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Introduction & Market Context
STAAR Surgical Company (NASDAQ:STAA) presented its first quarter 2025 earnings results on May 7, revealing significant challenges in its China business while highlighting growth across other global markets. The ophthalmic device manufacturer, known for its EVO ICL (TASE:ICL) (Implantable Collamer Lens) technology that addresses myopia, reported a substantial revenue decline primarily driven by disruptions in the Chinese market.
The company’s stock has struggled in recent months, trading at $17.76 as of July 21, 2025, well below its 52-week high of $42.64 but above its 52-week low of $13.50. Following the Q1 earnings release, STAAR’s shares dropped 5.25% in after-hours trading, reflecting investor concerns about the wider-than-expected loss despite revenue slightly exceeding analyst expectations.
Quarterly Performance Highlights
STAAR Surgical reported Q1 2025 net sales of $42.6 million, representing a 45% year-over-year decline from $77.4 million in Q1 2024. This significant drop was primarily attributed to minimal purchases by Chinese distributors. However, when excluding China, the company’s global sales actually increased by 9% year-over-year to $42.2 million, demonstrating resilience in other markets.
As shown in the following financial overview:
The company’s profitability metrics deteriorated substantially, with Adjusted EBITDA swinging to a loss of $26.4 million compared to a positive $5.3 million in the prior year period. Adjusted EBITDA per share declined to $(0.53) from $0.11 a year earlier. The earnings article confirmed that STAAR reported an earnings per share (EPS) of -$1.10, significantly missing analyst expectations of -$0.58.
Gross margin contracted to 65.8% in Q1 2025, down 13.1 percentage points from 78.9% in Q1 2024. The company expects this metric to rebound to approximately 70% in the second half of 2025 and eventually return to the 75-80% range after completing its Switzerland manufacturing ramp-up.
Regional Sales Analysis
Despite the overall revenue decline, STAAR Surgical demonstrated growth across all regions outside of China. The company’s regional sales performance illustrates this divergence:
The Americas region generated $6.7 million in sales, up 9% year-over-year, while EMEA (Europe, Middle East, and Africa) delivered $12.3 million, representing a 10% increase. The APAC region excluding China grew by 8% to $23.1 million. These positive trends indicate that STAAR’s core products continue to gain traction globally despite the China-specific challenges.
A more detailed breakdown of the company’s geographic sales performance over recent years and quarters provides additional context:
The data reveals the dramatic impact of the China market disruption, with China sales plummeting to just $389,000 in Q1 2025 from $38.5 million in the same period last year. This single market shift accounts for virtually all of the company’s overall revenue decline.
Strategic Initiatives
STAAR Surgical outlined several strategic initiatives aimed at addressing current challenges and positioning the company for future growth. CEO Stephen Farrell emphasized that the company is "turning the corner" with a focus on streamlined management, working with distributors in China, mitigating tariff impacts, reducing costs, and focusing on global operations.
A key element of STAAR’s strategy involves expanding manufacturing capabilities in Switzerland while mitigating the impact of China tariffs. President and COO Warren Foust detailed these efforts:
The company has shipped consigned inventory to China in April to address immediate supply needs and is rapidly expanding its Swiss manufacturing capacity, targeting 300,000 lens capacity by the end of 2026 and 800,000 lens capacity long-term. Additionally, STAAR is advancing its "Culture of EVO" initiative and preparing for the limited launch of its next-generation EVO+ (V5) lens in China by Q4 2025, pending regulatory approval.
Financial Position and Outlook
STAAR Surgical maintains a solid financial foundation despite current challenges, with $222.8 million in cash, cash equivalents, and investments as of March 28, 2025. The company reported restructuring, impairment, and related charges of $22.7 million in Q1 2025, reflecting ongoing organizational adjustments.
In a significant move, STAAR withdrew its previous financial outlook, citing economic uncertainty and evolving tariff policy. The company is implementing cost reduction measures, targeting a $225 million go-forward run rate for SG&A expenses. Management expects a return to profitability in the second half of 2025, with normalized sales in China anticipated by the third quarter.
Despite near-term challenges, STAAR Surgical continues to emphasize its long-term market opportunity in the global myopia space. The company estimates its immediate target market at 5.2 million surgical procedures in 2025, with a broader potential market of 2.7 billion people with myopia, including 1.1 billion in the primary target age range of 21-45 years.
As STAAR navigates through this transitional period, investors will be closely monitoring the company’s ability to execute on its strategic initiatives, particularly the expansion of Swiss manufacturing, the successful launch of EVO+ (V5) in China, and the implementation of cost reduction measures. The company’s performance in markets outside China provides a positive indicator, but the path to overall recovery remains dependent on successfully addressing the challenges in its previously largest market.
Full presentation:
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