STAAR Surgical at William Blair Conference: Strategic Shifts Amid Challenges

On Wednesday, 04 June 2025, STAAR Surgical (NASDAQ:STAA) presented at the 45th Annual William Blair Growth Stock Conference, discussing its strategic direction amid recent financial challenges. CEO Steve Farrell highlighted both the company’s long-standing success and the hurdles posed by the China market downturn, while expressing optimism about future growth prospects.

Key Takeaways

• STAAR Surgical is shifting focus to a broader market of glasses and contacts wearers.
• The company faced a 3% revenue decline in 2024, primarily due to issues in China.
• Despite challenges, ex-China sales grew by 9% year-over-year in Q1 2024.
• The company is working to mitigate tariffs through its Swiss manufacturing operations.
• STAAR anticipates a sales rebound in China and globally in the upcoming quarters.

Financial Results

STAAR Surgical reported a revenue decline of 3% in 2024, reaching $313.9 million, largely due to headwinds in the China market. The gross margin dropped from 78.9% to 65.8%, impacted by reduced production volumes and increased inventory reserves. However, the ex-China business showed resilience with a 9% growth in Q1 2024.

The company is actively reducing its SG&A expenses, targeting a $225 million run rate, and has completed most employee terminations. Despite the challenges, STAAR remains committed to returning to profitability, supported by a strong financial model and proven technology.

Operational Updates

STAAR Surgical is addressing its operational challenges by reducing excess inventory in China, expected to be resolved by month’s end. The company is leveraging its Swiss manufacturing facility to mitigate tariff impacts, treating it as a tariff-free zone.

Regulatory approvals have been secured for key products in China, Taiwan, and Brazil, with plans to roll out EVO Plus or V5 in China on a limited basis in Q4. The management transition and organizational restructuring have been completed, streamlining operations.

Future Outlook

Looking ahead, STAAR Surgical anticipates a significant sales rebound in Q3, particularly in China, with positive results expected globally. The company is targeting a $225 million SG&A run rate by year-end, aiming to restore historical earnings and cash flow generation.

With the prevalence of myopia projected to increase from 33% to 50% by 2050, STAAR sees a substantial market opportunity. The strategic shift towards converting glasses and contacts wearers to surgical solutions is expected to expand the addressable market significantly.

Q&A Highlights

During the Q&A session, CEO Steve Farrell emphasized the importance of transparency and strategic focus on converting glasses and contacts users to surgical solutions. While the company refrains from providing short-term guidance, it remains optimistic about Q3 and Q4 performance improvements.

Farrell reiterated STAAR’s position as a global leader in ophthalmic surgery and its belief in the superiority of its EVO ICL product over LASIK, underscoring the correlation between market presence and penetration success.

In conclusion, STAAR Surgical’s presentation at the William Blair Conference highlighted its proactive strategies to navigate current challenges and capitalize on long-term growth opportunities. For further details, readers are encouraged to refer to the full transcript below.

Full transcript - 45th Annual William Blair Growth Stock Conference:

Margaret Kayser Andrew, Med Tech Analyst, William Blair: All right. Good morning, everyone. Thank you guys for attending the William Blair Grostock Conference. Very pleased to have the team from STAAR Surgical here. My name is Margaret Kayser Andrew.

I am the med tech analyst here that covers STAAR. For a complete list of research disclosures and conflicts of interest, please see williamblair.com. But I’m going to turn it over to these guys and we might have chance for Q and A at the end. Thank you.

Steve Farrell, CEO, STAAR Surgical: Great. Thanks Margaret. I’m Steve Farrell and you guys have the pleasure of hearing the first presentation ever that I’ve made as as CEO of Star. A clicker. Next one.

Alright. Good start. So who are we? We’re a forty three year old company. Why is that important?

It’s important because we’ve got proven technology and we’ve seen competitors come and go over the last twenty years, but we’re still here. What are we? We’re a global leader in ophthalmic surgery. We believe we’re a superior solution to LASIK. Does that mean that LASIK is not a good solution?

No, it doesn’t. But we think we’re a better solution. Why do we think we’re better? We’re reversible. We our lens offers UV protection for the natural lens in the eye.

Our our product does not induce dry eye, and most importantly, we preserve the cornea. There’s no tissue removal. There’s no risk of eccasia which is the thinning of the cornea. We have a rapid recovery from our surgery. We’ve got improved contrast especially at night and it results in straightforward calculations for future IOL implants.

So when we age and we need a replacement of the natural lens, we haven’t complicated that by adjusting the cornea. We have a global presence. We have a reach with 75 countries. We have a number one refractive share in Japan. There’s been a lot of negative press on LASIK in Japan over the years, which is part of the reason for our rise.

We’ve also been a global leader in entering the Japanese market. So over time, we do better and we’ve been in the Japanese market for a while. We have about a 12%, perhaps a little bit more refractive share of the market globally. That number is a little bit hard because the data is not perfect, but we’ve got a good solid share of of the refractive market globally, but we still got a lot of room to move. What are our keys to accelerating growth?

Our keys to accelerating growth, we need some help from the macroeconomic tailwind. So we are fortunate to be in a in an expanding market, and I’m gonna talk more about that, But we are a discretionary purchase. And so that means that we are going to rise as things get better in the economy, and we’re gonna have some headwinds as things get tougher. The other the other key challenge for us to overcome is patients who are in glasses and contacts are reluctant to pursue a surgical solution. They’re just nervous about it.

And so that’s something that that we need to overcome. As the economy starts to improve, our performance will start to improve. In terms of our geographic sales mix, about 8% of our sales are in The US, Fifty One Percent are in China, Twenty Seven Percent in the APAC. Lastly, we’ve got about 14% in EMEA. If you look at the bottom right of this slide where you see, we were approved in Korea, Japan, and, and China in 2013 and 2014 and then weren’t approved in The US until 2022.

Why is that important? There is a correlation. It’s not a perfect correlation, but there is a correlation between how long we’re in market and how much success we have from a a penetration perspective. There’s, of course, also specific challenges that we have in each country. But generally, the longer we are in a country, the more comfortable surgeons get and the more comfortable patients get.

That word-of-mouth is, perhaps the most important criteria for us as we expand. I know there’s, been some concern of investors that our growth in The US hasn’t been rapid enough. That’ll come. And the reason it comes is we’re continuing to pursue the strategy. Surgeons are getting more comfortable.

And as patients have positive experience with the EVO ICL, we’ll start to reach an inflection point where we’ll start to get growth that is is more in line with what we hope and what we expect. We have a strong financial model, and we’re well positioned for a a strong rebound. In 2024, we achieved third 313,900,000 of revenue. That was down a couple 3% compared to, fiscal year twenty twenty three. That’s primarily as a result of, some headwinds that we experienced in China.

So the China market, for refractive surgery, started coming down in, kind of the middle of last year and, continued to be weak through the end of last year. It’s starting to come back now, but that’s what what has caused the the reduction in our sales growth, year over year 2024 over 2023, and it’s also what has caused us to have, very minimal sales in the first quarter, through our through our China distributors, first and second quarter. I’d point you to the bottom, what’s possible. These are actually fiscal, 2022 numbers where we achieved 78.5 gross margin, 15.4% operating margin, and 24.2% adjusted EBITDA margins. Why is that meaningful?

It’s meaningful because we’ve been there, and we think that we can get back there. It just takes time, but the earnings profile of this business are very strong. Okay. There we go. What are EVO ICL’s competitive advantages?

And I wanna also spend a few minutes on the large and growing market opportunity. So again, I just wanna reiterate, we don’t think that LASIK is a bad procedure. But for the eyes, we think we’ve got a a superior solution. What are the choices for patients who have myopia? They can wear glasses and contacts, but that creates a lifestyle limitation.

Or they can get a surgical choose a surgical option, which LASIK is obviously a a primary surgical option. Why do we think we’re better? If you look at the safety features on the right, we’ve got a reversible lens. So we are not permanently altering the structure of the eye. We’ve got a lens that goes in front of the natural lens.

And, so we do, less damage to the structure of the eye. We’ve got flexibility for future procedures. That’s really important because as we age and need a replacement of the the natural lens, we have not made alterations to the eye that that complicate that procedure. We can treat eyes with a thin cornea. Since we’re a supplemental lens, we offer UV protection.

We, have are really a very quick and easy procedure that’s less invasive. And importantly, no corneal tissues removed through our procedure, and our procedure does not cause dry eye syndrome. The columnar difference. This is really the differentiator for us. We have a a columnar product that’s made from collagen.

It’s biocompatible, and it’s a material that’s stable and quiet in the eye. And it’s been used in the eye for decades. So we have an advantage in our columnar product over the acrylic phacoic IOLs. We’ve, in our history, experienced probably 20 different competitors in the FACIC IOL space, and they’ve all had acrylic lenses. And we have a safety and effectiveness with our columnar difference that has been sustainable for us and has been a real competitive advantage in the past, and we expect it to continue to be in the future.

We’ve historically talked about five point two million procedures a year, which is the number of procedures for people who have myopia and have elected the surgical option. That’s LASIK, PRK, SMILE, EVO ICL, or one of our acrylic competitors. We’re starting to think about the market much more broadly and how can we get people out of glasses and out of contacts. We don’t see this as a zero sum game, and we’ve historically fought for this five our portion of the 5,200,000 procedures. We’re starting to think more broadly about how can we connect with people who are in glasses or in contacts or or untreated.

Bottom left of this slide, our estimated share, as I mentioned previously, of of today’s refractive procedure market is about twelve percent. We’re at seventy percent in Japan. Very high quality there. There’s surgeon confidence, and there is a negative bias against LASIK there. So is do I expect that we’ll be able to get to seventy percent in every market?

No. But that really shows shows what’s possible. Recently, we’ve had some regulatory wins. We’ve had in China, both Toric and Sphere have been approved. So, that was a nice win for us.

In Taiwan, the EVO ICL has been approved. And, in Brazil, we’ve, received approval, to lower the diopter range from negative six to negative point five. So made really good progress from a regulatory perspective and are optimistic about the opportunities for our EVO plus or v five in China when we roll that out in q four on a limited basis. I referenced this earlier, but our opportunity is really much larger than the 5,200,000 procedures. We welcome competitors into our space because it raises the awareness of the surgical options and of the lens option as a choice versus versus LASIK.

There are a potential for 5,400,000,000 eyes. The myopia epidemic is just exploding. And in the population that we serve, which is twenty one to forty five, there are two point two billion eyes, one point one billion people who are candidates for our procedure. I’d move, to the right, and those people are mostly in glasses, contacts, or or untreated. Moving to the right, where is the market?

I’ll start on the left with with China and India. I know we’ve, received some investor concern about our concentration in China. That’s where a lot of the myopia patients are. And so that’s an absolutely critical market for us. And it’s a growing market, notwithstanding some of the inventory issues we’ve had kind of in the the beginning of this year.

But it’s generally a growing market. It’s generally a a very important market, and it will continue to be a very important market for us. We’ve heard some noise or a lot of noise from investors around what we’re doing in China and the the tariff issue and inventory issue. And is there going to be some big backlash because of of the the trade war here? Our perspective is this trade war situation, we believe, is a transitory issue.

So we expect that over time to pass. We are the best solution for the patients in China. And so we’re not expecting a a regulatory backlash. We were just recently approved for, the evo toric Andosphere in China. So there was clearly an opportunity for, the Chinese government to retaliate, and they did not do that.

And I think the reason they didn’t is because we’re so important to to the people in China. I’d like to just remind you, and I’m I’m looking around the room. I’m not sure there’s anyone quite my age here. But in the nineteen eighties, there was a a big backlash against China I’m sorry, against Japan, much like what’s happening against China right now. And the country moved past that.

And in fact, we are now currently a 70% roughly share of of the market in China. If you go back to the the nineteen eighties and early nineties, there was a lot of anti Japan not allowing the Japanese to buy real estate, don’t buy Japanese cars. And so we heard a lot of that same rhetoric. Well, that passed, and we’re expecting that to pass with the the market in China also. Moving to the right, India is a very big market.

It’s not big for us right now, but that economy is growing six or 7% a year. Last quarter, I think it grew a little higher than that. So that economy is growing. And as wages increase and and that the per capita income increases, we expect India to be an important market for us. And then The US, you know, it’s not a huge market, but it’s an absolute critical market for us.

And so we remain committed to that market. I think perhaps our biggest challenge there is surgeon confidence combined with the referral. So we think we’re going to hit an inflection point. We’re not there. But as patients have success and as surgeons have success, we think we’re a great solution for, for The US market.

This is a graphical representation of, the 400 people who are or 399, I guess, who have not made the surgical election. We’ve historically fought over that one in four hundred people who make the surgical election, but we’re starting to think more broadly than than just the the people who make the surgical selection. And we think a rising tide will will lift all boats. Why do people not make the surgical election? At least in The US where people have money, the primary reason is fear.

And people get various levels of concern over getting eye surgery of getting any surgery. But getting eye surgery, there’s just a a higher level of concern. And so that’s something that we need to overcome. And one of the prime ways we overcome that is by word-of-mouth. When people have a surgery and they realize, okay.

This isn’t that big a deal. It wasn’t painful. It was very quick. And I think people have a perspective that eye surgery is a really scary thing, and it is until you’ve had it done. Other things we need, we need some help from the economy.

We’ve been had some pretty intense headwinds over the last six or nine months, especially in China, and we’re seeing that come back. But when we start to get tailwinds instead of headwinds, this is a discretionary spend, and we should come back very strong. The market is excellent. The prevalence is growing from myopia. Why is it growing?

It’s growing because kids and adults are spending their whole day looking at phones and looking at computers. And they’re not outside where their their eye is adjusting to to distances. So myopia is expected to grow from thirty three percent to fifty percent. I’ve worked in businesses that have had headwinds. I’ve worked in businesses that have that have had tailwinds.

Tailwinds are better, and that’s what we’ve got in terms of the myopia prevalence. This graph on the right is a graph of the diopter scale. And our our global average is somewhere in that eight to 10 range depending on what what data you look at in terms of our average diopter diopter range. We are the clear choice for higher diopters. And the reason we are the clear choice there is the amount of cornea that needs to be removed gets really intense when you get to kind of that eight, nine, 10, 12 range.

And so we are the clear choice there. Something that’s very important to us is we need to move down the diopter scale because that’s where a lot of the the patients are. So we’re, excited about what we believe is an inflection point that we’re reaching in The US where patients are are starting to have word-of-mouth around the the success that they’ve had with with our procedure. Alright. Recent financial results.

We can’t sugarcoat this. They’re they’re bad. So the first couple of quarters of this year have been very tough. Our net sales went from 77,400,000.0 a year ago, excuse me, to 42,600,000.0 in this year. That entire differential plus more is the reduction of of China, and I’ll I’ll talk more about that on the next slide.

Gross margins decreased from 78.9% to 65.8%. That’s primarily the result of reduced production volume. So we had some production variances because of the drop off in China. We have a ramp of our Switzerland manufacturing, which in the long run is going to be very good because we view our Switzerland facility as a tariff free zone. And, we had some increased reserves for excess and obsolete inventory.

We’re expecting, to be 75 to 80% longer term in terms of our our gross margin, but we’re we’re in a a depressed, time right now because of lower volume and, the manufacturing ramp in in Switzerland. Bottom right, restructuring impairment and and related charges of 22,700,000.0 in the first quarter. We’re going to have a a number, I don’t know what it is, also in the second quarter. This sounds like bad news, but it’s really good news masquerading as bad news. Why is that?

It’s because we’re in the process of reducing our s g and a to a $225,000,000 run rate. We’re taking out waste from the organization. We completed most of the terminations from an employee perspective this week, and so most of that’s behind us. The team has responded extremely well to that. The cuts are never easy.

They have a personal toll, which, you know, none of us like to do, but it was necessary for the business. And we’re confident that we’ll be exiting this year with a a $225,000,000 run rate, and we’re looking for other areas that we can save as well. Okay. I went too far. Okay.

Silver lining. Despite all of the macroeconomic headwinds and q one was a a tough year kinda or tough quarter globally, we were able to grow our ex China business 9% year over year. So if we’re able to achieve 9% year over year growth in a very challenging economy, we should be able to achieve greater growth than that when we get some some tailwinds. And so we’re we’re very optimistic about the future because in a tough tough quarter, we achieved a 9% year over year growth ex China. Okay.

Short term tactical challenges have really been mostly addressed. When we’ve met with it it feels like a 20 or so investors over the last month or so. And they all wanna talk about the management transition, China inventory, tariffs, cost control, Swiss manufacturing, and then the sales rebound. So those are kind of the key topics. Let me take them one by one.

Management transition, we’ve streamlined that organization, and, that’s really complete. We’ve restructured the company, and, that management piece is behind us. China inventory, we’ve, worked we’ve got an excess level of inventory in China partly because we weren’t close enough last year to our distributors and we continued to grow our inventory in market. And then we had a a decrease in in the demand in China which created a gap. So we’ve been working through that in the first six months of this year.

We’ve been working very closely with our distributors. And by the end of this month, the China inventory will be a nonissue. Tariffs, there’s been a huge amount of noise. Every time there’s a tweet, you see our our stock move one way or the other. The reality is we’ve substantially mitigated the tariff risk because we’ve got inventory in market that’s gonna get us through the end of this year, early next.

And we’ve got our Switzerland manufacturing, which we believe will be tariff free, which is is currently ramping. There’ll be a little noise around tariffs, from a a financial perspective, but it’s temporary, and it’s only on the ends. There are a few products that in the next six or nine months we won’t have out in the in the market that will need to manufacture in The US, but that’s gonna be kinda noise level immaterial. We’ve really resolved that tariff issue through either the Swiss manufacturing or by getting inventory in in house. Improving cash flow, we’ve, identified already all of the actions that we need to take to need to execute to get to a 225,000,000 run rate.

So, I’m hoping that after this q three, we don’t need to talk about the management transition. We’re not talking about China inventory. We’re not talking about tariffs. We’re not talking about s s g and a. We might be talking still a little bit about Switzerland manufacturing because we’re gonna be ramping that, but that’s a good thing.

And then we’re we’re mostly talking about the the sales rebound, which we’re already seeing and we’re expecting a meaningful lift in q three from China, and we’re expecting to have good results worldwide as well. So what’s the long term investment thesis? Our tactical headwinds have substantially been addressed over the last three or four months by the team. The headwinds appear to be slowing. We’ve got a really strong financial model.

And when we start getting some tailwinds, this business is gonna really take off. Our columnar technology is proven, and it’s difficult to replicate. And it’s difficult even for us to reproduce our polymer, and we’ve been doing it for decades. The EV EVO ICL has a long track record in the eye. The prevalence of myopia is really just exploding and is expecting to be about 50% of the market by 2050.

We’re expecting a return to our historical earnings and cash flow generation, and we’re dedicated to to shareholder transparency and maximizing returns. What does that mean? That means we’re not up here to sell you. We’re up here to to tell you how we’re thinking about the businesses, how we’re thinking about the good things, how we’re thinking about the bad things so that you can make the best investment decision. We think transparency with investors is absolutely critical.

We want to earn your trust, and, we’re excited, that you’re considering, joining the STAR team. So, I think I’ve got two and a half minutes left, and, we’d be happy to, take any questions if, anyone has any.

Margaret Kayser Andrew, Med Tech Analyst, William Blair: Maybe I’ll just, start out over here. You know, I wanna talk a little bit about, some of the the comments you’ve made recently about kind of market volumes and trends. You know, are you seeing any kind of improvement, deceleration? I think was was actually more more the comment than maybe we did here. And at what point do you feel confident to be able to put a guidance range out there?

Are there specific things that you’re looking for to to regain that confidence?

Steve Farrell, CEO, STAAR Surgical: Sure. So, let me let me answer the guidance question. Is we just went through all of the moving parts, and there are a lot of them and more. So, we we are not, at least in the short term, going to provide guidance, but that’s different from providing insight to you to make good investment decisions. We want you to think about the business the way we think about the business, whether that’s good, bad, indifferent.

We wanna educate you and help you understand how we’re viewing the market and how we see things evolving in the market. And so that’s, our objective is not to withhold guidance because we’re we’re hiding anything. It’s because there are a lot of moving parts. We don’t wanna be wrong. We wanna earn your trust, but that doesn’t mean that we’re not committed to being transparent.

In terms of, the growth, we feel very good about q three, q ’4. When you hear how the economy is moving up and down, you hear noise about China being soft. You know, we are seeing reasonable demand there. A lot happens in the in the third month of the any quarter. And so, you know, it’s it’s difficult to predict how how this quarter is going to come out.

But very confident in the in the long run of the business. I’m very confident in q three, a a very good rebound off of of where we’ve been in q three and q four. And I’m very confident that our s g and a will be at a level that will allow us to return to profitability.

Margaret Kayser Andrew, Med Tech Analyst, William Blair: Great. Yeah. So maybe just the last question. We were just talking about it on the side, but you’ve been in the role for ninety odd days. I think we talked ninety three, ninety four.

You know, maybe I know we we heard the presentation, but in terms of easy things that you wanna wanna shift maybe from a strategic perspective, where do you view that opportunity over the next couple of years? Thanks.

Steve Farrell, CEO, STAAR Surgical: I I think I talked about it a bit in in the session, but I I think that getting people out of glasses and contacts is absolutely critical. And as an organization, I would even see almost as an industry, we haven’t been focused on that. We’ve just taken the population of people who’ve already made the election for the surgical option, and we fought over those. I I don’t think we need to be fighting with our competitors. I think we need to be figuring out how to to make, better solutions for the people who are selecting, lifestyle restricting option like glasses and contacts or even worse aren’t aren’t getting, any help, at all.

Margaret Kayser Andrew, Med Tech Analyst, William Blair: Very helpful. Really appreciate it. Wonderful. Congrats on the first, presentation. I think you did well.

And Thank you. We’ll be in the breakout in Jennie B. Appreciate it.

Steve Farrell, CEO, STAAR Surgical: Appreciate it. Thank you.

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