STAA Q1 Earnings Call: Tariff Mitigation, Cost Cuts, and China Inventory Reshape Outlook

June 11, 2025 at 06:24 AM EDT

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Medical lens company STAAR Surgical (NASDAQ: STAA) reported Q1 CY2025 results beating Wall Street’s revenue expectations, but sales fell by 44.9% year on year to $42.59 million. Its non-GAAP loss of $1.01 per share was 66.9% below analysts’ consensus estimates.

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STAAR Surgical (STAA) Q1 CY2025 Highlights:

Revenue: $42.59 million vs analyst estimates of $40.35 million (44.9% year-on-year decline, 5.5% beat)
Adjusted EBITDA: -$26.39 million vs analyst estimates of -$26.51 million (-62% margin, in line)
Constant Currency Revenue fell 44.3% year on year (6.5% in the same quarter last year)
Market Capitalization: $899.6 million

StockStory’s Take

STAAR Surgical’s first quarter results were defined by the company’s efforts to address significant operational headwinds, particularly regarding channel inventory and tariffs in China. CEO Stephen Farrell acknowledged, “we have to do better and we will,” pointing to the management team’s focus on short-term tactical issues such as inventory management and cost controls, especially in the U.S. business. The company also implemented a streamlined management structure, with Warren Faust promoted to President and Deborah Andrews returning as Interim CFO to reinforce cost discipline. Despite a sharp decline in China distributor sales as partners worked through existing inventory, net sales outside China grew 9%, led by markets in Japan, South Korea, and India. Management was self-critical about recent performance, emphasizing that many of the operational challenges are being actively addressed through structural changes and renewed cost optimization.

Looking forward, STAAR Surgical’s management anticipates that revenue normalization in China and expanded manufacturing capabilities in Switzerland will be key to returning to growth in the second half of the year. CEO Stephen Farrell highlighted mitigation of tariff risk, increased focus on proprietary EVO ICL technology, and a renewed commitment to transparency with investors. The company expects its Swiss facility to be fully validated and approved for production by the summer, providing flexibility to ship products tariff-free to China and other markets. Management also emphasized a continued investment in global growth, especially in the Asia-Pacific region, and the planned launch of the EVO+ lens in China. Farrell stated, “We are monitoring inventory in China more closely. Cost controls are in place and the new management team is committed and motivated,” reflecting a cautious but optimistic outlook for the remainder of the year.

Key Insights from Management’s Remarks

Management attributed the quarter’s operational outcomes to inventory reduction in China, cost restructuring, and rapid adjustments to shifting tariff policies, while highlighting resilient growth in other international markets.

China inventory drawdown: The primary driver of the steep year-over-year sales decline was minimal ordering from China distributors, as they consumed excess on-hand inventory rather than placing new orders. CEO Stephen Farrell noted this was necessary to reset channel inventory and prepare for resumed ordering in Q3.
Tariff mitigation efforts: Facing new Chinese tariffs, STAAR Surgical executed rapid consignment agreements, shipping inventory into China before tariff deadlines. President Warren Faust emphasized that this proactive move positions the company with sufficient inventory in China to meet demand through early 2026 and reduces near-term exposure to tariff volatility.
Restructuring and cost reduction: The company announced significant cost-cutting measures, including reducing underutilized facilities, marketing spend, and U.S. personnel. Interim CFO Deborah Andrews explained these actions are intended to bring SG&A spending back to 2023 levels without undermining top-line growth ambitions.
International growth outside China: Despite challenges in China, sales in other regions rose 9-10%, with particular strength in Japan, South Korea, India, and EMEA markets. Management attributed this growth to ongoing demand for the EVO ICL platform and successful commercial execution in these markets.
Management realignment and renewed R&D focus: The management team was reorganized to prioritize efficiency and product pipeline development. Magda Michna was elevated to Chief Development Officer, tasked with diversifying the product portfolio and instilling greater discipline in research and development efforts.

Drivers of Future Performance

STAAR Surgical’s guidance hinges on resolving China inventory issues, expanding manufacturing capacity, and navigating tariff uncertainty as it seeks to restore growth and margins.

China market recovery: Management expects reported sales in China to rebound in the second half of the year as distributors resume normal ordering patterns after working through existing inventory. The anticipated launch of the EVO+ (V5) lens in China is also expected to support procedure growth, though approval timing and pricing remain to be finalized.
Swiss manufacturing ramp-up: The company’s new facility in Switzerland is on track for regulatory approval this summer, which should allow tariff-free shipments to China and improve supply chain flexibility. Management believes this will help mitigate ongoing tariff risk and support long-term gross margin recovery to the 75%–80% range once operating scale is achieved.
Cost discipline and SG&A control: STAAR Surgical aims to maintain tighter control over SG&A spending, particularly in the U.S., by matching resources to market opportunity. Management expects these measures, along with operational streamlining, to support profitability as sales volumes recover and as the company exits 2025.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will watch (1) the resumption of normalized ordering and reported revenue growth in China as inventory levels stabilize, (2) the successful regulatory approval and commercial launch of the EVO+ lens in the Chinese market, and (3) progress in scaling Swiss manufacturing operations to mitigate tariff risks and restore gross margins. Execution on cost controls and the impact of new leadership in key markets will also be important markers.

STAAR Surgical currently trades at a forward price-to-sales ratio of 3.1×. In the wake of earnings, is it a buy or sell? The answer lies in our full research report (it’s free).

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