Company: STAA
Filing Date: 2025-10-07
Form Type: DFAN14A
Source: 0001213900-25-097083
Chunk: 3

Company: STAAR SURGICAL CO
Filing Date: 2025-10-07
Form: DFAN14A
Chunk 3
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 estimates, the approximately 10% revenue decline that STAAR experienced was not driven by structural weakness. Rather, it was driven by short-term distributor inventory adjustments in China, STAAR’s largest market. Specifically, STAAR’s revenue owing to its China operations fell 82%, 99%, and 92% year-over-year in Q4 2024, Q1 2025, and Q2 2025, respectively, even as China’s GDP in the same period grew 5.4%, 5.4%, and 5.2%. This indicates that the revenue contraction was driven by unique, transitory issues affecting the Company specifically rather than enduring macroeconomic weakness in China.

As disclosed in STAAR’s earnings materials for the fiscal year ended December 27, 2024, elevated inventory levels in the distribution channel resulted in a deliberate reduction in net sales, which management previously anticipated would resolve over several quarters. Importantly, STAAR’s most recent quarterly report on Form 10-Q, for the period ended June 27, 2025, confirmed that distributor inventory levels in China have now returned to historical levels.We believe presenting the revenue trajectory without this context risks misleading shareholders about the Company’s underlying growth profile.

Similarly, the swing in operating margins from approximately 20% in the first half of 2022 to negative levels in the first half of 2025 was due largely to a significant escalation in operating expenses. These expenses increased from an annualized run rate of approximately $150 million in 2022 to $250 million in 2024. The majority of this increase stemmed from U.S. operations. From the period preceding 2022 to the end of 2024, the global employee headcount grew by approximately 400, with about 280 of those net additions based in the U.S., despite the U.S. only representing about 5% of run-rate revenue. Notwithstanding U.S. led expenditures totaling hundreds of millions of dollars, U.S. revenue rose modestly from approximately $15 million in 2022 to $20.5 million in 2024. We believe streamlining the U.S. operations could restore historical profitability margins with minimal impact on the overall revenue base.

Broadwood Partners agrees with this assessment, noting in their presentation that they “see an opportunity to further reduce SG&A expenses, particularly in the U.S., without impacting revenue.”

STAAR’s Market Presence in China Is a Strength, Not a Liability or “Overweight Exposure,” as STAAR Claims

STAAR’s