STAAR Surgical Company, a leading manufacturer of implantable lenses for vision correction, has faced significant headwinds in its largest market, China, over the past year. Despite these challenges, the company has demonstrated its resilience and commitment to expanding its global footprint and driving innovation in the ophthalmic surgical space.

Business Overview

STAAR Surgical was founded in 1982 and has been dedicated solely to ophthalmic surgery for over 40 years. The company designs, develops, manufactures, and sells implantable lenses for the eye and accessory delivery systems used to deliver the lenses into the eye. STAAR's primary focus is on its Implantable Collamer Lenses (ICLs), a family of lenses designed to treat myopia, hyperopia, astigmatism, and presbyopia.

The company's journey in the ICL market began in 1997 when it started selling its implantable Collamer lenses for myopia (nearsightedness) outside the United States. U.S. sales of the ICL commenced in 2006, marking a significant milestone in the company's expansion. In 2011, STAAR launched the ICL with CentraFLOW technology, commonly known as the EVO ICL, which uses a port in the center of the ICL optic to optimize fluid flow within the eye without affecting vision quality. This innovation eliminated the need for surgeons to perform a peripheral iridotomy procedure prior to ICL implantation, streamlining the surgical process.

While STAAR historically manufactured and sold intraocular lenses (IOLs) for use in cataract surgery, the company has strategically phased out its cataract IOL product line in recent years to focus on its ICL offerings. This shift in strategy has allowed STAAR to concentrate its resources and expertise on its core ICL products, which have become the cornerstone of its business.

STAAR's global presence has expanded significantly since its inception. The company now markets and sells its EVO family of ICL lenses worldwide, with 94% of its total sales occurring outside the United States in 2024. This international focus has been a key driver of STAAR's growth, allowing the company to capitalize on emerging markets and diverse demographic trends across different regions.

Financial Performance and Resilience

Financials In fiscal year 2024, STAAR Surgical reported net sales of $313.9 million, a 3% decrease compared to the previous year's $322.4 million. This decline was primarily attributed to a significant drop in sales in the company's largest market, China, where macroeconomic conditions and weaker consumer confidence adversely impacted demand for ICL procedures. The company reported a net loss of $20.2 million for the fiscal year 2024.

Despite the headwinds in China, STAAR Surgical demonstrated its resilience by generating $152 million in ICL sales outside of China, representing a 17% increase in the fourth quarter and a 13% increase for the full fiscal year. This strong performance in the company's other global markets, including the Americas, EMEA, and APAC (excluding China), underscores STAAR Surgical's ability to navigate challenging environments and capitalize on growth opportunities in diverse regions.

In the fourth quarter of 2024, STAAR reported revenue of $49 million and a net loss of $34,228. The Q4 results were significantly impacted by a $27.5 million order of ICLs shipped to a China distributor in December 2024, for which the company did not recognize revenue due to extended payment terms.

Gross profit margin for fiscal 2024 was 76.3%, down from 78.4% in fiscal 2023. The decrease was largely attributed to the recognition of $3.9 million in cost of sales associated with the $27.5 million ICL order shipped to a China distributor in Q4 2024. Gross profit was also negatively impacted by costs related to the expansion of STAAR's manufacturing capabilities in Switzerland and temporary production shutdowns.

Liquidity

The company's financial position remains robust, with $230.5 million in cash, cash equivalents, and investments available for sale as of December 27, 2024. STAAR Surgical's balance sheet strength provides the necessary resources to weather the current macroeconomic headwinds, invest in product development and manufacturing capabilities, and pursue strategic initiatives to drive long-term growth.

STAAR's liquidity ratios further underscore its strong financial position. The company reported a current ratio of 5.23 and a quick ratio of 4.62, indicating its ability to meet short-term obligations and maintain operational flexibility.

Navigating the China Challenge

The weakening economic conditions and reduced consumer confidence in China, STAAR Surgical's largest market, have had a significant impact on the company's financial results. In the fourth quarter of fiscal 2024, the company shipped a $27.5 million order of ICLs to one of its Chinese distributors, but due to the distributor's request for extended payment terms, the company was unable to recognize the revenue in the period.

To address the elevated inventory levels in China, STAAR Surgical has taken a cautious approach, limiting shipments to its distributors in the first half of fiscal 2025. The company expects minimal China ICL sales during this period as it works to align inventory levels with the anticipated demand recovery. STAAR Surgical has provided a wide guidance range for its China business in fiscal 2025, with ICL sales ranging from $75 million to $125 million, depending on the pace of the market's rebound.

The company's ability to navigate the China challenge is further bolstered by its diversified global footprint. In fiscal 2024, STAAR Surgical generated 94% of its revenue from markets outside the United States, demonstrating the strength and resilience of its international operations. The company's growth initiatives in regions such as the Americas, EMEA, and APAC (excluding China) have proven successful, with double-digit sales increases in these markets.

Innovation and Product Pipeline

STAAR Surgical's commitment to innovation has been a key driver of its success. The company's flagship product, the EVO ICL, has been at the forefront of the industry, offering patients a superior solution for vision correction. In fiscal 2025, the company plans to introduce the EVO Plus, an enhanced version of the EVO ICL, which is expected to provide additional clinical benefits and potentially command a higher average selling price.

Beyond the EVO ICL, STAAR Surgical is also actively investing in the development of new products and technologies to address the evolving needs of the ophthalmic market. The company's research and development efforts are focused on expanding its portfolio of presbyopia-correcting lenses, which will cater to the growing demand for vision solutions among the aging population.

STAAR's ICL product line includes the EVO family of lenses, which are designed to provide premium refractive outcomes while optimizing patient comfort. The EVO family includes the EVO ICL, EVO ICL, and EVO Visian ICL. STAAR also sells the Visian ICL, an ICL lens to treat hyperopia or farsightedness. The company makes its ICL products available in multiple models, powers, and lengths, including toric versions to correct astigmatism.

Operational Efficiency and Cost Management

In response to the macroeconomic challenges, STAAR Surgical has implemented a range of measures to optimize its operational efficiency and maintain a strong financial position. The company is reducing capital expenditures, lowering production output, and making targeted reductions to operating expenses, including headcount and discretionary spending.

These cost-saving initiatives are expected to help STAAR Surgical navigate the current environment while preserving its ability to invest in critical areas, such as commercial activities, product development, and manufacturing capacity expansion. The company's disciplined approach to capital allocation and cost management will be crucial in positioning it for a stronger recovery and long-term growth.

Outlook and Conclusion

STAAR Surgical's outlook for fiscal 2025 reflects the company's determination to weather the macroeconomic headwinds and position itself for future success. The company's guidance range for ICL sales, excluding China, is $165 million to $175 million, representing a growth range of 9% to 15% year-over-year. This performance is expected to be driven by the company's continued market share gains and the successful execution of its growth strategies in the Americas, EMEA, and APAC (excluding China) regions.

For fiscal year 2025, STAAR anticipates global net sales of approximately $40 million per quarter for Q1 and Q2. The company expects first half 2025 gross margins to be in the low 70s and second half gross margins to be in the mid to high 70s, resulting in a full year gross margin of approximately 75%. STAAR projects an adjusted EBITDA loss of approximately $30 million per quarter in the first half of 2025, followed by an adjusted EBITDA gain range of $5 million to $22.5 million per quarter in the second half of 2025, resulting in a full year adjusted EBITDA loss range of $50 million to $15 million. The company expects to end fiscal year 2025 with cash, cash equivalents, and investments of approximately $150 million to $175 million.

While the ongoing challenges in China present a significant near-term hurdle, STAAR Surgical's strong balance sheet, diversified global footprint, and commitment to innovation position the company well to navigate the current environment and emerge as a stronger, more resilient competitor in the ophthalmic surgical market. The company's ability to adapt to changing market conditions, invest in its product pipeline, and maintain operational efficiency will be critical in driving long-term shareholder value.

The global refractive surgery market is expected to grow at a CAGR of approximately 5-7% over the next several years, driven by increasing myopia/presbyopia prevalence and demand for vision correction procedures. STAAR Surgical, as a leader in the ICL market, is well-positioned to capitalize on this growth trend and continue to expand its market share in the coming years.