STAAR SURGICAL CO Q1 FY2025 earnings call

• Streamlined management structure: Promoted Warren Faust to President, brought back Deborah Andrews as Interim CFO, and elevated Magda Michna to Chief Development Officer.
• China inventory management: Working with distributors in China to manage inventory levels, with in - market ICL procedures improving and expected normalized sales in Q3.
• Tariff response: Negotiated consignment agreements and shipped consigned inventory to China distributors to mitigate tariff impact through early 2026, and ramping up manufacturing capacity in Switzerland.
• Cost cutting: Identified actions to reduce costs, including reduction of underutilized facilities and fixed assets, marketing savings, and personnel reductions, aiming for an SG&A run rate of approximately $225 million in 2025.
• EVO+ lens progress: EVO+ lens (V5) on track for approval in China later this summer, offering larger optical zone and eagerly anticipated by ophthalmic surgeons and patients.

Total net sales for the first quarter of 2025 were $42.6 million compared to $77.4 million in the year - ago quarter. China sales in the first quarter of 2025 were $389,000, versus $38.5 million in the year - ago quarter. Net sales excluding China were $42.2 million for the first quarter of 2025, representing 9% sales growth over the year - ago quarter. Historically, the difference between net sales and ICL sales has become small as sales attributed to IOLs and other products have decreased over time.

• Withdrew the company's outlook provided on February 11, 2025 due to government policy and economic uncertainty.
• Non - China sales: Expect sales growth of 9% to 15% in 2025.
• China sales: Confident of hitting the original guidance range of 75 - 125 million dollars.
• Gross margin: Targeting 70% gross margin in the second half of 2025, and expecting to return to profitability and cash generation in the second half of 2025 and exit 2025 with positive cash flow.

• Tariff policies and rates are evolving and difficult to predict, which may impact sales and profitability.
• Global economic uncertainty could lead to reduced demand for products.
• Competition from new market entrants may affect market share.

Q: As many other companies have done this quarter, you have withdrawn guidance because of the tariff situation and economic uncertainty. But you also indicated that procedure trends in China have improved and that your cost cutting is working. Does that mean that if economic trends around the world do not deteriorate from here on the current picture seems better than what was expressed by STAAR in February?

A: Yes. There's global uncertainty, but mitigating tariff issue, making progress on inventory and cost side. Non - China sales have 9% growth, confident of hitting China sales guidance range. Gross margin target has reasons for missing in Q1 but long - term outlook is positive. Cash outlook is also positive but with uncertainty. Committed to transparency and earning investors' trust.

Q: Maybe a little bit on the China commentary on consignment inventories, as a mitigation exercise in the face of the global trade war here, tariffs, is there any way to just quantify, I guess, how much inventory there is in the channel and consignment and when we sort of think about, and I know it's a little bit early, looking ahead to 20, 26, where perhaps they'll have to be additional mitigation efforts?

A: We have enough inventory to mitigate tariffs through early 2026. Consignment agreements were set up in 3 days with three - continent effort. Building inventory in Swiss facility, waiting on validations and approvals, confident about ramping up Swiss manufacturing to offset demand.

Q: Very helpful. And the follow up would be maybe just a fresh view from the company now on the pricing strategy, I would say maybe even globally here. What is the latest thinking on how Visian ICL should be priced in China and perhaps how it should be priced in the United States? Is there any major changes in how the team is thinking about the global pricing strategy?

A: No major changes. Value of EVO ICL is high as patients love it. Will continue to look at levers to unlock growth, but price is not the main component. Believe in the value of the product.

Q: Ryan Zimmerman: Okay. And then just, I want to understand. Sorry for all these questions. There's a lot of moving parts here, Stephen, that you're undertaking with the business. You have inventory levels in China. You talked about getting back to the third quarter, kind of a more normalized sales cadence. You now have this consigned inventory in China as well. That being said, if the market doesn't turn maybe as fast as you'd like, the sellout rate doesn't turn because of global macro dynamics, recessionary impact, what have you, how do you think about the inventory levels and the consignment in China going beyond kind of early 2026, because arguably they would get extended further out if your distributors can't work that demand down. And maybe, it speaks to the question, speaks to maybe like what you've done since taking the helm to see more transparently in China so that this doesn't become another issue again?

A: Consignment inventory in China is owned by us. We'll work through inventory levels, almost at contractual levels by end of next month. New leadership in China helps with transparency and strategy.

Q: Unidentified Analyst: Hey guys, thanks for taking the questions here. Maybe just to follow up on Ryan's questions around China. You have realigned some of the leadership for STAAR in China. So could you elaborate on how this new leadership is helping to inform just your broader strategy in China, especially given that the macro backdrop does seem to be improving in the region. And Stephen, I can appreciate that you're not providing formal guidance anymore, but you aren't necessarily shying away from the original guidance in China. So could you talk about the sort of pace of recovery that you expect in China throughout the year and what's underpinning your level of confidence of sort of being in that original guidance range?

A: Have great team in China, with experienced leadership. Wei Jiang joining as Interim Chief of APAC's strategy helps. ICL procedures up year - over - year, prevalence of myopia growing, Chinese government rate cuts, and working through inventory by end of next month underpin confidence in China recovery.

Q: Unidentified Analyst: Got it. That's very helpful. And sorry, just one quick point of clarification on the tariffs. Are you assuming anything in terms of, retaliatory tariffs going into effect after the 90 - day pause is lifted?

A: Don't know tariff situation, but in good shape through end of 2025. May have to ship some inventory in country if tariffs stay, but optimistic for solution to reduce tariffs. Vice premier of China and Scott Besant meeting in Switzerland is positive.

Q: Patrick Wood: Beautiful. Thanks guys. I'll keep it to one just to keep it snappy. The U.S. side of things kind of a fallen from Simmons side of things. How are you thinking about the go to market there, get the investment side of things. But there was a bunch of initiatives. There was, Highway 93 and then there was like trying to support surgeons on lens selection. Do you think the strategic approach was the right one? Or is that something you think you might end up changing?

A: Proud of what's done in U.S. Still focused on helping customers be clinically and economically competent. U.S. Highway 93 was about segmenting and targeting customers. Will still focus on that, and create pathways for other customers. Will right size U.S. operations as we go forward.