Good day, ladies and gentlemen. And welcome to the STAAR Surgical Inc. Fourth Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, today’s program is being recorded. I would now like to your host for today's program to Brian Moore with EVC Group. Please go ahead.

Thank you, operator and good afternoon, everyone. Thank you for joining us for the STAAR Surgical conference call this afternoon to review the company’s financial results for the fourth quarter and full year which ended on January 01, 2016. Joining me on the call today Caren Mason, President and CEO of STAAR Surgical and Steve Brown, CFO. The news release detailing the fourth quarter results was issued just after 04:00 PM Eastern Time and is now available on STAAR’s website at www.staar.com. Before we get started let me quickly remind you that during the course of this conference call the company will make forward-looking statement. We caution you that any statement that is not a statement and historical fact is a forward-looking statement. This includes remarks about the company's projections, expectations, plans, beliefs and prospects. These statements are based on judgment and analysis as if the date of this conference call and are subject to numerous important risk and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The risk and uncertainty 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 filings with the SEC. STAAR assumes no obligation to update these forward-looking statements to reflect future events or actual outcomes and does not intend to do so. In addition, to supplement the GAAP numbers, we have provided non-GAAP adjusted net income and diluted net income per share information. We believe that these non-GAAP numbers provide meaningful supplemental information, and are helpful in assessing our historical and future performance. Also, in order to compare our performance from period to period without the effect of currency fluctuations, we apply the same average exchange rate applications to prior periods or constant currency rate to sales. A table reconciling the GAAP information to the non-GAAP information is included in today’s financial release, which is available on our website. And with that, I would now like to turn the call over to Caren Mason, President and CEO of STAAR Surgical.

Thank you, Brian and good afternoon, everyone. I will begin our discussion with general commentary on the state of the business. Steve will then review key first quarter and full fiscal year 2015 financial results before we open the calls for your questions. I am celebrating my first anniversary as CEO of STAAR tomorrow. It has been an exciting yet challenging year and ultimately one of great progress. The 2015 financial results as reported earlier today ended on a high note after a difficult beginning to the year and we are endeavoring to continue the moment into 2016. Our goal is to increase ICL units by double-digits to expand our gross margins and to determine by year end what our IOL offering should look like as the true cataract care business. Building upon the foundation we began in 2015, the following is an abbreviated look at four of our strategic priorities for 2016. FDA remediation and continuation of quality systems overhaul is again at the top of our list of strategic priorities. We achieved our planned commitments in 2015 and came in a little under the $4 million budget to get the work done. In 2016, the achievement of remediation and quality system plan commitments as submitted to the FDA and assuring their global quality certifications are maintained remain as essential goals. Our targeted FDA remediation spend in 2016 is $2.1 million, which includes the continued advisory, directional and assessment support of consultants. We will also continue to hire top talent to round out our quality and regulatory teams. In addition, we have committed to invest capital in the acquisition and validation of a master control quality management system. The employee led culture of quality campaign had a strong kick-off in 2015 and our plans are just strengthen this initiative…

Thank you Caren and good afternoon everyone. I’ll start the financial overview with a summary of top-line results and then provide more details by product end market. STAAR achieved record sales of $20.9 million in the fourth quarter of 2015, an increase of 26% over the $16.6 million of sales reported in the fourth quarter of 2014. In constant currency sales increased 27%, the total currency impact on sales from the strengthening U.S. dollar against the euro and the yen was approximately $900,000 in the quarter. For our ICL product line total sales were $14.1 million for the fourth quarter of 2015, increasing by 57% from the prior year period with units increasing 60%. Sales increased in each of our regional markets with strong unit growth in EMEA and Asia-Pacific. EMEA ICL sales were $4.9 million during the fourth quarter, an increase of 19% compared to the prior year period with unit growth of 16%. Sales in Germany more than doubled over the prior year period due to the conversion of the market former distributor to direct selling and units increased 21%. The conversion plus other price increase as beginning in the fourth quarter offset over 90% of the $780,000 impact on EMEA sales from the weakening of the euro against the U.S. dollar. In other key markets in EMEA unit sales were similarly strong with Spain up 32% and the Middle East up 22%. Asia-Pacific ICL sales were $8 million during the fourth quarter, an increase of 118% compared to the prior year period with unit growth at 118% as well. Korea ICL sales tripled over the prior year period when sales were impacted by negative LASIK media coverage and some orders were delayed from the fourth quarter of 2014 to the first quarter of 2015. Korea sales ended…

Certainly. [Operator Instructions] Our first question comes from the line of Chris Cooley from Stephens. Your question please? You might have your phone on mute.

Good afternoon, Steve can you hear me clear?

We could be now.

Now we can yes, hi Chris.

Hey sorry apologize for that. And maybe one of the first to wish you happy anniversary there for one year and congratulations on a great fourth quarter.

Thank you, Chris.

Just two from me then I’ll hand back into queue. And I appreciate the guidance or the broad strokes there about the acceleration in growth as we go through the year. Maybe Steve or Caren if you just remind us if there are any one-time items that would either be lingering that should start to roll off as we think about either that impacts either growth or the margin through the year or one-time items that again we might should be thinking about outside of that $6.9 million in the first quarter? And then I just have a quick follow-up. Thanks so much.

Sure Chris, no one-time items that you should be thinking about other than the acceleration of the vested stock comp.

Okay, perfect. And then when we look a little bit here at kind of the change in branding and positioning really intrigued by that and look forward to seeing that at ESCRS later on this year, but could you talk to us a little bit about both the visual freedom initiative and the cash outlay there and what kind of pull through you expect to see from that initiative? I’m assuming it's global in scope. So how is going to be different maybe for let’s say market A versus here in the U.S.?

Okay. First of all the visual freedom identification is really about providing for the patient the opportunity to potentially eliminate the need for correction that includes contact lenses or glasses. We have built a new branding around that evolution in visual freedom. It is global. It will be rolled out by major market. We have already begun updating our DFUs using the new name and we have registered all the trade marks associated. So that by the time we are at ESCRS in May, we will be rolling out that branding. For CentraFLOW there will definitely be an emphasis not only on CentraFLOW as we know the lens today. Internationally obviously outside the U.S., but with the expanded optic. And so as I said in my prepared remarks we plan at that time also to be on the podium and talking about the impact of the expanded optic and what it does to add benefits in terms of patient comfort as well as night vision and large people accommodation. In terms of the impact and what it means, fundamentally we are saying is that when we look at our market and we look at the opportunity and we see that our approval by the regulatory bodies both in the U.S. and internationally in terms of the wide range of correction for myopia and with the fact that myopia adds a concern globally as I talked about in a press release earlier this year quoting from a Chinese study the opportunity for us is really to focusing on what the surgeon experience should be in terms of how they can actually build a practice around our ICLs. How the patient can rely upon the surgeon’s training and certification of that training by our company to give them a very good outcome. How the price value relationship between this procedure and the patient’s current use of spectacles contact lenses, eye drops and all other apparatus associated with being dependent upon something placed in the eye or on the eye or on the face so to speak glasses fundamentally can change somebody’s outlook variability to be healthy. We have a number studies that have cited that people who have removed those negatives of having to wear glasses or contact lenses actually exercise more, get healthier and there is lots of proofs around that and our brand ambassadors which I will hear more from will test to that. So yes this is going to be rolled out internationally globally and we do believe that the residual value of this change, the improvement of the messaging, the validation of the clinical capability, the clinical use of these lenses through all the studies that we’ve done and the meta analysis that we’ve concluded which we’ll talk about at ESPRS all of that as well as the affordability where we think dramatically change the paradigm from today.

That’s great. And if I may just squeeze one more and I promise to get back in queue. I’ll take a shot at this and I got an assumption about might the response is going to be here. But clearly you are making substantial progress in the remediation activities with the agency and I think that’s obviously referenced when you just look at the projected outlay of the cost associated with those activities in this year versus ‘15. But can you maybe with broad strokes maybe kind of identify some of the areas that remain in your mind so that we can kind of better gauge the effort that’s required to hopefully bring this to a favorable resolution?

I think the best way to respond is that yes we are making progress to the plan we committed to the agency in February 2015 each and every month we have a delivery date where we have an obligation to share progress based on all the commitments that we made. The really good news is that as we complete this work it gives us the opportunity internally to basically make these update changes and systemic upgrades the way we work now and in the future. In terms of reliance on outside support yes there is less reliance on outside support, which does account for quite a bit of the reduction in incremental cost. But in terms of giving you any feedback from the FDA or any other regulatory agency we just aren’t in a position to do that. But I am very proud of the team for their progress.

Agreed thank you so much and again congratulations on a great quarter.

Thanks Chris.

Thank you. Our next question comes from the line Raymond Myers from Benchmark. Your question please?

Great, thank you. Caren can you help us to understand the quality systems investment. It looks like that’s declining to $2.1 million in 2016 from about $4 million last year. So are we correct in doing that as a $1.9 million net savings this year?

Well yes, and fundamentally when we announced last year what our spending was it’s the incremental spending for the support of outside help in the form of a different types of consultants, assessment agencies et cetera that support the work that we do. So it’s really additional overhead that we’ll dissipate overtime as it becomes absorbed by our current staff and employees and future hire that I referred to in the script.

So there would be less spending though this year than last year?

Ray this is Steve. There is less spending on that remediation effort for outside people as Caren explained, but what we’ve done in the meantime is build up our base business quality staff.

So can you help us to think about the net difference between the spending on those things last year versus this year?

I think I would revert to the comments that I made at the end about our overall OpEx for 2016.

Okay, that’s fine thanks. And then also Caren, when you were discussing the Version 6. I believe you said you had announced the Version 6 launch when design frees was complete and also a first in man study was complete. Is this the first time you’ve talked about completing a first in man study before launching the V6?

So for [indiscernible] that really remained relatively quiet on our presbyopic ICL development. And I did mentioned that it is my practice not to announce deadlines or opportunities for launch until such time as we have design frees and the results of our first in man study. So what I’ve committed is that when that’s completed, I will honestly address whether we believe that we are finished in moving to clinical study and onto a launch pathway or whether we have more work to do.

Okay thank you. And then last question was about Germany. You converted to direct distribution in Germany, recently I am curious how much impact did that have on sales there in the fourth quarter? And what were sales in Germany in the fourth quarter?

Sure we had 21% growth in units in the fourth quarter in Germany. So double-digit growth and then because we’re capturing the distributor margin the sales were up significantly more. But we also had unit growth there.

Outstanding, thank you very much.

Thank you. Our next question comes from the line of Brian Weinstein from William Blair. Your question please.

Thanks for taking the question. My question is the relationships that you’ve signed with some of these kind of advance centers in Scandinavia and China in particular. Can you talk about was there any stocking that went into those arrangement that might have benefited the fourth quarter so that we may not be looking at the true run rate here?

Okay, so we actually work through our Chinese importer to bring stock into China, which is then distributed to sub-distributors who then support in this particular case the IR Hospitals throughout China. So that when they have very strong interest by patients they’re able to respond most of the time for all the spheric and much of the Toric requirement within 24 hours. In terms of its impact Q4 no there was nothing significantly different than what we had already begun to structure how we would supply in China not only for IR, but for other clinics and hospitals.

Okay. And just to push you guys a little bit on the last couple of questions, do you guys expect to be a cash generation or a cash burn situation in 2016?

Yeah, so we expect to be able to fund our plan from existing cash and operating cash. Was that your question?

Yeah, I mean partially I mean I’m just trying to understand are you guys going to be in a cash flow positive position kind of full year 2016 or will you be in a cash flow negative position for the year? I understand that you are going to be able to fund that from $14 million you have, but a year from now if that balance higher or lower based off of kind of your thoughts in your internal planning.

I can’t comment on whether the overall balance is going to be higher or lower at the end of the year. I can’t say that our plan doesn’t anticipate a need for outside financing.

Okay and then on your IOL stuff you had said that will have an idea what that will look like by year end. Can you be a little bit more specific about what you guys are – or what that comment was all about, any other thoughts, any other detail there?

Sure. We see as I’m sure you do a lot of movement in the IOL market in terms of premium, in terms of multi-focal accommodating lenses, tri-focal et cetera and we just at this point in time we are happy with some of our offspring in the space. But we did not believe that we are competitive with some of the more exciting and new designs that we are seeing in the market. So we are taking a very hard look at what is happening in the market, what the affordability index is by market, which is very important. Where the premium markets really are and in terms of having an expanded and experienced R&D team in the IOL we are taking a look at what opportunities we have either expanding our current polymer material or looking at other materials. So we are basically saying what do you wrap around a cataract care experience for the surgeon and the patient it’s really exciting and competitive we are most likely play in premium. The affordability index is of course very important to us to understand as I said what’s reimbursed and what comes out of the patient pocket and in what market. But we find IOL very attractive, but we don’t think we are playing nearly as well as we could and our results show it. So we need to over this year really take a hard look from our marketing and R&D teams to really recalibrate and get this right.

Okay, great. Thank you.

You’re welcome Brian.

Thank you. [Operator Instructions] Our next question comes from the line of Jim Sidoti from Sidoti & Company. Your question please.

Good afternoon. Can you hear me?

Yes, hi Jim.

Steve, I just want to be clear you say that you do not expect to need outside capital that between your existing cash and cash flow you will be able to fund the projects you haven’t planned for 2016?

That’s correct.

Alright. Can you give us some kind of guidance on the cadence of sales and I know you said you expect double-digit growth in ICL for the year. I assume you’re not going to grow the IOL business depending on what changes you make there. But do you expect that double-digit growth start in the first quarter or do you think that all accelerate as you go through the year?

We expect it to accelerate as we go through the year.

Alright. And then on the last call you indicated that most of the communication with the FDA was one way. I guess you're reporting to them, is that still the case or have you received any communication back your way to validate that the changes you are making are sufficient to what they are looking for.

No, actually we continue to do what we said we would do and we continue as I said earlier to provide that documentation. But there is at this point in time no discussion between STAAR and the FDA.

Alright, thank you.

Thank you, Jim.

Thank you. This does conclude the question-and-answer session of today’s program. I’d like to hand the program back to Caren Mason, President and CEO of STAAR Surgical for any further remarks.

Thank you everyone for your participation on our call today. We appreciate very much your interest and investment in our company. All the best to all of you. Thank you.