Staar Surgical Company ((STAA)) has held its Q1 earnings call. Read on for the main highlights of the call.
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The recent earnings call of STAAR Surgical Company presented a mixed sentiment, with a focus on strategic management changes and positive sales growth outside China. The company is making strides in cost optimization and expanding its manufacturing capacity. However, challenges such as significant revenue decline in China, lower profitability, decreased gross margin, and tariff issues were also highlighted.
Positive Global Sales Growth Outside China
Net sales excluding China reached $42.2 million for the first quarter of 2025, marking a 9% increase compared to the same quarter last year. This growth underscores the company’s ability to expand its market presence and drive sales in regions outside China.
Strategic Management Changes
STAAR Surgical has streamlined its management structure, promoting Warren Faust to President and appointing Deborah Andrews as Interim CFO. These changes are aimed at enhancing leadership effectiveness and driving the company’s strategic objectives.
Cost Optimization Efforts
The company has identified actions to significantly reduce costs, targeting an SG&A run rate of approximately $225 million by the end of 2025. This initiative is part of STAAR’s broader strategy to improve financial efficiency and profitability.
Continued ICL Demand and Growth in China
Despite a dramatic reduction in reported revenue, in-market ICL procedures in China are believed to be similar to or better than the first quarter of 2024. This indicates sustained demand for STAAR’s products in the Chinese market.
Expansion of Manufacturing Capacity
STAAR Surgical is increasing its manufacturing capacity in Switzerland, with a potential output of 300,000 lenses a year by the end of 2026. The company also sees a longer-term potential for producing over 800,000 lenses annually, supporting its growth ambitions.
Significant Revenue Decline in China
The first quarter reported China sales were only $389,000, a steep drop from $38.5 million in the same quarter last year. This decline is attributed to distributors consuming existing inventory, highlighting a significant challenge for the company.
Lower Profitability and Restructuring Charges
The adjusted EBITDA for the first quarter of 2025 was a loss of $26.4 million, with restructuring, impairment, and related charges totaling $22.7 million. This reflects the financial pressures the company is facing amid its restructuring efforts.
Decreased Gross Margin
The gross margin decreased to 65.8% from 78.9% in the previous year, impacted by higher manufacturing costs and increased excess and obsolete inventory reserves. This decline in margin is a concern for the company’s profitability.
Tariff Challenges in China
Retaliatory tariffs on U.S. goods by China have led to consignment agreements and shipment of consigned inventory to distributors in China, creating uncertainties. These tariff challenges continue to affect the company’s operations in the region.
Forward-Looking Guidance
During the earnings call, CEO Steve Farrell emphasized key metrics and strategic initiatives to address short-term challenges and drive long-term growth. Despite a decline in total net sales to $42.6 million due to minimal purchases by China distributors, sales outside China grew by 9% year-over-year. The company is optimistic about resuming normalized sales by Q3 and achieving a 70% gross margin in the second half of 2025. STAAR is focused on leveraging its proprietary technology and expanding manufacturing capabilities in Switzerland to capitalize on growing market opportunities.
In conclusion, STAAR Surgical Company’s earnings call revealed a complex landscape of growth and challenges. While the company is experiencing positive sales growth outside China and is committed to strategic expansions and cost optimization, it faces significant hurdles in the Chinese market and profitability pressures. The management’s forward-looking guidance reflects optimism for future growth, driven by technological advancements and strategic initiatives.