STAAR SURGICAL CO Q4 FY2025 earnings call

• Leadership: Deborah and Warren stepped into shared co - CEO roles effective February 1st. The board has engaged a search firm for the next CEO. - 2025 Review: 2025 was a year of transition, with disruption from the proposed merger with Alcon behind. - Market Position: Refractive surgery is moving towards lens - based procedures. EvoICL is gaining share. In China, market conditions stabilized in 2025 with in - market EVO ICL demand recovering at mid - single - digit rates. Outside China, U.S. business has momentum with expanded age range indication for Evo, and growth in Americas, EMEA, APAC. - Profitability: Made progress in 2025 by reducing costs and beating the second - half $225 million adjusted operating expense target. Focus on cost discipline for operating leverage. - Innovation: Launched EVO Plus in China, progressing rollout. Advancing Lioli injector for EVO ICL procedures. Working on pipeline for longer - term advancements. - Oracle ERP and IT Initiatives: Final stages of Oracle ERP implementation, advancing Stella online sizing and ordering platform, and other IT initiatives for efficiency.

In the fourth quarter of 2025, total net sales were $57.8 million compared to $49 million in the year - ago quarter. China net sales were $17.5 million in Q4 2025 vs. $7.8 million in Q4 2024. Excluding China, net sales declined by 2% year - over - year, with Americas up 18% in Q4, EMEA down 20% in Q4, and APAC ex - China up 2% in Q4. Gross profit margin for Q4 2025 was 75.7% of total net sales compared to 64.7% in the prior year quarter. Adjusted EBITDA for Q4 2025 was a loss of $200,000 compared to a loss of $20.8 million in the year - ago quarter.

Not providing financial guidance for 2026. But expect to significantly increase sales in 2026 compared to 2025. Target profitability in FY26. Gross margin expected to be slightly lower in 2026 relative to 2025 due to higher cost of inventory from Swiss manufacturing and increased inventory reserves, but will work to offset through higher ASPs, improved yields, and efficiencies. Expect to maintain operating expense run rate at levels aligned to the $225 million target. Cash will dip modestly in the near term but resume generation in the back half of the year and end 2026 with a higher cash balance than 2025.

• Distributor inventory fluctuations: Uncertainties in distributor inventory levels due to factors like mergers and market disruptions can impact sales. - Macro - economic challenges: Continued macro - economic volatility in China, such as housing market weakness, can affect in - market sales. - Tariff risks: Rising tariffs can create headwinds, although steps were taken in 2025 to mitigate exposure. - Competition risks: Competitors in the refractive surgery market can pose challenges, and the company needs to continue innovating to stay competitive.

Q: Just on distributor inventory, have the reductions continued into the first quarter or has that stabilized now that Alcon is behind you? And with that in mind, can you give us any guardrails for how to think about the first quarter and revenues, maybe compared to the $77 million in 1Q24?

A: We're pleased with inventory management progress. Inventory is in a good place, below the six - month contractual level. We're optimistic as the market starts to come back but not providing specific revenue guidance.

Q: To start out, I appreciate that you're not guiding for 2026, and I heard your comments there, Tom, but I just wanted to ask or maybe push a little bit more. So if we think about how China saw in - market demand up mid - single digits, but the rest of the business was down, I think you said about 2% outside of China. Curious if low single digits is a good place for 2026 collectively.

A: 2025 had disruption, particularly in Q4 with distributor decisions. Disruption is behind us, and we're optimistic about ex - China business continuing to grow as surgeons move towards lens - based refractive surgery.

Q: Hey, thanks for taking the questions from Anthony and I. Just wanted to ask the first one, maybe on China, you know, historically 2Q busy season, you know, obviously that was obscured last year because of the distributor dynamics. But wanted to hear about, you know, how we should be modeling 2Q. Is the seasonality still expected? And, you know, are there any early reads that that momentum that we typically see will be seen again this year in China?

A: We do expect seasonality to continue with Q2 and Q3 being strong for SAR in 2026 historically.

Q: Hi, good afternoon. Thanks for taking the questions here. I guess just bouncing off of the prior question, maybe Warren or Deborah, could you help us understand, like, what is the true growth algorithm from here? You know, how much is driven by the continued China recovery and growth versus, you know, ex - China recovery, penetration, and mix? And can you get back to that strong double - digit growth levels that you were seeing in China prior to last year and sort of that mid - teens growth level ex - China? Just help us understand how you get back to sort of the pre - 2025 levels and over what time.

A: Don't expect hyper - growth levels in 2026 like pre - 2025. We're working towards growth, but board has a long - view. Expect nice growth globally in 2026 but not guiding on specific numbers.

Q: Hi, Warren. Deborah, thanks so much for taking the question tonight. I just want to follow up on the comments on EVO Plus and the launch in China. You know, if I recall the strategy correctly, a part of it also was to defend against value - based purchasing in China. Are you seeing any headwinds to the traditional EVO ones right now from BBC in China, and do you expect any?

A: Haven't heard anything about value - based purchasing. Competitors are non - colomer lenses, and columnar is a differentiator. Early progress with EVO Plus is encouraging.

Q: Great. Good afternoon, Oren and Deborah. Thanks for taking my questions. I wanted to get your thoughts on what year has no stocking dynamics for China, just so we can kind of better frame know what a normal year is for china sales like is 2023 at 185 kind of a clean year in your view uh when you think about channel inventory um and you know not necessarily returning to that in 26 but you know over over the near term you know it seems like an easy question that to answer but the reality is china was going through it was going through such a hyper growth period that the distributors, the single distributor at the time, and then the two distributors, once we brought on HCDK, were doing everything they could to get inventory, get folks trained to get it out into, remember, these are thousands of hospitals in a very large, diverse country. And so I don't know when you would say that the in - market demand ceased in such a way that it started back - channeling or back - filling inventory at the distributor or anywhere else within that distribution lane. So I don't know that that question can be answered. What I can tell you is that on a go - forward basis, we understand our inventory position very well, and we have very good controls in place to ensure that we don't allow that to happen to us again. And so feel good about the contractual levels of inventory with our importers, feeling better about the stabilization seemingly of the China business in 2025 and excited for a clean start here in 26.

A: Can't answer when China had a clean year like 2023, but have good controls in place for inventory to prevent similar issues and feel good about 2026 start.

Q: Hey, guys. Thanks for taking the questions here. I'll keep it to one. The deck that you guys published on the Alcon merger included language around Starr's inability to penetrate lower diopter patients, which makes up the majority of refractive patients, and that is deviated from prior commentary around moving down the diopter curve. So could you just talk about that shift in messaging and really how it informs your strategic decision - making and process moving forward?

A: It's not a change in the need to go down the diopter curve. We know we need to continue, it's hard due to market infrastructure. We'll keep pushing to get customers to consider EVO at lower diopters.

Q: Hi. Good afternoon. Thank you for taking my questions. Two for me. The first one is on China, and lots of questions have been asked, but not sure we've discussed expectations for ICL end market growth in FY26. And, you know, it sounds like things have started to stabilize some over the course of 2025. Do you expect to see further recovery this year? And just any point you can put on it would be appreciated. And then I had a follow - up.

A: Lots of same challenges as 2025 in China, macro challenges still there. Cautiously optimistic about economy, Q4 2025 in - market sales accelerated. Reluctant to give guidance.

Q: Thank you so much. Yeah, great question, because it's the third pillar in our strategy here, and it's a place where we have, candidly, we haven't delivered in the way that we really want to. Evo is Amazing. The columnar material is differentiated, and now the onus is on us to bring new products to market. Proud of V5, proud of bringing EvoPlus to China. That's going to be a differentiator for us, we believe. We'll also bring the Lioli injector, which is incremental innovation. The lens is still the star of the show, but it'll be a nice way for our customers to be able to inject Evo into their patients. And then we're working on a series of projects in the background. We hope to be able to update you even in subsequent calls on timelines. Think of milestones like when we start to do first - in - man treatments and when we go through other stage gates of the design control process, which is an important part of the R&D process. We want to give you that visibility, just not ready to do it yet.

A: Innovation is the third pillar. Proud of EVO Plus and Lioli injector launches. Working on pipeline with milestones like first - in - man treatments, but not ready to provide specific timelines for all projects yet