STAAR Surgical — Third Quarter 2026 Earnings Summary

Financial Performance:

• Net sales for the third quarter ended October 2, 2026, were $83.4 million, a 12% decrease year-over-year from $94.7 million; excluding $25.9 million of previously deferred China sales recognized in Q3 2025, sales increased 21%.
• Net income for the quarter was $5.6 million ($0.11 per diluted share), down from $8.9 million ($0.18 per diluted share) in the prior-year quarter; excluding the after-tax impact of deferred China revenue, the prior-year quarter would have reported a net loss of $6.3 million ($0.13 per diluted share).
• Adjusted EBITDA for the quarter was $14.4 million ($0.28 per diluted share), down from $34.7 million ($0.69 per diluted share) in the prior-year quarter; excluding the deferred revenue impact, prior-year Adjusted EBITDA would have been $8.9 million ($0.18 per diluted share).
• Gross profit margin was 70.9% for the quarter, compared to 82.2% in the prior-year quarter; excluding the 100% margin deferred revenue from the prior year, the prior-year margin would have been 75.5%.
• Total operating expenses were $53.7 million, compared to $59.4 million in the prior-year quarter; excluding $6.0 million in restructuring and merger-related costs from the prior year, operating expenses were flat.
• Cash, cash equivalents, and investments totaled $206.4 million as of October 2, 2026, compared to $181.5 million at the end of the second quarter 2026.
• The company maintains a debt-free balance sheet.
• Free cash flow for the quarter was $26.38 million (calculated as net cash provided by operating activities of $27.315 million less capital expenditures of $0.935 million).

Guidance and Future Outlook:

• Management expects temporary gross margin pressures to abate beginning in the fourth quarter 2026.
• China seasonality is expected to moderate revenue and earnings in the fourth quarter, but not free cash flow.
• Unit costs are expected to stay elevated for the remainder of the year due to the sale of inventory produced in Q2 2026, but lower tariffs and smaller inventory provisions are expected to lift fourth-quarter gross margins above third-quarter levels.
• With both production facilities running at full capacity, unit costs are expected to improve further in 2027.
• Management raised its ambitions for the full year, expressing confidence in delivering strong full-year GAAP net income and free cash flow.

Business Segments and Product Lines:

• China sales were $39.3 million, down 30% year-over-year; excluding the $25.9 million deferred sales impact, China sales grew 31%.
• EMEA sales increased 31% year-over-year, or 51% excluding the Middle East region.
• Americas sales increased 14% year-over-year, driven by U.S. sales of $6.5 million, marking the third consecutive quarter of U.S. sales exceeding $6 million.
• APAC net sales (excluding China) increased 4% year-over-year, with growth in India and Taiwan offset by declines in Japan (currency headwinds) and South Korea (market weakness).
• The company completed the transition of all ICL manufacturing for the Chinese market to its Swiss facility to reduce U.S.-China tariff exposure.
• The company initiated clinical trials for next-generation presbyopia technologies, with first-in-human patient enrollment expected in the next few months.
• Recent regulatory label expansions increased the U.S. eligibility age to 60 (adding ~8 million patients) and lowered the minimum prescription in Brazil to -0.5 diopters (adding ~26 million patients).
• In China, distributor unit volume shipments grew 12.4% through the first nine months of 2026, with growth driven by share gains and a mix shift toward EVO+ and toric lenses.

Market and Competitive Landscape:

• The company published a global market report indicating a structural shift from laser-based to lens-based vision correction in multiple markets.
• EVO ICL unit growth is outpacing the broader refractive market globally, with the company gaining market share.
• In the U.S., Refractive Surgery Council data suggests laser vision correction procedures declined 5.8% in 2026 compared to 2025.
• In China, growth in public hospitals is accelerating, with mid-tier hospitals increasing procedures per hospital and lower-diopter procedures growing faster than higher-diopter procedures.
• The company is focusing on converting expanded regulatory eligibility into adoption through commercial execution.

Risks and Challenges:

• Gross margins were negatively impacted in the third quarter by higher manufacturing costs due to low production volumes from the new ERP system implementation, higher freight costs, tariffs on U.S. goods produced for China, and increased inventory provisions for expiring inventory.
• U.S. product in inventory and sold to China remains subject to tariffs until the Swiss facility fully replaces U.S. production for that market.
• The company faces risks related to foreign currency exchange rate fluctuations, international trade disputes, and dependence on demand from Asia.
• Potential risks include supply chain disruptions, product liability claims, and regulatory approval delays for new products.

Management Commentary and Tone:

• CEO Warren Foust stated the company is on track to deliver strong full-year results and is confident in the direction of the business.
• CFO Deborah Andrews noted that while temporary gross margin pressures exist, the company remains on track to hit its $225 million operating expense target for the year.
• Management highlighted three strategic focus areas: advancing the future of vision through product innovation, growing adoption through commercial innovation, and delivering with excellence through operational innovation.
• The Board authorized a $50 million share repurchase program in September, reflecting confidence in the business and a belief that shares are undervalued.
• Key leadership appointments include Ben Park (Chief Technology Officer), David Bailey (Chief Commercial Officer), Andrew Pilon (VP of Business Development), Ying Chen (President of STAAR Surgical China), and Pascal Aeschlimann (VP of Asia Pacific).

Other Key Points:

• The Board authorized a $50 million share repurchase program in September 2026.
• The company implemented a new enterprise resource planning (ERP) system during the year.
• The company received DEKRA certification of a second clean room at its Nidau, Switzerland facility.
• Distributor inventory in China ended the third quarter below the six-month target, with in-market volume growing while inventory decreased.
• The company estimates that each percentage point improvement in manufacturing yield could generate approximately $750,000 to $1 million in annual incremental gross profit.
• The company has no outstanding debt.