STAAR Surgical Co. (STAA) - Q2 2026 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended July 3, 2026. STAAR Surgical Co. designs, develops, and sells implantable Collamer Lenses (ICLs) for refractive surgery. The company operates as a single segment focused on ophthalmic surgical products. Following the termination of a proposed merger with Alcon in January 2026, the company entered a Cooperation Agreement with Broadwood Partners and completed a leadership realignment, appointing Warren Foust as CEO effective August 4, 2026.
Key Financial Metrics
| Metric | Q2 2026 (3 Months) | Q2 2025 (3 Months) | YTD 2026 (6 Months) | YTD 2025 (6 Months) |
|---|---|---|---|---|
| Net Sales | $93.5 million | $44.3 million | $187.1 million | $86.9 million |
| Gross Profit | $69.7 million | $32.8 million | $138.6 million | $60.8 million |
| Gross Margin | 74.5% | 74.0% | 74.1% | 70.0% |
| Operating Income | $10.1 million | ($29.9 million) | $18.1 million | ($87.4 million) |
| Net Income | $8.1 million | ($16.8 million) | $13.3 million | ($71.0 million) |
| Diluted EPS | $0.16 | ($0.34) | $0.26 | ($1.44) |
| Cash & Investments | $181.5 million | $163.9 million (Q1 end) | N/A | |
| Working Capital | $269.0 million | $243.0 million (Jan 2026) | N/A |
Liquidity & Debt: The company holds $148.6 million in cash and cash equivalents and $32.9 million in investments available for sale. There is no long-term debt reported; liabilities consist primarily of operating lease obligations ($35.9 million total) and accounts payable.
Material Changes vs. Prior Period
- Revenue Surge: Net sales increased 111% year-over-year in Q2 and 115% year-over-year for the six months ended July 3, 2026. This growth was driven almost entirely by the Asia Pacific region, specifically China, where sales rose from $5.3 million to $52.3 million in Q2.
- Profitability Turnaround: The company returned to profitability, reporting net income of $8.1 million in Q2 2026 compared to a net loss of $16.8 million in the prior year. This shift was due to revenue growth and the absence of significant restructuring charges that impacted the prior year.
- Restructuring Costs: Q2 2025 included $5.2 million in restructuring, impairment, and related charges (severance, asset impairments). Q2 2026 had no such charges, though $2.7 million in restructuring costs were incurred in the first half of 2026 related to leadership realignment.
- Merger Costs: The company incurred $6.7 million in merger transaction and related costs in the first half of 2026 following the termination of the Alcon merger and the execution of the Cooperation Agreement.
Outlook, Risks, and Management Commentary
- ERP Implementation: The company launched a new Enterprise Resource Planning (ERP) system in Q2 2026. While sales targets were met, the implementation caused operational challenges requiring manual intervention. Management anticipates resolving these issues in Q3 2026.
- China Tariffs & Supply Chain: Gross margins remain impacted by tariffs on U.S.-manufactured products sold to China. The company expects to supply 100% of EVO and EVO+ ICL lenses for China from its Swiss facility by the end of 2026, which should mitigate tariff impacts.
- Geographic Risks: Sales in the Middle East decreased significantly (58% in Q2) due to regional instability. Conversely, China distributors now account for 56% of Q2 net sales and 65% of trade receivables, creating concentration risk.
- Leadership Changes: Warren Foust was appointed President and CEO in August 2026. Deborah Andrews transitioned to Executive Vice President and CFO.
Investor Verification Checklist
- China Concentration: Verify the sustainability of the 111% sales growth in China and the risk associated with 65% of receivables being held by Chinese distributors.
- ERP Stability: Monitor Q3 2026 results for the resolution of ERP-related operational issues and any impact on cost of sales or SG&A.
- Swiss Production Ramp: Confirm the timeline for 100% Swiss manufacturing for China to validate the margin improvement outlook regarding tariffs.
- Merger Costs: Review the $6.7 million in merger-related expenses to ensure no further significant one-time costs are pending.
- Inventory Levels: Assess the increase in accounts receivable ($98.5 million vs $50.1 million prior year) relative to the consignment inventory model in China.