STAAR Surgical (STAA) Q2 Revenue Tops 9%

STAAR Surgical (STAA 0.11%), a medical device company specializing in implantable lenses for vision correction, released its earnings for Q2 FY2025 on August 6, 2025. The main news from the release is that both GAAP revenue and GAAP earnings per share came in ahead of analyst estimates, despite a sharp year-over-year drop caused by sluggish sales in China. The company reported GAAP revenue of $44.3 million, compared to an analyst expectation of $40.5 million, and a GAAP loss per share of $(0.34) versus consensus at $(0.56). Performance outside China was a bright spot, with net sales excluding China up 10% year-over-year, but management withdrew its formal financial outlook due to continuing uncertainty in China and unresolved tariff risks. The quarter reflects operational progress but also shows the ongoing challenges in returning to prior levels of profitability.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Business Overview and Strategic Focus

STAAR Surgical develops and manufactures implantable lenses used to correct refractive vision problems such as myopia, offering an alternative to laser eye surgery. Its core product is the implantable Collamer lens (ICL), made from a proprietary biocompatible material. This Collamer technology is designed to be flexible and gentle on the eye, allowing for minimally invasive and reversible procedures, which distinguishes the company in the vision correction field.

The company’s main business success factors include protecting its intellectual property, expanding into new and existing global markets, and securing regulatory approval for its products in key regions. Recent efforts have focused on expanding the availability of ICL products to more than 75 countries, though not all products are available in every market, managing risks connected to its heavy revenue reliance on China, and sustaining leadership through ongoing regulatory compliance and new product introductions.

Quarter in Review: Financial and Operational Highlights

In Q2 FY2025, revenue (GAAP) fell by more than half compared to the prior year, due to depressed demand and channel inventory drawdown in China, which has historically accounted for a large share of the company’s sales. The $44.3 million GAAP result, however, exceeded analyst expectations by $3.8 million, highlighting growing strength in markets outside China, as evidenced by net sales excluding China increasing 10% year-over-year. Net sales excluding China rose 10% from the prior year period, totaling $39.0 million.

The company’s flagship product family, the EVO ICLs (implantable Collamer lens technology), continued to gain momentum abroad. Restrained sales in China are tied to inventory normalization, as distributors relied on pre-existing stock rather than placing new orders with STAAR during Q1 and Q2 FY2025. Management expects inventory levels in China to reach contractual targets by around the middle of the year, with normalized sales anticipated to resume in the third quarter, potentially signaling an inflection point for Chinese sales.

Gross margin (GAAP) recovered sequentially, reaching 74.0%, compared to the previous quarter’s 65.8%, but it remains below last year's 79.2% mark. This contraction is primarily attributed to fixed manufacturing costs spread over lower unit volumes and the ongoing ramp up of a new production facility in Switzerland, which will help the company mitigate tariff risk for China-bound products. Operating expenses fell 5.6% year-over-year (GAAP) and included $5.2 million in restructuring and impairment charges. The company pursued significant cost controls, especially in its U.S. operations, with the majority of restructuring activities focused on U.S. operations and a targeted reduction in the annualized SG&A run rate to approximately $225 million as it exits FY2025, with the aim of reducing inefficiencies and right-sizing its structure for the current demand environment.

Despite these actions, STAAR reported a GAAP net loss of $(16.8) million. Adjusted EBITDA improved compared to the previous quarter but remained negative, and continued restructuring charges impacted profitability in Q1 FY2025. Cash and investments (GAAP) at the end of Q2 FY2025 stood at $189.9 million, declining from $222.8 million at the prior quarter’s close. The company has no outstanding debt and repurchased approximately 261,000 shares for a total cost of approximately $4.5 million under its existing buyback program.

During Q1 FY2025, STAAR also addressed challenges emerging from U.S.-China trade policy by forward-deploying consigned inventory into China ahead of new tariffs and stepping up production capabilities in Switzerland. These moves ensure continued product availability and flexibility in supply chain management. Management noted that enough inventory is now on hand in China to supply hospitals well into early 2026. The upcoming regulatory approval of the EVO+ lens (V5) product for China remains a future growth catalyst, as this will be the first new lens in that market in over a decade.

Looking Ahead: Outlook and Investor Watchpoints

Management withdrew formal financial guidance for the remainder of fiscal 2025 due to persistent volatility in the Chinese market and uncertainty over tariffs. Still, commentary pointed toward expectations for sales in China to return to more regular patterns starting in Q3 FY2025 as inventory normalization completes. Gross margin is also expected to face pressure for the rest of FY2025 due to costs associated with scaling the Switzerland facility, a key part of the company’s long-term strategy to reduce tariff exposure.

With no clear quantitative guidance for revenue or earnings, investors are left to focus on China’s recovery trajectory, the pending approval and launch of EVO+ lenses, and the impact of restructuring measures on near-term profitability and cash flow.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.