What STAAR Surgical (STAA) Said on Its Q3 Earnings Call

Key Points

• STAAR Surgical reported Q3 sales of $83.4 million, down 12%, and net income of $5.6 million. Excluding $25.9 million in prior-year deferred China sales, revenue rose 21% overall and China sales grew 31%, driven by demand for higher-priced V5 and toric lenses.
• Sales outside China increased 13% to $44.1 million, led by growth in EMEA and the Americas. Gross margin declined to 70.9% amid low-volume manufacturing costs, freight, tariffs and inventory provisions; the company expects Q4 margin to improve.
• STAAR completed the shift of China-bound lens manufacturing to Switzerland and is expanding capacity and improving yields. It ended the quarter with $206.4 million in cash and investments, no debt, and an authorized $50 million share repurchase program.

STAAR Surgical NASDAQ: STAA reported lower third-quarter sales and profit on a reported basis, but said revenue rose 21% after excluding a prior-year deferred sales item in China. The implantable lens maker also said demand for higher-priced products in China exceeded its ability to supply them during the quarter.

Net sales for the third quarter of 2026 were $83.4 million, down 12% from a year earlier, when the company recognized $25.9 million in deferred China sales. Excluding that item, prior-year quarterly sales were $68.8 million.

GAAP net income was $5.6 million, or $0.11 per diluted share, compared with $8.9 million, or $0.18 per share, a year earlier. Chief Financial Officer Deborah Andrews said the deferred China sales contributed $15.2 million to prior-year net income after tax. Without that contribution, the company would have recorded a $6.3 million net loss in the earlier period.

China Growth Driven by Product Mix

China sales fell to $39.3 million from $55.8 million on a reported basis. Excluding the prior-year deferred sales, revenue in the market grew 31% from $29.9 million. Andrews said all of that growth came from higher average selling prices as customers bought more V5, also known as EVO+, and toric implantable lenses.

President and CEO Warren Foust said distributor unit shipments downstream in China rose 12.4% over the first nine months, accelerating from mid-single-digit growth in 2025. He described those shipments as a proxy for implants, rather than a direct count of procedures.

Distributor inventory has declined over the past four quarters to below the company's six-month target. Foust said in-market demand drove the depletion, although the company's inability to supply all demand could have contributed. He said STAAR does not anticipate a large restocking order in the fourth quarter.

Foust said fourth-quarter China demand is expected to be lower sequentially, reflecting the seasonal shape of the market, but that the company expects China revenue to grow from a year earlier. STAAR declined to provide specific fourth-quarter guidance or say when it might issue guidance for 2027.

Growth Outside China and Margin Pressure

Sales outside China rose 13% to $44.1 million. Revenue increased 31% in Europe, the Middle East and Africa, or 51% excluding the Middle East, led by double-digit growth in Spain, Germany and the U.K. Americas revenue grew 14%, with the U.S. recording its third consecutive quarter of more than $6 million in sales.

Asia-Pacific revenue outside China increased 4%. Growth in India, Taiwan and other markets was partly offset by a slight decline in Japan, primarily due to currency, and weakness in South Korea.

Gross margin fell to 70.9% from 82.2%. Andrews said the prior-year deferred China sales were recognized at 100% gross margin, lifting that quarter's margin by 6.7 percentage points. Excluding the item, the prior-year margin would have been 75.5%.

The latest quarter's margin was pressured by manufacturing costs associated with low production volumes during the company's enterprise resource planning system implementation, as well as freight, tariffs and inventory provisions. Andrews said lower tariffs and smaller inventory provisions should lift fourth-quarter gross margin above the third-quarter level. Unit costs are expected to improve in 2027, with both manufacturing facilities operating at full capacity.

Adjusted EBITDA was $14.4 million, compared with $34.7 million a year earlier. Excluding the deferred China sales, prior-year adjusted EBITDA would have been $8.9 million. STAAR remained on track for its $225 million adjusted operating expense target for the year, Andrews said.

Manufacturing and Product Development

STAAR completed the transition of manufacturing for all China-bound implantable lenses to Switzerland by the end of the quarter. Andrews said the move should reduce exposure to tariffs on U.S.-origin products entering China, although U.S.-made products already in inventory will remain subject to tariffs when sold there.

Foust said certification of a second clean room in Nidau, Switzerland, supports further capacity expansion. The company is also working to improve manufacturing yields; each percentage point of improvement could generate approximately $750,000 to $1 million in annual incremental gross profit, he said.

Enrollment in first-in-human trials for two Collamer-based presbyopia products is expected to begin in the next few months, subject to remaining regulatory authorizations. Foust described the products as multifocal and aspheric options and said their designs incorporate feedback from patients and customers.

Cash equivalents and available-for-sale investments totaled $206.4 million as of Oct. 2, up from $181.5 million at the end of the second quarter. STAAR reported no outstanding debt. In September, its board authorized a $50 million share repurchase program.

About STAAR Surgical (NASDAQ:STAA)

STAAR Surgical is a medical device company focused on ophthalmic surgery and vision correction. The company develops, manufactures and markets implantable lenses and related products designed to reduce or eliminate dependence on glasses or contact lenses.

Its principal product line is the EVO Visian Implantable Collamer Lens (ICL), a lens implanted inside the eye to correct myopia, with or without astigmatism. Unlike procedures that remove corneal tissue, ICL surgery preserves the eye's natural lens and is designed to be removable.

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