STAAR Surgical Company (STAA) Earnings

Management highlights

### Overall Business Progress - Star Surgical has largely resolved 2025 challenges including Alcon merger-related disruption, elevated channel inventory in China, and tariff risks, delivering strong Q1 2026 results with positive adjusted EBITDA and broad revenue growth - Management achieved core objectives of revenue growth, expanded profitability, product portfolio strengthening, and next-generation pipeline advancement, surpassing the global milestone of 4 million ICLs sold ### China Market Updates - Inventory levels in China were normalized to contractual targets entering Q1, and were maintained at or below target during the quarter, with sales to distributors closely matching in-market end demand - The commercial launch of EVO Plus ICL in China saw stronger early demand than planned, requiring accelerated scaling of Swiss manufacturing output; strong surgeon adoption has validated the product's clinical differentiation - Star Surgical continues to gain share in China's premium lens-based refractive surgery market, which is more stable in 2026 than the 2022-2024 volatile period, with moderate ongoing growth in procedure demand ### United States Market Updates - The FDA approved expanding the EVO ICL indication to patients aged 45-60, adding 8 million more potential patients to the company's addressable U.S. market - U.S. net sales grew 22% year-over-year despite ongoing sluggish demand for corneal laser vision correction, reflecting increased surgeon adoption, improved commercial execution, and a focused marketing strategy - The U.S. ICL market remains underpenetrated relative to more mature global ICL markets, presenting a clear long-term growth opportunity ### Operational Milestones - The Nidal, Switzerland manufacturing facility is on track to supply 100% of EVO and EVO Plus lenses for the China market in 2026, eliminating the need for imports and associated tariffs - The company continues to roll out its new Oracle ERP system with limited business disruption to date, with expected long-term benefits for visibility, internal coordination, and business scalability - Cost reduction initiatives launched in 2025 have delivered sustained results: total operating expenses (excluding restructuring and merger costs) decreased 18% year-over-year, and the company remains on track to meet its full-year 2026 operating expense target of $225 million ### Financial Highlights - Adjusted EBITDA was $24.4 million in Q1 2026, compared to a $26.3 million adjusted EBITDA loss in the prior-year quarter - Gross profit margin improved to 73.6% from 65.8% year-over-year, driven by eliminated manufacturing ramp-up costs, lower advanced manufacturing expenses, reduced inventory provisions, and lower freight costs as a percentage of sales - Operating income was $8 million, compared to a $57.4 million operating loss in the prior-year quarter; net income was $5.2 million ($0.10 per diluted share), compared to a net loss of $54.2 million ($1.10 per diluted share) year-over-year - The company ended Q1 with $163.9 million in cash, cash equivalents, and available-for-sale investments, with no outstanding debt

Guidance

- Management is not providing full-year 2026 revenue guidance at this time, citing ongoing macroeconomic and geopolitical uncertainty across global markets, and a priority on only offering guidance once sufficient stability and visibility is achieved - The company reaffirmed its full-year 2026 operating expense target of $225 million, with quarterly spending expected to be roughly linear outside of temporary bumps from periodic industry trade shows, and full-year spending expected to stay at or below the target - Management maintained a 75% full-year 2026 gross margin target, noting that Q1 2026 came in below this target due to lingering headwinds from higher-cost 2025 inventory, but expects gross margin to approach the target by the end of 2026 with meaningful further improvement in 2027 as Swiss manufacturing volumes scale and unit costs decline - Management is optimistic for a good Q2 2026 aligned with historical seasonal trends for the year's peak refractive surgery season, but declined to commit to a specific sequential uptick in China or global revenue, and will revisit guidance later in 2026 once more performance data is available

Segment performance

Star Surgical reported total Q1 2026 net sales of $93.5 million, representing 119.6% year-over-year growth. The China segment contributed $47.4 million (50.7% of total net sales), driven by the launch of EVO Plus ICL and sustained demand for EVO ICL. The United States segment contributed over $6 million (6.4% of total net sales), growing 22% year-over-year. Excluding China, all other global segments combined grew net sales 6% year-over-year to $46.1 million (49.3% of total net sales), with solid double-digit growth in the Americas offset by macroeconomic and geopolitical headwinds in the Middle East and India that reduced segment net sales by less than $2 million.

Risks & headwinds

- Ongoing macroeconomic uncertainty across Europe and parts of Asia, and geopolitical and trade disruption in parts of the Middle East, have created near-term headwinds that reduced Q1 2026 net sales by less than $2 million, and the company continues to monitor these risks closely - Elevated price sensitivity and macro volatility in markets like India require a measured near-term approach to market expansion - Persistent weakness in the overall global laser vision correction market and general macroeconomic conditions can impact overall refractive procedure demand - New competitive entry in China's ICL market creates potential for market share pressure, though management notes competition validates the growth of the lens-based refractive surgery market - Counterfeit ICL products entering the Chinese market pose potential reputational and market share risks - While the EVO Plus ICL launch in China outperformed early expectations, unplanned scaling of Swiss manufacturing output created near-term supply constraints that are expected to be resolved by the end of Q2 2026

Analyst Q&A

• Q: Can management comment on whether the consensus full-year 2026 revenue outlook of ~$311-312 million is appropriate, and what is the outlook for Q2 peak season in China? /

  A: Management declined to confirm or comment on the consensus full-year revenue outlook. While the company is optimistic about Q2, the typical peak summer season, it cannot commit to specific outcomes due to broad macroeconomic and geopolitical uncertainty across global markets. Management confirmed Q1 2026 China performance was strong and inventory is appropriately positioned, and the company is prepared if peak seasonal demand materializes as expected.

• Q: Is Q1 2026 a clean, normalized base for modeling full-year 2026 revenue, and are there any factors that would prevent the typical sequential Q2 seasonal uptick driven by China? /

  A: Management confirmed Q1 2026 is the first clean quarter after multiple years of inventory noise, revenue recognition timing issues, and other disruptions, so all prior distortions are now resolved. The overall China refractive market is now stable, and EVO ICL continues to gain share from laser-based procedures. While historical trends point to a strong Q2, management still declined to guarantee seasonal patterns hold this year due to broader uncertainty, but remains optimistic for a good quarter.

• Q: How much of Q1 2026 China revenue was makeup for Q4 2025 order shortfalls, and what share of Q1 China revenue came from EVO Plus? /

  A: Management confirmed that entering 2026, China distributor inventory was already normalized, and at the end of Q1 2026 inventory remained at or below target levels, meaning Q1 China revenue reflects true in-market end demand rather than restocking. While EVO Plus demand exceeded early expectations and required accelerated manufacturing scaling, the company is not disclosing its specific share of Q1 China revenue at this time. The product is commanding a healthy premium price, it will remain the company's top-tier premium offering rather than replacing existing EVO ICLs, and full supply capability is expected by the end of Q2 2026.

• Q: What metrics does management need to see to start providing formal guidance, given the strong Q1 performance? /

  A: Management acknowledges the market wants guidance and has provided visibility into operating expense and gross margin targets. However, the new leadership team has only been in place for four months, and the broad macroeconomic and geopolitical backdrop remains uncertain. Management wants to ensure it can provide accurate, reliable guidance rather than risking missed targets, so it will only issue guidance once it achieves sufficient stability and visibility into full-year performance.

• Q: What is the quarterly spending cadence for 2026, and how should gross margin be expected to trend this year? /

  A: Full-year 2026 spending will remain in line with the $225 million target. Spending is roughly linear, though Q2 and Q3 will see small temporary bumps from major industry trade shows and increased direct-to-consumer marketing, so quarterly spending will increase slightly from the Q1 level. The 2026 gross margin target remains 75%, with Q1 coming in slightly short due to lingering higher costs from 2025 inventory. Higher Swiss manufacturing volumes in H2 2026 will reduce unit costs, bringing gross margin closer to target by year-end, with further meaningful expansion expected in 2027.