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STAAR SURGICAL CO (STAA) Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 net sales were $49.0M, down 35.8% year over year, with gross margin compressing to 64.7% and diluted EPS at $(0.69), driven primarily by an abrupt demand deterioration in China and a December $27.5M China shipment not recognized as revenue due to extended distributor payment terms .
  • Outside China, ICL sales grew 17% in Q4 (ICL ex-China $39.5M), with the U.S. up 22% and broader EMEA/APAC ex-China strength; however, China ICL sales fell 82% in Q4 to $7.5M, weighing on consolidated results .
  • FY25 outlook introduces a two-speed year: net sales ~$40M per quarter in Q1–Q2; China ICL $75–$125M in H2; ICL ex-China $165–$175M (9–15% growth); gross margin ~75% for FY25; adjusted EBITDA loss in H1 and gain in H2; company withdrew its Vision 2026 target operating model .
  • Stock reaction catalyst: management moved up the earnings call, disclosed the revenue recognition deferral and inventory normalization plan in China, and signaled cost controls and cash preservation (ending FY25 cash/investments expected $150–$175M), reframing near-term trajectory and risk around China demand and sell-through pace .

What Went Well and What Went Wrong

What Went Well

  • ICL sales ex-China rose 17% in Q4 and 13% in FY24; U.S. ICL sales up 22% in Q4 and 19% in FY24; EMEA and APAC ex-China posted growth despite macro headwinds .
  • Management reiterated balance-sheet resilience with cash, cash equivalents and investments of $230.5M at year-end, and no debt; AR already reduced post-quarter below $65M per CFO commentary .
  • CEO emphasized durable demand drivers and positioning: “Outside of China, we expect to sustain double-digit growth… Myopia is not going away… we have a unique technology in Collamer with over 30 years of proven clinical outcomes” .

What Went Wrong

  • China ICL sales collapsed 82% in Q4 to $7.5M; FY24 China revenue fell 13%, reflecting weak consumer confidence and volatile procedural volumes .
  • Q4 gross margin fell to 64.7% (vs. 79.6% prior-year) due to recognizing $3.9M cost of sales on China shipments without revenue recognition, plus manufacturing expansion/idling costs; operating loss was $(27.9)M and net loss $(34.2)M .
  • Company withdrew Vision 2026 sales/operating model; FY25 guide implies H1 adjusted EBITDA losses and constrained capex/production, highlighting near-term profitability pressure tied to China inventory normalization and macro uncertainty .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Net Sales ($USD Millions)$99.0 $88.6 $48.950
Gross Margin (%)79.2% 77.3% 64.7%
Diluted EPS ($USD)$0.15 $0.20 $(0.69)

ICL Sales by Region and China Mix

Metric ($USD Millions)Q4 2023Q3 2024Q4 2024
Americas ICL Sales$5.264 $6.187 $6.429
EMEA ICL Sales$10.103 $10.333 $10.978
APAC ICL Sales (incl. China)$59.254 $72.581 $29.519
Global ICL Sales$74.621 $89.101 $46.926
China ICL Sales$40.813 $51.719 $7.455
ICL Sales Ex-China$33.808 $37.382 $39.471

Selected KPIs

KPIQ4 2024
Operating Expenses ($USD Millions)$59.558
Adjusted EBITDA ($USD Millions)$(20.840)
Cash & Cash Equivalents ($USD Millions)$144.159
Investments Available for Sale ($USD Millions)$86.335
Accounts Receivable, Net ($USD Millions)$77.897
Cash, Cash Equivalents & Investments ($USD Millions)$230.5

Estimate Comparison

MetricQ4 2024 ActualQ4 2024 Consensus
Revenue ($USD Millions)$48.950 N/A — S&P Global consensus unavailable at time of analysis
Diluted EPS ($USD)$(0.69) N/A — S&P Global consensus unavailable at time of analysis

Note: Wall Street consensus via S&P Global was unavailable due to data access limitations during retrieval.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales (Company-level)Q1 2025Not previously provided≈$40M per quarterNew disclosure
Net Sales (Company-level)Q2 2025Not previously provided≈$40M per quarterNew disclosure
ICL Sales ex-ChinaFY 2025Not previously provided$165M–$175M (9–15% growth)New disclosure
China ICL SalesH1 2025Not previously provided< $5MNew disclosure
China ICL SalesH2 2025Not previously provided$75M–$125M (dependent on refractive volumes −10% to +10%)New disclosure
Gross MarginFY 2024~80% per quarter (remaining FY24) ; ≈79% for full year Q4 2024 actual 64.7% ; FY25 ≈75% (1H low 70s; 2H mid–high 70s) Lower near term; normalize in 2H25
Adjusted EBITDAFY 2025Not previously provided1H: ≈$(30)M loss per quarter; 2H: ≈$5M–$22.5M gain per quarter; FY25: $(50)M to $(15)MNew disclosure
OpEx – G&AFY 2025Not previously provided~$20M–$27M per quarterNew disclosure
OpEx – Selling & MarketingFY 2025Not previously provided~$22M–$30M per quarterNew disclosure
OpEx – R&DFY 2025Not previously provided~$11M–$15M per quarterNew disclosure
Tax ProvisionFY 2025Not previously provided$(5)M to $0New disclosure
Other Income/ExpenseFY 2025Not previously provided≈$0New disclosure
DepreciationFY 2025Not previously provided≈$10MNew disclosure
Stock-based CompensationFY 2025Not previously provided$23M–$38MNew disclosure
Vision 2026 Target ModelThrough 2026Target announced Sep-2023 [Q2 call referenced program] No longer expected to be achievedWithdrawn

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q4 2024)Trend
China macro & distributor inventoryQ2: dual distributors; cautious stimulus optimism; ~300 bps pricing benefit on contracts ; Q3: high season tapered; market softened; still outpacing Severe demand deterioration; China ICL −82% Y/Y in Q4; extended payment terms on $27.5M; focus on sell-through; minimal H1 China revenue; rebuild H2 Worsened late FY24; normalization expected H2’25 contingent on stimulus/consumer confidence
U.S. commercial execution (Highway 93/Fast Lane)Q2: raised U.S. outlook; 9 strategic agreements YTD ; Q3: 12 Fast Lane; strong growth vs declining LVC 13 Fast Lane agreements FY24; U.S. +22% Q4; assume ~15% U.S. growth in FY25; sequential momentum into Q1’25 Strengthening execution; continued share gains
Gross margin outlookQ2: ~80% each remaining quarter ; Q3: ≈79% FY24 Q4 margin 64.7% due to revenue deferral and period costs; FY25 ≈75% (1H low 70s; 2H mid–high 70s); longer-term >80% potential Near-term down; expected to normalize as production/output and mix recover
Tariffs/supply chainLimited prior commentarySwitzerland facility to ship into China post-EVO+ approval to mitigate tariffs; vertical integration; raw materials sourced U.S. Risk mitigation improving
Product roadmap (EVO+/V5)Q3: plan V5 mid-2025 to counter competition; pricing stratification EVO+ expected mid-2025 in China; potential ASP upside not included in guide Pipeline progressing; pricing optionality ahead
AI/tech enablementQ3: purchases of external AI tools; R&D step-up Continued investment in tools/process; ERP/quality/CRM upgrades underpin OpEx ranges Ongoing capability build
Regional trends (EMEA/APAC ex-China)Q2/Q3: EMEA/Middle East strong; Japan/South Korea growth EMEA up; Japan +15% Q4; South Korea +14%; India +21% FY24 Consistent ex-China double-digit growth

Management Commentary

  • CEO: “Outside of China, we expect to sustain double-digit growth across our global markets in 2025… Myopia is not going away, and we have a unique technology in Collamer with over 30 years of proven clinical outcomes.” .
  • CEO: “China… macroeconomic conditions and consumer confidence… remain weak… demand for our cash-pay ICLs deteriorated dramatically as we exited the year… [but] we expect overall lower demand in China in fiscal 2025, particularly in the first half.” .
  • CFO: “We expect global net sales to be approximately $40 million per quarter for each of Q1 and Q2… China revenue to rebound in the second half of 2025 in a range of $75 million to $125 million.” .
  • CFO: “Gross margin will normalize in fiscal 2025… first half… low 70s and second half… mid- to high 70s… full year gross margin of approximately 75%.” .
  • CEO: “Our strong balance sheet was built over years to provide resiliency to weather times of global uncertainty… which we believe are transitory.” .

Q&A Highlights

  • China revenue recognition and inventory normalization: CFO detailed the $27.5M December shipment to a newer distributor, extended payment terms, GAAP revenue deferral, and focus shift to sell-through; expects full recognition by end of Q3’25; lumpy payments typical .
  • Guidance assumptions: Americas refractive down 5–10%, EMEA/APAC ex-China flat; China refractive −10% to +10% drives $75–$125M H2 range; EVO+ ASP upside excluded .
  • Competitive landscape: Management downplayed iBright impact (sphere-only, limited clinical experience; toric is ~50% of market) and emphasized KOL relationships and installed base .
  • Tariff/supply chain risks: Switzerland sourcing for China post-EVO+ approval to mitigate tariff exposure; vertical integration limits tariff impact .
  • Cash burn and capex: Ending FY25 cash/investments $150–$175M; capex ≈$15M; AR collection progressing; cash usage depends on China H2 sell-in and gross margin translation .

Estimates Context

  • Wall Street consensus (S&P Global) was unavailable at time of retrieval due to data access limitations; therefore, comparisons to consensus could not be provided. We will anchor future estimate comparisons on S&P Global when accessible.

Key Takeaways for Investors

  • Near-term earnings pressure reflects China revenue deferral and inventory digestion; expect trough in H1’25 with ~$40M quarterly net sales, followed by H2’25 rebound contingent on consumer confidence/stimulus, with China ICL $75–$125M and adjusted EBITDA turning positive .
  • Ex-China growth is intact (ICL ex-China +17% in Q4), led by U.S. and EMEA; commercial initiatives (Highway 93/Fast Lane) continue to drive share gains even as the refractive market declines .
  • Gross margin should normalize from the Q4 China-related dip toward ~75% in FY25, improving in 2H as production/output align with demand; longer-term >80% remains plausible as volumes recover .
  • Cash preservation and cost controls (lower production, reduced capex, targeted OpEx cuts) provide resilience; expect FY25 year-end cash/investments of $150–$175M with no debt, reducing downside risk while awaiting China recovery .
  • Key watch items: China consumer stimulus cadence (Jan/March policy windows), sell-through trends, EVO+ approval timing/ASP impact, and tariff/geopolitics; these will shape H2’25 revenue realization and margin trajectory .
  • Narrative pivot: management clarified accounting impacts and distributor dynamics, shifted emphasis to sell-through, and withdrew Vision 2026 targets—resetting expectations; re-rating likely hinges on evidence of China demand stabilization and H2 execution .
  • Trading lens: H1’25 setup is challenged; potential inflection in H2 tied to China; ex-China strength cushions downside. Monitor monthly China sell-through updates and signs of stimulus transmission to discretionary procedures .

Citations:

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