STAAR Surgical Company (STAA) FY Conference Summary Company Overview - STAAR Surgical is a 43-year-old company recognized as a global leader in ophthalmic surgery, offering a superior solution to LASIK with its EVO ICL lens technology [3][4] - The company operates in 75 countries, holding a significant refractive market share, particularly in Japan where it has a 70% share due to negative perceptions of LASIK [5][6] Core Points and Arguments - **Product Advantages**: The EVO ICL lens is reversible, provides UV protection, does not induce dry eye, and preserves corneal tissue, leading to rapid recovery and better contrast vision [4][12][14] - **Market Position**: STAAR holds approximately 12% of the global refractive market share, with significant opportunities for growth, especially in China and India [6][20] - **Growth Drivers**: The company anticipates growth driven by macroeconomic improvements and increased patient comfort with surgical options as word-of-mouth spreads [6][10][30] - **Financial Performance**: In FY 2024, STAAR reported revenues of $313.9 million, a 3% decline from FY 2023, primarily due to challenges in the Chinese market [10][34] - **Margins**: Gross margins decreased from 78.5% to 65.8% due to reduced production volume and increased reserves for obsolete inventory [35] Challenges and Strategic Focus - **Market Challenges**: The company faces headwinds from patient reluctance to pursue surgical options, particularly in the U.S., where fear of surgery is a significant barrier [6][27] - **China Market Concerns**: There are investor concerns regarding inventory levels and tariff issues in China, but the company believes these are transitory and manageable [21][41] - **Operational Restructuring**: STAAR is undergoing a restructuring to reduce SG&A expenses to a $225 million run rate, which is expected to improve financial health [36][42] Future Outlook - **Market Potential**: The myopia epidemic is expected to grow, with projections indicating that 50% of the global population may be affected by 2050, presenting a substantial market opportunity for STAAR [45] - **Long-term Confidence**: The company is optimistic about returning to historical earnings and cash flow generation as macroeconomic conditions improve [46][51] - **Strategic Shift**: There is a focus on expanding the market beyond current surgical candidates to include those using glasses and contacts, aiming to increase overall market penetration [55] Additional Insights - **Regulatory Wins**: Recent approvals in China for new product variations are seen as positive developments that could enhance market presence [17][22] - **Sales Growth**: Despite challenges, the company achieved a 9% year-over-year growth in markets outside of China, indicating resilience and potential for recovery [38] This summary encapsulates the key points discussed during the STAAR Surgical conference, highlighting the company's strengths, challenges, and strategic direction moving forward.

Summary of Star Surgical Conference Call Company Overview - **Company**: Star Surgical - **Industry**: Medical Devices, specifically focusing on Intraocular Collamer Lens (ICL) technology Key Points Share Buyback Program - Star Surgical announced a $30 million share repurchase program, which was not included in previous cash guidance [2][4] - Management believes the current stock valuation is not reflective of the company's potential, prompting the buyback decision [4][5] - The board has only authorized this single repurchase, indicating it may not become a regular part of the capital allocation strategy [6][7] Inventory and Revenue Expectations in China - The company expects to reach contractual inventory levels with Chinese distributors by June [11] - Anticipated revenue of $27.5 million from one distributor is expected in Q3, with no changes to this expectation [13] - Revenue guidance for Q2 is cautious, with expectations of minimal revenue but a gradual ramp-up anticipated [15][16] - The company is managing inventory closely with distributors to align with actual demand [18][19] Market Trends in China - Demand for ICLs in China appears to be stabilizing, with Q1 showing flat to slightly up procedural volumes compared to the previous year [22][23] - The company is optimistic about long-term growth in China, despite some softness in Q2 [24][37] - The company is not affected by military refractive demands, which are not part of their business model [26][27] Competition and Product Differentiation - Star Surgical faces competition from Ibrite's FakeCIC IOL, but the company believes its unique collagen-based material offers a significant advantage [39][40] - The market for ICLs is large, with over 1 billion people still using glasses or contacts, indicating room for growth despite competition [47] - The company is focused on understanding pricing strategies of competitors and how they will affect market dynamics [44][45] Financial Guidance and Market Outlook - Star Surgical withdrew its 2025 revenue guidance due to uncertainties, including tariff risks and macroeconomic concerns [50][51] - The management team is committed to transparency and aims to provide clearer insights into market opportunities and risks [49][52] - Long-term growth expectations remain positive, with a focus on disciplined capital allocation and market share growth [61][62] Research and Development Opportunities - The company is exploring the use of its collagen material in other therapeutic areas, particularly within ophthalmology [57][58] - R&D spending is significant, but the company aims to focus on projects that can yield meaningful results in a timely manner [58] U.S. Market Strategy - The U.S. market remains critical for Star Surgical, with a current market share in the low to mid-single digits for EVO [60][61] - The company achieved over 50% market share in Japan, indicating potential for growth in the U.S. when market conditions align [62] Additional Insights - The management acknowledges past challenges in meeting revenue expectations and aims to set more realistic future guidance [61][62] - The company is prepared for the upcoming high season in China with adequate inventory positioned for demand [34][35]

Group 1 - STAAR Surgical's shares have sharply rebounded after a selloff following Q1 earnings [1] - Management has indicated an improved demand outlook in China, although growth outside of China was only 9% in Q1 [1] Group 2 - The investment thesis focuses on identifying undercovered companies, particularly in technology, software, electronics, and energy transition sectors [1] - The analysis aims to uncover asymmetric investment opportunities to achieve market-beating returns [1]

Core Insights - Staar Surgical reported a revenue of $42.59 million for the quarter ended March 2025, which is a 45% decrease compared to the same period last year [1] - The earnings per share (EPS) for the quarter was -$0.52, a decline from $0.06 in the year-ago quarter, but it exceeded the consensus EPS estimate of -$0.59 by 11.86% [1] - The revenue surpassed the Zacks Consensus Estimate of $40.34 million by 5.57% [1] Financial Performance - The stock of Staar Surgical has returned +23.5% over the past month, outperforming the Zacks S&P 500 composite's +10.6% change [3] - The company currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3] Geographic Sales Breakdown - In the United States, net geographic sales were $5.46 million, slightly below the average estimate of $5.82 million, representing a year-over-year increase of +10.6% [4] - In Japan, net geographic sales reached $11.39 million, exceeding the average estimate of $10.54 million, with a year-over-year change of +8.9% [4] - In China, net geographic sales were only $0.39 million, significantly lower than the estimated $1.15 million, marking a drastic year-over-year decline of -99% [4]

Company Performance - Staar Surgical reported a quarterly loss of $0.52 per share, which was better than the Zacks Consensus Estimate of a loss of $0.59, and compared to earnings of $0.06 per share a year ago, indicating an earnings surprise of 11.86% [1] - The company posted revenues of $42.59 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 5.57%, but down from $77.36 million in the same quarter last year [2] - Over the last four quarters, Staar Surgical has surpassed consensus EPS estimates three times and topped consensus revenue estimates three times as well [2] Stock Performance - Staar Surgical shares have declined approximately 23.3% since the beginning of the year, while the S&P 500 has decreased by 4.7% [3] - The current consensus EPS estimate for the upcoming quarter is -$0.59 on revenues of $41.03 million, and for the current fiscal year, it is -$0.81 on revenues of $260.45 million [7] Industry Outlook - The Medical - Dental Supplies industry, to which Staar Surgical belongs, is currently ranked in the top 27% of over 250 Zacks industries, suggesting a favorable outlook compared to the bottom 50% [8] - The Cooper Companies, another player in the same industry, is expected to report quarterly earnings of $0.93 per share, reflecting a year-over-year change of +9.4%, with revenues anticipated to be $995.5 million, up 5.6% from the previous year [9][10]

STAAR Surgical Company (STAA) Q1 2025 Earnings Call May 07, 2025 05:15 PM ET Company Participants Brian Moore - Vice President of Investor, Media Relations & Corporate DevelopmentStephen Farrell - CEO & DirectorWarren Foust - President & COODeborah Andrews - Interim CFOThomas Stephan - Vice PresidentAnthony Petrone - Managing Director Equity ResearchPatrick Wood - Managing Director Conference Call Participants Ryan Zimmerman - Managing Director & Medical Technology AnalystSimran Kaur - Equity Research Analy ...

Financial Data and Key Metrics Changes - Total net sales for Q1 2025 were $42.6 million, down from $77.4 million in the same quarter last year, primarily due to minimal purchases by distributors in China [24] - Adjusted EBITDA for Q1 2025 was a loss of $26.4 million compared to earnings of $5.3 million in the prior year, reflecting a $33 million decrease in gross profit [26] - Gross margin for Q1 2025 was 65.8%, down from 78.9% in the year-ago quarter, impacted by higher manufacturing costs and increased inventory reserves [28] Business Line Data and Key Metrics Changes - China sales were reported at $389,000 for Q1 2025, a significant drop from $38.5 million in the same quarter last year, as distributors consumed existing inventory [14][24] - Net sales excluding China were $42.2 million, representing a 9% growth year-over-year, driven by growth in APAC sales outside China [27] - The company expects to recognize $27.5 million in sales associated with a prior order in Q3 2025, which was not recognized upon shipment [14] Market Data and Key Metrics Changes - The company noted an improvement in ICL procedures in China, with end market demand strengthening despite the low reported sales [14] - In the Americas, sales growth was 9% in Q1 2025, while EMEA saw a 10% increase, and APAC sales excluding China were up 8% [27] - The prevalence of myopia is increasing globally, which is expected to drive demand for lens-based vision correction solutions [39] Company Strategy and Development Direction - The company aims to return to sustainable growth by addressing short-term tactical issues and focusing on strategic growth initiatives [7][8] - A new management structure has been implemented to enhance efficiency, including the promotion of key executives and the introduction of a Chief Development Officer [9][10] - The company is expanding its manufacturing capabilities in Switzerland to mitigate tariff impacts and increase production capacity [20][18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery in China and the potential for improved sales in the second half of 2025 [32][102] - The company is committed to transparency and aims to build trust with investors by delivering solid financial results [66] - Management acknowledged the challenges posed by global economic uncertainty but remains confident in the long-term growth potential of the EVO ICL technology [32][39] Other Important Information - The company has withdrawn its previous guidance due to tariff uncertainties and economic conditions but remains optimistic about achieving growth targets [31][60] - The restructuring efforts have resulted in significant charges, but the company believes these actions will lead to improved long-term profitability [25][30] Q&A Session Summary Question: Can you elaborate on ICL sellout in Q1 2025 and trends for Q2? - Management noted that end market sales were consistent across January, February, and March, and they are pleased with the pace of recovery [46] Question: What is the competitive impact of Ibrite on ICL? - Management indicated that competition has been minimal so far, and they welcome it as it raises awareness of surgical options [49][50] Question: How does the company view the current economic trends compared to previous guidance? - Management acknowledged global uncertainty but expressed confidence in hitting revised targets based on improving trends in China [57][60] Question: Can you quantify the consignment inventory in China? - Management stated they have enough inventory to mitigate tariff impacts through early 2026 and are working to align inventory levels with contractual obligations [71][92] Question: What is the pricing strategy for EVO ICL in China and the U.S.? - Management confirmed no major changes in pricing strategy, emphasizing the high value of EVO ICL to patients and surgeons [78]

Financial Performance - For the three months ended March 28, 2025, net sales were $42.6 million, a decrease of 45% compared to $77.4 million for the same period in 2024, primarily due to decreased sales in China[67]. - Net sales of implantable Collamer® lenses (ICLs) were $41.5 million, down 46.2% from $77.2 million in the prior year[74]. - Gross profit decreased by 54.1% to $28.0 million, with a gross margin of 65.8%, down from 78.9% in the previous year, attributed to higher manufacturing costs and increased inventory reserves[77]. - General and administrative expenses increased by 5.3% to $24.5 million, representing 57.4% of net sales, up from 30.0% in the prior year[78]. - Selling and marketing expenses decreased by 7.8% to $24.6 million, accounting for 57.8% of net sales, compared to 34.5% in the previous year[79]. - Research and development expenses increased by 2.1% to $13.7 million, representing 32.1% of net sales, up from 17.3% in the prior year[80]. - Restructuring, impairment, and related charges amounted to $22.7 million, representing 53.2% of net sales, a significant increase from 0.0% in the previous year[81]. Regional Sales Performance - Sales in the APAC region decreased by 61%, with ICL unit sales down 62%, primarily due to reduced sales in China[75]. - The EMEA region saw a 10% increase in sales, with ICL unit growth of 10%, driven by distributor and direct market sales growth[75]. - The Americas region experienced a 9% increase in sales, with ICL unit growth of 3%, mainly due to sales growth in the U.S. and Latin America[75]. Costs and Expenses - In Q1 2025, the company incurred costs of $9.447 million related to severance and workforce reduction, and recognized impairment expenses totaling $12.217 million on various assets[82]. - Other income, net for the three months ended March 28, 2025, was $2.915 million, representing a 70% increase compared to the same period in 2024, primarily due to higher foreign exchange gains[83][84]. - The effective tax rate for Q1 2025 was 0.5%, a significant change from (51.0)% in Q1 2024, influenced by income tax expenses in foreign jurisdictions[86]. Cash Flow and Assets - Cash and cash equivalents increased by $28.955 million from December 27, 2024, totaling $173.114 million as of March 28, 2025[88]. - The company reported a net cash used in operating activities of $5.734 million for Q1 2025, compared to a net cash provided of $21.680 million in Q1 2024[89]. - Net cash provided by investing activities was $35.351 million in Q1 2025, up from $16.187 million in Q1 2024, driven by proceeds from the maturity of investments[90]. - Net cash used by financing activities was $0.948 million in Q1 2025, a decrease from $4.056 million provided in Q1 2024[91]. - Current assets decreased by $41.442 million from December 27, 2024, totaling $326.498 million as of March 28, 2025[88]. Strategic Initiatives - The company is actively pursuing subleasing opportunities for two leased properties, indicating a strategy to optimize asset utilization[82]. - Future capital requirements will depend on growth rates in net sales and the timing of new product introductions, highlighting the company's focus on strategic growth initiatives[88].

Financial Performance - Net sales for Q1 2025 were $42.6 million, down 45% year-over-year, primarily due to a planned reduction of channel inventory in China[4] - Net sales excluding China were $42.2 million, reflecting a 9% year-over-year growth across all key markets[4] - The company reported a net loss of $(54.2) million or $(1.10) per share, compared to a net loss of $(3.3) million or $(0.07) per share in the prior year[12] - Adjusted EBITDA loss was $(26.4) million or $(0.53) per share, compared to earnings of $5.3 million or $0.11 per share in the prior year[4] - Net sales for the quarter ended March 28, 2025, were $42,589,000, a decrease of 44.9% compared to $77,356,000 for the same quarter in 2024[30] - The company reported a net loss of $54,211,000 for the quarter, compared to a net loss of $3,339,000 in the same quarter last year, reflecting a significant increase in losses[31] - The company experienced a significant decline in global sales growth of 3% in 2024, with a forecasted further decline of 45% in Q1 2025[34] Cost and Inventory Management - Gross margin decreased to 65.8% from 78.9% year-over-year, attributed to reduced production volumes and higher manufacturing costs[4] - The company is on track to reduce excess distributor inventory in China to contracted levels by the end of Q2 2025[3] - Cost control measures are expected to reduce the annualized SG&A run rate to approximately $225 million by the end of fiscal 2025, down from $252.2 million in fiscal 2024[9] - The company incurred restructuring, impairment, and related charges of $22,664,000 during the quarter[30] - The restructuring charges for Q3 2024 amounted to $22,664,000, reflecting ongoing adjustments in operational strategy[32] Cash and Assets - Cash, cash equivalents, and investments totaled $222.8 million as of March 28, 2025, down from $230.5 million at the end of Q4 2024[13] - Total current assets decreased to $326,498,000 as of March 28, 2025, from $367,940,000 as of December 27, 2024[29] - Total liabilities decreased to $107,392,000 as of March 28, 2025, down from $112,189,000 as of December 27, 2024[29] - Cash and cash equivalents increased to $173,114,000 at the end of the quarter, compared to $144,159,000 at the beginning of the period[31] Research and Development - Research and development expenses were $13,663,000, accounting for 32.1% of net sales, compared to 17.3% in the prior year[30] Market Expansion and Strategy - The company received regulatory approvals for EVO/EVO+ ICL in Taiwan and Brazil, expanding its market reach[9] - The company is withdrawing its previous financial outlook due to global economic uncertainty and evolving tariff policies[15] - The company plans to expand its market presence in the APAC region, despite recent sales declines, focusing on strategic investments and new product launches[34] - Constant currency sales for Q1 2025 are projected to decline by 44.9%, indicating potential challenges in maintaining revenue growth in the upcoming quarters[36] Currency and Foreign Transactions - The company experienced a gain of $1,418,000 on foreign currency transactions, a significant improvement compared to a loss of $2,297,000 in the prior year[30]

Sales and Revenue - STAAR Surgical Company generated approximately 100% of its net sales from implantable Collamer lenses (ICLs) for the fiscal year ended December 27, 2024[18]. - For the fiscal year ended December 27, 2024, 94% of STAAR's worldwide revenue was generated from product sales outside the United States[19]. - Other Products revenue accounted for less than 1% of total sales in fiscal 2024, indicating a strong focus on ICLs[30]. - In fiscal 2024, net sales to China distributors were $161.3 million, accounting for 51.4% of consolidated net sales, a decrease from 57.6% in fiscal 2023[41]. - The company generated approximately 94% of its total sales outside the U.S. in 2024[144]. - Net sales decreased in fiscal 2024 compared to fiscal 2023, but the company intends to return to sales growth[161]. Product Development and Market Position - STAAR has sold more than 3,000,000 ICLs worldwide as of March 2024, marking a significant milestone for the company[25]. - The company plans to continue developing and launching innovative products to meet clinical needs and customer demands[28]. - STAAR's EVO ICL is the only posterior chamber phakic IOL approved by the U.S. FDA, contributing to its position as the world's largest selling phakic IOL[24]. - The incidence of myopia is projected to affect nearly 5 billion people by 2050, driving demand for refractive procedures[27]. - STAAR's marketing programs aim to position ICL products as a premium option for patients, supported by surgeon education and training initiatives[28]. - Future growth depends on timely development of new ophthalmic products that are accepted by physicians and patients[169]. - Extensive clinical trials required for new products are expensive and have uncertain outcomes, potentially delaying market entry[171]. Manufacturing and Inventory - STAAR maintains significant manufacturing capabilities in California and Switzerland, with ongoing expansions to meet forecasted demand[21]. - Finished goods inventory as of December 27, 2024, was $43.3 million, representing 194 Days' Inventory on Hand (DOH)[43]. - The company has increased inventory levels to mitigate risks associated with potential disruptions in manufacturing and production processes[43]. - The company is expanding its manufacturing capabilities in Nidau, Switzerland, which involves significant risks and uncertainties[140]. - The company is vulnerable to disruptions at its principal manufacturing facility in Monrovia, California[140]. Competition and Market Challenges - Competition in the ophthalmic surgical product market is intense, driven by technological innovation and regulatory approvals[45]. - The company’s ICL technology competes with laser vision correction procedures, which are a significant alternative for consumers[46]. - The company faces intense competition from larger companies and low-cost Asian manufacturers in the ICL market[148]. Regulatory Compliance and Risks - Regulatory requirements for medical devices vary widely by country, impacting the time and cost of obtaining market clearance[56]. - The company’s ICL products are classified as Class III devices, requiring a more rigorous PMA approval process to demonstrate safety and effectiveness[62]. - The FDA's review of a PMA application typically takes between six and twelve months, but may extend significantly based on additional information requests[63]. - The company is subject to regular inspections by Notified Bodies in the US and Switzerland to ensure compliance with medical device regulations[74]. - The FDA may impose severe penalties for non-compliance, including revocation of approvals and potential criminal sanctions[69]. - The company is subject to anti-corruption laws, including the U.S. Foreign Corrupt Practices Act (FCPA), which could result in significant penalties for non-compliance[193]. - Changes in U.S. FDA or international regulations could adversely affect the company's competitive position and financial results[187]. Financial and Operational Risks - The company’s pension plans are underfunded by approximately $6.7 million as of December 27, 2024[152]. - The company may incur substantial expenses due to compliance with data protection and privacy regulations[157]. - The company is subject to risks associated with acquisitions, including integration difficulties and unknown liabilities[159]. - The company does not carry insurance for interruptions or potential losses arising from earthquakes or terrorism[143]. - Increased manufacturing, sales, and marketing expenses may exceed expectations, impacting financial condition[162]. - Climate changes and extreme weather conditions could disrupt operations and increase manufacturing costs[166]. - Relationships with healthcare professionals are subject to scrutiny under healthcare compliance laws, which could lead to penalties[182]. - Product recalls could result in lost sales and damage to the company's reputation[184]. Cybersecurity and Risk Management - The company has established policies for assessing and managing material risks from cybersecurity threats, integrated into its overall risk management program[207]. - The Audit Committee is responsible for discussing the company's policies regarding risk assessment and management, including cybersecurity risks[209]. - The company utilizes both internal personnel and external service providers to support its cybersecurity efforts[212]. - The CIO collaborates closely with legal, privacy, and internal audit functions to address cybersecurity and data privacy risks[213]. Investor Relations - The closing price of the company's common stock ranged from $23.93 to $52.25 per share during the year ended December 27, 2024[197]. - The largest investor beneficially owns approximately 22% of the outstanding common stock, while the largest three investors own approximately 51%[202]. - The company has not paid any cash dividends on its common stock since inception and does not expect to declare cash dividends in the foreseeable future[198].