exacerbatng broad economic challenges and now a new war and our refractve industry has not been immune, yet STAAR contnues to grow. We contnue to take market share, grow the overall refractve market and generate earnings and cash. As I mentoned before, our technology is without peer and our opportunity remains large. The epidemic of myopia that impacts more than 2 million people globally. Today, our growth opportunity is led by China, the largest market in the world for refractve procedures and other APAC geographies. But as we look to the future, we see many other markets representng a more meaningful contributon to our growth. Our vision remains to become the frst choice for those doctors and patents seeking visual freedom and I am confdent with our growing momentum, we will achieve that vision. This concludes our prepared remarks. Operator, we are now ready to take questons.

QUESTIONS AND ANSWERS

Operator

Thank you, ladies and gentlemen. We will now begin the queston-and-answer session. (Operator Instructons) Your frst queston comes from Anthony Petrone from Mizuho.

Anthony Charles Petrone - Mizuho Securites USA LLC, Research Division - MD & Senior Medical Devices, Diagnostcs and Therapeutcs Equity Research Analyst

Maybe Tom, I'll start of with just a commentary on geographic weakness when you think of the major regions, the Americas, EMEA and APAC, how should we be thinking about that across the geographies? And is there any geography in partcular where you're seeing more early pressures here just as it relates to economy? And then I'll have a couple of follow-ups. Thanks.

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Exhibit 99.1

NOVEMBER 01, 2023 / 8:30PM, STAA.OQ - Q3 2023 STAAR Surgical Co Earnings Call

Thomas G. Frinzi - STAAR Surgical Company - President, CEO & Chairman

Yes, sure. Thanks, Anthony. Good to hear from you. Again, we had a solid quarter. I think we contnue to grow in the Asia Pacifc regions. China was solid, India had a very good quarter, other Asia Pacifc geographies were favorable. As I mentoned in the prepared remarks, in Europe, certainly our 2 biggest direct markets, Spain and Germany had good quarters. And in the U.S., despite a contnued declining refractve market, we showed good growth. But again, we're mindful of what we read in the newspapers as you do as well. And we're constantly monitoring those factors and keeping our air to the ground with our people in all those markets globally.

Anthony Charles Petrone - Mizuho Securites USA LLC, Research Division - MD & Senior Medical Devices, Diagnostcs and Therapeutcs Equity Research Analyst

That's helpful. And maybe just a quick one on China. There's a lot on the antcorrupton campaign. It doesn't seem like there was any notable impact in the quarter. And when you think about where that's really being focused, it seems like it's more hospital based and I'm not sure your largest customer, Iyer has any exposure there. But can you just speak to the dynamics on China antcorrupton and how that relates to ICL volumes? And I'll leave it at that and hop back in queue. Thanks again.

Thomas G. Frinzi - STAAR Surgical Company - President, CEO & Chairman

Yes. Sure, Anthony. Thank you for the queston. And again, just as you stated, we agree. It is predominantly geared towards the public hospital system versus the private hospital system. The majority of our business, close to 80% is on the private side, 20% to 25% on the public side. But we're constantly monitoring that situaton. To date, it really hasn't been material, but we're keeping close tabs on it.

Operator

Thank you. Your next queston comes from Mr. Xuyang Li.

Xuyang Li - Jeferies LLC, Research Division - Equity Analyst

I guess, to start maybe just on the U.S., you highlighted U.S. Highway 93- and then give an example on the multcenter practce alliance. I guess I'm wondering how big is that practce? What's driving the move down the diopter curve to minus 3 and minus 6? Is it patent demand? Or are they getng beter at selling the procedure to patents? Maybe you can talk a litle bit about the economic arrangements ofered and as you'd be expanding that to other U.S. practces?

Thomas G. Frinzi - STAAR Surgical Company - President, CEO & Chairman

Sure. Yang, again, thank you for the queston. The practce we referenced is a big mult-locaton cataract practce based in the Southeast part of the country. They do a lot of cataract surgery. They do a lot of corneal based refractve surgery and certainly have a very nice growing lens-based refractve surgery practce. I think in terms of what's driving the move down the diopter curve, it's a litle bit of both of what you mentoned. We certainly contnue to increase consumer awareness through our investments in terms of digital marketng. But I also think internally, the practce has done enough procedures that their confdence level is extremely high, and they've made an absolute commitment that anyone minus 3 and above, that falls within our treatment range. EVO is going to be part of that discussion. And I think as consumers hear more and more about the benefts of EVO ICL surgery, they're optng for it versus laser-based vision correcton.

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Exhibit 99.1

NOVEMBER 01, 2023 / 8:30PM, STAA.OQ - Q3 2023 STAAR Surgical Co Earnings Call

Patrick F. Williams - STAAR Surgical Company - CFO

Yes. And just to add to the last part, I would say that we did know that this specifc practce has made the price of LASIK that they ofer in their practce or EVO as well a litle bit more on parity. We stll start charging a slight premium, but certainly down from prior maybe 6 to 9 months ago when we was charging for EVO.

Xuyang Li - Jeferies LLC, Research Division - Equity Analyst

Thank you. It's very helpful. Maybe to follow up or a second queston on the China business. I wanted to hear a litle 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 cites versus some of the lower-ter cites? What are you seeing from some of your larger customers?

Thomas G. Frinzi - STAAR Surgical Company - President, CEO & Chairman

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 routne basis. But I will tell you, certainly, in the Tier 1, Tier 2 cites, we're very pleased with end market sales. They contnue 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 contnue to see in market.

Operator

Thank you. Your next queston comes from David Saxon of Needham.

Unidentfed Analyst

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

Patrick F. Williams - STAAR Surgical Company - CFO

Yes. This is Patrick, of course. As we outlined on our IR Day and the deck is stll on the website, so people can certainly reference that. We did talk about a prety good expansion up to 1,000 basis points over tme. So we said we would hit 12% to 16% in 2026. One should expect that as revenue goes, operatng 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 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 initatves we're putng in place, the structures that we're putng in place and just getng more tracton as we move down the diopter curve and increase our brand awareness as we get the practces set up. So we're confdent about the expansion in the operatng margin. It just comes down to where do we want to contnue 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.

Unidentfed 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 getng the delivery tmes down? I guess, how big of an issue is that for adopton in the U.S. currently? Just maybe on the sales force in the U.S. 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 mentoned that in the comments. I might have missed that.

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Exhibit 99.1

NOVEMBER 01, 2023 / 8:30PM, STAA.OQ - Q3 2023 STAAR Surgical Co Earnings Call

Thomas G. Frinzi - STAAR Surgical Company - President, CEO & Chairman

No. I think certainly, from an ability to meet the demand of the customer in terms of tming of product., inventory levels or such, yields are up. And we certainly are meetng most orders right from inventory. And then in terms of customizing partcularly on the Toric side, we're within a 6-week period of tme, which is our stated goal, and that's always improving. Relatve to what we're doing in the U.S. from a structure point of view, Warren Foust, our Chief Operatng Ofcer, is taking much more of an actve involvement with our U.S. team as we certainly implemented across the U.S. Highway 93 initatve. And I think keeping his here to the ground and bringing his wealth is experience and leadership will only help as we contnue to gain momentum in the second biggest refractve market in the world.

Operator

Thanks. Your next queston comes from John Young from Canaccord.

John Edward Young - Canaccord Genuity Corp., Research Division - Associate

I just want to start on the U.S. Highway 93. I'm curious about this program, and maybe some of the comments that you made during the Q&A about being able to ofset one practces ofering the ones that near parity to LASIK. Are you discountng the lens as part of Route 93 or as a part of the co-marketng initatve? And how should we think about long-term AST specifc to the United States? Thanks.

Thomas G. Frinzi - STAAR Surgical Company - President, CEO & Chairman

Yes. John, how are you, frst of all, how's your vision?

John Edward Young - Canaccord Genuity Corp., Research Division - Associate

It's great.

Thomas G. Frinzi - STAAR Surgical Company - President, CEO & Chairman

Good. I always want to check in to make sure that EVO is performing as it should. But yes, specifc to your queston, as part of the alliance agreement and the volume commitment that a surgeon in that practce give us, there is some erosion of price, but it's relatvely within expectatons. And I think, again, it cuts both ways, right? We give a litle bit on price. They give a litle bit on what the consumer is paying and the combinaton thereof, given our strong balance sheet and no debt and the cash we generate, we're in a positon to be a litle bit more fexible to drive growth.

Patrick F. Williams - STAAR Surgical Company - CFO

Yes. And remember, John, at the Investor Day, we outlined our Vision 2026 we provided a full P&L on the gross margin. I specifcally addressed the fact that we would stll stay at about 81% for all 3 years, which gives us a litle bit of leeway wiggle room to be aggressive if we need to, but more importantly, to make sure, as Tom said, we're giving a litle there, given a litle. And so we did contemplate in our numbers currently and in our future numbers as well.

John Edward Young - Canaccord Genuity Corp., Research Division - Associate

Okay. That's great. Thank you. And then just for a follow-up, too. The sales and marketng expense being down a lot quarter-over-quarter. I heard you talk about just pulling back on the digital ad. But is this part of the macro concerns to that you'll be pulling back more here? And maybe you could just

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