STAAR Surgical Company Stock

Welcome to the STAAR Surgical second quarter 2026 results conference call and webcast. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Connie Johnson, Director of Investor Relations.

Thank you, operator. Good afternoon and thank you for joining us. On the call today are Warren Foust, President and Chief Executive Officer of STAAR Surgical, and Deborah Andrews, Executive Vice President and Chief Financial Officer of STAAR Surgical. Earlier today, we reported our second quarter 2026 results via a press release in Form 8-K. We posted our results, release, and shareholder letter to our investor website at investors.staar.com. Today's call is scheduled for 1 hour and will include Q&A for publishing analysts. Webcast participants can also send questions for today's Q&A session to [email protected].

Before we get started, I want to remind you that during today's discussion, we will be making forward-looking statements. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied by such forward-looking statements. I encourage you to read the disclosures in today's release, as well as on our filings with the SEC. Except as required by law, STAAR assumes no obligation to update these forward-looking statements to reflect future events or actual outcomes.

In addition, during today's discussion, we will reference certain non-GAAP financial measures including adjusted EBITDA and constant currency sales. Please refer to today's release for definitions and reconciliations of non-GAAP metrics. For brevity, unless otherwise specified, all comparisons on today's call will be on a year-over-year basis versus the relevant period.

Finally, a quick reminder. We intend to use our website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD.

Such disclosures will be included on our website in the investor relations section. Accordingly, investors should monitor our investor website in addition to following our press releases, SEC filings, and public conference calls and webcasts. And with that, I would like to turn the presentation over to our President and CEO, Warren Foust.

Good afternoon, everyone, and thank you for joining us. Six months ago, Deborah and I stepped into our roles as interim co-CEOs. Looking back now, I am struck by how much we accomplished together. We navigated uncertainty and challenges and leaned into significant opportunities. And today, we are proud to report the strongest first half revenue performance in STAAR's history. That includes the launch of EVO Plus in China, which fueled market share gains and drove both year-over-year and sequential growth in the region, back-to-back record quarters in the U.S., and a return to profitability and free cash flow generation across the business. These results reflect the focus, resilience, and execution of teams across the company, and that is a milestone worth celebrating.

Through it all, it's been a tremendous experience, one that I'm grateful for. As we move forward, I'm proud to do so as President and Chief Executive Officer. I thank the Board for their confidence and each of you for your continued support. I want to take a moment to recognize and thank Deborah Andrews. Over the past 6 months, Deborah has been an extraordinary partner, steady, wise, and tireless in her commitment to STAAR. Her clarity and focus on financial discipline, culture, and strategy have profoundly benefited this company. I'm thrilled that she continues as Chief Financial Officer and is doing so now as an Executive Vice President. I could not ask for a better partner as we lead our company forward.

Now, let's talk about the quarter, which was a strong one. Our shareholder letter published today covers our second quarter results, regional performance, ERP implementation, and long-term priorities in detail. Rather than repeat all of that here, I want to focus on the 3 priorities that we laid out nearly 6 months ago.

Revenue growth, profit expansion, and innovation acceleration. In the second quarter, we advanced all 3, and I'd like to walk you through where we stand. Starting with revenue growth, the second quarter was a strong revenue quarter. Net sales were $93.5 million, up 111% year over year. We delivered sequential growth in China, double-digit growth in the Americas, and double-digit growth in EMEA, excluding the Middle East.

Deborah will take you through the details a little later, but the headline is clear. This business is performing. One important item I want to flag for your modeling. Our third quarter of 2025 results included the recognition of $25.9 million related to the 2024 order. On a consolidated basis, third quarter 2025 net sales were $94.7 million.

Excluding that item, though, the comparable total base is $68.8 million. That revenue from the 2024 order will not repeat, and we encourage you to use the adjusted base when evaluating third quarter 2026 year-over-year results. Fourth quarter comparisons are unaffected. Fourth quarter 2025 net sales were $57.8 million.

Now on China, I'm proud of our market share gains and of our expanding EVO Plus launch. China remains critical to our success in an area where we have a compelling opportunity ahead. In the quarter, China grew sequentially supported by increased adoption of EVO Plus, and importantly, we saw no evidence of inventory build at distributors or hospitals reinforcing that our growth is being driven by demand.

The broader refractive market remains uneven. Recent industry commentary reinforces the view that procedures remain pressured in parts of China and APAC. Against that backdrop, STAAR's performance supports our belief that EVO is gaining market share. We're definitely getting a lift from the EVO Plus rollout, but more than that, we're seeing patients and surgeons really leaning into the benefits of lens-based surgery.

People like that EVO is reversible and doesn't require removing corneal tissue, and that's a big differentiator as laser-based procedures continue to struggle in many markets around the world. We also want to provide more clarity on China's seasonality. As discussed in our shareholder letter, the quarterly pattern in China has evolved. The first and second quarters are emerging as our strongest revenue quarters, supported by Chinese New Year, a shift forward of military recruitment-related procedures, and summer demand.

While the third quarter revenue is expected to be moderately lower than the second quarter due to shifts in seasonality, excluding the 1-time order of $25.9 million booked in the third quarter of 2025, we expect year-over-year growth. As is typical, the fourth quarter will remain seasonally softer than the first 3 quarters, but we are still planning for year-over-year growth. Outside China, we continue to see strong revenue contributions in key markets such as Japan and Korea, as well as double-digit growth in the U.S., the Americas broadly, and excluding the Middle East and EMEA as well. We also see compelling long-term opportunities in many other markets around the globe.

In the Americas, growth was led by another greater than $6 million quarter in the U.S., our second consecutive quarter at that level. The U.S. market remains underpenetrated, and we continue to see opportunity to grow EVO sales and continue to take market share as practices look for differentiated, lens-based refractive alternatives to laser vision correction as demand for laser procedures continues to decline.

In APAC outside of China, Japan remains an important market where EVO has strong category awareness, is a strong market leader, and has sustainable long-term potential. We continue to see solid underlying demand in Japan, bolstered by direct-to-consumer awareness initiatives launched in November of 2025. Unit volume rose 14%, though currency headwinds damaged the market and reported sales growth, which came in at 2%.

Across the broader region, market dynamics vary, and we are being disciplined about where we invest. In EMEA, excluding the Middle East, the region grew double digits, reflecting solid underlying demand across much of the region. Across all regions, our approach is consistent. Invest where we see the clearest returns and support surgeons and patients through service, training, and education. While we continue driving the global shift from laser-based to lens-based refractive surgery, we are also working to increase our product availability in order to satisfy the accelerating global demand that has outpaced our supply chain projections.

The second area is profit expansion. In the second quarter, we demonstrated meaningful progress in expanding profitability. We grew gross profit and net income compared with both the prior year quarter and the first quarter. These improvements resulted in significant cash flow generation, increasing cash from $163.9 million at the end of the first quarter to $181.5 million at the end of the second quarter.

This progress reflects the strength of our business model and the financial discipline that Deborah and the team had brought to the organization. The result is a company with strong gross margins, a strong balance sheet, no debt, an increasing cash balance, and the flexibility to invest in the business where it matters, commercial execution, customer support, product availability, innovation, and the systems that help us scale.

Our ERP implementation demanded significant energy and focus across the organization in the quarter. And our teams delivered. We continued to sell EVO lenses. We provided support for our customers and achieved strong results. The ERP system is now live and we are actively optimizing the system in the third quarter. This is not just an operational upgrade.

It is a foundational investment that improves visibility across our business and positions us to scale more effectively and efficiently as we grow. With the ERP system in place, we are also beginning to build towards artificial intelligence enabled capabilities that will improve how we operate over time.

The third area, innovation acceleration, is the one that I am most excited about. EVO is a genuinely differentiated product built on our proprietary Collamer material. It is a lens-based procedure that preserves the cornea, is removable by a surgeon, and addresses a broad range of myopia and astigmatism. While our progress is significant and exciting, accelerating, our global share of the refractive market remains far below what we believe is possible. That gap is our opportunity. Capturing it requires moving beyond a single product mindset.

EVO, powered by Collamer, is our foundation, but we have the opportunity to build a broader platform and a more diversified product organization supported by a disciplined innovation roadmap, structured product development, clear milestones, and a stronger execution accountability.

Our R&D team, including our advanced research group, is working hard against these objectives and is actively preparing for first-in-human studies on our next-generation product. To further support our efforts, we will soon be hiring a chief technology officer to drive STAAR's innovation agenda. I have personally led this search with the support from trusted advisors and our board. And I'll say this, this process has only deepened my conviction about STAAR's long-term potential.

I'm excited to share more in the coming weeks. This is the next chapter of STAAR, Grounded and Differentiated Technology, Disciplined Execution and Sustainable Long-Term Value Creation.

With that, I'll turn the call over to Deborah to walk through the financials in more detail.

Thank you, Warren. I'll provide a brief financial summary and then we'll move to Q&A. Second quarter net sales were $93.5 million compared to $44.3 million in the prior year quarter, which, as a reminder, was impacted by minimal China shipments while distributors worked through excess inventory.

Excluding China, net sales were $41.2 million, up 6% year over year. Regionally, the quarter was generally consistent with the preliminary net sales update we provided in July. APAC net sales increased 189% year-over-year. Excluding China, net sales were up 7% year-over-year. China net sales increased 100 plus percent and grew 10% sequentially to $52.3 million.

In Japan, unit volume rose 14%, though currency headwinds dampened reported sales growth, which came in at 2%. The Americas grew 12% year-over-year, and the U.S. delivered another approximately $6 million quarter. EMEA has declined 1%, resulting from the continued conflicts in the Middle East.

Excluding the Middle East, EMEA also grew 12% year over year. Gross margin was 74.5% compared to 74% in the prior year quarter. The improvement reflected lower Switzerland ramp-up costs, reduced advanced manufacturing expenses, inventory provisions and lower freight and other costs of sales as a percentage of sales, partially offset by higher per unit manufacturing costs related to lower production volumes in 2025.

Gross margin was also negatively impacted by China tariffs on U.S. manufactured product. Margins will continue to be impacted by tariffs until 100% of products shipped to China are manufactured in Switzerland, which should happen by the end of 2026. Total operating expenses were $59.6 million compared to $62.8 million in the prior year quarter. Excluding $5.2 million in restructuring and merger related costs from the prior year period, operating expenses increased approximately 3.7% year over year. Included within operating expenses were $1.2 million in marketing severance and $1.7 million in ERP consulting. We don't expect the severance to repeat and expect the ERP consulting expense to decline significantly beginning in the fourth quarter.

Depreciation expense related to ERP systems was $1.1 million. We continue to manage toward our 2026 spending target of $225 million, though we may choose to make targeted investments that could result in marginally higher spending should the opportunity arise.

Net income was $8.1 million, or $0.16 per diluted share, compared to a net loss of $16.8 million, or $0.34 per diluted share, in the prior year quarter. Adjusted EBITDA was $20 million, or $0.39 per diluted share, compared to an adjusted EBITDA loss of $14.8 million or $0.30 per diluted share in the prior year quarter.

We ended the quarter with $181.5 million in cash, cash equivalents, and investments available for sale, up from $163.9 million at the end of the first quarter, and we continue to have no debt. The company currently expects to generate significant free cash flow in the second half of the year, ending 2026 with well over $200 million in cash.

Overall, the second quarter reflected meaningful improvement in profitability, cash generation, and operating leverage. Our focus remains on maintaining financial discipline, advancing new product development, and investing selectively in the opportunities with the clearest return potential. With that, I'll turn it back to Warren.

Thank you, Deborah. Stepping back, the second quarter was a strong quarter that rounded out the best first half-year revenue performance in STAAR history. This is yet another step forward for STAAR. We grew revenue, expanded gross margins, generated net income, and built cash. And we have much to be proud of, growing EVO Plus adoption in China, back-to-back record quarters in the U.S., a successful ERP implementation, and early progress in organizing our product pipeline with an eye toward the mid- and long-term future.

Our strategy is clear, our team is focused and performing, and our long-term opportunity remains as compelling as ever. With more than 4 million lenses sold, 85 countries served, and 32 years of proven Collamer safety and efficacy in a world that is becoming more myopic every year. Now, our focus is to build on this momentum. Revenue growth, expanding profitability, and advancing innovation.

Deborah and I are aligned with our board and management team as we focused on long-term value creation through clear priorities and operating discipline. Thank you for your continued support. With that, operator, we are now ready to take questions.

[Operator Instructions] The first question will come from John Young with Canaccord. Please go ahead.

I want to touch on Q3 and just maybe understand how you're going to level set investors, just given the comps and the one-timers that he called out. So using that adjusted number of $68.8 million that was in the press release and that he spoke about, you know, consensus currently sits at $80.9 million going into this print, so about 17.5% year-over-year growth from that figure you provided.

Are you comfortable with the consensus number today? And what's a good way to think of the Q3 growth algorithm? If you're not comfortable about that number, how should we think about growth overall for the quarter?

Yes, hey John, great question. Nice to hear from you, and I'll make some comments and then invite Deborah to join. Look, we don't comment on consensus numbers generally. What I would say is we tried to give a little bit of a bridge to how you think about Q3 and Q4. We wanted to be clear that you needed to take the 2024 order out of each quarter so that you could have an appropriate base. We intend to grow off of that number. In fact, we're planning to grow on Q4 as well. That's what we would say as far as how to think about it.

I think the primary driver of the success so far, clearly China has come back for us. We recognize that the market is somewhat muted. You hear that in some of the commentary about other companies that are reporting, but we believe we have a nice advantage with EVO Plus launching in that market. We're clearly taking share relative to our competitors. And then we're still putting up a nice performance around the rest of the world, even in the face of some external challenges.

Okay, great. And then maybe just as a quick follow-up then, any of this color on where EVO Plus is today as a share of China volume versus your initial expectations at launch? And then maybe how could we think about the price versus unit benefit in Q3 to China?

You bet. Yes, it's a good one. Look, we're excited about what's happened with EVO Plus. Candidly, it's outstripped our supply capabilities based on the demand. It's higher than what we anticipated it would be. Certainly, we saw that in the first quarter, and second quarter was no different. So, even in other markets around the world, we're now working to try and sort through scaling up supply to be able to reach the demand.

And so that speaks to EVO Plus has done better in China than expected. As far as the percent penetration of it, look, by the time we exited the quarter, it's probably close to a third of the units. And so we feel that's pretty strong, and it beats what we expected when we started. So, you know, how you think about it going forward from a price standpoint, we're still taking a considerable premium.

Our customers and seemingly their patients have not balked at that premium. And so we expect that to continue at least into the near term. And then we'll see what next year brings.

The next question will come from Tom Stephan with Stifel. Please go ahead.

I want to start off with China and sort of thinking more intermediate to long term. Comp's weird this year when the street looks at numbers, but you're seeing obviously underlying volume growth. obviously have a good sense on price and mix. So not asking for guidance or anything, Warren, but if we think out to 2027 on a full year basis, and that obviously strips out any quarter to quarter seasonality questions, like as we sit here today, what do you view as the general range of call it normalized year-over-year China growth for STAAR, and then I'll have a follow-up.

Yes, thanks, Tom. Appreciate the comments. And look, I love that you said you're thinking intermediate to long term. That's what we want. We're focused on building the long term, not just from the revenue standpoint, but the infrastructure investments that we're making in the organization, the preparations we're making behind the scenes from a portfolio standpoint. We are intending to operate this business into the long term. So thanks for that mindset.

You said it, look, aside from the nuance of us taking out the $25.9 million from the Q3 base, now we're going to be back to what we call clean quarters. We had clean quarters already this year, and you've seen growth better than market in China, and you've seen us continue to deliver in markets elsewhere around the world. And so I have no reason to believe that's going to change in China.

Our thinking is that as that market, which we think is probably mid to single digits right now from a refractive market standpoint, pulled down a little bit by lasers that are struggling, but it's offset by improvements that are happening, largely because of price with EVO Plus and then V4c halo effect that's happening when patients go in looking for V5 and either don't get it because it's slightly higher price from a premium standpoint, or it's not even available because we're trying to satisfy that demand.

So we think that feels like a tailwind as we go into next year, but not really ready to comment on exactly what that means for the quarters. I'll just finish by saying we did try and give some more guidance, not formal guidance, but some guidance around what the shape of the quarters look like in China.

Clearly Q1 and Q2 have now moved in the last couple of years to be seasonally our highest quarters. Q3 is still strong, but it's typically going to be less than what Q1 and Q2 are, and Q4 will be a softer quarter from a total revenue standpoint. But again, we're planning growth in both of those quarters, notwithstanding the $25.9 million that we've talked about extensively. I hope that makes sense.

Makes sense. Appreciate that. And I'll maybe shift a little near term. I wanted to start off long term to set this up a little better, but I'll take a stab at kind of the 3Q, 4Q cadence and focus on China here. Warren, if I got this right, I think you mentioned 3Q China revenues moderately lower than 2Q. Hopefully I heard that right.

Wondering if we can put a finer point on that. And I'll ask it in the context of 3Q24 and 3Q23. China dollar declines were $10 to $15 million, roughly speaking. Warren or Deborah, is that reasonable for 3Q26 China, particularly as EVO Plus Mix, I think, continues to provide a continued sequential headwind. And as we try to contemplate, it sounds like pretty resilient ICL, China summer high season trend.

So is that down $10 to $15 million that you've seen in the past a good anchor point?

Yes, that's a good one. Look, I'll start and then invite Deborah. I think it's important to remember two things. The seasonal shift has happened that I described. So Q1 and Q2, we expect to be stronger. That's borrowing partially from Q3. So it's hard for us to say, gosh, this is exactly what we think is going to happen in Q3 because one, because of that dynamic, and then two, because of what we said around having to pull some of that 2024 order out of Q3. But we still expect the underlying, I think the important piece, the underlying demand in China, it's stable.

It's not amazing. It's not as high as it was back in periods of hypergrowth, but we're taking advantage of it disproportionately because of the acceleration of share capture in our view. So I think that's how I would be thinking about it. It's hard for us to put a number on that, which is sort of stating the obvious why we have it.

The next question will come from Anthony Petrone with Mizuho Americas. Please go ahead.

Congrats, everyone, on the new roles and look forward to working with everyone moving forward. Maybe I'll pivot to the U.S. and then come back to China. Just maybe an update on active sites and the strategy. So where are we in terms of total active sites in the U.S.? And I know that there was sort of a go deeper penetration strategy, but also there was a push to open up new sites. Maybe where are we on active sites and a recap and a refresh on the strategy between deeper penetration at the EVO live sites versus going after new accounts. And then I'll have a follow-up on China.

Yes, thanks Anthony. Good to hear from you. Look, what we're seeing in the U.S. is a bit of what we're seeing around the world. Remember that only got the approval for EVO in '22. Commercial launch kind of happened in 2023 as we built up the team. And what you're seeing now is we've got hundreds and hundreds and hundreds of active sites. We're going deeper where we know we can make the biggest difference. We're focused on 2 key things.

And it's a U.S. discussion, but it's also the one that is relevant outside of the U.S. And that is, once we get customers clinically confident, when they use EVO, and those patients come back and they see them in the clinic, or they see the optometrist, these are happy people. And so what we're seeing is the surgeons get more confident clinically and then they look for how do I make this work for me economically and that varies by whether they operate in their practice or whether they go down the street in their car to a multi-specialty ASC where they have to pay anywhere from $900 to $1,800 an eye to operate on them. That's a more challenging situation to where we have in-office suites where the doctor can go right down the hall and operate in his or her own practice. So you can see where there's opportunity sets within each one of those scenarios.

We've stratified those customers. Our team is actively and aggressively going after clinically confident customers with an economic message that says, you've got revenue that's walking out of your practice because they're high diopter and someone's trying to sell them LASIK, which is declining year over year, and now again quarter over quarter. And so that's a little bit of an almost dated discussion because what's happening now is patients are asking for EVO because they're hearing more about it.

Younger patients and younger doctors recognize the value of a removable, reversible technology, and so they're more excited. So more of those surgeons in the U.S. are offering EVO as one of their refractive surgery options. And so you're seeing the adoption, you're seeing less walkout revenue, and you're seeing more of the practices that we're targeting narrow the delta for the patient from a pricing standpoint. So they make it more accessible to them, and that's what we're seeing drive the adoption in the U.S. It's still on smaller volume that we want, but we're proud of another $6 million quarter and looking forward to continued growth.

Very helpful. And China, you know, EVO Plus, just a reminder, what percent of the market does the larger lens size open up in China? And then just looking at the consignment numbers, they're up pretty substantially year over year in the queue. I was wondering how much of the China consignment sales were linked to EVO Plus.

I'll let Deborah comment on the consignment sales. I'll just say as far as opening up the opportunity, look, the way we see market demand is it's unlimited. And that's not just China, that's on a global basis. The amount of refractive error on this planet is untreated and it's massive. And so we're on a journey after it. Obviously we're constrained by some things. We're constrained by total patient in the refractive market coming in and seeking consultation.

And then as it pertains to EVO Plus in China, we're constrained a bit by inventory as we've been struggling to build enough to meet the demand in Q1 and then in Q2. I think we're getting our hands around that now, particularly as we get into the latter parts of Q3 and into Q4, we'll see some of the demand slow down just because of the dynamics of the seasonality.

So that'll actually help us from a supply standpoint. But you're seeing, you know, There's no additional number of patients that EVO Plus opens up because EVO Plus can be used for any number of patients that EVO could be used for. It becomes a premium positioning at the account level and whether the patient has the economics to support themselves on it.

I guess, this is Deborah. From a consignment standpoint, actually our consignments in China are way down. And that's why you're seeing increased tariff costs on the gross margin side. Because if you recall, we shipped those consignments before the increased tariffs were put into effect last year, early last year. And so now that those lenses have been used, we're shipping U.S. product into China increasingly and they are subject to tariffs. But the overall numbers are way down in China in consignments.

The next question will come from Simran Kaur with Wells Fargo. Please go ahead.

Warren, you know, you framed the China share gains as coming primarily from laser-based procedures. Can you just help us understand the mechanism behind that? Are you seeing more patients opt for ICL up front, or is the bigger driver surgeons expanding into ICL and converting procedures within their practices?

And as domestic competition develops in the China refractive market over the next few years, how durable do you believe those share gains are?

Yes, hey, Simran. Thanks for the question. Look, I think starting with the competition, we're thrilled to have competition. It's just more of an admonition that the future's lens-based from a refractive surgery standpoint. You're seeing laser volumes around the world face headwinds. And is that what's happening in China? It's hard to say getting into the share discussion. We believe a little bit of all of it's happening. Patients are coming in asking for EVO Plus. Oftentimes, they're getting EVO Plus if they have the economics to do it and we're able to supply it.

And then even when they're not and if they're a candidate for V4c, we're seeing a bit of a halo effect that's happening from that standpoint. So despite the otherwise sort of modest market growth in refractive in China, we believe we're getting a bigger share of it because we're getting dollar share with EVO Plus and we're getting some unit share probably with EVO Plus and with EVO that's inviting that competition.

And so, we respect it. We see it outside of China. We see it inside of China. It's not made such an impact so far. Remember, these are acrylic lenses. The advantages of STAAR for 32 years and beyond now is our material.

The EVO and EVO Plus powered by Collamer message is very real and the trust that our surgeons have for a device that they've had implanted for 30 plus years gives them great confidence, and I think it makes it more challenging for these other devices that are not made out of Collamer to compete in those markets. It doesn't mean that we have any disrespect for them, it just means they've got an uphill battle.

Got it, very helpful. And for my follow-up, you know, ex-China, I can certainly appreciate on a year-over-year basis every region grew, but if I look at the growth rates across APAC in particular, it looks like it's decelerated pretty significantly. So maybe just to help us understand what's going on in the region, And more broadly, should we think about ex-China as sort of a mid-single-digit grower going forward, or is there opportunity to re-accelerate the growth rate there?

You know, we have strong contributions from our largest markets in the region in APAC, Japan and Korea. Japan grew substantially from a unit standpoint but faced tremendous headwinds from a currency experience from an exchange standpoint. So I think it's 13% or 14% growth even in units, and then what we faced after currency was just 2% growth.

So it's modest from that perspective, but the underlying market activity is strong. And we don't have any reason to think that that's going to change. Korea is a bit of the low season for Korea. Korea's also, it's a smaller market relative to Japan, but it's a really important one for us, and it's onewcastlemax where we have great sales execution, great customer relationships, and so we believe in the long-term viability of that market as well.

India is really, really a long-term play for us. That's a complicated market. It's complicated relative to local competition. It's complicated relative to macroeconomic factors that they're facing. Obviously, there's currency issues associated with being able to access U.S.-made and Swiss-made products in India.

So that's a long term process for us, but it's still a really important market. So as far as the heart of your question of what should we expect as far as growth rate, can't say, but what I would say is we don't have any reason to believe that the viability of EVO in those markets is going to be under any siege.

No, I just wanted to add that plus we're seeing really strong growth in Taiwan, which we just launched last year. And that market is really doing very, very well. Sequentially, every quarter, it's increased significantly. So nice market there.

It's a fun market to think about because we just got the approval for EVO Plus. It's adjacent to China, obviously. So from a patient population standpoint, they have access and visibility to seeing the social media and the happiness with EVO. And its the one that we're going to start servicing and it's filled with lasers and opportunity.

The next question will come from Ryan Zimmerman with BTIG. Please go ahead.

You know, the first question, I want to go back to the pricing and volume dynamics in China for a minute here. You know, Warren, I was struck by your comments about a third of the lenses in China are EVO Plus. And, you know, let's assume that, you know, there's a 30%, 40% price premium on that product. I mean, that would suggest, I think, that you're getting about, call it 10 points of growth on those lenses.

But if you back that out and all else being equal, if the China market's mid-single digits, is it and again, I can appreciate that you're taking share in the market, but wouldn't that suggest that the volume, the units are declining in China?

Well, you got to start with this exit share in July. So we don't have, it's not a third of the units of EVO Plus for the full year. And so, remember, we're building as we go. We're not even launched with EVO Plus and all of the hospitals or the systems that we're going to ultimately get launched and listed into.

So the math becomes a little bit challenging from that perspective. But again, I'll just double down on revenue in China now is being driven by 2 things. It's being driven by return of our EVO V4c, somewhat of a halo effect, and it's being driven by adoption, both units and price, with EVO.

And so, How much that's ultimately going to go from a third exit to the full year, we'll see. It remains to be seen, and we have to be able to supply it as well.

Okay, that's very helpful and that, you know, buttons that up. The other question I had was just U.S. And, again, I can appreciate, you know, that this is still building, but if you go back to the launch of EVO in the U.S., I mean, we have seen sequential growth from 1Q to 2Q every quarter since EVO launched.

I appreciate that, you know, it's holding steady at $6 million, but it did decline sequentially a little bit in the U.S. in 2Q. And that may just be, you know, based on small numbers and so forth. But I wanted to at least, you know, get your perspective on that because it is still early days, you know, given the opportunity in the U.S.

That's a good one. Look, I think the long-term value of the U.S. market is massive. I think access that we have is going to create a channel for us to do all sorts of things. And this is a long-term discussion, not a quarter-to-quarter one. But just as a practical matter, even though we do better than the laser market, there's often an inverse relationship between how the laser market declines and we grow, but we're not taking every one of those points of their decline clearly.

And so when the overall refractive market shrinks or grows, we benefit from that or we suffer a bit from that. So in Q2, sequentially versus Q1, you saw the laser, the total refractive market go down, driven by lasers because they have the predominant share, And so we suffered a bit from that.

So that explains, I think, some of the sequential, we grew but the decline versus our first quarter performance, which was like 22%. There's probably some timing in there also. And then the other thing I'll say candidly, the U.S. makes up 5%, maybe 7% of the share here. When we're on backorder or supply constraint in our largest market, China, or in other markets as a result, as we try and satisfy by building product, we have to build MTOs, made-to-order products for Torics.

And when we do that, those are built in smaller units, smaller volume of units, and therefore it gums up our supply chain. And when that happens, guess what? The U.S. goes on back order for MTOs. And so that's going to explain some of it too. I suspect if you channel check, you'll find some unhappy customers, unfortunately, in the U.S. that are trying to get product from us, which we are cranking out now to try and get caught up.

The next question will come from David Saxon with Needham and Co. Please go ahead.

Maybe just on the, I'll start on the ERP, any way to quantify the impact of the second quarter earnings, I'm sorry, orders or revenue, and does that all get recouped in the third quarter or does that take longer or is it just lost sales at this point?

No, no, we don't think the impact was material, there was any material impact overall on our revenue numbers. You know, as far as the P&L is concerned, the impact was mainly on expenses as we work to stabilize the system overall and upgrade or update the system.

But on the revenue side, could there have been some lost sales, I guess, on the MTO side of it, the made-to-order lens side of it? It could have been. But that's mainly driven not by the ERP system. It's driven by the strong demand in the first half of the year, especially in China.

Hey, David, we referenced it in the pre-release, and then we referenced it in the shareholder letter. Honestly, it's more of an acknowledgment of how hard our teams work because despite the internal exhaustion that it created, we were still shipping products, still booking orders, still servicing our customers, still delivering the revenue for the quarter, which delivered our profit.

So I think the ERP system has been a big lift. We'll continue to tune it as we go, but from a revenue impact, I think it was negligible.

Yes, I mean, I would just say, understand that we've actually exceeded our plans, operating plans for both the first and second quarter of this year. That I will say. we're pleased overall.

Okay. That's helpful. Thanks for that. And then maybe I'll try a third quarter question. So obviously appreciate the seasonality commentary. So, I mean, looking at third quarter, you know, round numbers, sounds like you'll land somewhere in the $70 to $90 million range. I guess sitting here halfway through the quarter or thereabouts, how would you characterize the sequential trend you're seeing? Like how steep or gradual is that trend line looking at this point?

Look, I won't comment on the specifics there. I would just say from a trend line standpoint, I don't think a lot has changed. We've seen some commentary out there around the high season for China, remembering we believe there's kind of 2 high seasons that happened back to back in Q1 and Q2 now because of the pull forward of the military procedures as well as the Chinese New Year. And then in the second quarter, you get a bit of the, to get some of the summer high season, which fades off during Q3.

If you listen to what's happening in China, it's sort of flat to mid-single digit sort of growth for the market. And as you've heard us say, at least in the quarter, we've done better than that. So I all those dynamics hold as we go forward and then you just have to back out the $25.9 million from last quarter to get your Q3 and think about a little bit of growth there.

Same for Q4. Q4 was unaffected by that order, but we think we're planning at least to grow in Q4.

The next question will come from Mason Carrico with Stephens. Please go ahead.

This is Harrison on for Mason. Just wanted to ask on ASPs, blended ASPs under pressure from Toric/sphere mix and the diopter curve dynamics. After exiting Q2 at 30% of China volume, is the EVO Plus premium now large enough to offset these headwinds at the consolidated level in the back half of the year?

Look, it's a good question. I'd have to give a lot of thought to that to try and come up with the best answer. I would just say, clearly, we're going to continue to get ASP to the level that we can get it tailwind from EVO Plus. But honestly, price is a function of well at least in Europe, a country like Germany where we have the highest price in Europe, we're facing competition, we're going to have some ASP slippage there, but it's not massive.

We've held price in most markets around the world partially because the adoption of Toric continues, and so Toric's a little bit higher priced, the higher mix of Toric we have, the better pricing we have, so I'm less concerned about pricing and I'm more concerned and focused on continuing to take share, which we believe we have line of sight to keep doing. So rather than say we're going to overcome price erosion with price in China on EVO Plus, I'd rather say we're focused on taking share on global markets and we think we can do that.

You mentioned diopter, and outside of China, if you look at our percentage of units that we sell, if you look at above minus 8 and you look at below minus 8, we've moved ourselves down outside of China a couple of percentage points at least down from minus 8 into the minus 6 to minus 8 range. And so we believe that we are continuing to move ourselves down the diopter curve. And any time we're doing that, that gives us an opportunity to take share where lasers may have been treating that patient before. And so that's going to be our focus rather than the ASP component.

Great. Thank you. That all makes sense. And then, sorry if I already missed on the call, but when do you expect to have enough EVO Plus inventory to fully supply the demand you were seeing right now in the China region?

You know, I think we're there or thereabouts now. Remembering that we're going to start to see the summer part of the high season tail off, which gives us a chance to catch our breath and start to build units. So I think by the end of the third quarter, roughly, we should be in place where we can supply as much EVO Plus as necessary.

Now our focus is to build V4c. Remember, every unit of V4c that we build in Switzerland for China gives us the benefit of not having to pay the tariffs. And so our focus is supplying EVO Plus, but a side card of we want to make sure we supply as much V4c out of China as possible. And we're hoping by the end of the year we're going to be able to accomplish that.

The next question will come from Adam Maeder with Piper Sandler. Please go ahead.

Congrats on the appointments. I'll keep it to one multipart question. In the press release, you talked about moving beyond a single product line company into kind of, I think, a true platform was the phrase you used. Could you just expand on that comment? Are you thinking about moving beyond the refractive market? Or is it more a focus of kind of having a broader offering within refractive?

And I'm assuming everything kind of starts and stops with your polymer-based technology. Is that the right way to think about it? And just any comments around potential time lines, whether it's years or medium, long term would be helpful.

Thanks Adam. I love the question. Look, we're excited to run this business for the long term. The thinking here now has really evolved to we want to establish the infrastructure and the capabilities for this to be a long-term investment for folks, but a long-term successful company in ophthalmology.

And so from a pipeline standpoint, we've got great engineers, and great clinical, medical, regulatory talents in this organization that have been working in the background for years now on a variety of things. And so we're looking forward to bringing those things together in what will be a more cohesive, a more easy-to-understand portfolio. And we'll talk about that in future releases. We're not ready to talk about it today.

You heard us say we're going to hire a chief technology officer. I'm excited about that. I'm excited to be able to start talking about first in human testing that we will be doing very soon, as early as even the first part of next year, if we can't even do it sooner. And that's on next generation products. We said before we're focused on things, of course, that are going to be very, very important. the material capabilities that we have are unique.

And that's how Collamer has differentiated us for many years. So we want to use those same capabilities, whether it's Collamer or whether it's something else, for us to be able to accelerate and become beyond just an EVO ICL company.

Refractive is our wheelhouse. In the sulcus is our wheelhouse, where the surgeons place the EVO ICL. So I think all of those represent opportunities. You've heard us talk in the past about extended depth of focus or presbyopia correction, being able to take advantage of a patient's natural ability to accommodate, but be able to give them some extra help with a lens-based technology, that's an option amongst many other options. So we'll talk about those in a more formal way as we go, but there's a lot of excitement here about our future.

I'll stay tuned. Thank you.

[Operator Instructions Please stand by as we pull for questions.

Showing no further questions, this will conclude our question and answer session as well as conference call. Thank you for attending today's presentation. You may now disconnect.

Hi. My name is John Young, and I'm a medical technology research analyst here at Canaccord. Thank you for joining us today for a call with management of STAAR Surgical following their Q1 results. I'm happy to introduce Warren Foust, Interim Co-CEO and President and COO; and Deborah Andrews, Interim Co-CEO and CFO. Participants who'd like to ask questions, please use the Q&A feature through the webcast. I'll do my best to include those in our discussion today. Warren and Deborah, thank you so much for being here today.

Perhaps we could start with a high-level question about STAAR's technology before we jump into some more detailed questions about the business. So can you start by reminding investors what differentiates EVO ICLs from laser vision correction? And why you believe lens-based refractive surgery is gaining share perhaps both globally and then also in the U.S.

Yes, John, happy to. First of all, thank you for having us. Thanks to you, and thanks to Canaccord. It's a pleasure to be here with you.

Look, EVO ICL is the child of ICL -- STAAR ICLs that have been around for -- in eyes for 30-plus years. And so we're very proud of the history that we have, but we're also proud of the future going forward. And relative to ICLs different from laser vision correction procedures, those require the removal of corneal tissue, where an ICL is simply adding something to the natural lens system in your body. So that's the first distinction. And then some of the things that come after that may be relative to it.

For example, when you take corneal tissue, you often induce dry eye. So if a person who could become a patient already has dry eye symptoms, using a laser vision correction technology often induces more dry eye. EVO ICLs do not. So that's an important component.

Then polymer. Polymer is the material. It is collagen infused with monomers, which become this unique material. It's very soft and is very elegant inside the eye, and it acts -- we say very quietly in the eye, meaning nothing in the body is reacting to it. So it's very bio-friendly, and it seems to be a big difference maker in ICL technology versus other ICLs that have come in the past because many have tried, but many of those technologies that have come that were made out of plastics, acrylic materials, those have not continued.

I still wouldn't let it in my eye, but I could definitely sing it praises for it. I think we'll move to China. China revenue, $47.4 million was the standout in Q1. How much of that strength was true end market procedure recovery versus EVO+ launch benefit versus channel normalization?

Yes. Deborah and I have taken a really strong approach at looking at inventory on an every week, if not every day basis. And so we understand much better what's happening downstream, particularly with our 2 importers as they ship products to the hospitals and to sub-distributors. So we keep close tabs on inventory. So we feel really good about the fact that it was end market sales that were driving the procedures for the Q1.

Now candidly, it's a better quarter than we expected. And some of that is, I think, relative to the excitement around EVO+ that exists in the market. We launched EVO+ in very, very small quantity at the end of Q4, and then we began to roll that out to more facilities here in the first part of 2026 in Q1. And so I think the combination of EVO+ with clean inventory because even as recently as September of 2025, we got back to contractual levels of inventory, and we've made sure that we've maintained that as we've gone forward.

And just as a follow-up to that of an investor question, just asking, how do you gain those insights into the inventories in China, making sure they stay at those contractual levels? What services do you use? And how real time is the data that you guys are able to see when you go through it week by week?

Yes. Our importers are providing us with their logistics data. So we know what we sold to the importers, of course, and they provide us with their logistics data. So we're able to see when they ship product out to third parties. So they ship them to hospitals, they ship them to subdistributors. And in many instances, they'll ship them to medical supply companies, which are holding companies in between the hospitals and their downstream other hospitals. So we see all that data.

So when we say end market sales, we don't have procedural data. We can't see the procedure happening as an implant. We hope to at some point in the future. But today, we don't have that visibility. What we see are the shipments out of our importers minus the returns that come back from those same entities that transact with our importers.

And so in times when we had elevated inventory, we've known what that number is. If we see that come down now to contractual levels, we describe that as around 6 months. And we know we exited 2025 at that level. And we know at the end of Q1, we're actually there or maybe even slightly less than the 6-month level.

And our importers provide that information to us on a weekly basis. And then every month, at the end of the month, we get their inventory levels to make sure we're able to track their inventory as well.

Great. Deborah, I want to revisit some comments made yesterday at a competitor conference that, I think, it might be worth revisiting around Q2 in China, particularly about the possibility that Q1 benefited from some pull forward related to military procedures possibly. And setting some stage here, China historically has seen a pretty strong seasonal ramp from Q1 to Q2 has been pretty widely discussed.

It sounds like yesterday, you're expecting maybe more flat sequentially given some of these changes in seasonal dynamics. Could you just go over them? And then maybe taking a step back, are those comments you made yesterday, are they based on something new that you're seeing? Or would you characterize those comments yesterday as being the continued caution that you had that mindset going into the Q1 print?

Yes. I believe I discussed this to a certain extent on our Q1 call, whether it was in Q&A or otherwise. But Q1 was exceptional for us this year. It was beyond what we were even expecting. And if you recall last year in Q1, although we didn't have any sales to the market, our in-market sales were also exceptionally strong as told by our distributors.

Now the reason we were told they were exceptionally strong was because of this military pull forward of procedures from summer season, summer months to the first quarter. I was skeptical last year that, that was real and that really impacted STAAR because we don't -- those procedures are LASIK procedures generally. And of course, we don't participate in that market. So I was skeptical about whether or not that was a real phenomenon and whether we would actually see that again this year. But indeed, with the results that we saw in Q1, we think that probably is likely the case that we are seeing a pull forward of procedures.

So I am guessing, as you said, typically, historically, '22, '23, '24, you would have seen a nice ramp between Q1 and Q2. I'm guessing that's not going to be the case as a result of this change in trend and that it will be similar, maybe a little bit more than what you saw in Q1. And then I'm guessing Q3 maybe even a little bit less than what we've seen historically, still high, but more of a flattening out amongst those quarters.

That makes sense. And what are you seeing so far in Q2 relative to that new pattern?

Look, I guess what I would say is just maybe a little bit of history is important. The 2024 time frame feels like it was near the bottom because we had such a decline in the end market procedures. Again, this is the logistics shipments that we saw our importers shipping downstream and coming back. '24 was double-digit decline at [indiscernible]. '25, we saw some recovery. We described it as mid-single-digit level by the time we exited the year, but that included the high first quarter, sort of modulated Q2 and Q3, and then not great at the end of Q3. But Q4 was okay.

We came into '26 in that same way for Q1. So when we think about procedures in Q1, which is important to your question around Q2, procedures were probably in that same range. Maybe they're mid-single digits. I think when you listen to ZEISS, they talked about it being a stable market, but not necessarily growing. When you listen to Aier and Huaxia, they grew revenue in the 9% or 10% range, Bright Eye about half of that. But that's not speaking to procedures. That was their revenue. And they talked about getting a lift from ASP. We know we benefited from that.

So we know we're taking some level of share. But if you think about that Q1 mid-single digit, Q2 is probably not too different. We'll see. As we get into the high season, then we expect procedures to start to increase, but we've got to wait and see that come through.

Got it. And Warren, how should I think about the mid-single-digit market growth and then also the premium you're likely to get from EVO+ and the ongoing launch there in China?

Yes. I mean we're proud of the premium we're getting. Customer excitement is real around EVO+. In fact, it was more than we expected in Q1. We didn't plan to launch 100 units in Q1, and we saw more demand than we expected. You know we're scaling our Nidau, Switzerland facility to be able to provide that. That's going well, and that is something we need to continue to scale to meet the demand for EVO+. We think around about the middle of the year, we should be in a place where we can supply at least the demand and then be able to start building some safety stock. We're excited about doing that.

I would say that we got a lift in premium from ASP, no doubt. That's helping us with share from a dollar standpoint. But it's clear that from an even end market unit standpoint, there was a lot of excitement around this earlier version, we call that V4c, so EVO. Maybe that's a halo effect because patients were running EVO+ and they were waiting. I don't know the dynamic there, but it sure feels like we were able to take some share.

And then we're hopeful that as the market comes back itself and we see more easing of geopolitical tensions around the world, and in China, we see less macroeconomic pressures when we see the market continue to grow or get back to real growth, then that share gain will help us be even better, we think.

And could you just remind us in China, just where ICL share is relative to LASIK refractive procedures?

Yes. I don't know if we've given that number explicitly. So I won't say now. But what I'll say is we have markets around the world in Japan where it's north of 50% or 60%, some even cited at 70%, depending on how you count it to some markets like the U.S., where we've only launched EVO here in the last -- since 2022, really in 2023 to commercially launch where we have a share of 3% to 5% and you have everything up to maybe 15% or 20%. I think China is somewhere in that range between 10% and 20%.

Makes sense. And then moving to the U.S., Q1 was another great result, growing 22% year-over-year, exceeding $6 million quarterly sales for the first time. Love to go through what drove that inflection? Was it new surgeon adoption, higher utilization among existing surgeons, better marketing or broader patient awareness?

Yes. It's all of that, I think. And in a lot of ways, there's pieces of it. Look, what we know is the last several years have been a mess for laser vision correction in the U.S. in particular, but in other markets around the world. And so procedures that [ pain ] corneal tissue and patient awareness through platforms like Instagram and TikTok and so on, there's a truth through a never-LASIK crowd.

There are folks that -- we've surveyed around 1,800 folks and found out that 50% of them, they're not interested in LASIK ever. And then of the 50% that are, half of them still have fear, but almost all of them were open to an alternative. And we think that's where we're starting to really see opportunity because we're now -- we've always been clinically aligned, I think, with our customers.

They recognize that ICL is good treatment, particularly for mid to high myopia. They've known it's good for lower levels of myopia. But what we have now is we have more economic alignment with our customers. They're looking. They tell us they're looking for ways to improve their practice economics because of the decline in LASIK, because of the declining reimbursement they're getting for high-volume procedures like cataracts.

And so the cash-pay elective procedure that doesn't remove corneal tissue, that seems to be a real excitement for our customers. So you're seeing new adoption as a result of it. You're seeing increase in offering that leads to patients at lower-diopter as a result of it. And then clearly, our marketing team and our U.S. field organization, they've really done a great job in execution. So I think it's a little bit of all of the things that we said.

Yes. Going to marketing, when you first launched, you had a pretty broad strategy, I think we could say in the U.S. But I think now you really transitioned to specific marketing around centers that are EVO-first centers, perhaps you can call them. What are you seeing there in terms of engagement and driving patients to these practices that are willing and able to offer EVO to patients?

Yes. We held an EVO masters course in Austin, Texas, I don't know, a month or so ago, and had 150 surgeons highly engaged talking about marketing programs and how they're engaging their patients. When the campaign was launched back in 2023, late '22, early '23, it was a broad campaign, as you described. And it was great because it builds some awareness.

In fact, we hear about it now. Our surgeons 3 years later are telling us they like that campaign. But the reality is it might have driven a person who could have become a patient into a practice, but the practice wasn't really ready. And so they converted them to what they knew and what their practice was tooled to be able to convert them to, which was LASIK.

Now 3 years later, where you have many more practices, which are actively engaged in EVO, they're actively trained, their staffs are ready to talk about the benefits that EVO offers, they still may offer LASIK and that's fine, it's still a good treatment, but they're talking to their patients or potential patients around EVO, that's having a real impact.

So those customers that are willing to offer EVO and mid and low diopters, those customers that are already trying to attract refractive patients, if they have interest, we partner with them in a much more targeted marketing approach to try and appeal to people in their geography that can come in for that stated purpose. And we're just finding that as shared buy-in from the customer and a lot of impact on a potential patient.

And do you guys have any data in terms of taking share from LASIK versus attracting patients who maybe would have been on the sidelines otherwise at this point in the U.S.?

It's hard to say. We know we're getting both types of patients because you're still offering or our customers are still offering EVO with doctors that lasers can't even touch. So when you get into minus 10, 11, 12, you shouldn't, I don't think, be touching those patients with lasers in most instances. So they don't. They use -- they often use first-line therapy IPL.

What we're seeing now, though, is lower diopters that are offering it and it's a patient preference in many instances. They know neighbors or friends or family members that are -- that have had the procedure, and they'll see EVO and customers are starting to choose it there.

So we don't really have the data on what's happening in market share. But what I will say is EVO now, in the quarter, you saw we posted the 22% growth in the U.S. It's a couple of quarters in a row now where we've got high double-digit growth against the backdrop of pretty high double-digit decline in LASIK. And so they're on a little bit of an inverse from one another's trajectory as it is ICL versus LASIK.

And the FDA recently expanded EVO's labeled age to 21 to 60. I think it added about 8 million patients to your TAM. How quickly can that translate into additional commercial opportunity for STAAR?

Look, it's immediate and maybe small doses. It's a hard thing to estimate. And the reality is, as patients start to get up closer to the age 60, then refractory lens exchange becomes an option for that person through a cataract replacement. But this -- our surgeons are telling us they're really excited to be able to offer that 40- to 60-year-old where they've not really had great confidence around the technology that they should choose. This just gives them another data point for them to be able to suggest to their patients.

So this is, to me, less about the 8 million TAM in the U.S., and it's more about a committed strategy that we have on a global basis to open up EVO ICL opportunities to more patients. Global labeling in Brazil, which happened recently; the approval in Taiwan, which happened last year; the new labeling for the U.S., it's part of a strategy that we'll continue to try to get more EVO demand.

And beyond LASIK, what remains the biggest bottleneck in the U.S. in terms of adoption in your view?

Look, there's a lot of infrastructure around lasers. These things have been bought and paid for many years ago, and it's a profitable procedure, particularly for customers that own them. What they're finding though now is those lasers that are aged, they cost a lot to maintain them. It costs a lot to have a technical service agreement with them. And when the patient load slows, then that's why I think you're seeing them look for more opportunities. But that's still a bottleneck. It's still a place where the customer has to have the awareness, they need to have a refractive stream of patients coming in. Most of those now, we've got reasonable relationships, and I think we're starting to make great progress illustrated by the Q1 results.

Deborah, if we could maybe touch on this guidance. STAAR continues to not provide formal '26 revenue guidance despite strong Q1. What specific milestones or visibility would you need before becoming comfortable issuing guidance again?

Well, first of all, let me say we're in this for the long term. And so that's where our focus is. We think it was very important for us. We knew we were going to increase our revenue significantly over last year. We also thought it was very important to achieve profitability, which we did with nice increases in our operating margin and our EBITDA margins. But we need to have predictability.

If we were to give guidance, we need to have predictability so that we have confidence to accurately and responsibly give guidance. And as you saw with Q1, that was above our expectations. So now the question is, okay, what happens in Q2, what happens in Q3. Q4, I think will follow similar trends to what we've seen historically. But we just don't feel that it's responsible to give guidance until we have more certainty around those numbers.

And without asking for guidance, our model assumes revenue $321 million, and consensus is the $332 million, so 34% year-over-year growth. Are you comfortable the Street is? And maybe just walk us through the swing factors that would drive upside or downside to those numbers today?

Yes. We don't really comment on the consensus numbers. But again, Q1 was excellent for us. So we're really pleased with that result and what that purviews for the rest of the year, I hope.

The biggest swing factors include the continued strength in China demand, of course, and EVO launch, the adoption -- continued adoption of EVO+, which was really strong in the first quarter. That carries a premium price, of course, and potential downsides to this are the macroeconomic and geopolitical issues that we face internationally, particularly in the Middle East and in India. And that could expand throughout other regions of the world where we sell our products. So that gives us a little pause.

And maybe moving to the P&L. Gross margin was 73.6% in Q1, and you said that 75% is now more of an exit target for the year. What are the key levers for STAAR to get back towards that 75%?

Yes. Well, as you said, that's an exit target for us, which we hope to achieve. But the key levers are significantly increased manufacturing volumes in our Swiss facility, which we're on target to achieve. This will improve our overhead absorption and reduce our unit costs. We expect to sell through high unit cost product somewhere in the -- by the second half of this year. And we also expect increased ASPs as we fully launch our EVO+ in China. And also as we -- now that we have -- we're able to fully manufacture EVO+ in our Swiss facility, we will begin manufacturing our EVO product in our Swiss facility. And as a result, we will not have any import tariffs on that product. So that will improve our margins additionally.

Okay. Great. And I'm not sure if this applies here or not. I know a lot of med tech companies have been talking about refunds for previously paid tariffs. Would you fall under that category of possible refunds from tariffs in the U.S. and say China?

No. I think, the refunds that the U.S. is giving for tariffs that companies have had to pay or companies that have been charged tariffs locally in the U.S. versus we're paying tariffs to the Chinese government. They're not going to give a refund.

I understand. Okay. You reiterated on the call to the $225 million operating expense target for 2026. Where are you still investing in the business? And where have you permanently reset the cost structure?

Yes. I think where we're still investing is primarily in technology and innovation for this year, including our ERP system, continued investments in ERP and our online ordering platforms. And we're also looking at opportunities to invest in AI solutions for the business overall.

Where we've reset the cost structure is in areas that are not ROI driven. So we've been disciplined about removing spend that doesn't support our growth, our value creation. And you can see that in the reduction in our operating expenses, which were down 18% year-over-year.

Where we need to invest, we will invest, and -- but we need to make sure it has payback. We would expect, as the year -- as revenue recovers, we expect to see additional operating leverage with a leaner cost base and disciplined spending, additional incremental sales, we expect to support our path towards a double-digit operating margin continuing.

Okay. Great. And just one from the audience, too. Just any idea on long-term target margins and any additional incremental investments that would be needed to be made in either sales or marketing or operations?

Yes. I mean, generally, we -- a company like ours, I would say, should be targeting double-digit operating margins, and we're about there. But like I said, where we need to make investments. And the biggest investment, as I said, are in technology and in our innovation platform, where we're going to want to launch -- have a cadence of innovation that we launch over time. It's very expensive as you enter into clinical trials and that kind of thing. So -- but we'll definitely make those investments as needed.

Great. And we can to jump to that. Longer term, what are the biggest product innovation opportunities beyond EVO+ for STAAR? It comes to mind, I think of optics, sizing, toric matrix, presbyopia, we have the EDOF lens that you guys have been working with a little bit, workflow tools or indications. Could you just walk us through that?

Yes, sure. So innovation is an important one. And you mentioned, we've been very overt about our efforts on revenue growth and profitability. Innovation, we've said less about, but it's one of our core strategies. And so there's a lot of work in the background going on around innovation. So we can address some of this that you ask, but it is important.

Innovation comes in a lot of different ways. And so we don't want to underestimate the impact that the new ERP system can make on the organization. That's innovative in its own right because it's going to allow us to work differently. It hardens the organization for the long term. So this is about creating infrastructure that helps sustain this company many, many years into the future. So we're excited about that. We're talking about innovation in manufacturing and operations that can do those things and serve that goal.

Look, we've talked about the interest in presbyopia. Presbyopia is sort of a [ soda ] word, if you will, for a bunch of different brands that can happen. These are things like extended depth of focus, which we have interest in. We have a foray into with EVO Viva, but that's a very nuanced and more of a niche product for specific patients, maybe 45 to 55, minus 5, minus 6 and above myopia. We can take the learnings from that platform and look at other opportunities around extended depth of focus, presbyopia improvement, multifocality is an option. All of these things are within our capability and within our material capabilities. I think that's really important.

We can take the existing EVO material polymer, and we can do different things inside the eye, potentially outside the eye, but our focus is ophthalmic inside the eye to do things in the focus or even in the capsular bag. Those things stay within our opportunity set from an innovation standpoint.

Things like extending our shelf life. These are things that are important. We need to look at how do we manage, for the long term, our existing portfolio to make sure that we get the most out of investor capital. So that's on the table. Not to mention all of the other iterative things that we can do relative to size, relative to diopters. All of these things are on a portfolio road map, and we look forward to talking about those more as we get closer to the end of the year.

I know we just have a minute left. So just maybe a final big picture question for you both. Just if STAAR executes well over the next few years, what should the company look like from a geographic standpoint, financially and strategically versus where it is today?

I mean, look, we -- from my perspective, we have to build on the incredible foundation that we have operating in 80-plus countries, a user base that is avid. They love EVO ICLs. When a patient has been exposed to it -- and here's an example, John. When patients have been exposed, they become ambassadors for us, so do our surgeons.

And so you think about the fractional penetration that we have in a market where myopia is growing sadly, and it's creating an epidemic, 50% of the population will soon be myopic. That's -- in some markets, it's already that way. And so the ability to build on that, I think, is really important. So you should see a broadly penetrated multi-continent penetration of technology that doesn't remove corneal tissue, that's additive to a patient, that's removable and doesn't induce dry eye. So I think you're going to see continued adoption from our perspective.

Great. Thank you so much, Warren and Deborah, for today. It was really informative, and I appreciate the time.

Thank you, John.

You got it. Thank you.

Thanks.

Greetings, and welcome to the STAAR Surgical First Quarter 2026 Results Call and Webcast. [Operator Instructions].

I would now like to turn the call over to Connie Johnson, Director of Investor Relations.

Thank you, operator. Good afternoon, and thank you for joining us. On the call today are Warren Foust, Interim Co-CEO, President and Chief Operating Officer of STAAR Surgical; and Deborah Andrews, Interim Co-CEO and Chief Financial Officer of STAAR Surgical. Earlier today, we reported a first quarter 2026 results via a press release and Form 8-K. We posted our results release and shareholder letter to our investor website at investors.staar.com. Today's call is scheduled for 1 hour and will include Q&A for publishing analysts. Webcast participants can also send questions for today's Q&A session to [email protected].

Before we get started, I want to remind you that during today's call, we will be making forward-looking statements. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied by such forward-looking statements. I encourage you to read the disclosures in today's release as well as disclosures in our filings with the SEC. Except as required by law, STAAR assumes no obligation to update these forward-looking statements to reflect future events or actual outcomes. In addition, during today's discussion, we will reference certain non-GAAP financial measures, including adjusted EBITDA and constant currency sales. Please refer to today's release for definitions and reconciliations of non-GAAP metrics. For brevity, unless otherwise specified, all comparisons on today's call will be on a year-over-year basis versus the relevant period.

Finally, a quick reminder. We intend to use our website as a means of disclosing material nonpublic information and for complying with our disclosure obligations under Regulation FD. Such disclosures will be included on our website in the Investor Relations section. Accordingly, investors should monitor our investor website in addition to following our press releases, SEC filings and public conference calls and webcast.

And with that, I would like to turn the presentation over to Interim Co-CEO, Warren Foust. Warren?

Good afternoon, everyone, and thank you for joining us. Deborah and I are excited to be with you once again and to update you on the progress that we have made in our first 100 or so days since we began leading the company as interim co-CEOs. I'm really happy to talk about Q1 of 2026 as we have now largely moved past many of the challenges that we faced in 2025, significant disruption stemming from the potential Alcon merger process, elevated channel inventory in our largest market and risks of rising tariffs to name a few. Those issues are behind us.

Now turning to Q1. We see that we're off to a very positive start as reflected in our first quarter results. I would point to solid execution across the business and continued momentum broadly across our key markets. We made substantial advancements in pursuit of our core objectives, in particular, relative to revenue growth and expansion of our profitability. We remain focused on these efforts as well as working to strengthen our product portfolio and developing our next-generation pipeline.

In the first quarter, we delivered strong net sales growth, both sequentially and year-over-year. We also delivered a meaningful improvement in profitability in the quarter with adjusted EBITDA turning positive. This performance was driven primarily by strong results in China, our first greater than $6 million quarter in the United States and solid growth from each of our 3 regions. We were also excited to reach a significant milestone, surpassing 4 million ICLs sold globally. I'm proud of our committed teams and distribution partners around the world who are driving revenue growth. At the same time, we are maintaining spending discipline and improving profitability through focused execution. I believe that our results are an early indication that our approach is beginning to work.

Beyond the financial results, the quarter also included several important business milestones that reinforce our confidence in STAAR's long-term opportunity. First, we made further advancements in the launch of EVO+ ICL in China and began shipping meaningful volumes into the market. Second, we entered Q1 with inventory levels in China normalized and aligned with our contractual targets, and we were able to grow sales while maintaining and even slightly reducing inventory levels during the quarter. Third, our Nidau, Switzerland manufacturing facility continues to scale and is planned in 2026 to supply 100% of the EVO and EVO+ lenses shipped to China without import tariffs. And finally, we are progressing through the rollout of our new Oracle ERP system with limited business disruption to date and expected benefits in visibility, coordination, and scalability over time. Together, these milestones are important because they support both our near-term execution and our longer-term ability to scale the business more efficiently.

Let me now provide more context on China, which was the primary driver of our first quarter and remains a key focus area for STAAR. In China, our first quarter performance reflected continued share gains in premium lens-based refractive surgery. The key messages were clear: continued strength in EVO ICLs, strong early demand for EVO+ ICLs, normalized inventory levels, better downstream visibility and a more stable market environment. Refractive market conditions in China were more stable in the first quarter than during the volatile period from 2022 to 2024. The macro environment remains mixed, but based on what we are seeing and hearing from customers, refractive procedure demand continues to grow at a moderate pace. We are encouraged by our team's performance in Q1 and the early response to EVO+, an important step in our innovation strategy where strong surgeon adoption and clinical differentiation have already required higher output from our Swiss manufacturing site.

Moving forward, we remain focused on disciplined execution and sustaining this momentum over the course of the year while carefully monitoring macroeconomic factors in the market. Now as we look at the United States, we are encouraged by our first quarter sales that exceeded $6 million, and we continue to view this market as an important long-term growth opportunity for STAAR. We also received FDA approval expanding the EVO ICL indication to patients aged 45 to 60, further increasing our addressable market. Net sales grew 22% year-over-year against the backdrop of continued sluggishness of laser vision correction procedures that require removal of corneal tissue. The continued adoption of EVO ICL reinforces our belief that the future of refractive surgery is largely lens-based. We believe our performance reflects increased surgeon adoption, improved commercial execution, and a more focused marketing strategy around customers who are incorporating EVO ICL more meaningfully into their refractive offerings.

The U.S. remains underpenetrated relative to more mature ICL markets, which is why we continue to view it as an important long-term growth opportunity. Outside China and the U.S., several markets experienced geopolitical and trade-related disruption during the quarter, particularly in parts of the Middle East. The impact on net sales was limited to less than $2 million. We continue to monitor these developments closely, along with the broader macro uncertainty in Europe and in parts of Asia. We also continue to see attractive long-term opportunities in markets such as India, even though near-term price sensitivity and macro volatility require a measured approach.

More broadly, as we pursue global growth opportunities, we are being disciplined in how we allocate capital and resources. We are prioritizing markets and commercial programs where we see the strongest potential while continuing to benefit from the cost reduction efforts we initiated in 2025. As sales grow, we expect this approach to support operating leverage going forward. Overall, our view is unchanged. The global shift toward lens-based refractive surgery remains a meaningful long-term growth driver for STAAR. Taken together, these updates reflect the progress we are making commercially and operationally while maintaining the discipline needed to build more consistent performance over time.

With that, I'll turn the call over to Deborah to walk through the financials in more detail. Deborah?

Thank you, Warren. Our first quarter results reflect strong execution across both sales growth and profitability, consistent with the framework we outlined in our fourth quarter shareholder letter. Net sales were $93.5 million, increasing 119.6% year-over-year, driven by strong China sales and double-digit growth in the Americas. China net sales were $47.4 million in the first quarter, driven by the commercial launch of EVO+ and continued demand for EVO. Distributor inventory remained comparable to year-end 2025 levels and within our targeted range to appropriately service the refractive market.

Excluding China, net sales grew 6%, which we view as solid given the macroeconomic environment. First quarter net sales were bolstered by a solid quarter in the U.S. market despite the downtrend in laser vision correction in the country, partially offset by macroeconomic and geopolitical headwinds in the Middle East and India. Adjusted EBITDA was $24.4 million compared to an adjusted EBITDA loss of $26.3 million in the prior year quarter, reflecting higher net sales, improved gross profit and the benefits of the cost actions we've implemented since 2025. We are beginning to see operating leverage emerge consistent with our path to sustainable profitability.

Gross profit margin in the first quarter of 2026 was 73.6% of total net sales compared to 65.8% in the prior year quarter. The year-over-year improvement was primarily driven by the elimination of period costs related to the ramp-up of manufacturing in Switzerland, a reduction in advanced manufacturing expenses, lower inventory provisions and decreased freight and other cost of sales as a percentage of sales. These benefits were partially offset by higher per unit manufacturing costs resulted from lower production volumes in 2025.

Total operating expenses for the first quarter of 2026 were $60.9 million compared to $85.4 million in the prior year quarter. Excluding restructuring and merger-related costs, operating expenses were $51.5 million compared to $62.7 million in the prior year quarter, a decrease of 18% year-over-year, reflecting the cost reduction efforts initiated in 2025 and continued spending discipline. The company remains on track with its spending target of $225 million in 2026.

Operating income for the first quarter of 2026 was $8 million compared to a loss of $57.4 million in the prior year quarter. Net income for the first quarter of 2026 was $5.2 million or $0.10 per diluted share compared to a net loss of $54.2 million or $1.10 per diluted share in the prior year quarter. The year-over-year improvement in net income was primarily attributable to higher gross profit and lower operating expenses, demonstrating our ability to grow net sales while maintaining spending discipline. We ended the quarter with $163.9 million in cash, cash equivalents and investments available for sale with no outstanding debt.

On a sequential basis, cash declined from the fourth quarter of 2025, primarily due to costs, including seasonal bonuses and other employee incentives, global sales meetings, severance and costs associated with the cooperation agreement with Broadwood Partners. With these items now behind us, we expect to build cash throughout the remainder of the year. Overall, we are encouraged by the profitability and operating leverage demonstrated by our first quarter results. We remain focused on balancing growth with disciplined investment and maintaining financial flexibility.

With that, I'll turn the call back over to Warren. Warren?

Thank you, Deborah. To close, Q1 was a strong quarter. It demonstrates the progress we are making toward building a stronger STAAR with differentiated technology, greater operating discipline and a clearer path to sustainable growth and profitability. We believe STAAR is better positioned today than it was entering the year. In the quarter, we demonstrated strong growth, return to profitability, improved adjusted EBITDA margins and operational improvements. We launched EVO+ ICL in China, advanced our Swiss manufacturing capabilities, continued the rollout of our Oracle ERP and strengthened our cost structure.

At the same time, our long-term opportunity remains compelling. STAAR possesses differentiated polymer material and advanced optical technology in EVO ICL. Additionally, we see growing global adoption within a large market supported by increasing myopia prevalence and a shift toward lens-based refractive surgery. Now our focus is to build on this momentum against our core objectives, revenue growth, expanding profitability and advancing innovation. Deborah and I are aligned with our Board and focused on long-term value creation through clear priorities and operating discipline. Thank you for your continued support.

Operator, we are now ready to take questions.

[Operator Instructions] And the first question will come from John Young of Canaccord Genuity.

Congratulations on the progress that you guys have been making. I appreciate you guys are not giving guidance right now. But I first wanted just to touch on just consensus into the print was $311 million, and then $312 million. Are you comfortable with that figure? And then just as a follow-up to on China, what is the confidence that you have in the Q2 high season, just given the Q1 success that you've seen so far? But sequentially flat Q2 China revenue be a good way to think about next quarter?

Yes. John, thanks for the question, and I appreciate both of them. Look, we understand why you'd want guidance. Historically, Q1 has been really strong, and we're proud of the Q1 performance. But what's happened in the past is you've seen the tendency for the high season to maybe not show up in this period of '22 to 2024, where things were a little softer. So we're optimistic, but we're just not ready at this point to say, "Hey, we're certain about everything that's going to happen downstream with all of the stuff that's going on macroeconomically and geopolitically, not just in China, but elsewhere."

A couple of wars going on, a couple of challenges going on in various markets relative to currency. So we're just not ready to do that. So I can't comment on the $311 million to $312 million. As it pertains to China, look, the market, you've seen reports from our biggest customer there that the refractive market seems more stable than it's been. We certainly saw that as we went out of 2025. And I think Q1, we're pleased so far with where we are. And let's see what the high season brings, but we'll certainly be ready for it as if the high season comes.

The next question will come from Tom Stephan with Stifel.

Congrats on the results here. I'll start off on China competition. Warren, maybe if you can talk about what you're seeing in China from a competitive standpoint with iBright? How big has that gotten in its first 12-plus months in the market? And what are your expectations moving forward on iBright's impact as well as potential additional China phakic IOLs on the come? And then I'll have a follow-up.

Yes. Tom, thanks for the question. Look, we love the idea of competition. It just further validates our view that the future of lens-based refractive surgery is exactly that. It's lens-based, and we stand to gain from that. So good to have competition. As it pertains to iBright, we see them. We know that there were some implants that happened early on. And I think surgeons are probably taking a measured approach. There's no toric available. So it's a steer-only lens. We respect them as competitors, but thus far, it's just been -- it's been a nonissue for us.

Got it. Super helpful. And then I'll take a stab at the revenue outlook here. But I mean, I look at 1Q, it seems like it was a normal quarter by all accounts, really, notably from an inventory standpoint. And in fact, I think you mentioned it was down sequentially. So my question is like for us, is it fair to use 1Q as a clean base and think about typical seasonality in the business for 2Q and moving forward. I mean for 2Q specifically, as you mentioned, it usually sees a pretty meaningful sequential uptick driven by China. Like is there anything that would prevent that from occurring? And yes, I guess the heart of my question, like is 1Q kind of a clean base off which we can think about modeling the rest of the year on reps?

Yes, you bet. Maybe I'll start and then invite Deborah to round out the comments. Look, I think we know that last year, there was a little bit of pull forward in the first quarter relative to military procedures and things of that nature. We don't participate in those procedures in China, but there's somewhat potentially of a halo effect where you get clinics out that are recruiting for these patients to come to their clinics. And certainly, those patients that could end up being candidates for EVO ICL could get it. So we'll see if that's a repeat as we go into the second quarter here. As far as seasonality, students are still going to graduate from college. Their parents are still going to want them to get out of glasses and contacts. Those people that could become patients will evaluate their options. And we think and see that increasingly, folks are choosing EVO ICLs. Now what that's going to mean from a seasonality standpoint, hard to say. It is true that typically June and July are higher months, if you look back in history, but we just can't say yet that we think that's going to be the case. Again, the strength in Q1 is real. Let's see what Q2 brings. But Deborah, anything to add?

No. I think we're optimistic about the future. We expect to have a good Q2. The results of Q3 remain to be seen yet. And so we're kind of cautious about our giving guidance or anything like that, at least in the short term, and we'll revisit it later on in the year.

And I will just say to your question about it being the first clean quarter, look, we had a lot of noise in 2025 and even back to the end of 2024 relative to the things that happened with inventory and the timing of recognizing the revenue and the timing of recognizing COGS associated with it. As I said in my prepared remarks, all that stuff is now out of the system. And so end market demand, which is really important, and we monitor it closely. We said at the end of 2025, we think it was in that mid-single-digit range. We've said today, and I think that we've seen IR and even others that have reported, the refractive market in China seems somewhat stable. Now is that -- are we all really excited about that? I want the refractive market to continue to grow. We're excited about the fact that EVO seems to be taking share in a refractive market where laser vision correction that requires the removal of corneal tissue is sort of coming out of favor.

The next question will come from Simran Kaur with Wells Fargo.

Maybe just to follow up on the Q1 China number here. I know Warren and Deborah, you guys talked about sort of Q4 being a little bit noisy due to product returns that you had in the distribution channel. And that dynamic would have normalized post the deal and sort of that noise abating. So I guess my question is, did that dynamic reverse in Q1? And how much of the Q1 China revenue represents post-deal makeup orders for the Q4 shortfall? And really just trying to understand what a clean Q1 China run rate is here? And then I have a follow-up.

Okay. Thanks, Simran. Look, we talk about inventory here every day, if not every day, it's every week for sure. So we're monitoring closely what's happening with end market demand. And so we know what the inventory levels were as we crossed the threshold into 2026. And we -- at the end of the quarter, we posted a solid number in China, and that inventory level with our distributors and the 2 importers that we have in China was at or below the levels that we entered the year. And so we know that the end market demand is what's driving the sales. So we feel good about that, and we'll continue to watch that. You can rest assured and count on us for that.

And we also were pleased to see that our sales to the market approximated the sales into the market. And that's what we've been wanting to see a stable inventory with our sales to the market approximating sales in the market.

Got it. That's very helpful. And just on EVO+, I think I heard -- if I heard your comments correctly, you said early EVO+ demand exceeded expectations here in Q1. Any color on what EVO+ represented as a percentage of Q1 China revenue? And how should we think about the volume price mix benefit from EVO+ in Q1 and then just going forward as it starts to ramp?

Yes. Look, we've been excited about the customers' reaction around EVO+, not just our surgeons, but consumer interest in EVO+. So that's exciting. Remember that all of that product comes out of our Swiss manufacturing plant in Nidau. And to do that, we're having to and have had to scale that plant to be able to not only build V5 but EVO+, but ultimately to be able to build EVO, the original version, we call it V4c, but EVO for our customers in China. The reality is we needed more V5 than we had planned to produce. So that's a good fact. We'll have that under control very soon. So we think we'll be able to supply the market fully against its needs by the end of the Q2 time frame and for the rest of the year. And by the rest of the year, we'll be up -- for the rest of the year, we should be able to supply both EVO+ and EVO out of our Swiss manufacturing plant. So that's all good.

As far as the ratio, we're not sharing those numbers yet, but I -- what I would offer you is we know that the market has adopted and accepted the premium that EVO+ is requiring. And so that's a good thing. It also means that there'll continue to be -- the customers in China have taken a pricing strategy to be able to offer a more premium EVO+, still offering a higher price premium EVO, and that goes along with our other refractive offerings. And so you're not going to see a full conversion strategy to V5 to EVO+. You're going to see surge customers continue to use that product as their most premium product.

[Operator Instructions] The next question will come from Anthony Petrone with Mizuho Group.

Congrats on a strong quarter here. Maybe a follow-up on China from 2 angles. One is specifically from Aier Eye Care Group that a few years back when we looked at the volumes specifically in China, I think pre the correction, Aier was accounting for 50% or so of volumes in China. So I want to confirm where Aier is these days? And what is the visibility into their procedure backlog specifically? And then I'll have one quick follow-up.

Yes, Anthony, it's a good question. It's not quite that high. I don't think we've revealed exactly what that is. So I'll stop short there. But Aier remains a very large, very important customer for us in China. We have close working relationships with them on the ground from our direct STAAR employees, and we have close working relationships with them through our importer. So we maintain proximity to them on an all-time basis. They seem to have high appetite to continue having a premium offering. They have high appetite for EVO+, but we -- our strong quarter was really driven by continued adoption of EVO at mid- and high diopters. And so I think they continue to run a well-rounded business. It plays an important part of our existing and our future business in China, and the relationship with them is very strong.

And then a follow-up just on the distributor dynamic. With more limited visibility than we had in prior years, we're going to the heightened season here in 2Q, 3Q, the visibility is still somewhat limited. What is the right amount of inventory the distributors should be holding these days? And are your 2 distributors in the marketplace kind of where they need to be for where the end market demand is? I'll hop back in queue.

Yes, it's a great one. We've said that 6 months is what we have contractual relationships with, with both of our importers, and we're at or below those levels. And so we were well beyond those as we exited 2024. We spent 2025 working them down painfully and made it through that process by the September time frame, and now we've kept close watch on that. Obviously, end market demand remains the primary driver of how the inventory levels go up and down. But as Deborah pointed out earlier, the 2 market sales now much more closely approximate the end market demand that we're seeing. So we have visibility of end market sales. It's really logistics. We've disclosed around this extensively.

But we talk about end market sales and what we're talking about are the logistics, the shipments that go out from our importers downstream to sub distributors and in many cases, directly to hospitals, less those returns. And that gives us a really good approximation of what's actually happening in the market. And as long as we continue to maintain our levels of inventory where we started, which is around or about 6 months, then we feel confident that we've got a good understanding of what's happening with the end market demand.

The next question will come from Ryan Zimmerman with BTIG.

I'm going to keep hitting the same topic. I apologize because I think it's very important. I look at the consignment numbers this quarter and last quarter, and I think about that in the context of where that's been historically. And I want to understand how you think about that because as the consignment does remain more elevated, I'm wondering how much of that is a reflection of your distributors either some of that inventory coming back specifically and moving in a consignment?

And then the ultimate question is we've historically seen 1Q to 2Q step up. I don't know if you're committing to that. I can't tell without the guidance because, again, in a normalized environment, you should see a step-up from 1Q to 2Q in seasonal dynamics because of the busy season. But right now, the street is not modeling that. So I'm wondering if you could kind of help me think through the marriage of those 2 a little more closely. And this may be repetitive from what's been asked, but it's important, obviously.

I mean, obviously, we had a very, very strong Q1 and was probably even, frankly, a little more than what we were expecting, to be very honest with you. And so our natural question is, is this going to duplicate in Q2? That's the big question. We expect to have a good Q2 as it is the beginning of the busy summer season. And whether it duplicates exactly or whether it's a little bit more, we haven't predicted at this time. We can't predict at this time and/or we're not predicting at this time. And then Q3, again, it could be that the seasonal patterns change a little bit from what we've experienced historically. So we really need to -- we've had a good Q1, a clean Q1, I would say. And now we're looking to repeat the trend here in Q3 and -- Q2 and Q3, so that we can -- so that we're able to predict on a more -- on an accurate basis for you all.

Yes. And just on consignment inventory, Ryan, thanks for the question. Look, we have some consignments around the world ex-China that help us maintain service levels for our business. We only put a consignment actually 2 different times, one consignment into China to avoid the impact of tariffs at the time when ultra-high, if you go back and you remember, 100-plus percent tariffs, we shipped inventory proactively into China to be held at our importers, but it wasn't a move to a consignment strategy. That was a -- I sort of refer to it as a decrypting amount of inventory. We don't replenish it.

So that consignment is sort of going away as it's utilized, and we rely for service levels on our importers to have their inventory. So when we talk about inventory levels, it's apples-for-apples that we required -- we had a contract with our distributors to hold 6 months of inventory to maintain service levels. Well documented, we got way outside of that. We got that back under control by September of last year and have maintained that. And that's still true for Q1. And so I wouldn't conflate the consignment, particularly in China with any of those numbers.

Okay. So the second question.

We'll be practical by the end of the year.

Go ahead, Deb. Sorry, sorry. Yes, I appreciate that. I didn't mean to interrupt. What is it that you need to see to give guidance. I mean, I guess, like what are the metrics that you would look to and say, okay, now we have line of sight to our business. Because I think it's not clear to us what's holding you back given the performance we saw in 1Q, which was clearly good.

Yes. Look, as I said before, I know why you want it. It makes perfect sense. And we'd love to give it. We tried to give some insights, particularly around OpEx, and we've even made comments around gross margin and so on. The current structure, we've been in place now for 4 months. We made a lot of progress, no doubt. Q1 strength is real. We just hit the backdrop of everything that's happening around the world. And with the fact that others have sat here and said, "Hey, Q1 was great, let's beat and raise and then give guidance." And then we watched how that turned out. And so we're pleased with Q1. We're excited about Q2, but we're just stopping short yet of giving it. As soon as we feel like we have enough stability to be able to accurately predict because we want to be right. As soon as we feel like we have enough information to accurately predict for you is what we would need to have in order to provide it.

The next question will come from David Saxon with Needham & Co.

Sorry to just harp on the second quarter. I just wanted to follow up, Deborah, on some of the comments you said. I think you said something like you expect to have a good 2Q. So just trying to understand, is that a reflection of trends you're seeing in April and kind of into half of May, even putting aside numbers, like anything qualitatively you can say or talk about, about how second quarter is shaping up relative to what we saw in the first quarter?

I mean, second quarter is shaping up as I would expect in a normal Q2 based on historical trends.

Okay. That's perfect. And then maybe on just pricing. I mean, it looks like it was down maybe high single digits on a global basis. I don't know if that's just geographic mix or anything to call out there? And what are you seeing from a kind of region-specific basis on pricing?

Yes. Thanks for the question. The whole world is under pressure relative to pricing. And I think we've done a pretty good job at the country's level of our leaders trying to hold pricing and get value for what is offering restorative sight to patients that are in search of it. So we're proud of what folks have done. Sometimes you get nuances relative to the mix in toric versus sphere. So that's one thing that we keep an eye on. No doubt, we're getting an increase -- we're getting a lift in price in China with the launch of EVO+, which will help us from a global, if you start averaging out ASPs. And then in various markets, as our customers start to go down the adopter curve and to choose lens-based refractive technology instead of laser-based that require removal of corneal tissue that's not reversible, then those customers trying to put pressure on us around price. And so the hope is anywhere that we're exchanging price, it's in exchange for more volume, but it's something we keep close tabs on.

The next question will come from Mason Carrico with Stephens.

A lot has been asked here, particularly around China. And I think you guys made it clear that you don't provide -- plan on providing any incremental insight there. But I was -- I wanted to ask, would you at least be willing to provide some additional thoughts around your expectation for growth in the business ex-China in 2026? And I guess as my second follow-up here, are you able to quantify the contribution from the expanded age range indication for EVO in the U.S.

Mason, maybe I'll start with the second one first. We've quantified what the opportunity is. I think it's a harder exercise to try and quantify exactly how much you get for it, especially in the first quarter when it was -- when we received the updated labeling, which we're excited about. It matches most of the labeling we've had around the world. Our regulatory team is awesome, and they've done a great job of going and market-by-market looking to say, "Hey, where can we take advantage of getting more patients, the potential to get EVO through our labeling?" Whether it's going down in age, whether it's changing the cylinder, whether it's just going down in the doctor that's approved in that market. So kudos to that team. It probably opens up a universe of 8 million more potential patients. We'll see how many of those we can tackle over the course of the coming year and years, but we know it opens up. And it opens up more conversation around what are the options for patients. So there's that. And then the first question, I'm sorry?

Growth expectation ex-China.

Ex-China. Look, we're finding out, we remain optimistic, particularly in the long-term value of this business from a growth opportunity standpoint. If you just look at what's happening with refractive surgery and the sluggishness that I described in the U.S., but also the shift that we're seeing away from laser vision correction as the primary option. Surgeons and customers and practices, depending on how they're shaped around the world that are serious about offering refractive technologies must have EVO ICL as an offering in order for them to be a comprehensive refractive surgeon. And that is exciting for the long-term prospects of this business.

Now in the short term, what role is ex-China going to play? We continue to have strong growth from major markets. You look at Japan, we're proud of what's happened there. You look at U.S., that's a growing market, and it's one we sort of stopped talking about, and we still are confident about the U.S. as a long-term growth driver, but 22-plus percent growth there coming off of a strong growth last year, and that number is now becoming a more respectable number. It used to be high growth on low volume, still want to grow that volume substantially, but we're proud there and proud of other markets. We'll keep fighting it out and do the best we can. But I think you're going to see broad growth across the business.

And we're up pretty much in every market with the exception of the Middle East and India. So that hit us and results -- as a result, our ex-China growth was only 6%. But it's a solid 6%, that's great, still mid-single digits. So if we get some relief in those other countries than other markets, then potentially, it could be higher than that.

The next question will come from Adam Maeder with Piper Sandler.

Congrats on the start to the year. I'll keep it to one. And Deborah, for you, I wanted to ask about the P&L. I don't think that's been discussed yet in the Q&A. Really strong OpEx discipline in the quarter. I appreciate, I think you have the FY '26 spend target of $225 million. I was hoping you could just maybe give us a little bit more color in terms of quarterly cadence for spend in the model. And then on the gross margin front, maybe I just missed it in the prepared remarks, but can you just remind us how you expect gross margin to trend this year?

Right. Well, our targets for gross margin have been this year about 75%. We knew we'd fall short of that. I hope we exit the year -- at least exit the year at that. But we do have some headwinds with higher cost of inventory rolling through the P&L, things like that, inventory provisions, higher inventory provisions from expiring product that was sold in '23 and '24. And then we're significantly increasing our volumes in our Swiss facility in the second half of the year. So with that, we should see improved unit costs in the second half of the year. And so I hope then you'll see tailwinds on gross margin beginning in 2027. But that's the target for gross margin overall.

In terms of spending, our spending is fairly linear with the exception of when we have trade shows. So in quarters where we have trade shows like ASCRS or ESCRS, which is typically like Q2, Q3, you'll see a bump in spending. Otherwise -- and it just depends. We actually spending this year, if you multiply it out, it's well under $225 million run rate. So we do expect that there will be some increased DTC and things like that in the following quarters. So it's not going to be exactly the same. I expect this is going to increase from where it is, but overall, maintain that $225 million level.

The next question is a follow-up from Anthony Petrone of Mizuho Group.

Just a follow-up here. Given out in the past just the global growth rate of the refractive market, total refractive surgeries. And then if we have to break that out, I guess, globally, we can do the math just where ICL sits. But do you have handy the -- where we exited April as it relates to global refractive surgery growth and where are you guys settling up versus that?

Yes. Thanks, Anthony. Those numbers are just so muddy. When you get outside of the U.S. and outside of Western Europe and just a few countries and then outside of major markets, China, Japan, it gets pretty muddy. Market Scope does a good job, the best they can. IQVIA data does the best job they can. Refractive Surgery Council in the U.S. would tell you that the first quarter was down 7%. We grew 22%. Last year, I think they would say it was down 15%. The China market who knows? It looks like it was flattish at least for the last year or so. And you see what we're doing in growth. Our growth numbers are sort of gaudy, obviously, because of the low base or no base even in Q1. And so that's not appropriate.

But I think what we believe is happening is what others have said is happening, including our largest customer, that the market is sort of stable, maybe it's low single digits, could be even flat and maybe we're getting it out of price with EVO+. It's just too early to tell on what's happening there. But I think if you just take a step back from it and you acknowledge that the data is dirty, the laser vision correction market is flat to declining in most major markets around the world. Where SMILE has a larger penetration of the total laser vision correction procedures, then they grow a little bit. But generally speaking, the refractive market is pulled down by lasers and it's increasing by ICLs.

This concludes our question-and-answer session as well as conference call. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to the STAAR Surgical Company Fourth Quarter 2025 Financial Results Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Connie Johnson, Director, Investor Relations. Please go ahead.

Thank you, operator. Good afternoon, and thank you for joining us. On the call today are Warren Foust, Interim Co-CEO, President and Chief Operating Officer of STAAR Surgical; and Deborah Andrews, Interim Co-CEO and Chief Financial Officer of STAAR Surgical.

Earlier today, we reported our fourth quarter and fiscal 2025 results via press release and Form 8-K. We posted our results release and shareholder letter to our investor website at investors.staar.com. Today's call is scheduled for 1 hour and will include Q&A for publishing analysts. Webcast participants can also send questions for today's Q&A session to [email protected].

Before we get started, I want to remind you that during today's discussion, we will be making forward-looking statements. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied by such forward-looking statements.

I encourage you to read the disclaimers in today's release, the shareholder letter as well as disclosures in our filings with the SEC. Except as required by law, STAAR assumes no obligation to update these forward-looking statements to reflect future events or actual outcomes.

In addition, during today's discussion, we will reference certain non-GAAP financial measures, including adjusted EBITDA and constant currency sales. Please refer to today's release for definitions and reconciliations of non-GAAP metrics. For brevity, unless otherwise specified, all comparisons on today's call will be on a year-over-year basis versus the relevant period.

Finally, a quick reminder. We intend to use our website as a means of disclosing material nonpublic information and for complying with our disclosure obligations under Regulation FD. Such disclosures will be included on our website in the Investor Relations section. Accordingly, investors should monitor our investor website in addition to following our press releases, SEC filings and public conference calls and webcasts.

And with that, I'd like to turn the presentation over to the Interim Co-CEO, Warren Foust. Warren?

Good afternoon, everyone, and thank you for joining us. Deborah and I are pleased to be with you today on our first quarterly results call as Interim Co-CEOs. Before we dive in, I'd like to address our leadership structure.

Deborah and I stepped into the shared role of Co-CEOs effective February 1st, and we are jointly leading the organization on an interim basis. We bring continuity to this transition. Deborah and I have worked very closely and collaboratively over the past year in our roles as Chief Financial Officer and President and Chief Operating Officer, respectively, and that partnership has positioned us well for this next chapter. We complement each other's capabilities and areas of expertise, and we are aligned on both priorities and execution.

STAAR's Board of Directors has engaged Egon Zehnder, a leading global executive search and leadership advisory firm, to conduct the search for STAAR's next Chief Executive Officer. The search will include both internal and external candidates.

2025 was a difficult year of transition for STAAR. We expect 2026 to be a much better year, a year of growth, improving profitability and meaningful progress across our innovation pipeline, all of which we plan to discuss on today's call. As Connie indicated, along with today's results release, we have issued a shareholder letter that provides commentary on 2025 and discusses our plans and approach for 2026.

Deborah and I have the benefit of being deeply familiar with and embedded in the operations of STAAR. We are working with our teams to evaluate our portfolio and road map after a period of uncertainty, setting clear expectations on both operational front and in terms of financial performance in order to unlock the power of our 2026 growth, profit and innovation plan.

We are encouraged by the start of 2026. The team is energized and productive. Days are filled with customer engagements, distributor meetings, internal town halls, leadership alignment sessions, and global commercial kickoffs focused on clinical training, commercial readiness, sales effectiveness and message discipline.

Our teams are excited because across most markets, refractive surgery continues to move toward lens-based procedures and away from laser vision correction procedures that require corneal tissue removal. EVO ICL continues to gain share even as the broader laser vision correction market struggles.

Consequently, STAAR remains well positioned to reaccelerate growth in existing markets and unlock opportunities with our new product offerings. In China, our largest market, after several years of macroeconomic volatility driven by COVID, housing market weakness and uneven consumer spending, conditions stabilized in 2025 as policy support increased and the stock market rose sharply.

In-market EVO ICL demand recovered at mid-single-digit rates and procedures improved as we exited the year. This recovery did not translate into China net sales growth for STAAR in 2025 as our distributors reduced inventory levels, but it does provide us with optimism about 2026. Market conditions in China appear to be positioned for a rebound, which will help drive growth for STAAR.

Outside China, we also have reason to be optimistic about STAAR's future growth. We are seeing momentum in our U.S. business despite the ongoing decline in laser vision correction procedures. And with our recently announced expanded age range indication for EVO in the United States, which is now approved for myopia treatment in adults aged 21 to 60, our opportunity is even bigger. This expanded indication equates to roughly 8 million more potential candidates for EVO in the United States.

Our efforts to expand our EVO labeling are helping fuel our growth in other parts of the world as well. For example, in Brazil, EVO had previously been approved for use down to minus 6 diopters and can now be used for treatment of myopia down to minus 0.5 diopters. Our growth remains steady across the Americas, and we expect to see additional expansion in Canada in 2026.

In 2025, we went direct in Canada. And while the team is small, our efforts there are already paying off. In 2026, we are targeting solid growth of EVO in EMEA and in our Asia Pacific markets such as Japan, Korea and India.

India, in particular, where we're laying a foundation, represents a growing opportunity for us as its economy is growing quickly and a rising portion of its population can afford refractive surgery. We're also excited about the market opportunities in Taiwan, where we received regulatory approval in 2025.

In terms of profitability, we made a lot of progress in 2025, and profitability will continue to be a focus in 2026. In 2025, we took costs out and reduced our annualized adjusted operating expense run rate, and we beat our second half $225 million target communicated to investors back in Q1 2025.

As revenue grows, we expect cost discipline to drive operating leverage. We are focused on enterprise-wide impacts, not isolated improvements and on new ways of working that increase the velocity of decision-making, so actions can translate more quickly into results and returns.

Profitability expansion comes from reducing costs enterprise-wide, but it also comes from disciplined investing. We are focused on opportunities big and small, including manufacturing and infrastructure improvements, and we continually look for margin improvement opportunities in our sales and distribution network.

We also believe that optimizing ASPs can contribute to increased profitability. We are allocating capital where it makes the greatest impact, the right programs in the right markets, supported by the right people and infrastructure.

To that point, we are in the final stages of our Oracle ERP implementation, which will modernize the way we operate enterprise wide. Full deployment is expected early in the second half of the year. Alongside ERP, we are advancing Stella, our next-generation online sizing and ordering platform, which reduces friction in the adoption of EVO ICL technology.

We are also advancing additional IT initiatives spanning from manufacturing process improvements to sales force enablement. We believe these investments will not only benefit our surgeon customers and patients, but will drive efficiency and profitability across the organization.

Our 2026 growth, profit and innovation plan also reflects a renewed focus on innovation. I'm proud to report that we have launched EVO+ in China, and we are progressing with our rollout plan as we scale Swiss manufacturing to meet demand.

EVO+ represents our first new lens in China in more than a decade. Early demand has been encouraging, and we are working to increase supply as production scales. Over time, we expect higher ASPs and margin expansion from EVO+ in China.

In 2026, we are also expanding the commercial availability of the Lioli injector for EVO ICL procedures. The Lioli injector has been well established in the United States, and we are pleased to bring this new injector option to our surgeons in EMEA. We're excited about these near-term launches, but we are also focused on our pipeline for the longer term.

We are building new capabilities, and our teams are establishing clear milestones and time lines for future advancements as well as the operational discipline and accountability required to stay on track in a rapidly evolving market.

Before I hand things over to Deborah, I think it's important to recognize that 2025 is now in the rearview mirror and the disruption associated with our proposed merger with Alcon is behind us. Our shareholders have spoken supporting a long-term approach, and we are listening to them, embracing the opportunities for STAAR as a stand-alone company. We firmly believe that STAAR has everything it takes to deliver on our growth, profitability and innovation goals. We have superior technology.

Our differentiated Collamer material is the foundation for our EVO technology and is unmatched in the market. Only STAAR has 40-plus years of history treating myopia with our innovative lens-based procedure. And the myopia and dry eye disease epidemics are only getting worse.

We have trusted relationships with our partners. The STAAR surgeon community is passionate about EVO ICLs and bringing the benefits of lens-based vision correction without corneal tissue removal to their patients. The power of this devoted customer base is real and tangible.

We have a talented team. Our dedicated employees and the STAAR leadership team are aligned, focused and have the capabilities to execute our goals and objectives and drive stockholder value creation.

Now I would like to turn things over to my Co-CEO, Deborah, for additional commentary and to discuss our financial results. Deborah?

Thank you, Warren. I'm pleased to join you on today's call, and I'm proud to lead the STAAR organization with you as Co-CEO. As Warren said, we took a number of steps in 2025 to reduce our costs and improve our profitability. A key activity in 2025 was addressing our China inventory to position STAAR for future growth.

Our most significant operational challenge in 2025 was working through rebalancing product inventory in China following weakened demand in 2024. That year saw a double-digit decline in in-market EVO ICL sales and elevated inventory levels. In response, we deliberately paused shipments, normalized channel inventory and strengthened distributor discipline. These actions were painful, but necessary. By late 2025, inventory held by our distributor customers in China had declined to contractual levels. In-market sales and procedures improved and business momentum began to return.

As previously discussed, our December 2024 China shipment contributed to elevated inventory levels. This $27.5 million shipment was consumed during fiscal 2025. And by the end of Q3, we had fully recognized the revenue associated with the December 2024 China shipment. During much of this period, STAAR did not have complete visibility into downstream inventory levels or actual EVO ICL procedure volumes.

Over the past year, we have invested time and effort in more comprehensive data processes and analyses that now provide improved and still evolving insight into inventories across the channel. While this work is ongoing, our visibility has improved materially and will continue to strengthen.

Let me briefly touch base on tariffs and Swiss manufacturing. We are pleased to report that we were able to respond quickly in 2025 when rising China-U.S. tariffs created additional headwinds for our business. We are able to mitigate near-term exposure by deploying temporary consignment inventory and leveraging existing China held inventory, while accelerating manufacturing expansion in Nidau, Switzerland.

Our Swiss facility is now producing commercial product and is focused on EVO+ for China. Products manufactured in Switzerland are not subject to U.S.-China tariffs, which will be a benefit in the near-term as we roll out EVO+ in China. We believe Swiss manufacturing can be a long-term benefit as we look to manufacture EVO and EVO+ for China in the future.

Swiss manufacturing not only helps mitigate tariff exposure, but it provides flexibility and scale to support sustained growth and significantly strengthens our long-term supply chain resilience.

Now I'd like to turn to fourth quarter results. I'll start with fourth quarter sales performance, then margins, profitability and cash.

Total net sales for the quarter were $57.8 million as compared to $49 million in the year-ago quarter, driven by a lower-than-expected rebound in sales in China, partially offset by growth in Americas and non-China APAC regions.

China net sales were $17.5 million in the fourth quarter of 2025 as compared to $7.8 million in the year-ago quarter. During the quarter, certain China subdistributors and customers returned some inventory to our distributors, resulting in lower-than-anticipated fourth quarter net sales for STAAR.

We believe this was largely due to uncertainties about their future if the company were acquired by Alcon. This uncertainty also impacted sales to distributors in other parts of the world. While these disruptions depressed our fourth quarter results, we believe that reduced distributor inventories will lead to improved net sales for STAAR in 2026 and beyond.

Excluding China, net sales declined by 2% year-over-year, with the Americas up 18% in the fourth quarter, EMEA down 20% in the fourth quarter, driven by a distributor transition in the Middle East and distributor dynamics across the region due to the proposed Alcon merger and APAC ex-China up 2% in the fourth quarter.

Turning to margins. Gross profit margin for the fourth quarter of 2025 was 75.7% of total net sales compared to the prior year quarter of 64.7% of total net sales. The increase in gross profit versus the prior year quarter was due primarily to the timing of the recognition of the cost of sales associated with the December 2024 China shipment, decreased period costs resulting from cost reductions implemented in the first quarter of 2025 and the ramp-up of Swiss manufacturing, partially offset by higher inventory provisions.

Total operating expenses for the fourth quarter of 2025 were $66.6 million compared to $59.6 million in the prior year quarter. Operating expenses for the quarter included costs related to the company's terminated merger transaction with Alcon of $11.2 million and costs related to restructuring of $0.7 million. Excluding the costs related to the merger and restructuring, operating expenses for the fourth quarter of 2025 were $54.7 million, a reduction of 8.2% from the prior year quarter.

Our 2025 cost actions reversed the expense growth of prior years, and we achieved significant cost savings in 2025. As revenue recovers, we intend to maintain this cost discipline, positioning the company to return to profitability. Because our proprietary products can earn strong gross margins, our operating margin has the potential to be quite high if we execute our plans effectively.

Adjusted EBITDA for the fourth quarter of 2025 was a loss of $200,000 as compared to a loss of $20.8 million in the year-ago quarter. The year-over-year improvement in adjusted EBITDA was primarily attributable to higher gross profit and lower operating expenses before merger and restructuring expenses, partially offset by merger and restructuring expenses.

Turning to our balance sheet. We ended the quarter with approximately $187.5 million in cash, cash equivalents and investments available for sale, a level of cash we have held fairly steady since Q2 despite significant restructuring and merger-related expenses. STAAR has no debt.

As we look ahead to 2026, we are not providing financial guidance. However, we do want to provide some color commentary as to how we think 2026 will compare to 2025. First, because we expect to significantly increase our sales in 2026 compared to 2025 and because we made significant cost reductions in 2025, we are targeting profitability in FY '26.

Second, while we are driving profitability, we believe gross margin will be slightly lower in '26 relative to '25 as higher cost of inventory for our Swiss manufacturing facility is sold in '26 and increased inventory reserves from expiring product create headwinds. We will work to offset these increased costs in 2026 through higher ASPs, improved yields and efficiencies in our manufacturing, which should lead to tailwinds in 2027.

Third, we achieved significant operating expense savings in 2025. For 2026, we expect to maintain our operating expense run rate at levels generally aligned to the $225 million target we communicated to investors back in Q1 2025.

Finally, while cash will dip modestly in the near-term, we expect to resume cash generation in the back half of the year and end 2026 with a higher cash balance than 2025.

Now I'll turn the call back over to Warren. Warren?

Thanks, Deborah. To summarize, 2025 was a year of transition. 2026 is about execution. We have stabilized China. We have rightsized costs. We are scaling Swiss manufacturing. We're accelerating EVO+ in China, and we are aligned around growth, profit and innovation.

We possess differentiated Collamer material, exceptional optical technology and a proven ability to gain market share in a very large and growing myopia market. We are moving quickly to ensure every employee understands our growth, profit and innovation focus and carries measurable goals tied directly to execution.

Our people are talented and highly capable. We recognize change can be difficult, but it's also exciting and filled with promise and opportunity. We are working to reignite the organization around sustained long-term growth.

Our Board and leadership team are aligned. Our strategy is clear, and our focus is disciplined execution and long-term shareholder value creation. We are energized by what lies ahead and confident in our path forward. Thank you for your continued support.

Operator, we'll now take questions.

[Operator Instructions] The first question comes from Tom Stephan with Stifel.

First one, just on distributor inventory. Warren, have the reductions continued into the first quarter, or has that stabilized now that Alcon is behind you? And with that in mind, can you give us any guardrails for how to think about the first quarter and revenues maybe compared to the $77 million in 1Q '24? We're here in March. I actually think Chinese New Year ended today. So just any comments on 1Q revenue as well would be helpful. And then I have a follow-up.

Yes. Thanks for the question. Look, we're really pleased with the progress we've made on inventory management. I actually love the progress and the oversight. We've got a new leader based there in Asia Pacific and China. This is a highly skilled, deeply experienced senior VP who's joined us, who's helping with that process. We're looking at inventory on a weekly basis. So we understand much better than we used to. It will never be perfect, but we understand it much better than we did.

So we watched at the end of 2025 inventory get cooled down all the way below or right at contractual levels as we exited 2025. And we continue to see really stable inventory levels at our distributor. In fact, we're a little bit below the 6-month contractual level that we referenced before. So inventory is in a good place. We feel like we're ready now as the market starts to come back and we'd see what the market is going to bring. So that's on inventory.

And then as far as just the Q1, you heard Deborah's comments, we're obviously not going to provide guidance. But what we would say is we're pleased with how '25 ended in China end market. 2024 was a really challenging year. That was, we believe, double-digit decline in in-market demand, which in 2025 rebounded to a nice sort of mid-single-digit level, and we think that we're going to experience that as we exited '25 into '26. So we maintain optimism.

Got it. That's great. And then just my follow-up, more thematic and taking a step back. Warren or Deborah, maybe if you can spend some time just discussing sort of the health of the organization today and how it compares to pre-Alcon. Sort of curious if this is any sort of consideration, positive or negative, in the near-term or long-term as we think about the path forward for the company?

Yes, it's a good one. I'll start and maybe Deborah can join us because I think she's done a lot in 2025 on the financial side to really get us into a healthy place. You'll remember that we let expenses spiral out of control in advance of the Alcon merger agreement. And we really got control of that starting in the Q1 2025 timeframe. And so I think as we went through the year, despite what was going on with the disruption, and there was a lot of disruption, particularly in the Q4 timeframe, we can talk about that. But we got our expenses in line, and we've carried that discipline now through '25 and we believe into '26, and that's our plan is to make sure we maintain that discipline. So I think from a cost management standpoint, that's great.

Now it's about restoring revenue. You heard us talk about this 3-pronged approach. Let's grow our revenue, let's expand our profit margin, and then we have to accelerate our innovation. And we've got the organization what we believe, even early in our new roles, aligned around those 3 focal points. So I think what you would find is post Alcon transaction, we have a very aligned Board. The Board and the management team, we all want the same thing. We want growth and profitability. The organization, I think, is happy to be past the disruption. And so now it's about can we go out and execute. And I believe that we have the talented team to lead us to do that.

The next question comes from Ryan Zimmerman with BTIG.

This is Izzy on for Ryan. So to start out, I appreciate that you're not guiding for 2026, and I heard your comments there, Tom, but I just wanted to ask or maybe push a little bit more. So if we think about how China saw end market demand up mid-single digits, but the rest of the business was down, I think you said about 2% outside of China, curious if low single-digits is a good place for 2026 collectively? Any growth -- or any commentary on growth you can qualitatively, would be super helpful as we start to think about our models?

Thanks for the question, Izzy. Is the question -- I'll make sure I understand. Is the question that the 2% we saw in the quarter ex-China? Is it a question around ex-China? Or is it something else?

So as we think about the balance of the company, right, weighing what we've seen in China versus what you're doing in the rest of the world collectively, do you think low single-digits is a good place to be or something that could be achievable for 2026 for STAAR?

Got it. I think -- it's a good question. Look, I think 2025 needs a little context, particularly in Q4. There's a lot of disruption. And we watched our distributor partners all around the world, not just in Asia. We watch our distributor partners make decisions around what are they going to do with inventory. Imagine being a distributor facing into what you believe is going to be a transaction and likely thinking you're going to lose your job, you're going to skinny your inventory down. You're likely going to stop investing in some of the key things that might drive revenue to your company and so on.

So we saw all of those things happen, particularly in Europe, where you see the European number pretty soft for Q4. We think those things are largely influenced by that disruption, and that disruption is behind us now. And so we're still optimistic as we've ever been around ex-China business being able to continue to grow. Clearly, surgeons are moving away from LASIK and taking steps in the direction of lens-based refractive surgery, choosing Collamer, which has been around for 30 years. We're the only one in the phakic IOL business that's been there. They're choosing ICLs. And so we're seeing that momentum continue. We think in China and we think ex-China that we're going to be able to continue that momentum. As you mentioned, we're not guiding on what we think that number is going to be, but we're pleased with where we are.

Got it. And as we think about the distributor dynamics, can you elaborate a little bit more about the specific structural changes that you've put into place with those agreements, particularly in China that will prevent us from seeing any form of inventory buildups similar to what we saw in '24 and '25?

You bet. Look, as I mentioned before, it's never going to be perfect. And so I don't want to pretend that we know everything about China all the way down through the different layers of subdistribution, first tier, second tier, holding companies for the hospitals and then out into the vast number of hospitals in China.

What I would suggest to you is we have a lot better process around it now. We see those numbers weekly. We understand what the number -- the shipments that go from our distributors downstream into the distribution network and the returns that come against them. Therefore, we have a -- it's a proxy for net sales. It's not a true net sales number. But as the inventory levels have now rightsized in China, we now feel like we've got a good proxy for what in-market demand looks like.

The next question comes from Brad Bowers with Mizuho.

Just wanted to ask the first one maybe on China. Historically, 2Q busy season. Obviously, that was obscured last year because of the distributor dynamics. But wanted to hear about how we should be modeling 2Q? Is the seasonality still expected? And are there any early reads that, that momentum that we typically see -- will be seen again this year in China?

This is Deborah. We do expect that -- from a seasonality standpoint that Q2 and Q3 will continue to be very strong for STAAR in 2026, as it has been historically. So don't expect significant changes in that area.

Okay. That's helpful. And then maybe just a high-level one, just how we should be thinking about prioritization, U.S. growth versus China growth. Obviously, historically, China has been a ballast to the business. How should we be thinking about getting back towards that versus accelerating some of the U.S. businesses and again, the prioritization of each?

Yes. So -- it's a good question. Look, we're proud of the progress we're making in the U.S. We continue to see success there. You saw us rightsize our cost structure last year. Some of that was relative to the U.S. business itself. Some of it was just global footprint because a lot of our headquarters -- certainly our headquarters, but a lot of our infrastructure is U.S.-based. So you saw us tone that down and still have nice double-digit growth in the U.S.

And so it's just a smaller business relative to the bigger business outside of the U.S., particularly China, of course, Japan our second, and Korea and Southeast Asia, India representing big opportunity, not to mention what we do in Europe. And so we'll continue to invest with -- along with our customers that invest in EVO ICL. We'll do that in the United States. We'll do it outside of the United States as customers are interested in partnering with us.

Again, we're seeing surgeons and our customers. We're seeing patients ask for alternatives to laser vision correction that requires corneal tissue removal. They're moving toward the lens-based option that's reversible. And so we're seeing that. And as customers share that with their potential patients, then we'll partner with them, and we'll put our investments there. But China is the biggest opportunity for us. It remains that way. We'll continue to double and triple down there.

The next question comes from Simran Kaur with Wells Fargo.

I guess just bouncing off of the prior question, maybe Warren or Deborah, could you help us understand like what is the true growth algorithm from here? How much is driven by the continued China recovery and growth versus ex-China recovery penetration and mix? And can you get back to that strong double-digit growth levels that you were seeing in China prior to last year and sort of that mid-teens growth level ex-China? Just help us understand how you get back to sort of the pre-2025 levels, and over what time?

Yes. Thanks for the question. I think -- I don't think in 2026 we're going to be seeing the hyper growth levels that we saw back 2023 and before that. Certainly, we're working towards that. Right now, thankfully, our Board has a very long view of the company. And while we do expect nice growth globally for the company in 2026, I would caution, I don't expect to see 20%, 25% growth, although that is definitely what we're working to, and that is definitely the opportunity for sure.

Understood. That's very helpful. And maybe just in China, I appreciate the commentary around the EVO+ sort of launch. How should we think about competition in 2026? And can you give any color around what is that ASP delta between EVO+ versus EVO in China? And how much of the 2026 China growth algorithm is being driven by price versus volume and sort of underlying demand and improving macro?

Yes, it's a good question, Simran. And what I would say is even just appending to Deborah's previous comments because I think they're somewhat related, we're still wildly underpenetrated as far as refractive surgery as a percentage of the myopia epidemic that exists in this world. China is no different. They, in fact, lead in that. Maybe India is right there close with them. And so I think we collectively, as those that want to impact that epidemic. Lens-based refractive surgery is growing, but that's one piece of it. And so I think there's going to be plenty of opportunity for us, plenty of opportunity for competition as well.

What I would say about the competitors, look, we take it really seriously. It's a little flattering, if I'm honest, that phakic IOLs are starting to grow. And I think it just speaks to LASIK is in most markets on the decline and folks are looking for another way to treat. And this reversible approach, I think, is really appealing to the patient, or potential patients. So it's a strong recognition we're happy with.

Many companies have come as competitors in the past, and they all are non-Collamer lenses. They are acrylic lenses, which are varying types, but it typically creates a more rigid structure. And history will tell you that of the many that have come, only a few have really even stayed in the market. And so Collamer is a differentiator for us, 30-plus years. We had a pretty big head start on the market. And so we're taking advantage of that, but we can't just rely on that. We also have to continue to innovate. And so it's important for us to bring products like EVO+ into the Chinese market to allow us to expand.

So that gets to your question around ASP. What we've seen so far is a lot of excitement around EVO+. So we're happy about that. And we're going to continue to try and scale up our Swiss plant to be able to satisfy the demand. We are seeing a premium. We're not sharing the premium. You can imagine why it's a competitive advantage to us. What I'll say is that customers see the difference and patients are paying for the difference. And so we'll see where that goes. It's still really early. I wouldn't make too much out of it yet, but we are pleased with the early progress.

The next question comes from John Young with Canaccord Genuity.

I just want to follow up on the comments on EVO+ and the launch in China. If I recall the strategy correctly, a part of it also was to defend against value-based purchasing in China. Are you seeing any headwinds or -- to the traditional EVO lens right now from VBP in China? And do you expect any?

Yes. We haven't heard anything about VBP. And so what I would say is, in order for a VBP to happen, typically, it happens in the public market. It can happen in the private market. There are examples of that in dental. And I think even in some of the provinces, they've tried to look at orthokeratology. But we've not heard anything about VBP. Remember that our competitor, the Loong Crystal that you hear about, they don't have a toric version yet. You need multiple competitors in the market before the government has typically gotten interested in it. We certainly can't predict one way or the other what's going to happen, wouldn't try to do it. But to answer your question, haven't heard a thing about VBP and feel like so far, so good.

Great. And then in your script, you also talked about the importance of people in the organization. I'm just wondering, have you had any higher-than-usual turnover in the organization outside the restructuring with all the changes that have been going on?

No. Things have been pretty steady in that regard. We have a wonderful team. We have wonderful employees in the organization. They're all very happy, to be very honest, that the Alcon transaction did not go through because they love working here, and we love having them. So yes, so far, so good in that regard.

The next question comes from David Saxon with Needham & Co.

I wanted to get your thoughts on what year has no stocking dynamics for China, just so we can kind of better frame what a normal year is for China sales? Like, is 2023 at 185 kind of a clean year in your view when you think about channel inventory and not necessarily returning to that in '26, but over the near-term?

It seems like an easy question to answer, but the reality is China is going through -- was going through such a hypergrowth period that the distributors -- the single distributor at the time and then the 2 distributors, once we brought on HTDK, were doing everything they could to get inventory, get folks trained, get it out into -- remember, these are thousands of hospitals in a very large, diverse country. And so I don't know when you would say that the in-market demand ceased in such a way that it started backchanneling or backfilling inventory at the distributor or anywhere else within that distribution lane. So I don't know that, that question can be answered.

What I can tell you is that on a go-forward basis, we understand our inventory position very well, and we have very good controls in place to ensure that we don't allow that to happen to us again. And so feel good about the contractual levels of inventory with our importers, feeling better about the stabilization seemingly, of the China business in 2025 and excited for a clean start here in '26.

Okay. Great. And then just as my follow-up, I wanted to switch gears to the U.S. and just to get an update on the strategy. How has it evolved since early to mid-last year? What's going right? What are some areas that need retooling?

Yes. Our U.S. team is so good. The people running that organization are fantastic. And what I'll tell you is, they -- a couple of years ago, you'll remember the language of Highway 93. And that's -- that wasn't -- at the time, it was 93 customers, but it's not really designed to be 93 customers. It's designed to be a mindset of let's focus on the customers that are willing to partner with us and that want to drive EVO ICLs as an option for their patients.

And that team has expanded upon that list now and what they've done is really get into the economics of making EVO ICL a better business for these refractive surgeries -- excuse me, these refractive surgeons that want to grow their practice. And they'll describe a market -- it's a refractive market that's not shrinking. It's one that's shifting and it's shifting away from LASIK, which requires corneal tissue removal and going to a reversible procedure that when priced appropriately, when taught appropriately to the staff and therefore communicated appropriately to a potential patient, it's a really high profit opportunity for those practices. And so they're focused around that mission.

They have strong training and message discipline, and they're executing against it. And you saw the results for 2025 with double-digit growth, and we're excited to see what they're going to do this year. And they're doing it on a string budget relative to what it was a couple of years ago. We were wasting money in the U.S. We were spending it in the wrong places. I learned a lot of lessons in that. I was sitting right here for it. And so I feel like we're in a better place.

The next question comes from Mason Carrico with Stephens.

I'll keep it to one. The deck that you guys published on the Alcon merger included language around STAAR's inability to penetrate lower diopter patients, which makes up the majority of refractive patients, and that is deviated from prior commentary around moving down the diopter curve. So could you just talk about that shift in messaging and really how it informs your strategic decision-making and process moving forward?

Yes, it's a fair question. And I would just make one subtle correction to it, and it's that it's not a change in messaging from the standpoint of we know we have to go down the diopter curve in order to be effective. We know that even in the publication you're referring to, that we made progress coming down the diopter curve starting back at the -- I don't remember from memory, but minus 12 diopter down to something like minus 9, minus 9.5.

Now we're at that point where we have to continue to go down the diopter curve, and it's hard to do. It's hard because in markets around the world where customers have invested in infrastructure to treat patients with laser technology, they want those technologies that they invested in to pay dividends. And so the reality is we're going to keep fighting that fight. We're going to keep pushing appropriately for our customers to consider EVO lower diopters.

We know that the higher diopter refractive error correction the patient has, the more tissue you have to take, which induces dry eye, which does other things. And so we're going to continue to push. We haven't made as much progress as we would like to make. We always want to make more. Some markets will do better. Some markets will continue to have wild amounts of high myopia. Think of Asian markets like China, like India, like Korea and Japan, there's plenty of high myopia patients to treat. But we're going to keep the fight up, and I'll take your question as encouragement that we need to do so.

The next question comes from Adam Maeder with Piper Sandler.

Two for me. The first one is on China and lots of questions have been asked, but not sure we've discussed expectations for ICL in-market growth in FY '26? And it sounds like things have started to stabilize some over the course of 2025. Do you expect to see further recovery this year? And just any finer point you can put on it would be appreciated. And then I had a follow-up.

A lot of the same challenges we've been fighting in -- that we fought in 2025 are still there. There's still macro challenges in China. They're just getting better. You see the stock markets doing a whole lot better in China, but you see the housing market is still a little bit depressed. They're coming out of the Chinese New Year. I don't know that we have good data on it yet. I think the tone out of Chinese New Year was seemingly positive. We'll see. The stimulus that the government has put into place through the course of 2024 and then 2025, we think, is starting to help. Maybe it's some of the driver behind even the stock market surge. So cautiously optimistic about their economy. What role that's going to play in in-market sales, too hard to tell.

What we can tell you is that Q4 in 2025 was a nice acceleration relative to the previous quarters in in-market sales. That left us for the full year '25 around, we believe, a single-digit in-market demand growth versus the prior year. So hopefully, we get a little bit of that momentum coming out of Q4. Hopefully, the economy stays as it has been or gets better, but it's still too early to tell, thus the reluctance to give guidance.

Okay. That's very helpful, Warren. I appreciate the color. And for the follow-up, I wanted to ask about innovation and prioritizing innovation. I think that was mentioned a couple of times during the call in the shareholder letter. So I guess, what can you tell us today about the innovation pipeline and specifically, how we should think about some of these new products potentially getting regulatory clearance and impacting models?

Yes. Great question because it's the third pillar in our strategy here, and it's a place where we have -- candidly, we haven't delivered in the way that we really want to. EVO is amazing. The Collamer material is differentiated. And now the onus is on us to bring new products to market. Proud of V5, proud of bringing EVO+ to China. That's going to be a differentiator for us, we believe. We'll also bring the Lioli injector, which is incremental innovation. The lens is still the star of the show, but it will be a nice way for our customers to be able to inject EVO into their patients.

And then we're working on a series of projects in the background. We hope to be able to update you even in subsequent calls on time lines. Think of milestones like when we start to do first-in-man treatments and when we go through other stage gates of the design control process, which is an important part of the R&D process. We want to give you that visibility, just not ready to do it yet.

That's all the phone questions we have so far.

Okay. Operator, it sounds like there's no more questions?

That concludes the question-and-answer session and today's conference call. Thank you for attending today's presentation. You may now disconnect.