STAAR Surgical at Stifel Forum: Strategic Moves and Market Challenges

On Tuesday, 27 May 2025, STAAR Surgical (NASDAQ:STAA) participated in the Stifel 2025 Virtual Ophthalmology Forum, where the leadership outlined strategic initiatives and addressed challenges. The company announced a $30 million share buyback, signaling confidence in future growth despite uncertainties in the Chinese market and competitive pressures.

Key Takeaways

• STAAR Surgical has authorized a $30 million share repurchase program, indicating belief in its undervalued stock.
• The company is navigating inventory management and competition in China, aiming for $27.5 million in Q3 revenue from one distributor.
• Guidance for 2025 has been withdrawn amid market uncertainties, but transparency with investors remains a priority.
• R&D efforts are concentrated on core ophthalmology capabilities, with a focus on expanding market share in the U.S.

Financial Results

• Share Buyback Program:

- The board authorized a $30 million share repurchase, reflecting management’s view that the stock is undervalued.

- Future buybacks could occur, contingent on M&A and R&D expenditures.

- This move is part of a broader capital allocation strategy, leveraging anticipated strong cash flow.

Operational Updates

• China Market Strategy:

- STAAR Surgical is on track to meet contractual inventory levels in China by June.

- Expected revenue from one distributor is $27.5 million in Q3 2025.

- A gradual revenue increase is anticipated in Q2, though market conditions remain volatile.

- The company is prepared for the summer high season with sufficient inventory, yet remains cautious due to economic conditions.

• Competition:

- The company addressed competition from Ibrite’s FakeCIC IOL, highlighting the benefits of its collagen-based products over acrylic alternatives.

Future Outlook

• Guidance and Transparency:

- 2025 revenue guidance has been withdrawn due to economic uncertainties and potential trade wars.

- STAAR Surgical is committed to transparency and may reinstate guidance as market conditions stabilize.

- Current trends suggest revenue growth may be at the lower end of previous projections.

• R&D and U.S. Market Expansion:

- Focus on R&D is centered on ophthalmology and leveraging unique material science expertise.

- Despite challenges, there is potential for growth in the U.S. market, with current market share in low to mid-single digits.

- Internationally, the company has achieved over 50% market share in Japan, demonstrating potential for success under favorable conditions.

Q&A Highlights

• CEO Steven Farrell emphasized a strategic approach to investments, acknowledging risks and opportunities.
• The management reiterated its commitment to transparency and aligning investor perspectives with market realities.

In conclusion, readers are encouraged to refer to the full transcript for a detailed understanding of STAAR Surgical’s strategic directions and market positioning.

Full transcript - Stifel 2025 Virtual Ophthalmology Forum:

Tom Steffen, Analyst, Stifel: All right. Good afternoon, everyone. Tom Steffen with Stifel. Very excited to have Star Surgical here with us today. Pleased to be joined by Steven Farrell, CEO Warren Faust, President and COO Deborah Andrews, Interim CFO and Brian Moore, Investor Relations.

I’ll start with some more recent news, would say, just on the share buyback, you announced a $30,000,000 I believe, repo program a few weeks back. Steven, maybe to start with you, can you talk about kind of the genesis of this decision, and ultimately the motivation to make this move, particularly given that it wasn’t contemplated, I don’t believe in your cash guidance that was conveyed a week prior.

Steven Farrell, CEO, Star Surgical: Sure. Thanks, Tom. Pleasure to be here. Management’s an iterative process. And so we’re constantly assessing what’s happening in the marketplace, both from a business perspective and from an Investor Relations perspective.

Our perspective here as a management team is we like to make small bets and some of them will pay off, some of them won’t. We there wasn’t any M and A that was imminent at the time that we made the decision. There still is not. And we just have looked at our stock price and don’t understand the current valuation. And we think there’s a very good opportunity to acquire and invest in our own stock.

We also feel like we will be in the long run generating significant cash. And so we felt like investing in the short term in our stock was the right decision.

Tom Steffen, Analyst, Stifel: Got it. That makes sense. And a good segue into my follow-up. So as you return to generating cash, hopefully exiting this year, I mean, we now think about share repo as a more established part of your capital allocation strategy? Or conversely, is the 30,000,000 maybe more one time in nature?

Steven Farrell, CEO, Star Surgical: Sure. So the Board has only authorized this one repurchase. In general, I think that companies that are generating strong cash flow, I’m supportive personally of having some meaningful share repurchase aspect from a capital allocation perspective, but it’s hard to predict that. M and A could change that perspective. And we could find that we want to accelerate our spend on the R and D front and that could change our perspective.

So we’ve only made the decision for this single repurchase.

Tom Steffen, Analyst, Stifel: Got it. But it sounds like maybe more of an openness relative to kind of the prior regime’s view. Is that fair?

Steven Farrell, CEO, Star Surgical: Yes, certainly at the current values.

Tom Steffen, Analyst, Stifel: All right. Perfect. That’s helpful. And then I’ll shift to China and ask a couple of questions on inventory. And Stephen, on the call, you mentioned that you expect to be at contractual inventory levels with your China Distributors, I believe, by the June.

Is that still the expectation, one? And then I’ll ask a follow-up after that.

Steven Farrell, CEO, Star Surgical: Sure. We are on track. Our demand has been as we expected it to be through the May from the January. And so we’ve worked through most of our inventory issue and by the June, we expect to fully work through so that we’re at contractual levels entering Q3.

Tom Steffen, Analyst, Stifel: Got it. And so the $27,500,000 in revenue from one of the distributors, is that still anticipated? Is the rev rec there still anticipated to occur in 03/2025 or is there a chance normal rev rec, could commence with at least one of the two distributors in February? Maybe if you can you can talk about both of those dynamics.

Steven Farrell, CEO, Star Surgical: Sure. So in terms of the $27,500,000 we fully expect that in Q3 as expected and nothing’s changed from that perspective. And we’ve had recent conversations with our distributor partner. And so we are not losing sleep in that from that perspective. And as it relates to Q2 revenue, one of the things that’s important is we’ve got thousands of SKUs.

And so what our guidance and it’s a little bit of a flaw in the averaging, but guidance assumed no revenue at all in China till June 30. And then July 1, the switch goes on and we’re full on track. That doesn’t really reflect how the world works. And so if you think about our inventory level, it kind of follows a bell curve. And the fact that we are targeting six months inventory, that does not mean that there aren’t SKUs that will be required outside of that.

So what we are expecting is a gradual ramp up over time, but we’re expecting to have a solid Q3 and Q4.

Tom Steffen, Analyst, Stifel: Okay. So when you say gradual ramp up over time, is that starting in 2Q in the latter parts of 2Q? Or talk me through what you mean by kind of the timing of that gradual ramp up?

Steven Farrell, CEO, Star Surgical: Sure. So we’ve already we’re already getting some orders on either end of the spectrum. And so we’re not expecting any real meaningful revenue in Q2 as a result of that, but it’s likely to be greater than zero.

Tom Steffen, Analyst, Stifel: Okay. Okay. And greater than I assume 1Q as well, given 1Q was light or similar to 1Q, not to split hairs here?

Steven Farrell, CEO, Star Surgical: I don’t know because a lot of our sales occur in the third month and we haven’t entered that. But we are expecting some small amount of revenue in from China in Q2.

Tom Steffen, Analyst, Stifel: Okay, great. And then last one here on inventory. I guess moving forward, how can you better ensure that your sales are, I’d say, truly reflective of demand, of trends of and is closely aligned with with end market procedure volume. I think consignment sales probably are a good start. But in what ways can China visibility improve for investors moving forward?

Steven Farrell, CEO, Star Surgical: Sure. So great question. And I think as an organization, we’ve perhaps over complicated this. And it’s really just a matter of being close to the distributor, understanding what the distributor needs are and really walking arm in arm with our distributor, which we are our distributors, plural, which we’re currently doing. And so there’s really not a detailed science to it as much of it is making sure that we are managing to the contractual levels, which is a six month inventory and not more than that.

And so we, as an organization, very close to the distributors, and we’re making sure that we are managing to those contractual levels. Because if their inventory is at a six month level, then we know that our revenue is more or less the procedure volume because that’s what’s going on to the hospitals and surgeons.

Tom Steffen, Analyst, Stifel: Got it. That makes sense. And maybe shifting to kind of China trends. You talked on the call on the one q call about ICL sell out that was flat or perhaps even up year over year in 01/2025. And broadly, seems as though China is at a minimum stabilizing.

Can you discuss a bit just what you’re seeing so far in 2Q twenty five just in terms of ICL growth or just how the demand picture in China has trended for ICL compared to 1Q?

Steven Farrell, CEO, Star Surgical: Yes. Warren, do you want

Warren Faust, President and COO, Star Surgical: to take that? Yes, sure. I think we were all time elated Q1 relative to Q3 and Q4 of last year because it was so soft. So we said we were we think the procedural volume, which you’re calling sell out, which is appropriate. We think that was flat to maybe slightly up versus Q1 of a year ago.

May April and May, when we were just in China a couple of weeks ago, Steve and I together and when you talk to the customers there, I think they’re reflecting some of the same sentiment you’ve heard from Zeiss and maybe others. And that is still better than it was certainly at the end of last year, but it slowed a bit, maybe softer than Q1. But I think overall, the sentiment around China stabilizing, that feels right. The end market demand feels like we’re in a much better place than we’ve been in China compared to the prior six months.

Steven Farrell, CEO, Star Surgical: Got I’d also add that we feel very bullish about the long run. So we as Bart suggested, the week before last, we were in China meeting with customers and hospitals. And there is a lot of excitement around our product and our ability to capture share there.

Tom Steffen, Analyst, Stifel: Got it. That’s great. And sticking with kind of trends, Warren, you mentioned maybe two q a a bit softer than than one q potentially, and it could relate to to to the question I’m about to ask. But in one q, as I’m sure you’re aware, one of your leader peers did note there was seemingly a bolus of China military refractive demands just due to changes in post op recovery requirements, I believe it was. So are you aware of whether ICL experienced this dynamic as well in the quarter in 1Q at the end market level?

Yes.

Warren Faust, President and COO, Star Surgical: It’s a good question, Tom. You’re referring to the military typically around the June timeframe in China, they get submitted for laser refractive procedures. ICLs are not part of that. We’re not involved in that military portion of the business. So it represents an opportunity for us as we go forward, certainly something we care about.

But in a good way, in this example, we’re not impacted by that. Those procedures were pulled forward and requested that they start those in January. So you saw the laser refractor business see a bit of a artificial or just a pull forward bump that will be determined what’s going to happen with that for the rest of the year from a laser perspective. Good news for us is demand in the market was still, as I described, we were pleased with it. Certainly, we’d like for it to be better, but it was okay.

And we’re not impacted by that at all.

Steven Farrell, CEO, Star Surgical: Yes. So that did not inflate our Q1 results.

Tom Steffen, Analyst, Stifel: Got it. Perfect, perfect. That’s super helpful.

Warren Faust, President and COO, Star Surgical: And

Tom Steffen, Analyst, Stifel: so Warren, again, maybe 2Q potentially softer than 1Q. Is that, you know, not sure how 1Q, 2Q seasonality works exactly at the end market level. I know Chinese New Year, there there is a bit of a higher level of demand. But as we think about those one q and two q dynamics, you know, what are the early signals for China summer high season? What are your distributors saying?

Have the conversations with them around end market forecasts started to pick up a bit since June is right around the corner. Maybe if you can talk to just kind of expectations for summer high season.

Warren Faust, President and COO, Star Surgical: Look, we’ve had a couple of years in a row where we were had a successful Q1 and then we got excited and sort of projected things were going to be better and better and sort of the old beaten raise. And then the high season didn’t really come. And some of that is our own fault. Think we had too much inventory in the system. We weren’t disciplined around the six month inventory.

We’ll never make that mistake again. So somewhat was self inflicted. The market certainly was softer in the high season that starting in June going even through to the September timeframe. We, of course, in discussions with the distributors, everybody’s optimistic that it’s going to come back. I think that the market wants some stimulus for the population.

That stimulus needs to trickle down and become consumer confidence for the Chinese population in order for them to get back to a roaring high season. But I think for our perspective, we’re trying to take the moderate approach and to say that we believe that the business is coming back nicely so far in China. We’ll certainly be ready. We have plenty of inventory in the country, tariff proof already sitting there because we shipped product in advance on consignment. So we’re ready for a high season if it comes.

The good news is we’re not going to sell in, in a way that we have to be concerned about because hoping that it’s going to come through because now we’re inventory positions, tariff free, ready for high season. Gosh, I hope it comes.

Tom Steffen, Analyst, Stifel: That’s great. No, I appreciate it.

Steven Farrell, CEO, Star Surgical: I’d add one other thing on the conclusion that Q2 is softer. I don’t know that we’re signaling that right now. What we’re signaling is we don’t know and that the third month is an important month. But we’re hearing from people that we know and respect like Zeiss, like our hospital partners that things are a little soft. And so it’s a fine distinction.

But what we’re saying is that we’re seeing softness in the market as opposed to predicting what our Q2 is going to be.

Tom Steffen, Analyst, Stifel: Okay. Got it. Got it. No, that’s appreciate the delineation there. Sticking with China, a couple more questions.

Just wanted to ask about competition and ibrite’s FakeCIC IOL specifically. You know, Warren, I think on the call, you talked about their launch so far maybe being a bit quiet from your perspective. But maybe if you can discuss kind of key learnings in the field in China around their product. I mean, what should investors know or be aware of, based on everything you’re kind of learning week by week, month by month?

Warren Faust, President and COO, Star Surgical: Yes, it’s a good one. And look, I think investors should be aware that in thirty years of history, there have been quite a few companies, some of the big names, big strategics that have internally tried to develop an ICL to bring it to the market because they see the opportunity in it and they’ve stopped those programs or if products have gotten to market, they’ve not been so effective. And we believe it’s because of the material. We uniquely created and continue to manufacture and develop our material and it’s collagen based. And so we copolymerize actual porcine collagen and create a very, very soft, very safe product that acts a bit as a biologic in the eye.

And when other companies have tried with acrylic materials or silicone or PMMA materials, those materials have just proven over time to not be as effective in that very delicate space tucked in just behind the iris in front of the natural capsular bag. Differently than an IOL, which goes safely inside the capsular bag where the cataract companies play. And there’s a level of safety that exists and the material is important, but it’s more important from a refractive index standpoint than it is from softness and a carefulness of the material. So we believe that’s why any acrylic lens, Ibrite happens to be an acrylic lens that comes to the market. Surgeons will often take a wait and see approach to see if they’re going to end up with iris issues or if they’re going to end up with cataract issues.

These things take one, two, three, sometimes five or seven years before you really understand the impact of it. I’m not suggesting customers are going wait five to seven years. I’m just simply saying that for a tried and true thirty year product to be upseated by maybe a new acrylic model, I just think that’s why you’re seeing it be probably slow. That’s one. Secondly is we have SPEAR and Toric.

And Toric is for a patient that has an astigmatism. Your investors, the investors there may understand that the eye is naturally shaped to be like a globe, like a round like a basketball, but very common. And particularly as we age, patients will start to get a more football shaped eye, which is an astigmatism, which causes you to get a little bit of blur even in your normal line of distance. If you don’t have the ability to rotate the lens on the axis of that football, then you don’t have a toric and they don’t. And that’s about 55 of the population in China, roughly around the world, but in China in particular.

And so today, it’s not a complete offering. Today, it’s a new product in the face of thirty years of trusted products. So I just think, we’re excited that there’s competition because it’s more people talking about ICLs. But I don’t think you’re going to see a massive swing to any particular competitor. Okay.

And as far as what we’re learning in the market, we’re really seeing where they’re going to price the product and it’s not clear yet. Pricing strategy from the hospital, of course, is different than pricing strategy from the manufacturer to the importer or to the distributor. Clearly, they’re going to offer incentives to the distributor to try and move more product. We know that’s happening, no So their sales may even reflect that. It’s really the question of what’s happening at the hospital level when they go downstream to the patient.

And we believe they’ll try and price it somewhere close to EVO, probably good pricing economics would tell you that you would go at or just slightly below the incumbents and then you’d be willing to discount based on volume. Then the question is, what kind of volume are they going to get from the market, which is going to allow them to discount. And it’s from the volumes they’re selling now, it’s just not clear. But again, I think so far, what I said weeks ago was it slow and I think it’s still fairly slow.

Tom Steffen, Analyst, Stifel: It. That’s super helpful.

Steven Farrell, CEO, Star Surgical: Tom, the other thing I’d add here is the competition is good. And we’re not operating in a zero sum game here. There were a little over 2,000,000 or I guess, point 6,000,000 people who elected the surgical option. But there’s over 1,000,000,000 people who decided to stay in contacts or glasses or untreated. So for every one person that’s made the surgical decision, there’s 400 that have not or who have not.

And so we see that the additional conversation around ICL as an option is a net plus for us because we’re trying to grow that $2,600,000 not just fight over the components of it.

Tom Steffen, Analyst, Stifel: Got it. That’s helpful. And Stephen, maybe I’ll stick with you just on 2025. You withdrew guidance, but said you thought you had a good shot of hitting 2025 total revenue guidance, the prior management’s team’s numbers. So maybe can you talk about the thinking there a bit?

And secondly, would you expect to potentially reinstitute 2025 guidance come August, on the 2Q call?

Steven Farrell, CEO, Star Surgical: Sure. So, this is a bit around semantics, but we are committed to transparency with the investment community. We’re committed to at the end of every call, we want you to be thinking about the market, the opportunities and the risks the same way we are. And so that’s our commitment is to help you understand how we are viewing the market. In terms of specific guidance, we’ve missed, I think, either two or three times in the last couple of years.

That’s not an acceptable hit rate for this management team. And so we want to be certain or near certain when we provide guidance that we’re going to hit it. The situation right now is even though we have substantially are in the process of substantially mitigating the tariff risk, the risk still exists because it impacts the psyche of people who are making major spending decisions. And so even though we talk about we’ve mitigated the tariff risk, it still has an impact on people. There is concern about the trade war in general.

There’s macroeconomic concerns. And so it felt to us like the right thing was to pull that guidance. But that doesn’t change our commitment to making sure that you’re thinking about all the risks and opportunities the way we are. So we intend to continue to be transparent and we intend for at the end of each of our quarterly calls for you to have enough information so that you can make intelligent investment decisions. And so that’s kind of where we are from a process perspective.

In terms of whether we intend to reissue guidance or to start giving guidance again, I don’t know. I think we have to wait and see kind of how it plays out, but we are committed to helping you and helping you in a more effective way than we’ve historically done to understand how we’re thinking about the business. If you look over the last couple of three years, I don’t think our guidance has really helped investors make better investment decisions. And so what we’re committed to is giving you the our mindset and our way of approaching the business, how we’re thinking about the risks and opportunities.

Tom Steffen, Analyst, Stifel: Got it. That’s great. Appreciate that. And so, on the 1Q call, just to dig in a little bit into 2025, At least to us, you seem to suggest that China, you felt good about the original. I think it was January to January, but maybe ex China growth of nine to 15%, there was a little more caution.

A, is that kind of fair? But b, more importantly, is that kind of still how you’re viewing the 2025 outlook big picture?

Steven Farrell, CEO, Star Surgical: I thought you’re going to let us off the hook on this one, Tom. You’re trying a second time. I’ll to

Tom Steffen, Analyst, Stifel: give it a shot.

Steven Farrell, CEO, Star Surgical: Yes, fair enough. So I think where we were at in our quarterly call, which is we feel pretty good towards the lower end of the both of those ranges. And so we continue to be very bullish about this business long term and are confident in our ability to grow this business and to open new markets. But we’re probably towards the lower end of the range. And we’re just this current team is of a mindset of when we tell you something firm, we want it to be firm.

And I don’t think that’s necessarily been our historical practice.

Tom Steffen, Analyst, Stifel: Appreciate that. Got it. That’s helpful. Couple of minutes left. I’m going to try to squeeze in maybe two or three questions.

But starting with R and D, on the call, you talked about opportunities to use the columnar material in other therapeutic areas, particularly within the eye. If you’re willing to share, can you elaborate a bit more on that? What could that entail?

Warren Faust, President and COO, Star Surgical: So look, columnar is well tested in the eye and it’s a unique capability for us to be able to create and in some ways manipulate as needed material. And so we want to take advantage of that capability. Certainly, there are other there’s reason to believe there’s other disciplines, which columnar or a version of columnar could be used in, but set that aside because that’s something that we’re going to take a look at and see what the opportunity is. And then it’s about, do we have a right to win in that space? Is there an incumbent already that already does really well there?

We’re not looking to just go out and prospect into some new space. We’re looking to take advantage of a core capability that we have. That’s most likely in the eye. There are clearly opportunities that we have been working on in the background. We spend a lot of money on R and D.

You can see how much that is. And we’ve really brought nothing to bear for it with the exception of EVO, which is really critically important with the central whole and with the opportunity to bring intermediate sizes and things for the future. Eagle Plus is a meaningful opportunity for us in China, but beyond that, what’s next. And so we’re just signaling that we’re going to establish clarity around skinning down their scope of opportunity of what we’re going to spend our resources on and what we can bring to meaningful markets in an appropriate amount of time. And we think that focus is represents opportunity for the organization.

Steven Farrell, CEO, Star Surgical: I think you’ve said it.

Tom Steffen, Analyst, Stifel: Got it. That’s great. Last question for me. Just on The United States, the EVO launch has been a bit challenging end markets here domestically certainly have not helped. But Steven or Warren, how are you thinking about the long term opportunity maybe from a market share standpoint?

I think roughly your EVO is low to mid single digit share in The US today. Over time, you know, should investors be thinking about this as a 20% plus share market, maybe closer to 10%? Talk to us about kind of the the long term opportunity for EVO in The US maybe from a share perspective, then we can wrap up.

Steven Farrell, CEO, Star Surgical: Sure. So I think part of what happened in The U. S. Was expectations. And I think if a couple of years ago, we’d said that we thought we’d grow this business 9%, ten %, eleven % and we’d be kind of $45,000,000 in revenue.

I don’t know that there would be the same level of disappointment. I think we set up expectations that we’ve missed. And so that’s at least a part of the problem. U. S.

Market continues to be an absolutely critical market for us. And we are continuing to stay focused. We’re just spending there in a disciplined fashion. And we are making sure that we’re being good stewards of your capital as we’re investing. We’ve achieved over 50% share in Japan.

And so when the right elements come together, we can get a very good share, but we’re not going to predict, I don’t think right now, where we’re going to be with The U. S.

Tom Steffen, Analyst, Stifel: Fair enough. All right, Stephen, Warren, Deborah, Brian, thank you guys so much. Appreciate you participating.

right. Take care.

Steven Farrell, CEO, Star Surgical: Thank you.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.