Q4 2023 Alcon Inc Earnings Call

Operator: Greetings. Welcome to Alcon's fourth quarter 2023 earnings call. At this time, all participants are in a listen-only mode.

Greetings and welcome to Alcoa's fourth quarter 2023 earnings call.

At this time all participants are in a listen only mode.

Operator: The question and answer session will follow the formal presentation. If anyone today should require operator assistance during the conference, please press star zero from your telephone keypad. Please note, this conference is being recorded. At this time, I'll now turn the conference over to Dan Craven, Vice President and Global Head, Investor Relief.

Question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference. Please press star zero from your telephone keypad.

Please note this conference is being recorded.

At this time I'll now turn the conference over to Dan Cravens, Vice President and global head of Investor Relations.

Dan Cravens: You may now begin.

Dan Cravens: Welcome to our <unk> fourth quarter 2023 earnings conference call today, We issued a press release interim financial report and annual report posted and posted a supplemental slide presentation on our website to intent to enhance today's call. You can find all these documents in the Investor Relations section of our website.

Dan Craven: You may now, 23 earnings. Thank you. Thank you. Today we issued a press release, an Interim Financial Report, and Andrew Kobitzer, at investor.alcon.com. Joining me on today's call are David Endicott, our Chief Executive Officer, and Tim Stonecipher, our Chief Financial Officer. This press release, presentation, and discussion will include forward-looking statements. We expressly disclaim any obligation to update forward-looking statements as a result of new information or future developments, except as required by law. Our actual results may differ materially from those expressed or implied in our four reports. We are still working to determine the cause of death. Accordingly, you should not place undue reliance on any forward-looking statement. Important factors that could cause our actual results to differ materially from those in our forward-looking statements are included in Alcon's Form 20-F and our earnings press release and interim financial report on file with the SEC and available on the SEC's website.

Dan Cravens: At Investor Day at Alcon Dot Com joining me on today's call are David Endicott, Our Chief Executive Officer, and Tim Stonesifer, Our Chief Financial Officer.

Dan Cravens: Our press release presentation and discussion will include forward looking statements. We expressly disclaim any obligation to update forward looking statements as a result of new information or future developments, except as required by law.

Dan Cravens: <unk> results may differ materially from those expressed or implied in our forward looking statements. Accordingly, you should not place undue reliance on any forward looking statements important factors that could cause cause our actual results to differ materially from those in our forward. Looking statements are included in <unk> form 20-F and <unk>.

Dan Cravens: Our earnings press release, and interim financial report on file with the SEC and available on the Sec's website.

Dan Craven: Non-IFRS financial measures used by the company may be calculated differently from, and therefore may not be comparable to, similar measures used by other companies; these non-IFRS measures should be considered along with, but not as alternatives to, the operating performance measures as prescribed by IFRS; please see a reconciliation between our non-IFRS measures and directly comparable measures presented in accordance with IFRS and our public filing.

Dan Cravens: Non ifr finance Ifr S financial measures used by the company may be calculated differently from and therefore may not be comparable to similar measures used at other companies. These nine ifr S measures.

Dan Cravens: Should be considered along with but not as alternatives to the operating performance measures as prescribed per our FRS.

Dan Cravens: Please see a reconciliation between our non ifr S measures with directly comparable measures presented in accordance with our <unk> and our public filings for discussion purposes. Our comments on growth are expressed in constant currency in a moment David will begin by recapping highlights from the fourth quarter. After his remarks, Tim will discuss.

Dan Craven: For discussion purposes, our comments on growth are expressed in constant current. In a moment, David will begin by recapping highlights from the fourth quarter. After his remarks, Tim will discuss our performance and outlook for 2024. Then David will wrap up, and we'll open the call for Q&A. With that, I will now turn the call over to our CEO, David Endicott. Thanks, Dan.

Dan Cravens: Our performance and outlook for the for 2024, then David will wrap up and we'll open the call for Q&A with that I'll now turn the call over to our CEO David Endicott.

David J. Endicott: Thanks, Dan Good morning, and welcome to <unk> fourth quarter 2023 earnings call.

David J. Endicott: Good morning, and welcome to Alcon's fourth quarter 2023 earnings. As I reflect on 2023, I'm extremely proud of what the team has accomplished. In a year of continued supply challenges, foreign exchange headwinds, high inflation, persistent competition, and geopolitical uncertainty, our team achieved some remarkable results. We outgrew our markets in almost every category with sales of $9.4 billion. Double-digit sales growth of 10% is driven by our broad portfolio of innovative products, solid commercial execution, and robust... We grew quarterly earnings by 33% to $2.74 per share. We expanded core operating margin by 150 basis points, Morrison, David Huygens, Eric Green, Kurt Vogel, Prashant Patel, and David Anderson. We generated more than $700 million of free cash flow, and we advanced our innovation and commercial agenda, particularly in our Vision Care franchise with the launch of Total 30 for astigmatism and multifocus. We also expanded our ocular health business with the integration of Roclatan and Ropressa and concluded phase 3 trials for AR15512, our dry eye pharmaceutical.

David J. Endicott: As I reflect on 2023 I'm extremely proud of what the team has accomplished.

David J. Endicott: A year of continued supply challenges foreign exchange headwinds high inflation persistent competition and geopolitical uncertainty our team achieved some remarkable things.

David J. Endicott: We outgrew our markets in almost every category with sales of $9 4 billion.

David J. Endicott: Double digit sales growth of 10% this.

David J. Endicott: This was driven by our broad portfolio of innovative products solid commercial execution and robust markets.

David J. Endicott: We grew core diluted earnings by 33% to $2 74 per share.

David J. Endicott: We expanded core operating margin by 150 basis points to 19, 7% and when adjusting for foreign exchange. We grew core operating margin by 280 basis points to 21%.

David J. Endicott: We generated more than $700 million of free cash flow and.

David J. Endicott: And we advanced our innovation and commercial agenda, particularly in our vision care franchise with the launch of total 30 for astigmatism and multifocal we.

David J. Endicott: We also expanded our ocular health business with the integration of Rockwell tenant Rhopressa and concluded phase III trials for a 15512, our dry eye pharmaceutical candidate.

David J. Endicott: Based on these results, it's clear that our portfolio of products... The markets are growing and remain healthy. We're demonstrating our ability to execute commercially, and we're steadily advancing it. I look forward into 2024. I'm excited about our product pipeline and our commercial agenda. Let me start with Surgeon.

David J. Endicott: Based on these results, it's clear that our portfolio of products is winning.

David J. Endicott: Our markets are growing and remained healthy we're demonstrating our ability to execute commercially and we are steadily advancing our pipeline.

David J. Endicott: I look forward into 2024, I'm excited about our product pipeline and our commercial agenda, let me start with surgical most.

David J. Endicott: The most exciting near-term product launch is Unity VCS, our next-generation FACO VISTA. This machine delivers unprecedented surgical performance that we expect will drive upgrades and capture. Unity is a dual console with best-in-class FACO and vitreo-retinal capabilities.

Most exciting near term product launches unity Vcs, our next generation <unk> device.

David J. Endicott: This machine delivers unprecedented surgical performance that we expect will drive upgrades and capture market share.

David J. Endicott: Unity is a dual console with best in class FICO and with Vitreoretinal capabilities. This combination reduces the equipment footprint in the or and streamlines the procedural setup and intraoperative workflows. In addition, it was designed to create near physiological conditions during surgery, which is expected to improve performance and efficiency.

David J. Endicott: This combination reduces the equipment footprint in the OR and streamlines the procedural setup and intraoperative workflow. In addition, it was designed to create near-physiological conditions during surgery, which is expected to improve performance. Efficiency Without Compromise. Additionally, UnityVCS represents an important opportunity to secure the next generation of consumables. As a reminder, consumables are a significant recurring revenue stream for us and contribute approximately half of our surging... Submit it for FDA authorization at the end of 2023 and expect approval in the coming months with international markets to follow in early 2022. As we look to the anticipated rollout, we plan to gradually introduce VCS to the market in late 2024 and expect more meaningful revenue contributions starting in the fall. We're also working to increase surgical efficiency in the clinic through better diagnosis. For example, the upcoming launch of our Next Generation Diagnostics, unity di UnityDX is a first-of-its-kind whole eye analyzer that combines six separate devices into a single machine to deliver best-in- This reduces the overall footprint in the clinic and reduces pre-op... All of this is surrounded by the ability to seamlessly move data over to the cloud, from the clinic into the O.R. and then back into the clinic post-op.

David J. Endicott: Out compromising safety.

David J. Endicott: Additionally, unity Vcs represents an important opportunities to secure the next generation of consumables. As a reminder, consumables are a significant recurring revenue stream for us and contribute approximately half of our surgical revenue.

David J. Endicott: We submitted for FDA authorization at the end of 2023 and expect approval in the coming months with international markets to follow in early 2025.

David J. Endicott: As we look to the anticipated rollout we plan to gradually introduce vcs to the market in late 2024, and expect more meaningful revenue contribution starting in 2025.

David J. Endicott: We're also working to increase surgical efficiency in the clinic through better diagnostics with the upcoming launch of our next generation diagnostics device Unity Dx.

David J. Endicott: Unity <unk> is a first of its kind whole I analyzer. The combined six separate devices into a single machine to deliver best in class performance at a lower price.

David J. Endicott: This reduces the overall footprint in the clinic and reduces preoperative time.

David J. Endicott: All of this is surrounded by the ability to seamlessly move data over to the cloud for the clinic into the or and then back into the clinic post Operatively Importantly, this technology will also leverage the data captured to improve outcomes through AI driven algorithms.

David J. Endicott: Importantly, this technology will also leverage the data captured to improve outcomes through AI-driven analysis. We're targeting to pilot UnityDX and select international markets in the back half of 2024, with broader international and U.S. commercialization, will position your DX as a premium diagnostic device that will complement our current offering, the Argos Bionic. We are very pleased with the performance of Argos, which continues to see very strong demand. Now I'll turn to implantables, where we're combining best-in-class materials, delivery, and optics to drive premium penetration. In the fourth quarter, global ATI well penetration was up 170 basis points year over year, driven by international markets, notably China.

David J. Endicott: We're targeting to pilot unity Dx in select international markets in the back half of 2024 with broader international and U S commercialization in 2025.

David J. Endicott: We are positioning <unk> as a premium diagnostic device.

David J. Endicott: Will complement our current offering the Argos Biometer, we're very pleased with the performance of Argos, which continues to see very strong adoption.

David J. Endicott: Now I'll turn to Implantables, where we're combining best in class materials delivery and optics to drive premium penetration and share.

David J. Endicott: In the fourth quarter Global <unk> penetration was up 170 basis points year over year, driven by international markets, notably China.

David J. Endicott: In the U.S., HIY penetration has remained stable in the high teens versus prior year; however, it improved 50 basis points sequentially from the third quarter, and we continue to expect penetration to return to historical growth rates. Based on our willingness to pay data, we continue to believe that there's significant headroom for penetration. Turning to market share, I continue to be pleased with our leadership in IOL. Globally, we are the market leader, and we have an enviable position with approximately one-third of the monofocal category and approximately one-half of the PCIOL category as of the fourth quarter. Indeed, in the U.S., our PCI Well Share remains stable above 80%. We are particularly excited about our opportunity to grow our share in international markets. For example, in China, where we have historically been under-indexed, our recent success in the National Volume-Based Procurement Tender will provide a great platform to expand our footprint in this large and growing market. Following the award, Alcon will hold the preferred position in the trifocal, extended depth of focus, and bifocal categories, as well as their toric modalities across each of those categories.

David J. Endicott: In the U S. <unk> penetration has remained stable in the high teens versus prior year. However, it improved 50 basis points sequentially from the third quarter and we continue to expect penetration to return to historical growth rates in the future.

David J. Endicott: Based on our willingness to pay data we continue to believe that there's significant headroom for penetration going forward.

David J. Endicott: Turning to market share I continue to be pleased by our leadership in <unk>.

David J. Endicott: Globally, we are the market leader Alcoa has an enviable position with approximately one third of the amount of focal category and approximately one half of the PCI category as of the fourth quarter. Indeed in the U S. Our PCI will share remains stable above 80%.

David J. Endicott: I'm, particularly excited about our opportunity to grow share in international markets. For example, in China, where we have historically been under indexed our recent success in the National volume based procurement tender will provide a great platform to expand our footprint in this large and growing market.

Following the award Alcon will hold the preferred position in the Tri focal extended depth of focus and bifocal categories as well as the toric modalities across each of those categories in China.

David J. Endicott: With this tender, we expect to gradually increase our market share in the U.S. category, starting in the second. Now I'll turn to VisionCare, where our historical investments have created the strongest pipeline we've had in years. Starting with contact lenses, since SPiN, we've launched a wave of new products into fast... These include the daily Sci-Hi category, as well as areas where we have opportunity to capture share, such as Torix and Reusable. Based on the fourth quarter report, it is clear that our strategic investments are working and we're now one of the fastest growing companies. In 2023, we launched two new specialties, Total 30 for astigmatism and These launches expand our specialty portfolio, which also includes Precision One Tauric and Daly's Total One Tauric and its multifocal. We are particularly pleased by the performance of our Toric lenses. These lenses leverage our proven precision balance technology. Patented design features defined anchor points that deliver exceptional stability and a smooth fit.

David J. Endicott: With this tender we expect to gradually increase our market share in the advanced technology category, starting in the second half of the year.

David J. Endicott: Now I'll turn to vision care, where our historical investments have created the strongest pipeline we've had in years.

David J. Endicott: Starting with contact lenses since spin we've launched a wave of new products into fast growing markets. These include the daily Si Hy category as well as areas, where we have opportunity to capture share such as tourism and reusable.

David J. Endicott: Based on fourth quarter reported sales it is clear that our strategic investments are working and we are now one of the fastest growing companies in contact lenses.

David J. Endicott: Yeah.

David J. Endicott: In 2023, we launched two new specialty lenses totaled 30 for astigmatism and for multifocal. These launches expand our specialty portfolio, which also includes precision with toric and dailies total one toric and it's multifocal.

David J. Endicott: I'm, particularly pleased by the performance of our toric lenses. These lenses leverage our proven precision balanced technology.

David J. Endicott: The design features defined anchor points that deliver exceptional stability and a smooth fitting process.

David J. Endicott: Additionally, with an expanded portfolio of specialty lenses, we're seeing an accelerated uptake of the spherical. Shifting to ocular health, as I mentioned earlier, we recently announced positive top-line results in phase 3 trials for AR15512, a novel dry eye candidate, which we estimate could have peak sales between 250 and 400. We're excited about 512 as it has the potential to address the limitations of current dry eye medications and provide dry eye sufferers with a new and effective therapy. Dry eye is one of the most common ocular disorders impacting approximately 38 million people in the U.S. However, fewer than 2 million patients are treated.

David J. Endicott: Additionally, with an expanded portfolio of specialty lenses, we're seeing an accelerated uptake of the spherical modalities.

Now shifting to ocular health as I mentioned earlier, we recently announced positive top line results.

David J. Endicott: For phase III trials for a one five to 501 to a novel dry eye candidate.

David J. Endicott: We estimate that peak sales of between $250 million to $400 million.

David J. Endicott: We're excited by 512 as it has the potential to address the limitations of current dry eye medications and provide dry eye sufferers with a new and effective therapy.

Dry eye is one of the most common ocular disorders impacting approximately 38 million people in the U S less than 2 million patients are treated with a prescription product.

David J. Endicott: The primary endpoint was met in both phase 3 studies, reporting a path to seek full indication for the treatment of signs and symptoms of dry skin. The 512 product is effective as early as day one, consistent to day 90, which is an important differentiator versus other currently in. As for timing, we intend to file the new drug application around the middle of 2024 and anticipate bringing the medication to the U.S. market around the middle of 2020. 512 is the first product candidate in our emerging pharmaceutical portfolio, which also includes the glaucoma assets roclotan and ropressin. We continue to be very pleased with the performance of these medications. For the full year 2023, total prescription growth was in the mid-single digits, ahead of glaucoma.

David J. Endicott: The primary endpoint was met in both phase III studies supporting a path to seek full indication for the treatment of signs and symptoms of dry eye.

David J. Endicott: I want to product as effective as early as day one.

David J. Endicott: And persistent today 90, which is an important differentiator versus other products currently in the market.

David J. Endicott: As for timing, we intend to file the new drug application around the middle of 2024, and anticipate bringing the medication to the U S market around the middle of 2025 from there we expect more meaningful revenue contribution beginning in 2026.

David J. Endicott: <unk> two is the first product candidate in our emerging pharmaceutical portfolio, which also includes the glaucoma assets <unk> and Rhopressa.

David J. Endicott: I continue to be very pleased with the performance of these medications for the full year 2023 total prescription growth was in the mid single digits ahead of the broader glaucoma market.

David J. Endicott: Strategically, we will continue to focus on expanding its market. Turning to our over-the-counter portfolio, our Sustane brand continues to perform exceptionally well with another year of double-digit sales. We continue to see strong demand for our multi-dose preservative-free formulations, which are helping expand the U.S. preservative-free category. And finally, we're pleased with the recovery of our contact lens care business, are now in a situation of unconstrained supply, and are happy to be able to restock this product in the U.S. and internationally. While the Connick Linscare market is broadly flat, we do expect to see year-over-year growth in this category due to the supply chain challenges we face. Now, let me provide an update on our end. Surgical, we estimate that global cataract procedural volume was low single digits in the fourth quarter versus prior.

Strategically we will continue to focus on expanding its market access.

David J. Endicott: Turning to our over the counter portfolio, our sustained brand continues to perform exceptionally well with another year of double digit growth we.

David J. Endicott: We continue to see strong demand for our multi dose preservative free formulations, which are helping expand the use preservative free category.

And finally, we are pleased with the recovery of our contact lens care business. We're now in a situation of unconstrained supply and are happy to be able to restock. This product in the U S and internationally.

David J. Endicott: Well contact lens care market is broadly flat, we do expect to see year over year growth in this category due to the supply chain challenges we faced in 2023.

David J. Endicott: Now, let me provide an update on our end markets and surgical we estimate that global cataract procedural volume growth was low single digits in the fourth quarter versus prior year.

Timothy C. Stonesifer: In contact lenses, we estimate that retail market value was up mid to high single digits. Similar to last quarter, we saw steady wear trade up and meaningful contribution from price. Now, with that, I'll turn it over to Tim, who will take you through our financial results and provide more color. Thanks, David.

David J. Endicott: In contact lenses, we estimate that retail market value was up mid to high single digits similar to last quarter, we saw steady where trade up and meaningful contribution from price.

David J. Endicott: Now with that I'll turn it over to Tim who will take you through our financial results and provide more color on our outlook.

Timothy C. Stonesifer: Thanks, David We're pleased to report fourth quarter sales of $2 3 billion.

Timothy C. Stonesifer: We're pleased to report fourth quarter sales of $2.3 billion, up 10% versus the prior year, including favorable prices. However, our fourth quarter U.S. dollar sales growth included approximately 200 basis points of pressure from foreign currency. In our surgical franchise, revenue was up 8% year over year to $1.4 billion. Implantable sales were $438 million in the quarter, up 5% year-over-year, mainly driven by demand for advanced technology interoperability, including Vividi, Panoptix, and our monofocal Taurus, an international model. In consumables, our fourth-quarter sales were up 9% to $688 million.

Timothy C. Stonesifer: Up 10% versus prior year, including favorable pricing.

Our fourth quarter U S. Dollar sales growth included approximately 200 basis points of pressure from foreign currency.

In our surgical franchise revenue was up 8% year over year to $1 4 billion.

Timothy C. Stonesifer: Implantable sales were $438 million in the quarter up 5% year over year.

Timothy C. Stonesifer: Mainly driven by demand for our advanced technology, intraocular lenses, including devotee Pan optics, and our mono focal toward us and international markets.

Timothy C. Stonesifer: And consumables are fourth quarter sales were up 9% to $688 million.

Timothy C. Stonesifer: In the quarter, we saw strong demand for Cataract and Vitrex, particularly in international markets. In equipment, sales of $226 million were up 14% year-over-year. Sales were driven by double-digit growth in international markets for Cataract and Vitrad due to the ongoing upgrade. We also saw higher service revenue, while we expect the international equipment upgrade cycle to continue into 2024, given the strong sales in 2020 and the future of UnityFACO. We expect equipment sales to be broadly aligned with revenue in 2020. During division care, fourth quarter sales of $980 million were up 13%. Contact lens sales were up 10% to $579 million. Our innovation, including the SPHERE and TORC products, continues to win in the market. This growth was partially offset by declines in our legacy land.

In the quarter, we saw strong demand for cataract and <unk> consumables, particularly in international markets.

Timothy C. Stonesifer: And equipment sales of $226 million were up 14% year over year.

Timothy C. Stonesifer: Sales were driven by double digit growth in international markets for cataract and <unk> equipment due to the ongoing upgrade cycle.

Timothy C. Stonesifer: We also saw higher service revenues in the quarter.

Timothy C. Stonesifer: While we expect the international equipment upgrade cycle to continue into 2024, given the strong sales in 2023 and the future Uniti FICO launch, we expect equipment sales to be broadly in line with 2023.

Timothy C. Stonesifer: Turning to vision care fourth quarter sales of $980 million were up 13%.

Timothy C. Stonesifer: Contact lens sales were up 10% to $579 million in the quarter.

Timothy C. Stonesifer: Our innovation, including sphere, and toric product launches continues to win in the market.

Timothy C. Stonesifer: This growth was partially offset by declines in our legacy lines brands. Additionally, we saw strong contribution from price in the quarter.

Timothy C. Stonesifer: Additionally, we saw a strong contribution from Price. Inocular Health's fourth quarter sales of $401 million were up 17% year-over-year. This growth was driven by a portfolio of eyedrops, price increases, and recovery from supply chain challenges. Additionally, approximately four points of ocular health growth in the quarter were from products acquired in 2020. Now moving down the income statement, fourth quarter core gross margin was 62.1%, up 120 basis points. This improvement was driven by higher sales, price, and manufacturing efficiencies from higher volumes and processes. This growth was partially offset by inflationary pressures. Our operating margin was 18.9%, up 360 basis points year over year, as we continue to see operating leverage from SG&E. Fourth quarter interest expense was $47 million compared to $40 million last year, driven by higher debt following the funding of the area and Les Favreau.

Timothy C. Stonesifer: And ocular health fourth quarter sales of $401 million were up 17% year over year.

Timothy C. Stonesifer: This growth was driven by a portfolio of eye drops price increases in recovery from supply chain challenges and contact lens care.

Timothy C. Stonesifer: Approximately four points of ocular health growth in the quarter was from products acquired in 2022.

Timothy C. Stonesifer: Now moving down the income statement.

Timothy C. Stonesifer: Fourth quarter core gross margin was 62, 1% up 120 basis points.

Timothy C. Stonesifer: This improvement was driven by higher sales price and manufacturing efficiencies from higher volumes and process improvements.

Timothy C. Stonesifer: This growth was partially offset by inflationary pressures.

Timothy C. Stonesifer: Core operating margin was 18, 9% up 360 basis points year over year as we continue to see operating leverage from SG&A.

Timothy C. Stonesifer: Fourth quarter interest expense was $47 million compared to $40 million last year, driven by higher debt. Following the funding of the <unk> acquisition and less favorable interest rates.

Timothy C. Stonesifer: The fourth quarter average core tax rate was $13.8 billion, compared to 30.6% last year. For the full year, the average core tax rate was 17.2%, compared to 18.6% in 2020. The current year benefited from the mix of pre-tax income across jurisdictions and Discrete Tax Benefits. Four diluted earnings were $0.70 per share in the quarter, up 78% from last year. Now, before I touch on our outlook for 2024, I'll discuss a few cash flow and other related items. Free cash flow for 2023 was $730 million compared to $581 million in 2020. The improvement versus 2022 reflects an increase in cash flows from operations, partially offset by higher capital. For 2024, we expect a meaningful step-up in free cash flow versus 2023. Finally, in 2023, we concluded our transformation program on time and on budget.

Timothy C. Stonesifer: The fourth quarter average core tax rate was 13, 8% compared to 36% last year.

Timothy C. Stonesifer: For the full year the average core tax rate was 70% 17, 2% compared to 18, 6% in 2022.

Timothy C. Stonesifer: The current year benefited from the mix of pretax income across jurisdictions and discrete tax benefits.

Timothy C. Stonesifer: Core diluted earnings were <unk> 70 per share in the quarter up 78% from last year.

Speaker Change: Now before I touch on our outlook for 2024, I'll discuss a few cash flow and other related items.

Speaker Change: Free cash flow for 2023 was $730 million compared to $581 million in 2022.

Speaker Change: The improvement versus 2022 reflects an increase in cash flows from operations, partially offset by higher capital expenditures.

Speaker Change: For 2024, we expect a meaningful step up in free cash flow versus 2023.

Speaker Change: Finally in 2023, we concluded our transformation program on time and on budget I.

Timothy C. Stonesifer: I'm proud of how well the team has executed this program. We exceeded our savings target, which has enabled us to invest in R&D, grow the top line, and expand margins through operations. Moving to the 2024 guide, our current outlook assumes that markets will grow in line with historical averages of mid-single digits and that exchange rates as of the end of January hold through year-end. Accordingly, we expect 2024 net sales of $9.9 to $10.1 billion, which corresponds to 6-8% constant currency sales. This growth will be underpinned by our broad portfolio of products. Thank you. Thank you. This growth is offset by approximately 60 bases of foreign exchange.

Speaker Change: I am proud of how well the team has executed this program, we exceeded our savings target, which has enabled us to invest in R&D grow the top line and expand margins through operating leverage.

Speaker Change: Now moving to the 2020 for guidance.

Speaker Change: Our current outlook assumes that markets will grow in line with historical averages of mid single digits and that exchange rates as of the end of January hold through year end.

Speaker Change: Accordingly, we expect 2024 net sales of nine 9% to $10 1 billion, which corresponds to 6% to 8% constant currency sales growth.

Speaker Change: This growth will be underpinned by our broad portfolio of products, particularly in our vision care franchise. This growth is offset by approximately 60 basis points of foreign exchange impact.

Timothy C. Stonesifer: Moving to R&D expenses, the investments we've made are performing well, and we have one of the strongest pipelines in Alcon. Accordingly, we will continue to invest in innovation and expect core R&D expense to be at the high end of our range of 7 to 9 percent. Moving to profitability, we continue to expect our core operating margin to expand through. Given continued currency headwinds into 2024, we currently forecast a core operating margin of between 20.5 and 21.5%. This forecast reflects approximately 30 basis points of foreign exchange headwinds versus the prior year. In terms of phasing, we expect both the first and second quarters to be pressured by approximately one percentage point. It's recovery in the back half.

Speaker Change: Moving to R&D expenses the investments we've made are performing well and we have one of the strongest pipelines in <unk> history.

Speaker Change: Accordingly, we will continue to invest behind innovation and expect core R&D expense to be at the high end of our range of 7% to 9% of sales.

Speaker Change: Moving to profitability, we continue to expect our core operating margin to expand through operating leverage.

Speaker Change: <unk> continued currency headwinds into 2024, we currently forecast core operating margin of between 25 and 21, 5%.

Speaker Change: This forecast reflects approximately 30 basis points of foreign exchange headwinds versus prior year.

Speaker Change: In terms of phasing, we expect both the first and second quarters to be pressured by approximately one percentage point with recovery in the back half of the year as we said in the past. This is due to higher cost inventory that was manufactured in 2023 and will be sold in 2024.

Timothy C. Stonesifer: As we've said in the past, this is due to higher-cost inventory that was manufactured in 2023 and will be sold in 2021. Looking beyond 2024, we remain confident in our ability to achieve the goals we laid out in our most recent capital market. Moving down the income statement, we expect interest and other financial expenses to be between $190 and $210 million. As we have stated in the past, we expect our tax rate to increase due to the implementation of Pillar 2, with a core effective rate of approximately 20%.

Speaker Change: Looking beyond 2024, we remain confident in our ability to achieve the goals we laid out laid out at our most recent capital markets day.

Speaker Change: Moving down the income statement, we expect interest and other financial expense to be between 190 and $210 million.

Speaker Change: As we stated in the past, we expect our tax rate to increase due to the implementation of pillar two with a core effective rate of approximately 20%.

Timothy C. Stonesifer: Based on all these factors, we project core diluted earnings in the range of $3 to $3.10 per share, which corresponds to 13-16% constant currency growth over 2020. This growth is offset by approximately seven-tenths of foreign exchange headwind versus prior. I'm also pleased to report that our Board of Directors is proposing an increase in our dividend to $24.17 per share. This is in line with our payout policy of 10% of the previous year's core net income pending shareholder approval. Shareholders will vote on this proposal at our upcoming Annual General Meeting in May.

Speaker Change: Based on all of these factors we project core diluted earnings in the range of $3 to $3 10 per share, which corresponds to 13% to 16% constant currency growth over 2023.

Speaker Change: This growth is offset by approximately seven.

Speaker Change: Foreign exchange headwind versus prior year.

Speaker Change: I'm also pleased to report that our board of directors is proposing an increase in our dividend to <unk> 24 <unk> per share.

Speaker Change: This is in line with our payout policy of 10% of the previous year's core net income pending shareholder approval.

Speaker Change: Shareholders will vote on this proposal at our upcoming annual general meeting in May.

David J. Endicott: Finally, I want to thank the entire Alcon team for another great year, and with that, I'll turn it back over to Tim. To conclude my remarks, I want to thank the team once again for a strong 2023. These results demonstrate the durability of our market. Brett is one of our growth drivers. As we look to the future, we have a lot of momentum underpinned by a robust pipeline of products, and we will continue to expand our portfolio into high-growth, high-margin, and durable opportunities that will drive above-market sales, deliver operating leverage, and long-term shareholder growth. And with that, let's open up the line.

Speaker Change: Finally, I want to thank the entire icon team for another great year, and with that I'll turn it back over to David.

David J. Endicott: Thanks, Tim to conclude my remarks, I want to thank the team once again for a strong 2023.

David J. Endicott: These results demonstrate the durability of our markets the breadth of our growth drivers and the expertise of our team.

David J. Endicott: As we look to the future we have a lot of momentum underpinned by our robust pipeline of products.

David J. Endicott: We continued to expand our portfolio into high growth high margin and durable opportunities.

David J. Endicott: That will drive above market sales deliver operating leverage and long term shareholder value.

Speaker Change: And with that let's open up the line for Q&A.

Operator: Thank you. At this time, we'll be conducting a question and answer session. If you would like to ask a question today, please press star 1 on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue.

Speaker Change: Thank you at this time, we'll be conducting a question and answer session.

Speaker Change: I'd like to ask a question today. Please press star one from your telephone keypad.

Speaker Change: Formation tone or indicate your line and in the question queue.

Speaker Change: You May press Star two if you like to remove your question from the queue.

Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Please limit yourself to one question and one follow-up. One moment, please, while we poll for questions. Thank you. Thank you. And our first question today will be coming from the line of Veronica Dubjava with Citi. Please proceed with your question. Thank you guys, good morning, and thank you for taking my questions. I have two, please. Iowell. David, there's been a lot of debate in the market about. Schultz.

Speaker Change: Speaker equipment may be necessary to pick up your handset before pressing the star Keith.

Speaker Change: So they may address questions from as many participants as possible. We ask you. Please limit yourself to one question and one follow up.

Speaker Change: One moment please poll for questions. Thank you.

Speaker Change: Thank you and our first question today will be coming from the line of Veronica <unk> with Citi. Please proceed with your question.

Veronica: Hey, guys. Good morning, and thank you for taking my question can you. Please.

Veronica: The first one is just looking at the <unk> performance.

Veronica: A lot of hypermarket about competitive pressures and product launches and so I'd love to understand from you.

David J. Endicott: Thank you. We'd love to understand from your guys' perspective what you are. U.S. Premium Iowa, which is so kind of backwards looking as you look at the fourth quarter and also what you're looking forward to for the product launches coming up from some of your competitors and kind of what you're all around. Related to that, my follow-up is on the same topic, but slightly forward-looking as well. You mentioned in your prepared remarks that you're excited about the pipeline and Zania Walsh, and maybe we could talk about what those look like. Wybie.

Veronica: Your guidance.

Veronica: <unk>.

Veronica: Yes.

Veronica: Outperformed itself had a backwards looking if you look at the fourth quarter and also what your expectations are heading into 2024, obviously the headache.

Veronica: Okay.

Veronica: Coming out from some of your competitors and kind of what your assumptions I.

Speaker Change: I guess related to that my follow up.

Speaker Change: Topic.

Speaker Change: Forward looking as well you mentioned in your prepared remarks that you are excited about the pipeline including from innovation.

Speaker Change: Can you maybe talk to what those look like.

Speaker Change: Marshall.

David J. Endicott: Thanks, Veronica. Just a couple things. On IOLs, you know, we had strong growth internationally and a solid U.S. performance. The U.S. is really wrapping around competitive impacts at this point. So, you know, penetration in the U.S. grew about 10 percent over prior year, sorry, 10 basis points over prior year, and about 50 basis points sequentially. So, in terms of movement of penetration, we feel like it

Marshall: Thanks, so much.

Yes, Thanks, Brian.

Marshall: Just a couple of things on <unk>.

Marshall: <unk> had strong growth internationally and a solid U S performance. The U S is really wrapping around competitive impacts at this point so.

Marshall: <unk> in the U S grew about 10% over prior year sorry.

Marshall: 10 basis points over prior year, and about 50 basis points sequentially. So in terms of movement of penetration we feel like it's normalizing, we think kind of long term. This 50 basis points that we've talked about in the past is a good answer.

David J. Endicott: We think, kind of, long-term, this 50 basis points that we've talked about in the past is a good answer. Look, we have maintained our share in the U.S. on AT IOLs for the PC category, but we've lost a little bit in TORIC, and again, that's, you know, to be expected. What we see right now, though, is that this seems to be sequentially moderating, and we're kind of normalizing around where we've been. So, I think, you know, long-term, we feel pretty good about the U.S., and, you know, kind of as expected, I would say. The bigger story, though, is the global AT IOL penetration, and, you know, that was up 170 basis points and principally driven by China. So, we kind of look forward to this and say, where is the opportunity for share? Where is the opportunity for penetration growth? Certainly, there is some in the U.S., but it's likely to be moderate.

Marshall: Look we have maintained our share in the U S on <unk> for the PC category, but we lost a little bit of toric and again I think thats to be expected, what we see right now, though is that that sequentially seems to be moderating and we're kind of normalizing around around where we've been so I think long term we feel.

Marshall: Pretty good about the U S and kind of as expected I would say the bigger story, though is the global <unk> penetration in that.

Marshall: That was up 170 basis points, principally driven by China. So we kind of look forward on this and say where is the opportunity for share, whereas the opportunity for penetration growth certainly there is some in the U S. But it's likely to be moderate internationally, we see China and the GBP. There on that win is a very significant opportunity for us because we have a single digit.

David J. Endicott: Internationally, you know, we see China and the VVP there, and that win is a very significant opportunity for us because we have a single-digit share in China. We've been under-indexed there for quite some time. We chose not to play in the last VVP, and in this case, we have won the VVP against most of the categories, I think seven of the eight.

Marshall: Sure.

Marshall: China, we've been under indexed there for quite some time, we chose not to play in the last few EVP and in this case, we have won the Pvp kind of against most of the categories. I think 78, so liberty Pan optics Theyre Tour X. Our whole line basically is going to be in play starting middle part of the year and as you probably know China is the second largest.

David J. Endicott: So, Vividi, Panoptix, their Torix, our whole line basically is going to be in play starting in the middle part of the year. And, as you probably know, China is the second largest AT IOL market in the world. So, from our point of view, you know, we've got nice progress to be made internationally. The U.S. is normalizing, and, you know, there are going to be new products coming in. None of that is new to us.

Marshall: <unk> market in the world So.

Marshall: From our point of view, we've got nice progress to be made internationally.

Marshall: U S is normalizing and.

Marshall: There are going to be new products coming in and none of that is new to us I think we've been talking about competitors coming in and seeing them internationally and even the ones. We kind of know can be first in the U S. We're not terribly bothered about.

David J. Endicott: I think we've been talking about competitors coming in and seeing them internationally, and even the ones we kind of know are going to be first in the U.S., you know, we're not terribly bothered about. A lot has been made out of, you know, the RX-Sight product, and I would just say that, again, it's 15,000 to 20,000 lenses in a million-unit market. So, it's just not going to be a big deal.

Marshall: A lot has been made I think out of there.

X sight product and I would just say that again, it's I think it was 15% to 20000 lenses in 1 million unit market.

Marshall: It's just not going to be a big deal I think directionally, we have a really good eye on our international growth and the penetration number in particular.

David J. Endicott: I think, directionally, we have a really good eye on our international growth and the penetration number, in particular. Thanks. Oh, yeah, you know, look, I mean, we are working on a number of ideas. I mean, first of all, Panoptix is a patented trifocal that has set points that are unique. And I think, you know, it's very difficult to improve on it.

Marshall: Innovation.

Speaker Change: Oh, yes.

Speaker Change: I mean, we are working on a number of ideas I mean first of all Pat optics is a patented tri focal that has set points that are unique and I think it's very difficult to improve on it. So I think as I recognize there are people, who say they are coming in with Tri focal.

David J. Endicott: So I think, I recognize there are people who say they're coming in with trifocals, but there are very few going to be competitive, as they are, you know, around the world, very few that are competing with Panoptix in that way. And Vividi has a very unique wavefront shaping idea.

Speaker Change: Very few are going to be competitive as they are.

Speaker Change: Around the world very few that are competing with Penn optics in that way and <unk> has a very unique wavefront shaping ideas. So these are very specific technologies, which afford very specific benefits and I think they are going to be very durable in the U S market as they have been around the world. We are working on a number of other ideas obviously we.

David J. Endicott: So these are very specific technologies that afford very specific benefits. And I think they are going to be very durable, you know, in the U.S. market, as they have been around the world. We are working on a number of other ideas. You know, obviously, we've got some ideas around how we can improve contrast sensitivity, how we can improve intermediate vision. Those are going to be experimented with for the rest of this year and into next year.

Speaker Change: Got some ideas around how we can improve contrast sensitivity how we can improve intermediate vision.

Speaker Change: Those are going to be experimented with for the rest of this year and into next year and we will if we find something we really get excited about we'll bring that out and we'll get your information around that when we do.

David J. Endicott: And we'll, you know, if we find something we really get excited about, we'll bring that out, and we'll get you information about that when we do. The other big thing, of course, is our, you know, accommodating and adjustable program. And that program will be read out in the middle part of the year in its first in-human trial.

Speaker Change: The other big thing of course is our accommodating an adjustable program and that program will read out in the middle part of the year on its first in human trial, and we'll give you updates around that at that point, but again I think we have what we think are really good ideas around both accommodation and adjustability, we think our adjustable mechanism is more durable.

David J. Endicott: And we'll give you updates around that at that point. But again, I think we have what we think are really good ideas around both accommodation and adjustability. We think our adjustable mechanism is more durable, it's easier to do, and it's a little bit more predictable than what's currently available.

Speaker Change: It's easier to do.

Speaker Change: And it's a little bit more predictable than what's currently available. So although it's a fairly far ways out I would just say that in terms of long term, we feel very good about our competitiveness.

Operator: So although it's a fairly far way out, I would just say that, you know, in terms of the long term, we feel very good about our competitiveness. That's right. Our next question is from the line of Ryan Zimmerman with BTIG.

Speaker Change: That's great. Thanks, Craig.

Speaker Change: Our next question is from the line of Ryan Zimmerman with BTG. Please proceed with your question.

Timothy C. Stonesifer: Pleased to see you with your, Good morning, thanks for taking the questions and congratulations. You asked a two-part question on guidance first, and then one on Roclatan and Repressa. On guidance, Tim, when you look at results over the past year, and I appreciate the commentary on pacing for margin... The top line doesn't follow, I guess, what I'd consider kind of normal seasonality, right? First quarter was above fourth quarter, second quarter grew, and then third quarter fell. That could help us on the top line maybe with pacing through the year, and then the second part on guidance is, you know, I appreciate you're taking FX from the end of January, but if you look at the Japanese yen, for example, Forty-Base, the other way in February, so just how might that impact the EPS guide, and then I have a follow-up on Rockwell. Yeah, thanks, John. Good question.

Good morning, Thanks for taking my questions and congrats on the 23.

Ryan Zimmerman: Two part question on guidance first and then one on rockets had on Rhopressa on guidance.

Ryan Zimmerman: When you look at results over the past year and I appreciate the commentary on pacing for margins.

Ryan Zimmerman: The top line doesn't follow I guess, what I would consider kind of normal seasonality first quarter was above fourth quarter second quarter grew in the third quarter Phil.

Ryan Zimmerman: Help us on the topline maybe with pacing through the year and then the second part on guidance as I am.

Phil: Appreciate your taking FX from the end of January but if you look at the Japanese yen. For example, it's gone up I think 240 basis points the other way.

In February and so just how might that impact the EPS guide and then I have a follow up on Roxanne on Rhopressa.

Roxanne: Yes, Thanks, Brian Good question, yes.

Timothy C. Stonesifer: So from a top-line perspective, this year was a little bit different, or 2023 was a little bit different than prior years. But as I look back at historical growth rates, I think we will tend towards more of a common seasonality. So, from a revenue perspective, I would expect Q2 to be higher as we ramp up for allergy season, and then I would expect Q4 to also be a little bit higher, given the fact that, you know, typically, equipment sales are stronger in Q4. So I'd go back to your kind of 2022-21 models.

Roxanne: So from a top line perspective.

Roxanne: This year was a little bit.

Roxanne: Different from 2023 was a little bit different than prior years.

Roxanne: As I look back at historical growth rates, I think we will trend towards more of a common seasonality. So I would expect from a revenue perspective, I would expect Q2 to be higher as we as we ramp up for for allergy season, and then I would expect Q4 to also be a little bit higher given the fact that.

Roxanne: It typically equipment sales are stronger in Q4, so I'd go back to your kind of 'twenty to 'twenty, one models and I think we will probably pace towards that as far as far as FX listen our internal processes are really built around.

Timothy C. Stonesifer: And I think we'll probably pace towards that. As far as FX is concerned, listen, our internal processes are really built around, you know, kind of locking down a budget at the end of January. It's just not really practical to, you know, finish our budget yesterday for today's call.

Roxanne: Kind of locking down a budget at the end of January it's just not really practical to finish our budget yesterday for todays call. So that's why we picked the end of January.

Timothy C. Stonesifer: So that's why we picked the end of January. To your point, the end's up. If you look at the end of January, the end was about $147. I think today it's about $150.

Roxanne: To your point the ends up if you look at the end of January the yen was about 147 I think today, it's about $1 50. So there is a bit of a pressure point, but if you look at some of the other currencies in emerging markets. We've gotten some favorability there. So I would say overall versus the end of January FX FX had an immaterial right as of today.

David J. Endicott: So there is a bit of a pressure point. But if you look at some of the other currencies and emerging markets, we've got some favorability there. So I would say overall, versus the end of January, FX has an immaterial rate as of today. We'll continue to monitor that going forward. And if there are any changes, we'll certainly let you know. And then, you know, Roc LaTanne Repressa, David, if I think back, I think it was growing, and correct me if I'm wrong, 20% a year, or at least it was growing at that pace before you guys acquired it. You guys grew up in the mid-single digits, so what's the right way to think about those assets in your history? will make them work.

Roxanne: We'll continue to monitor that going forward and if there are any changes, we'll certainly let you know.

Roxanne: And then Roxanne reprocessed, David if I think back I think it was growing and correct me, if I'm wrong, 20% a year or at least it was on that pace before you guys acquired it you guys grew mid single digits. So what's the right way to think about those assets in your hand, as you make them organic and 24.

David J. Endicott: Yeah, look, we're very positive about where it is right now. I think you've got to remember there's a big push in the market for generics right now, and as a number of glaucoma products have gone generic, there has been a lot of excess pressure. So I think directionally there has been a little bit of a slowing, both in the market. I think the market was net negative in value, and I think directionally, we grew in the high single digits on TRX. What we expect going forward is that we'll certainly outgrow the market and gain share, and I think we're kind of pleased with where we are at this point. But remember, too, that we had to consolidate two sales forces, put them together, get them out there, and redeploy that group. So I think we're through that bit, and I expect a very positive team growth in that area. Our next question is from the line of Susanna Ludwig with Bernstein. Thanks. Good afternoon.

Roxanne: Yes look we are we're very positive about where it is right now I think you've got to remember there's a big push in the market to generics right now and as a number of the glaucoma.

Roxanne: Products have gone generic there is been a lot of excess pressure. So I think directionally there has been a little bit of a slowing both in the market I think that the market was net negative in value and I think directionally. We grew in the high single digits.

Roxanne: On <unk> I think what we expect going forward is it will certainly outgrow the market and gain share and I think we're kind of pleased with where we are at this point, but remember too that we had to consolidate two sales forces put them together get them out there redeploy that group. So I think we're through that bit and I expect kind of a I would think very positive kind of teens kind of grow.

Roxanne: In that area.

Speaker Change: Thank you.

Speaker Change: Our next question is from the line of Susanna Ludwick with Bernstein. Please proceed with your question.

Susanna Ludwick: Hey, Thanks, good afternoon, and thanks for taking my questions.

David J. Endicott: And thanks for taking my questions. I have one and one follow-up. So on 5-1-1-12, can you provide some color as to what are the swing factors that you think will get you from the low end to the high end of your 250 to 400 million peak sales? Just on this, also, this is a category that's quite sensitive to marketing spend. So how much investment do you think it will require to drive this sales range? Yeah, good question.

Susanna Ludwick: I have one and one follow up so on <unk> one on one.

Susanna Ludwick: Can you provide some color as to what are the swing factors that you think that your friends for the low end to the high end of your 250 to 400 million peak sales.

Susanna Ludwick: Also this is a category that's quite sensitive chief marketing spend so how much investment do you think it will require to drive the sales range.

Speaker Change: Yes, good questions.

David J. Endicott: I think, you know, what we're going to obviously be focused on is labeling and access in the early parts of the next kind of year and a half. So, you know, we'll submit in the middle part of the year. We'll have a good discussion. We feel good about what we've got in terms of labeling.

Speaker Change: What we're going to obviously be focused on as labeling and access in the early parts of the.

Speaker Change: Kind of a year and a half so.

Speaker Change: We will submit in the middle part of the year, we will have a good discussion we feel good about what we've got in terms of labeling.

David J. Endicott: You know, I think as we get all of that detail out and we look at what the access point is and how fast we can get access, that will determine, I think, the early curve on this one. And access is obviously a big deal in a market like this. So, you know, I think those are the big variables that you kind of step back and say, how do we move this product along? You know, investment wise, you know, I think as we get closer to it, we'll have a better picture of how we want to see this. But I would say that we expect to have some significant leverage from our existing sales force. And obviously, you know, depending on the size of the product, we may make considerable investments. But I think directionally, you know, we believe this is kind of a we'll we'll size it appropriately to wherever we end up with the revenue. Okay, great. Thank you. Our next question is from the line of... Petrone with the Zuho Group.

Speaker Change: I think as we get all of that detail out and we look at what the access point is and how fast we can get access that will determine I think the early curve on this one and access is obviously a big deal in a market like this so I think those are the big variables. If you kind of step back and say how do we move this product along.

Speaker Change: Investment wise I think as we get closer to it we'll have a better picture of how we want to have.

Speaker Change: We see this but I would say that we expect to have some significant leverage from our existing <unk>.

Speaker Change: Salesforce and obviously.

Speaker Change: Depending on the size of the product we may make considerable investments, but I think directionally. We believe this is kind of a well size it appropriately to wherever we end up with the revenue.

Speaker Change: Okay, great. Thank you.

Speaker Change: Our next question is from the line of Anthony Petrone with Mizuho Group. Please proceed with your questions.

David J. Endicott: Thanks for taking the questions. Congratulations on a good quarter. Maybe one I'll start with contact lenses and maybe talk a little bit about the sustainability of price in contact lenses, and maybe, you know, the flip side of that question is on the manufacturing side.

Anthony Charles Petrone: Thanks for taking my questions. Congrats here on a good quarter, maybe one.

Anthony Charles Petrone: I'll start with on contact lenses, and maybe talk a little bit about the sustainability of price.

In contact lenses and maybe.

Anthony Charles Petrone: The flip side of that question is on the manufacturing side. We are hearing that there are still constraints I think for all of the suppliers. So maybe just talk a little bit about the manufacturing capacity just industry wide and what needs to be done to get that level said, it and I'll have one quick follow up on glass glaucoma.

David J. Endicott: We're hearing that, you know, there are, you know, still constraints for all of the suppliers. So maybe just talk a little bit about the manufacturing capacity just industry-wide and what needs to be done to get that leveled, and I'll have one quick follow-up on glaucoma. Well, I think the sustainability of prices is a good question, and it will depend a lot on the consumer and what happens in the market. As of the last couple of years, a significant part of the growth, let's say a third of the growth, has been coming from the price in the market. That's not different than the historical number. It's largely the mix and price, mixed to dailies and then some other price.

Speaker Change: Well I think the sustainability of price is a good question and it will depend a lot on the consumer and what happens in the market.

Speaker Change: As of the last couple of years much of what I would say a significant part of the growth, let's say a third of the growth was coming from price in the market and that's not different than the historical number it's largely been mix and price mix to dailies and then some price, but price used to be kind of 1% to 2% probably more recently.

David J. Endicott: The price used to be 1% to 2%, and probably more recently it's been 2% to 3% as part of that 6% average growth, if I was giving you a very broad stroke across the last several years. I think we'll see. What we're really concerned about is not pricing out the consumer from trading up to dailies, because that's really where our principal interest is. From there, I think manufacturing is unconstrained right now. We feel very good about our manufacturing capacity. We have plenty of room to make as much as we need, and if others are having a little bit of trouble making product, again, that's, I'm sure, a short-term problem for them, but we will certainly supply in an unconstrained fashion for the indefinite future. Very quickly on glaucoma, just thoughts on drug-device combination solutions.

Speaker Change: It's been two to three.

Speaker Change: Part of that 6% kind of average growth if that was kind of giving you a very broad strokes across the last several years.

Speaker Change: I think we'll see.

Speaker Change: What we're really concerned about is not pricing out the consumer from trading up to dailies, because thats really where our principal interest is from there I think manufacturing.

Speaker Change: We're kind of unconstrained right now we feel very good about our manufacturing capacity.

Speaker Change: We have plenty of room to make as much as we need.

Speaker Change: And if others are having a little bit of trouble, making product again, thats I am sure a short term problem for them, but we will certainly supply.

Speaker Change: In an unconstrained fashion for the indefinite future.

Speaker Change: And quickly on glaucoma.

Speaker Change: Thoughts on drug device combination solutions, you have a competitor out there with the glaucoma Idose just your thoughts on that category and does alcon has to be there. Thanks.

David J. Endicott: You have a competitor out there with Glaucose I-Dose. Just your thoughts on that category, and does Alcon have to be there? Well, you know, we'll see how reimbursement plays out there. I think it's a great idea. You know, I think the real question is whether or not reimbursement will come around to it and be permanent in a way that is helpful, you know, to advancing that product. And again, we'll have to see, you know, at a practical level, you know, whether, you know, people want to go back in and replace these things over, you know, I've been going over this for two or three years, but, but I'm sure, you know, those guys are smart guys, they'll figure it out. So we'll see in time. You know, there are a lot of good ideas in that space.

Well, we'll see how reimbursement plays out there I think it's a great idea.

Speaker Change: I think the real question is whether or not reimbursement will come around it and be permanent in a way that is.

Speaker Change: Helpful.

Speaker Change: Dancing that product and again, we'll have to see at a practical level.

Speaker Change: Whether people want to go back in and replace these things over I think you went over this two years or three years, but but I am sure.

Speaker Change: Those guys are smart guys they'll figure it out so we will see over time there are a lot of good ideas in that space. So if they blaze the trail there will certainly be interested.

David J. Endicott: So if they blaze a trail there, you know, we'll certainly be interested. Our next question is from the line of David Saxon with Needham and Company. Oh, great. Good. Good. Good morning. Thanks for taking my questions. Maybe one for Tim.

Speaker Change: Thank you.

Speaker Change: Our next question is from the line of David Saxon with Needham <unk> Company. Please proceed with your question.

David J. Endicott: Oh, great good.

David J. Endicott: Good morning.

David J. Endicott: Thanks for taking my questions, maybe one for Ken.

Timothy C. Stonesifer: So operating margins should be down around one point in the first half that applies a fairly meaningful ramp into the second half. So outside of higher-cost inventory, what drives that ramp, and does that improvement continue into 2025? Yeah, great question.

David J. Endicott: Operating margin should be down around one point in the first half that.

David J. Endicott: That's fairly meaningful ramp into the second half so outside of higher cost inventory, what drives that ramp and does that improvement continue into 'twenty five.

Ken: Yeah, Great question I mean, the primary pressure point, we're going to see in the first half is going to be that higher cost inventory that's bleeding through the P&L. So you're absolutely right that would carry forward. If you look at the second half run rate as that sort of normalizes.

Timothy C. Stonesifer: I mean, the primary pressure point we're going to see in the first half is going to be that higher cost inventory that's bleeding through the P&L. So you're absolutely right, that would carry forward if you look at the second half run rate. As that sort of normalizes, you know, we will have less gross margin pressure, and we'll have all the benefit of that operating leverage. So that should carry forward into the future. And again, our whole financial thesis is around going faster than the market. And when you do that and maintain your cost envelope, you should get nice operating leverage. And that's what we would expect to happen. Okay, great.

Ken: We will have less gross margin pressure and we will have all of the benefit of that operating leverage so that should carry forward into the future years and again, our whole financial thesis is around.

Ken: Going faster than the market and when you do that and maintain your cost envelope you should get nice operator.

Ken: Operating leverage and that's what we would expect to happen.

David J. Endicott: And then my follow-up question is on Ocular Health. You talked about pricing, but I would love to hear how much pricing benefit you saw specifically in Ocular Health. Is that kind of the primary driver of the vision care margin performance, or other factors driving that? And then in 24, where across the, you know, broader portfolio do you expect to take the most price? Thanks so much.

Speaker Change: Okay, great. Thank you.

And then my follow up is.

Speaker Change: In ocular health you talked about pricing.

Speaker Change: But would love to hear how much pricing benefit you saw specifically in ocular health.

Speaker Change: Is that kind of the primary driver of the vision care.

Speaker Change: <unk> performance.

Speaker Change: Other factors driving that and then in 'twenty, four where across the broader portfolio do you expect to take the most price. Thanks so much.

David J. Endicott: Yeah, I mean, I think in terms of ocular health, it's probably fair to say about a third of the growth was price. I think, you know, you see a slightly less amount of that. I would suspect this year, I would think a little bit less than that, particularly in contact lenses, is going to be achievable. But I would say, in terms of margin progression, it was, it was broadly, you know, a number of things actually mix in ocular health helps us quite a little bit; our eye drops are very profitable and sustainable, and it's quite a big brand at this point. And when you think about sustain, you know, it is a high-margin eye drop that's over the counter that has, you know, really strong durability.

Speaker Change: Yes, I mean, I think I think in terms of ocular health.

Speaker Change: I think it's probably fair to say about a third of the growth was price.

Speaker Change: You'll see a slightly less amount of that I would suspect this year I would think a little bit less than that.

Speaker Change: Particularly in contact lenses is going to be achieved.

Speaker Change: Achievable, but I would say.

Speaker Change: In terms of margin progression. It was it was broadly.

Speaker Change: A number of things actually mix in ocular health helps us quite a little bit our eye drops are very profitable and sustained it's quite a big brand at this point and when you think about sustained.

Speaker Change: It is a high margin eyedrop that's over the counter that has really strong durability. So we expect that product to continue to contribute to ocular health margins going forward. Then you layer on manufacturing productivity gains of which there was significant amounts of that last year.

David J. Endicott: So we expect that product to continue to contribute to ocular health and margins going forward. Then you layer on manufacturing productivity gains, of which there were significant amounts last year. And then price, which obviously contributed to what was, I think, quite a substantial sector performance for us on a segment basis. So that was really part of the margin story there. And I think directionally for next year, we see kind of a similar, but probably not quite as strong as a price move. Great, thank you. Our next question is from the line of Larry Biegelsen with Wells Fargo. Good morning.

And then the price that obviously contributed to what was I think quite a substantial sector performance for us on a segment basis. So that was really.

Speaker Change: The margin story, there and I think Directionally for next year, we see kind of similar but probably not quite as.

Speaker Change: As strong of a price move.

Speaker Change: Great. Thank you.

Speaker Change: Our next question is from the line of Larry <unk> with Wells Fargo. Please proceed with your questions.

Timothy C. Stonesifer: Thanks for taking the question. One for Tim on 2025, one for David on AR 15512. Tim, can you just confirm that the 1% of margin pressure you meant is going to be down 100 basis points year-over-year in the first half? That's what I thought the person on the prior question asked. I wasn't sure if it was 100 basis points lower versus the second half or down 100 basis points year-over-year. Sorry for that

Larry: Hi, good morning, Thanks for taking the question one for Tim.

Larry: 125, one for David on <unk>.

Larry: 1512.

Larry: Tim can you just confirm.

Larry: The 1% of margin pressure you meant it's going to be down 100 basis points year over year in the first half.

Speaker Change: That was my that's what I thought the person on the <unk>.

Timothy C. Stonesifer: Your question asked that I wasn't sure if it was 100 basis points lower or 100 basis.

Timothy C. Stonesifer: And then for my question, just confirm you're still confident in your long-term margin goal for 2025 of the operating margin guidance approaching the mid-20s, or at the time, I think it was 23% to 24%, and can growth accelerate next year with the launches of Unity and AR 15512? Yeah, Larry, good clarification. The 100 basis points in the first half are down year over year. So that's how you should read that. And again, once that inventory is gone, it's kind of what I would consider a one-time phenomenon. Once that flows through the P&L, you know, the gross margins will begin to improve. As far as Capital Markets Day is concerned, listen. We gave Capital Markets Day in March of last year. We gave you some guidelines for 2027. We feel very comfortable with that.

Timothy C. Stonesifer: Versus second half for one down 100 basis points year over year, sorry for that and then for my question. Just confirm you are still confident in your long term margin goal for 2025 of the op margin guidance approaching.

Timothy C. Stonesifer: Mid twenty's or at the time I think it was 23% to 24% and can growth accelerate next year with the launches of unity and five 5% went to.

Speaker Change: Yes, Larry.

Speaker Change: Good clarification, the 100 basis points in the first half is down year over year. So that's that's how you should read that and again once that inventory is kind of what I would consider a onetime phenomenon once that flows through the P&L.

Speaker Change: The gross margins will begin its didn't continue to improve as far as the capital markets day listen we gave capital markets day in March of last year.

Speaker Change: We gave you some guidelines for 2027, we feel very comfortable with that if you're referring to the 2021 capital markets day in that approaching mid twenty's that we've talked about.

Timothy C. Stonesifer: If you're referring to 2021 Capital Markets Day and the approaching mid-20s that we talked about, I think we said approaching mid-20s in 2025. If you take the midpoint of this guide and you translate it back at those foreign exchange rates, we actually beat it by a year. But obviously, you know, we report in U.S. dollars, so that's more of a theoretical sort of credibility type of question. But yes, if you were to translate it, we would be a year ahead on that one. And Larry, on Unity and 5.1.2, the real financial impact, I would say, for Unity will be 2025, and I would think 2026 for 5.1.2. Because just remember, we're going to get approval this year.

Speaker Change: We said approaching mid <unk> in 2025, if you take the midpoint of this guide and.

Speaker Change: And you translate it back at those foreign exchange rates, we actually beat it by a year, but obviously, we report in U S dollars, but so thats more of a.

Speaker Change: Theoretical sort of credibility type of question, but yes, if you were to translate it would be a year ahead on that one.

Speaker Change: Sorry on the annuity and 512.

Speaker Change: Really.

The real financial impact I would say for unity will be 2025, and I would think 2020 645 went to because just remember we're going to get an approval. This year, we're going to spend a good bit of time.

David J. Endicott: We're going to spend a good bit of time with a limited launch, making sure that that thing runs as pristinely as our current equipment does, and then we'll release it for broad revenue growth. And I think that's what's going to happen with Unity.

Speaker Change: With a limited launch making sure that that thing runs as pristine Lee as our current equipment does.

Speaker Change: And then we will release it to bureau for broad revenue growth and I think that's that's what's going to happen to unit that will happen probably late this year for full release and then you really see revenue next year.

David J. Endicott: That'll happen probably late this year for full release, and then you'll really see revenue next year. And then on 5.1.2, we won't even submit till the middle of the year on 5.1.2. So then you'll have a year of submissions.

Speaker Change: And then on the if I went to we won't need to submit to a middle of the year on 501. Two so then you'll have a year of.

Speaker Change: Of submission and so by the time, we get access by the end of 2005, Youre really talking about a 26 impact. So that's the way to think about when those kind of play out but I think the reason we point. These out right now is because we're very confident in the pipeline and we feel really good about our ability to kind of grow steadily over a broad port.

David J. Endicott: And so by the time we get access, by the end of 2025, you're really talking about a 26 percent impact. So that's the way to think about when those kind of play out. But I think the reason we point these out right now is because we're very confident in the pipeline, and we feel really good about our ability to grow steadily over a broad portfolio of stuff. That's lovely.

Speaker Change: Polio and stuff.

David J. Endicott: David, just one follow-up on 15512, sorry. What was the symptom you showed a benefit on in the Phase 3 trials? And can you talk about tolerability?

Speaker Change: That's helpful. David just one follow up on 15512, sorry.

Speaker Change: What was the symptom you showed a benefit on in the phase III trials can you talk about tolerability.

David J. Endicott: What we've heard is when you look at the Phase 2 paper, there was a rate of burning or stinging about 40% of the time. How do you think that impacts adoption? Thank you. Yeah, we'll see over time. But I mean, you know, like almost every eyedrop in this space, there is some burning and stinging. The discontinuation rate, I think, was inconsequential, like one or 2%.

David: What we've heard is when you look at the phase II paper.

Speaker Change: Right, there was burning or stinging about 40% of the time, how do you think that impacts adoption. Thank you.

Speaker Change: Yes, we will see over time, but I mean like almost every eye drop in this space.

Speaker Change: There is some burning and stinging the discontinuation rate I think was inconsequential like one or 2%. So I don't think we read that as a major problem, but what I would say is that <unk>.

David J. Endicott: So I don't think we should read that as a major problem. But what I would say is that, directionally, the primary endpoint was a non-anesthetized Schirmer strip of 10 millimeters or more. And we did very, very well on that very significant day. And that was day one, and it was consistent at day 90. So very important, you know, in terms of onset and very important in terms of its ability to create, through this TRIP-M8 mechanism, natural tears, so not supplementing tears but rather stimulating natural tear production. And if that's true, you know, as we kind of work our way through all these data, you know, that's a very exciting thing, because this is, I think, kind of a very different idea than trying to help To kind of create more tears.

Speaker Change: Directionally the primary endpoint was.

Speaker Change: And unless the non anesthetize schirmer strip of 10 millimeters or more.

Speaker Change: And we did very very well on that very significant and that was day, one and consistent at day 90, So very important in terms of onset and very important in terms of its ability to create through this trip mechanism natural tears, so not supplementing tiers, but rather stimulating Nash.

Speaker Change: <unk> tier production and if that's true as we kind of work our way through all of these data.

That's a very exciting thing because this is.

Speaker Change: I think kind of a very different idea than trying to help the body.

Speaker Change: By supplementing this is actually.

Speaker Change: Working with the body to kind of create more tears. So we're excited about the mechanism.

David J. Endicott: So we're excited about the mechanism. Our next question is from the line of Brett Fishman with KeyBank Capital Markets. Hey guys, thanks so much for taking the questions.

Speaker Change: Thank you.

Okay.

Speaker Change: Our next question is from the line of Brett Fishbein with Keybanc capital markets. Please proceed with your question.

Brett Fishbein: Hey, guys. Thanks, so much for taking the questions just wanted to start off with a quick follow up on the revenue growth guidance understand different carrier definitely looks positioned to lead the way in terms of growth for 2024, but just curious on how you see the overall surgical segment progressing in context of the expected step down in equipment and if you think the rest of the.

David J. Endicott: Just wanted to start off with a quick follow-up on the revenue growth guidance. I understand vision care definitely looks positioned to lead the way in terms of growth for 2024, but just curious how you see the overall surgical segment progressing in context of the expected step down in equipment and if you think the rest of the segment can kind of like be an offset and have the broader segment trend toward the low end of the overall cost of currency. Yeah, look, I mean, clearly, surgical will lag VisionCare next year by a little bit, but not a ton. I mean, it's in a pretty good place with consumables, right?

Speaker Change: And can kind of like being offset and have the broader segment trend towards the low end of the overall constant currency range.

Speaker Change: Yes look I mean, clearly surgical we'll lag vision care next year by a little bit, but not a ton I mean, it's in a pretty good place with consumables right and remember maybe one of the underappreciated stories is how strong our consumables business is it is half of our revenue in surgical and it's been growing really really well so one of the surprises.

David J. Endicott: And remember, maybe one of the underappreciated stories is how strong our consumables business is. It's half of our revenue in surgical, and it's been growing really, really well. So, you know, one of the surprises for us in equipment this year, for example, was, you know, our share growth. We expected, I think, in many ways, to face more competitive pressure than we have.

Speaker Change: For us and equipment. This year for example was our share growth.

Speaker Change: We expected I think in many ways.

So, let's just face more competitive pressure than we have we've actually gained share in our equipment footprint, both internationally and in the U S. And in addition to that we've added equipment in so Argos has done very well our microscopes have done well.

David J. Endicott: We've actually gained share in our equipment footprint, both internationally and in the US. And in addition to that, we've added equipment. So, Argos has done very well.

David J. Endicott: You know, our microscopes have done well. You know, our refractive equipment has done well. And we've really done, you know, across the board, we've had a really exciting year for equipment. Now, that makes it tough to grow on a comparable basis, but it creates a bunch of consumables for us to grow. So, you know, if half of our business can grow, you know, nicely with the consumables business, we're going to be in a pretty good place. And again, I think implantables, you know, we should expect to grow with or ahead of the market. So, directionally, you know, we expect, you know, as we've said, the equipment to be relatively flat year on year, principally because of the compare, but also because we're going to stall the market a little bit with, it's like when you see the new, you know, the new car model from whatever your favorite brand is, you know, a lot of people will wait, you know, six months, a year to get it before they buy a new one.

Speaker Change: Refractive equipment has done well and we've really done across the board. We've had a really exciting year for equipment now that makes it tough to grow on a comparable basis, but it creates a bunch of consumables for us to grow so.

Speaker Change: Half of our business can grow nicely with the consumables business, we're going to be in a pretty good place and again I think implantables, we should expect to grow with or ahead of the market. So directionally, we expect as we've said.

Speaker Change: The equipment to be relatively flat to year on year, principally because of the compare but also because were going to install the market a little bit with us.

Speaker Change: It's like when you see the new the new car.

Speaker Change: Model from whatever your favorite brand has a lot of people will wait six months a year to get it before.

David J. Endicott: So we expect some of that to happen. All right, that makes a ton of sense. And then just one quick follow-up for me. I think the operating margin guidance looks like it's implying about 80 basis points of year-over-year expansion at the midpoint. And I definitely appreciate the first-half gross margin commentary. But just curious on a full-year basis if you think gross margins can generally trend in line with the previous year, or if you're looking at that more as a full-year offset to the operating margin expansion.

Buy a new one so we expect some of that to happen.

Speaker Change: Alright, it makes a ton of sense and then just one quick follow up for me I think on the operating margin guidance looks like it's implying about 80 basis points of year over year expansion at the midpoint and definitely appreciate the first half gross margin commentary, but just curious on a full year basis. If you think gross margins can generally trend.

Speaker Change: In line with the previous year or if youre looking at that more as a full year offset to the operating margin expansion and thanks for taking the questions.

Timothy C. Stonesifer: And thanks for taking the question. Yeah, I would expect that we'll continue to get gross margin improvement in the second half of the year as we pass through that inventory. So I would think about gross margins being relatively in line with what we saw last year, and then you obviously see continued operating leverage throughout the year, and that's what's driving the margin rate improvement for this year. Our next question is from the line of Tom Steffan with CFL. Please proceed.

Speaker Change: Yes, I would expect that we'll continue to get gross margin improvement in the second half of the year as we.

Speaker Change: We pass through that inventory so.

Speaker Change: I would think about gross margins being relatively in line with what we saw last year and then you obviously see continued operating leverage throughout the year and that's what's driving the margin rate improvement for this year.

Speaker Change: Our next question is from the line of Tom <unk> with Stifel. Please proceed with your question.

David J. Endicott: Great. Hey guys, thanks for taking the questions. Maybe the first one on the IOL business in China. David, can you set us up maybe on the 2023 base, and then just talk about the assumptions of the outlook? for your China IOL sales in 2024, particularly, I guess, as we think about VVP this year and then I have a follow-up. Yeah, Tom, let me try to give you some kind of directional help, you know, with that one. China is now the second largest country for ATI wells in the world. It's about half of the size of the United States in terms of volume.

Tom: Great Hey, guys. Thanks for taking the questions.

Tom: Maybe first one on the iron ore business in China.

Tom: David can you level set us maybe on the 2023 base and then just talk about the assumptions of the outlook for your China <unk> sales in 2024, particularly I guess as we think about PDP. This year and then I have a follow up.

David: Yes, Tom Let me, let me try and give you some kind of directional help with that one.

Speaker Change: China now has the second largest country for hei hotels in the world.

Speaker Change: Half of the size of the United States in terms of volume and I will just read that as units.

David J. Endicott: And I'll just read that as units. You know, we have a single-digit share in that market, which is very unusual. So most markets around the world, we probably, in ATIOLs, have somewhere between 30 and 80. So pick a share number you like, and then kind of have the U.S. market and apply whatever you think the trajectory ought to be. That's probably the best way to model it.

Speaker Change: We have a single digit share in that market, which is very unusual so most markets around the world, we probably in <unk>.

Speaker Change: Wells have somewhere between 30 and 80.

Speaker Change: So pick us pick a share number you like and then kind of have the U S market and apply the whatever you think the trajectory ought to be that that's probably the best way to model it and we try not to give individual products in country guidance, but I recognize it's an interesting topic and we've been thinking about how to explain it that's probably the best we can do with that one.

David J. Endicott: We try not to give individual products and country guidance, but I recognize it's an interesting topic, and we've been thinking about how to explain it. That's probably the best we can do with that one. But I do think that going forward, it'll be back half loaded this year and then kind of full year loaded the following year. So, as you probably know, the award signs up in this, you know, really this next quarter, the second quarter. So we should have most of it done by kind of April, May, maybe a little into June, and then, you know, start to sell it, principally in the back half. So that's kind of the pattern. Got it. That's helpful. And then my follow-up is just on Idris.

Speaker Change: But I do think that going forward it'll be back half loaded this year, and then kind of full year loaded the following year. So as you probably know the award signs up in this really this next quarter. The second quarter. So we should have most of it done by kind of April may maybe a little into June and then start to sell it.

Speaker Change: Selling in principally in the back half so that's kind of the pattern.

Speaker Change: Got it that's helpful. And then my follow up is just on.

David J. Endicott: I guess, directionally, David... discuss a bit how that product performed in 2023 and again directionally expectations for 2024. Yeah, look, I mean, you know, we were pleased with Hydris, especially given all the noise around the reimbursement challenges. So you know, the reimbursement hiccups with some of the other products caused some stalling in the market, I think. The market was a little bit softer than normal than we would have expected. But we grew nicely with Hydris, and we continue to grow nicely with Hydris, and expect to kind of grow our share in that market. We did grow our share in 23, and we will continue to do that in 24 against that MIGS market.

Speaker Change: Hi address I guess Directionally, David can you discuss a bit how that product performed in 2023 and again directional expectations for 2024.

David: Yes look I mean, we were pleased with hydrus, especially given all the noise around the reimbursement.

David: Challenges. So you know the reimbursement hiccups with some of the other products.

David: Cause some stalling I think in the market.

David: It was little bit softer than normal than we would have expected, but we grew nicely with hydrus continue to grow nicely with hydrus and expect to kind of grow share in that market. We did grow share in 'twenty three and we will continue to do that in 'twenty four against that Migs market. The mixed market didn't grow as fast as we would have expected, but but.

David J. Endicott: The MIGS market didn't grow as fast as we would have expected. But overall, we did quite well. I think what you're seeing right now with Hydris is that a lot of people have come to an understanding that if you're going to do a stent, this one has some of the most compelling data for efficacy of anything out there. So I think we feel like people have come to the understanding that, you know, this is glaucoma, and you want to treat this, you want to get ahead of it; Hydris is your best chance to do that.

David: All we did quite well I think what youre seeing right now with hydro <unk> has a lot of people have come to an understanding of if youre going to do a stent. This one has some of the most compelling data for efficacy of anything out there. So I think we feel like people have come to the understanding that this is glaucoma and you want to treat this you want to get ahead of it hydro.

David: Is your best chance to do that.

David J. Endicott: And so that with the medication reduction over the time horizon has had a really positive impact on folks. So that's probably, you know, where we are now. And I think directionally in 24, we see the same thing, you know, kind of a very positive ahead of market growth performance. That's great. Thanks again.

David: So that with the medication reduction over over the time.

David: Time horizon has been really a positive impact on folks. So that's probably where we are now and I think directionally in 'twenty four we see the same thing kind of a very positive ahead of market growth performance.

Speaker Change: That's great. Thanks again.

Speaker Change: Sure.

David J. Endicott: Our next question is from the line of Izzy Kirby with Redburn Partners. Please proceed with your question. Hi, thanks for taking my question, everyone. I just wanted to touch on some of the market dynamics there. I noticed within your guide, you see markets sort of growing in line with historic levels, but I think for 23, you were talking to markets sort of at or above. You know, is there anything you're seeing within your underlying markets, particularly in surgical, that's influenced this? And then related, we'd love to hear about some of the dynamics you're seeing in cataract surgery in the U.S., perhaps any color you could give us on the volumes in the fourth quarter and for 24, and then I have a follow-up on China. Yeah, look, markets, mid-single digits is probably, you know, was high for 2023 because of the comparison. So you had China, you know, wrapping around; you had some other Asian markets that were wrapping around. So you should have expected to see a better than historical rate in 23, and we did.

Speaker Change: Our next question is from the line of easy Kirby with Redburn Partners. Please proceed with your questions.

Kirby: Hi, Thanks for taking my question I, just wanted to just touch on some of the market dynamics that I noticed within your guide you see market sort of growing in line with historical levels, but I think the 23, you were talking to market sort of at or above is there anything you're seeing within your markets, particularly inside your call.

Kirby: And then related I would love to hear about some of the dynamics youre seeing in cataract surgery in the U S.

Kirby: Any color you could give us on the volumes in the fourth quarter and 24, and then I have a follow up on China.

Speaker Change: Yes look.

Markets mid single digits.

Speaker Change: Probably was high for 'twenty four 'twenty three because of the compare so you had China.

Speaker Change: <unk> around you had some other of the Asian markets that we're wrapping around so you should have we should have expected to see a better than historical rate in 'twenty three and we did.

David J. Endicott: I think, you know, going forward, we see that really normalizing, and typically, the U.S. market is 2% to 3% growth, and internationally, it's kind of that 4%, maybe 5%, you know, and so between those two, you get kind of that, I would say, kind of 3% to 4% is the cataract market. So that's really what we've been talking about. Now, I'm not sure you were interested in the VisionCare market, but I'll throw it in. The VisionCare market, you know, again, we see kind of growth in that mid-single digits, which is really the historical rate. That's pretty much what it grew, grew a little faster than that, but I think principally because price was a little bit more aggressive this year than in prior years. So that's kind of where we see the market, and I would just characterize that as very normalized growth and what we should expect. In the cataract, the U.S. dynamic was, again, very normal for us.

I think going forward, we see that it really normalizing and typically the U S market is 2% to 3% growth internationally, it's kind of that four maybe five.

Speaker Change: And so between those two you get kind of that I would say kind of three to four is the cataract market. So that's really what we've been talking about now.

Speaker Change: Im not sure you were interested in the vision care market, but I'll throw it in.

Speaker Change: Vision care market again, we see kind of growing in that mid single digits, which is really the historical rate that's pretty much what it grew a little faster than that but I think principally because price was a little bit more aggressive in this in this year than in prior years. So that's kind of where we see the market and I would just characterize that as very normalized growth and what we.

Should expect.

Speaker Change: In the cataract use dynamic was again very normal for us we look at our consumables as the proxy for.

David J. Endicott: You know, we look at our consumables as a proxy for what's going on in the market. You know, we grew nicely in consumables, and we know what the unit growth in the U.S. was, and that's a pretty good proxy given our share of what happened in the U.S. And so we kind of know that it was in that 2 to 3 percent range, and that's, you know, as we said, that's kind of the low single digits was a pretty reasonable number in the fourth quarter. Okay, no, that's helpful. Thank you.

Speaker Change: For what's going on in the market.

Speaker Change: Grew nicely in consumables, we know what the unit growth in the U S was.

Speaker Change: And that's a pretty good proxy given our share of what happened in the U S and so we kind of know that it was in that 2% to 3%.

Speaker Change: And that's as we said, it's kind of the low single digits was a pretty reasonable number in the fourth quarter.

Speaker Change: Okay. That's helpful. Thank you and then just on China I'd Love to hear your thoughts on why you decided to sort of participate and lean into the V. P.

David J. Endicott: And then just on China, I'd love to hear your thoughts on why you decided to sort of participate and lean into the VBP this time around, you know, what has changed in that market to make you interested in part... Well, I mean, at the core of it, it's the volume. If we go back several years, and we decided not to do it, there were two reasons for it. One reason is that we had a very strong position in the private market, and we were unclear on whether the public market was ever going to get into ATI Wells. And, you know, that has obviously changed our view quite substantially, as about a third of that market is now in the public sector.

Speaker Change: This time around you know what has changed in that market.

Interested in participating.

Speaker Change: Well I mean at the core of it it's the volume.

Speaker Change: Time that we if you go back several years, when we decided not to do it there were two reasons for it one is we had a very strong position in the private market and we were unclear on whether the public market was ever going to get into <unk> and that was that has obviously changed our view quite substantially as about a third of that market is now in the public sector.

David J. Endicott: And so, you know, that plus, what has happened historically is when you go into the BBQ the first time, you get a very good price. The second round is a very substantial cut. And so I think on a year-on-year basis, it's very difficult to absorb that most everybody else who's seen these things, I think advised us around that.

Speaker Change: And so that plus what has happened historically is when you go into the BBC. The first time, you get a very good price on the second round.

Speaker Change: As a very substantial cut and so I think on a year on year basis, its very difficult to absorb that most everybody else who has seen these things I think advised us around that so our calculus was we get through it on the private market and then evaluated the second round that's exactly what we did and I think in this way our prices are.

David J. Endicott: So our calculus was we get through it on the private market, and then evaluate it in the second round. That's exactly what we did. And I think in this way, you know, our prices are better than our floor prices around the world. So pretty good prices, not great prices, but you know, very European, I would say based prices. So, you know, from our perspective, we see a lot more reasonable growth with a lot of volume. And this is a very big market now. So a lot of things have changed since our original decision not to participate. And, you know, we're very pleased with the reception, I think, of Vividi and Panoptix. I think the Chinese have a very high interest in what, you know, the best products in the world look like.

Speaker Change: Our better than our floor prices around the world, So pretty good pricing, great pricing, but very European I would say based pricing. So from our perspective, we see a lot more reasonable growth with a lot of volume.

Speaker Change: And this is a very big market now so.

Speaker Change: Things have changed since our original decision not to participate in.

Speaker Change: We're very pleased with the reception I think too vividly and Panoptic. So I think the Chinese have a very high interest in what the best products in the world look like.

David J. Endicott: Great, that's helpful. Thank you. Thank you. Our next question is from the line of Jeff Johnson with Baird. Thank you. Good morning, guys.

Great. That's helpful. Thank you.

Speaker Change: Thank you.

Speaker Change: Our next question is from the line of Jeff Johnson with Baird. Please proceed with your questions.

Jeffrey D. Johnson: Thank you good morning, guys, maybe one question on cataract and one on contact lenses. So David you were talking about unity launching maybe later this year and really scaling throughout 2025 have you talk yet about what kind of price premium you would expect to get maybe on the system itself, but more importantly on the consumables that will go with unity.

David J. Endicott: Maybe one question on cataracts and one on contact lenses. So, David, you were talking about Unity launching maybe later this year and really scaling throughout 2025. Have you talked yet about what kind of price premium you'd expect to get, maybe on the system itself, but more importantly, on the consumables that will go with Unity? We haven't really had it yet, Jeff, but I think you're right to assume that there'll be a premium. You know, I think what we believe is that this, you know, the whole premise of the UnityVCS system is that you're getting two units in one, so you don't have to buy a Constellation and a Centurion. You get both of them, only, you know, really better versions of a VITREP machine and a cataract machine in a single unit, which on a capital basis should save you some money on a footprint basis.

David: We haven't really yet, Jeff, but I think youre right to assume that there'll be a premium.

David: I think what we believe is that this.

David: The premise really of the unity Vcs system is that Youre getting two units in one so you don't have to buy a constellation and a.

David: Since you are in you get both of them only really better versions of a rep machine in our cataract machine in a single unit, which on a capital basis should save you some money on.

David: On a footprint basis saves you space and importantly on a on a procedural time basis, we believe it will be more efficient. So what we're looking to do is establish that principle and then share that value back with the surgeons and the ASC is that by this equipment. So our consumable will be a little bit more expensive.

David J. Endicott: And importantly, on a procedural time basis, we believe it will be more efficient. So what we're looking to do is establish that principle and then share that value back with the surgeons and the ASCs that buy this equipment. So our consumables will be a little bit more expensive, and, you know, we'll ask for some of that value. But if you can do more surgeries in a day, you're going to make more as an ASC, and you should be willing to share that back with us. And so I think that's directionally how we see this thing playing out, which is a reasonably, you know, reasonably premium equipment capital, but really importantly, a nice steady consumable over a long stretch of time. Remember, this is typically a 10-year cycle.

David: We will ask for some of that value, but if you can do more surgeries in a day.

David: Youre going to make more as an ASC and you should be willing to share that back with us and so I think thats directionally, how we see this thing playing out which is a reasonably consume reasonably premium.

David: Equipment.

David: Capital, but really importantly, a nice steady consumable over a long stretch of time remember this is a.

David: Typically a 10 year cycle. So we can get a consumables really launched at a premium and we feel really good about that.

David J. Endicott: So if we can get our consumables really launched at a premium, we feel really good about that. All right, that's helpful. And then just on the contact lens side, should we think about anything launching this year in the contact lens business? You know, it feels like we're picking up some signals.

Speaker Change: Alright, that's helpful. And then just on the contact lens side should we think about anything gating. This year in the contact lens business you know it feels like we're picking up some signals you may be looking to take the ACP off the market in the U S and kind of forced that up conversion to <unk>.

David J. Endicott: You may be looking to take DACP off the market in the U.S. and kind of force that up-conversion to P1. You know, I think when you did that with Focus a few quarters ago, we haven't seen it in the numbers. Focus, though, is an older, smaller product line. DACP priced, I think, relatively close to P1.

Speaker Change: I think when you did that with focus a few quarters ago, we haven't seen it in the numbers focus, though an older smaller product line D. ACP priced I think relatively close to <unk>. So as you for some of that up conversion, but maybe lose some fits two competitors out of the ACP.

David J. Endicott: So, you know, as you force some of that up-conversion but maybe lose some fits to competitors out of DACP, anything we should just think about over the next few quarters, is that just kind of noise, at least at our level, looking into your company? Yeah, look. I mean, I think, you know, our contact lens business right now is going on all cylinders. We're doing really, really well. I would say, in particular, you know, our TORIC lenses have gained a ton of share. And, you know, I think that's the design.

Speaker Change: We should just think about over the next few quarters is that just kind of noise at least at our level looking into your company. Thanks.

Speaker Change: Yes look I mean I think.

Speaker Change: Our contact lens business right now is going on all cylinders, we're doing really really well.

Speaker Change: I'd say in particularly our toric lenses have gained a ton of share.

Speaker Change: And I think Thats the design honestly I think our designs are are very stable. They are easy to fit and they settle quickly and that is a really exciting phenomenon to see.

David J. Endicott: Honestly, I think our designs are very stable, they're easy to fit, and they settle quickly, and that is a really exciting phenomenon to see. You know, as we look at the new portfolio in the U.S., Precision One has been so successful, I think, that, you know, we are not going to sample DACP anymore, but we are not taking it off the market. So, it'll be available to anybody who's wearing it, but really, there aren't a ton of new starts on our DACP product in the U.S., and so, you know, we're going to decrease the sampling on that. That's really, maybe what you're picking up.

Speaker Change: As we look at the new portfolio in the U S. Precision one has been so successful I think that we are we are not going to sample the ACP anymore, but we're not taking it off the market. So it will be available to anybody who is wearing it but really there isn't a ton of new starts on <unk> product in the U S and so we're going to decrease.

Speaker Change: Sampling on that that's really maybe what you are picking up so again.

David J. Endicott: So, again, our fit sets, we aren't really deploying any new ones so that we can concentrate, really, on Precision One as our kind of mainstream product, and then, obviously, Daily's Total One is our premium brand. And then, you know, obviously, we have Total 30, which we're excited about for reusable. And, you know, before too long, we'll be talking about T7 as the next alternative, you know, into that kind of, I would say, you know, cost-sensitive market, but still wanting, you know, a replaceable lens at a little more frequent interval. So, we've got a lot of choices in new products, and it's just kind of natural for us to phase out some of our sourcing on some of the older And, again, those will be available, but they may not be promoted. All right, helpful, thank you. Our next question is from the line of... David Addington with J.P. Morgan. Glad to see you.

Speaker Change: We aren't really deploying any new ones. So that we can concentrate really on precision one is our kind of mainstream product and then obviously dailies total one is our premium brand.

Speaker Change: Then obviously we have.

Total 30, which we're excited about for reusable and before too long, we'll be talking about <unk>, 7%.

Speaker Change: As the next alternative into that kind of I would say cost sensitive market, but still wanting.

A replaceable lens at a little more frequent intervals. So we got a lot of choices and new products.

Speaker Change: And it's just kind of natural for us to phase out some of our resourcing on some of the older products and again those will be available, but they but they may not be promoted alright.

Speaker Change: Alright helpful. Thank you.

Speaker Change: Our next question is from the line of David Adlington with Jpmorgan. Please proceed with your question.

David J. Endicott: Hey guys, thanks for the questions. First one on surgical and on China again, I'm afraid. I just wondered, of that 6% to 8% growth guidance, I just wondered if you could give us some sort of idea in terms of what sort of tailwind you're seeing from China BPP on that. And, in addition to that, I just wondered if those sales are likely to be accretive or dilutive to your margins. And the second one, just on equipment, you've pointed towards flats for the year, but obviously, with the new launch being H2-weighted, do you think there's a quarter, either the first quarter or second quarter, possibly, where we could see equipment sales down year on year? I was trying to get as much of that as I could. I'm not sure I got all of it.

Hey, guys. Thanks for the question first one on search and on China.

David J. Endicott: China again, I'm afraid I just wanted to have that 6% to 8% growth guidance I'm just wondering if you could give.

David J. Endicott: Give us some sort of idea in terms of what sort of tailwind you are seeing.

David J. Endicott: From China, if anything on that.

David J. Endicott: And.

David J. Endicott: In addition to that I just wanted to if those sales are likely to be accretive or dilutive to your margins.

David J. Endicott: Second one just on equipments.

David J. Endicott: Push towards flat for the year below the knee launch being H two weighted do you think this is a quarter by the first quarter second quarter, possibly but what we could see equipment sales down year on year.

Speaker Change: I was trying to get most of that I'm not sure I got all of it. So let me let me make an attempt at it and then please jump in here and correct me if I didn't get the question right.

David J. Endicott: So let me make an attempt at it, and then please jump in here and correct me if I didn't get the question right. On China, you know, I wouldn't try to put a lot into the six to eight per se for next year. I think, directionally, we've kind of given you some help on how to size it.

Speaker Change: On China.

Speaker Change: I wouldn't try to put a lot into the 6% to eight per se for next year I think directionally.

Speaker Change: Kind of given you some help on how to size it but we really don't know what the rate of pickup is going to be we'll have a better sense by the end of the year, what it looks like the 25 and maybe we'll be able to guide a little better the following year for 25, when we get a full year impact.

David J. Endicott: But we really don't know what the rate of pickup is going to be. We'll have a better sense by the end of the year about what it looks like for 2025, and maybe we'll be able to guide a little better the following year for 2025 when we get a full year's impact. I would say it is accretive, obviously, because it's ATI Wells, and that's a high margin

Speaker Change: I would say it is accretive obviously, because it's ATI wells and Thats a high Mark just one of our highest margin product. So whatever that revenue is it's very very positive on a margin basis.

David J. Endicott: That's one of our highest-margin products, so whatever that revenue is, it's very positive on a margin basis. I'm not sure what the other part of that question was about.

Speaker Change: And relative to I'm not sure what the other part of that question was.

David J. Endicott: Um, did I get that question right? Yeah, I mean, the equipment... Directionally, it really isn't going to impact anything until 2025, so I think for the rest of this year, I think you should expect a pretty steady year-over-year, relatively flat. You know, it could be up, it could be down a little bit, but I would think about the year as relatively flat on the equipment front. We could be surprised, and I've been surprised before.

Speaker Change: Did I get that question right.

Speaker Change: Okay any equipment.

Speaker Change: Jeff.

Jeffrey D. Johnson: Yes, I mean the equipment.

Jeffrey D. Johnson: Directionally really isn't going to impact.

Jeffrey D. Johnson: Anything until 'twenty five so I think.

Jeffrey D. Johnson: The rest of this year.

Jeffrey D. Johnson: You should expect a pretty steady year over year relatively flat.

Jeffrey D. Johnson: Be up it could be down a little bit, but I would think about the year as relatively flat on the equipment front, we could be surprised and I've been surprised before we called it a little bit soft. This year, we were wrong, but we've been a little bit surprised at how successful we've been taking share I think as we introduce our own upgrade we're likely to see some stalling.

David J. Endicott: We called it a little bit soft this year, and we were wrong, but we've been a little bit surprised at how successful we've been taking share. I think as we introduce our own upgrade, we're likely to see some stalling of equipment, so that's kind of the theory that we have right now for why we should see most of the year relatively stable in equipment. That's great. Thanks very much. Thank you. Our final question is from the line of Sophie Osner with HSBC. Hi, thanks for squeezing me in and congratulations on the results. One question on China and one on the mix, please.

Jeffrey D. Johnson: Of equipment. So that's kind of the theory that we have right now for why we should see most of the year relatively stable and equipment.

Speaker Change: That's great thanks very much.

Speaker Change: Thank you. Our final question is from the line of Stephanie <unk> with HSBC. Please proceed with your question.

Speaker Change: Hi.

Stephanie: Thanks for squeezing me in and congrats on the results and one question on China and one on <unk>.

David J. Endicott: In China, VBP, as we understand it, there'll be a monofocal, and that's part of it. I would believe that you're more on the advanced side, but exactly which category do you think you would be taking a larger share? And would you then, down the line, consider any production onshore? And my second question relates to the mix. You had quite a high equipment sale that came above estimates, and with Unity, it will probably come higher. Will this have a downward impact, a downward weight on the margins on the surgical side?

Stephanie: In China, we BP as we understand there'll be a wonderful and that's <unk>.

Speaker Change: Part of it.

Stephanie: I would believe that you are more on the advanced part, but exactly which could take a category do you think you would be taking a larger share and would you then down to ly consider any production onshore and my second question relates to <unk>.

Stephanie: The mix you had quite high equipment sale.

Stephanie: Came above estimates and with G&A key it will probably come higher will this have a downward impact on like weight on the margins on the surgical side.

David J. Endicott: So, in China, on the VBP, we won all but the monofocal business. So, I think there were eight categories. I think we got seven of the eight where we were in the primary position. But they're all advanced technology lenses. It's Torix, it's multifocals, it's bifocals, it's extended depth of focus lenses.

Stephanie: So on China on the GBP.

Stephanie: We won all but the mono focal business. So I think they were.

Stephanie: Eight categories I think we've got seven of the eight where we were the primary position.

Stephanie: But theyre all advanced technology lenses, it's toric multifocal, it's bifocals its extended depth of focus lens.

David J. Endicott: So, you know, those are all our highest-margin products. And so, yes, that's a positive. We are not looking at production at this moment. We're not looking at production in China. We have very strong production facilities in the U.S. and in Ireland for our ATI wells.

Stephanie: So.

Stephanie: Those are all our highest margin products and so yes that will.

Stephanie: Positive.

Stephanie: We are not looking at production at this moment, we're not looking at production in China, We have a very strong production facilities in the U S and in Ireland for.

David J. Endicott: And the scale that we have there is really important in terms of keeping our costs down. In terms of mix, the equipment will always have a downward mix for us because it is a lower margin relative to the rest of our lines. But I wouldn't expect that to really hit this year.

Stephanie: For our <unk>.

Stephanie: The scale that we have there is really important in terms of keeping our costs down.

Stephanie: In terms of mix the equipment will always have a downward mix of for us because it is a lower margin relative to the rest of our lines, but I wouldn't expect that to really hit this year. It would really be a 2025 impact to the extent that we convert to selling the new equipment, the new equipment itself.

David J. Endicott: It would really be a 2025 impact, you know, to the extent that we convert to selling the new equipment. But the new equipment itself is not lower-margin than our old equipment. It's just a matter of what the total equipment mix is to the rest of our business. So, keep that in mind. Our new equipment will be about the same margin as our old equipment.

Stephanie: Is not.

Stephanie: Lower margin than our old equipment. Its just a matter of what the total equipment mix to the rest of our businesses. So keep that in mind, our new equipment will be about the same margin as our old equipment.

David J. Endicott: Perfect. Thanks very much. Thank you. At this time, we've reached the end of the question and answer session, and I'll turn the call over to Dan Cravens for a closing remark. Thank you everybody for joining us this morning. If you have any other questions from the analyst community, certainly reach out to Alan Turing and myself or reach out to our CorpComm people for media.

Speaker Change: Perfect. Thanks very much.

Speaker Change: Thank you at this time, we've reached the end of the question and answer session now I'll turn the call over to Dan <unk> for closing remarks.

Dan Cravens: Thanks to everybody for joining us. This morning, if you have any other questions from the analyst community certainly reach out to Alan triangle myself for our reach out to our Qualcomm people for media. Thanks again for joining.

Dan Craven: Thanks again for joining us. Thanks. Thank you. This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.

Dan Cravens: Thank you. This will conclude today's conference you may disconnect. Your lines at this time. Thank you for your participation.