STAAR SURGICAL CO

The following table shows the percentage of our total sales represented by certain items reflected in our Condensed Consolidated Statements of Income for the periods indicated.

(1) For the three and nine months ended September 26, 2025, amounts include $25.9 million and $27.5 million, respectively, of net sales related to the December China Shipment. As the associated cost of sales was recognized upon shipment in December 2024, these amounts were recognized at 100% gross margin.

Net Sales

The following table presents our net sales (dollars in thousands):

Net sales for the three months ended September 26, 2025 increased 7% from the same period of 2024. Net sales for the three months ended September 26, 2025 included $25.9 million of sales related to the previously disclosed December China Shipment, which was paid in full during the three months ended September 26, 2025. The composition of our net sales is primarily related to ICL sales. ICL sales include normal recurring sales adjustments such as sales return allowances. The sales increase was driven by the Asia Pacific (“APAC”) region, which increased 6%, with ICL unit increase of 7%. The increase in the APAC region was driven by sales growth in Korea, Japan and China, partially offset by decreased sales in other APAC distributors. The Europe, Middle East and Africa (“EMEA”) region sales increased 8% with ICL unit growth up 23%, due primarily to sales growth in our distributor markets, partially offset by decreased sales in our direct markets and changes in our sales return allowances. The Americas region sales increased 20% with ICL unit growth up 15%, due to sales growth in Canada and U.S. Changes in foreign currency favorably impacted net sales by $0.9 million.

Net sales for the nine months ended September 26, 2025 decreased 31% from the same period of 2024 primarily due to decreased China sales. Net sales for the nine months ended September 26, 2025 included $27.5 million of sales related to the previously disclosed December China Shipment, of which payment of $1.6 million was received during the three months ended June 27, 2025 and the remaining $25.9 million was paid in full during the three months ended September 26, 2025. The sales decrease was driven by the APAC region, which decreased 42%, with ICL unit decrease of 43%. The decrease in the APAC region was driven by decreased sales in China, partially offset by sales growth in India, Korea and Japan. The EMEA region sales increased 12% with ICL unit growth up 14%, due primarily to sales growth in our distributor and direct markets. The Americas region sales increased 13% with ICL unit growth up 9%, due to sales growth in Canada, Latin America distributor markets and U.S. Changes in foreign currency favorably impacted net sales by $1.3 million.

Gross Profit

The following table presents our gross profit and gross profit margin (dollars in thousands):

Gross profit for the three months ended September 26, 2025 increased 13.7% from the same period of 2024. Gross profit margin increased to 82.2% of sales for the three months ended September 26, 2025 compared to 77.3% of sales for the three months ended September 27, 2024 due primarily to timing of the recognition of the cost of sales associated with the December China Shipment. The cost of sales for the December China Shipment was recognized in December 2024 when product was shipped, and the net sales of $25.9 million was recognized upon payment in September 2025 at 100% gross margin. The increase in gross margin also reflected decreased period costs as a result of our cost reductions implemented in the quarter ended March 28, 2025.

Gross profit for the nine months ended September 26, 2025 decreased 33.3% from the same period of 2024. Gross profit margin decreased to 76.3% for the nine months ended September 26, 2025 compared to 78.5% for the nine months ended September 27, 2024 due primarily to higher manufacturing costs per unit due to lower production volume and increased excess and obsolete inventory reserves, partially offset by decreased period costs as a result of our cost reductions implemented in the quarter ended March 28, 2025 and timing of the recognition of cost of sales associated with the December China Shipment.

General and Administrative Expense

The following table presents our general and administrative expenses (dollars in thousands):

General and administrative expenses for the three months ended September 26, 2025 decreased 4.3% from the same period of 2024 due to decreased outside services and facilities costs, partially offset by increased stock-based compensation and bonus expenses. General and administrative expenses for the nine months ended September 26, 2025 decreased 3.4% from the same period of 2024 due to decreased outside services, partially offset by increased bonus and stock-based compensation expenses, salary-related and payroll tax expenses and facilities related costs.

Selling and Marketing Expense

The following table presents our selling and marketing expenses (dollars in thousands):

Selling and marketing expenses for the three months ended September 26, 2025 decreased 18.7% from the same period of 2024 due to decreased advertising and promotional activities and as a result of costs and charges in the prior year period associated with the opening of our new experience center, partially offset by increased bonus and stock-based compensation expenses. Selling and marketing expenses for the nine months ended September 26, 2025 decreased 13.4% from the same period of 2024 due to decreased advertising and promotional activities and as a result of higher costs and charges in the prior year period associated with the opening of our new experience center and travel related expenses, partially offset by increased bonus and stock-based compensation expenses and salary-related and payroll tax expenses.

Research and Development Expense

The following table presents our research and development expenses (dollars in thousands):

Research and development expenses for the three months ended September 26, 2025 decreased 24.8% from the same period of 2024 primarily as a result of purchases of in-process research and development in the prior year period related to external AI tools for measurement and lens size selection and decreased salary-related and payroll tax expenses. Research and development expenses for the nine months ended September 26, 2025 decreased 13.3% from the same period of 2024 primary as a result of purchases of in-process research and development in the prior year period related to external AI tools for measurement and lens size selection, decreased clinical expenses associated with U.S. post-approval clinical activities and outside services.

Merger Transaction and Related Costs

The following table presents professional service expenses we incurred in connection with our merger with Alcon (dollars in thousands):

Restructuring, Impairment and Related Charges

The following table presents our restructuring, impairment and related charges (dollars in thousands):

In the first half of 2025, we took a number of steps to change our leadership team, realign our leadership structure to better address market needs, reduce costs and discretionary spending, and better position the Company to return to sustainable growth. As part of this leadership realignment and related efforts, during the three and nine months ended September 26, 2025, we recognized costs related to severance and reduction in workforce of $18,000 and $12,471,000, respectively; consulting expenses of $8,000 and $874,000, respectively; impairment expenses on leasehold improvements and machinery and equipment of $0 and $7,759,000, respectively, as we will no longer be using these assets; and impairment on real property right-of-use assets of $0 and $4,083,000, respectively, as we are actively pursuing subleasing opportunities for two of our leased properties. In addition, we also recognized impairment of $0 and $2,751,000 during the three and nine months ended September 26, 2025, respectively, for internally developed software that we will no longer be using as we will transition to a cloud-based software solution. The restructuring effort was substantially completed as of June 27, 2025.

Other Income, Net

The following table presents our other income, net (dollars in thousands):

Other income, net decreased for the three months ended September 26, 2025 due to foreign exchange losses and decreased interest income. Other income, net increased for the nine months ended September 26, 2025 due to foreign exchange gains, partially offset by decreased interest income.

Income Taxes

The following table presents our income tax provision (dollars in thousands):

The income tax provision increased during the three months ended September 26, 2025 due to the reversal of income tax benefits recorded during the six months ended June 27, 2025, as a result of the recognition of the $25.9 million December China Shipment. The income tax provision decreased during the nine months ended September 26, 2025 due to losses before taxes recognized during the nine months ended September 26, 2025, compared to the nine months ended September 27, 2024.

The effective tax rates for the three months ended September 26, 2025 and September 27, 2024 were 52.7% and 24.2%, respectively. The effective tax rates for the nine months ended September 26, 2025 and September 27, 2024 were (0.9)% and 34.1%, respectively. Our effective tax rates differ from the U.S. federal statutory rate of 21%, primarily due to the income tax expense generated in foreign jurisdictions.

Our future effective income tax rate depends on various factors, such as changes in tax laws, regulations, accounting principles, or interpretations thereof, and the geographic composition of our pre-tax income. We carefully monitor these factors and adjust our effective income tax rate accordingly.

Liquidity and Capital Resources

Our principal sources of liquidity are cash, cash equivalents, investments available for sale (“AFS”) and cash flow from operating activities. We believe these sources of liquidity will be sufficient to meet our anticipated cash needs, including working capital needs, capital expenditures and contractual obligations for at least 12 months from the issuance date of the financial statements. We expect that cash flow from operating activities may fluctuate in future periods as a result of a number of factors, including fluctuations in our operating results, working capital needs, capital expenditures, and capital deployment decisions. In addition, future capital requirements will depend on many factors including our growth rate in net sales, the timing and extent of spending to support our growth strategy, the expansion of selling and marketing activities, the timing of introductions of new products, as well as global macroeconomic factors. If our anticipated future cash flow from operating activities is insufficient to satisfy our future capital requirements in the long-term, we may need to seek additional capital. Our financial condition at September 26, 2025 and December 27, 2024 included the following (in thousands):

Cash and cash equivalents include cash and balances in deposits and money market accounts held at banks and financial institutions. Our investment policy’s primary objective is capital preservation while maximizing our return on investment. Investments available for sale may include U.S. government and corporate debt securities, commercial paper, certain certificates of deposit and related security types, that are rated by two nationally recognized statistical rating organizations with minimum investment grade ratings of AAA to A-/A-1+ to A-2, or the equivalent. The maturity of individual investments may not extend 24 months from the date of purchase. There are also limits to the amount of credit exposure in any given security type. We do not have any off-balance sheet arrangements.

A summary of cash flows for the nine months ended September 26, 2025 and September 27, 2024 was as follows (in thousands):

For the nine months ended September 26, 2025 net cash used in operating activities consisted of $62.1 million net loss and $17.3 million in working-capital changes primarily related to changes in inventories, current liabilities, capitalization of cloud-based software and changes in accounts receivable; partially offset by $49.1 million in non-cash items primarily related to stock-based compensation expenses and impairment on fixed assets. For the nine months ended September 27, 2024 net cash provided by operating activities consisted of $34.6 million in non-cash items primarily related to stock-based compensation expenses and net income of $14.0 million, partially offset by $33.6 million in working-capital changes primarily related to the capitalization of cloud-based software and changes in accounts receivable.

For the nine months ended September 26, 2025, net cash provided by investment activities was $65.8 million which consisted of $93.0 million in proceeds from the maturities of investments AFS, partially offset by $26.5 million of purchases of investments AFS. During the first half of 2025, upon maturity of investments AFS, funds were placed into money market accounts to serve as liquidity for operations, and during the three months ended September 26, 2025, we began to purchase investments. For the nine months ended September 27, 2024, net cash used in investment activities was $39.7 million which consisted of $61.2 million in purchases of investments AFS and $17.7 million in purchases of property, plant and equipment, partially offset by $38.3 million of proceeds from the maturity of investments AFS.

For the nine months ended September 26, 2025 net cash used in financing activities was $4.5 million which primarily consisted of $6.5 million of repurchases of common stock pursuant to our share repurchase program and $1.4 million to repurchase employee common stock for taxes withheld, partially offset by $3.4 million of proceeds from the exercise of stock options. For the nine months ended September 27, 2024, net cash provided by financing activities was $5.8 million which consisted of $7.4 million of proceeds from the exercise of stock options, partially offset by $1.4 million to repurchase employee common stock for taxes withheld.

Commitments

Employment Agreements

The Company’s Chief Executive Officer entered into an employment agreement with the Company, effective February 26, 2025. He and certain officers have as provisions of their agreements certain rights, including continuance of cash compensation and benefits, upon a “change in control,” which may include an acquisition of substantially all of its assets, or termination “without cause or for good reason” as defined in the employment agreements.