Q1 2024 Alcon Inc Earnings Call

May 14, 2024

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Greetings and welcome to the Alcon first quarter 'twenty 'twenty four earnings call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.

Operator: Greetings and welcome to the Alcon first quarter 2024 earnings call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Dan Cravens, Vice President of Investor Relations. Thank you, sir. You may begin.

As a reminder, this conference is being recorded it is now my pleasure to introduce your host Dan Cravens, Vice President of Investor Relations. Thank you. Sir you may begin welcomed al Com's first quarter 2024 earnings conference call today, We issued a press release and interim financial report and posted a supplement.

Daniel Cravens: Welcome to Alcon's first quarter 2024 earnings conference call. Today we issued a press release, an interim financial report, and posted a supplemental slide presentation on our website to enhance today's call. You can find all these documents in the investor relations section of our website at investor.alcon.com. Joining me on today's call are David Endicott, our Chief Executive Officer, and Tim Stonesifer, our Chief Financial Officer.

Operator: ??

Daniel Cravens: On slide presentation on our website to enhance today's call you can find all these documents in the Investor Relations section of our website at investors that Alcon dotcom join.

Daniel Cravens: Joining me on today's call are David Endicott, Our Chief Executive Officer, and Tim Stonesifer, Our Chief Financial Officer, 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.

Daniel 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. Our actual results may differ materially from those expressed or implied in our forward-looking statements. Accordingly, you should not place any 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 Results Form 20-F and our Earnings Press Release and Interim Financial Report on file with the Securities and Exchange Commission and available on the SEC's website at sec.gov.

Daniel Cravens: Law.

Daniel Cravens: Our actual results may differ materially from those expressed or implied in our forward looking statements. Accordingly, you should not place any undue reliance on any forward looking statements.

Daniel Cravens: Important factors that could cause our actual results to differ materially from those in our forward. Looking statements are included in our <unk> form 20-F, and our earnings press release and interim financial report on file with the Securities Exchange Commission and available on the Sec's website at SEC Gov.

Daniel Cravens: 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 financial 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 filings. For discussion purposes, our comments on growth are expressed in constant currency.

Daniel Cravens: Non <unk> 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 non <unk> financial measures should be considered along with but not as alternatives to the operating performance measures as prescribed per FRS. Please see.

Daniel Cravens: A reconciliation between our non <unk> measures with directly comparable measures presented in accordance with Iff's ifr as in our public filings for discussion purposes. Our comments on growth are expressed in constant currency in a moment David will begin by recapping the highlights from the first quarter. After his remarks, Tim will discuss our.

Daniel Cravens: In a moment, David will begin by recapping highlights from the first quarter. After his remarks, Tim will discuss our performance and outlook for 2024. Then David will wrap up, and we will open the call for Q&A. With that, I'd now like to turn the call over to our CEO, David Endicott.

Operator: Greetings and welcome to the Alcon first quarter 2024 earnings call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Dan Craden, Vice President of Investor Relations. Thank you, sir. You may begin.

Daniel Cravens: <unk> and outlook for 2024, then David will wrap up and we will open the call for Q&A with that I'd now like to turn the call over to our CEO David Endicott.

David J. Endicott: Thanks, Dan, and thank you all for joining today's call. I'm pleased to report another quarter of strong performance across our business. We grew sales by 7% to $2.4 billion, and we grew core diluted earnings by 21% to $0.78 per share.

David J. Endicott: Thanks, Dan and thank you all for joining today's call I'm pleased to report another quarter of strong performance across our business. We grew sales by 7% to $2 4 billion.

Daniel Cravens: 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 financial 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 filings. For discussion purposes, our comments on growth are expressed in constant currency.

David J. Endicott: We grew core diluted earnings by 21% to <unk> 78 per share and we expanded core operating margin to 22%.

David J. Endicott: And we expanded core operating margin to 22%. These results reflect the strength of our broad portfolio of products. I'm particularly pleased with the performance of the contact lens business, where we saw another quarter of record sales. It's clear that our business is delivering solid growth supported by leading positions in durable end markets.

David J. Endicott: These results reflect the strength of our broad portfolio of products and.

I'm, particularly pleased with the performance of the contact lens business, where we saw another quarter of record sales. It's clear that our business is delivering solid growth supported by leading positions in durable end markets.

David J. Endicott: Now starting with surgery, in the coming months, we expect to receive FDA approval for our Unity VCS FACO machine. As I've said before, UnityVCS is a best-in-class phaco- and vitreoretinal console that was designed to create near-physiological conditions during surgery, which is expected to improve performance and efficiency without compromising safety. We're encouraged by the feedback we've received from clinical utilization in initial cases performed by surgeons around the world. Unity will be a meaningful improvement in cataract and VIT-RET surgery. Today, there are more than 28,000 of our Centurion and Constellation devices in the market that we expect to upgrade to the Unity platform over the next decade.

David J. Endicott: Now starting with surgery, in the coming months, we expect to receive FDA approval for our Unity VCS phaco machine. As I've said before, UnityVCS is a best-in-class phaco and vitreoretinal console that was designed to create near-physiological conditions during surgery, which is expected to improve performance and efficiency without compromising safety. We're encouraged by the feedback we've received from clinical utilization in initial cases performed by surgeons around the world. Unity will be a meaningful improvement in cataract and VIT-RET surgery. Today, there are more than 28,000 of our Centurion and Constellation devices in the market that we expect to upgrade to the Unity platform over the next decade.

David J. Endicott: Now starting with surgical in the coming months, we expect to receive FDA approval for our unity Vcs <unk> machine.

David J. Endicott: As I've said before our unity Vcs is a best in class FICO and Vitreoretinal cards. So that was designed to create near physiological conditions during surgery, which is expected to improve performance and efficiency without compromising safety.

David J. Endicott: We're encouraged by the feedback we've received from clinical utilization and initial cases performed by surgeons around the world.

Speaker Change: Yes, it will be a meaningful improvement in cataract surgery today, there are more than 28000 of our centurion and constellation devices in the market that we expect to upgrade to the unity platform over the next decade.

David J. Endicott: Toward the end of 2024, we will start user preference evaluations with surgeons in the U.S. and select international markets ahead of a broader commercial launch in 2025. Additionally, following the launch of VCS, we will offer a cataract-only system called Unity CS, which will be available starting in 2026. Importantly, Unity brings with it new and innovative consumables that drive incremental benefits for the surgeon. The launch of these instruments will help us secure the next decade of our consumables business, which is a large, recurring, and profitable revenue stream. Now I'll move to implantables, where we continue to outpace market growth, and I'm particularly pleased with our performance in international markets. I'll start with Panoptix.

Speaker Change: Towards the end of 2024, we will start user preference evaluations with surgeons in the U S and select international markets ahead of a broader commercial launch in 2025.

Speaker Change: Additionally, following the launch of ECS, we will offer a cataract only system called unity CFS.

Speaker Change: Which will be available starting in 2026.

Speaker Change: Importantly, unity brings with it new and innovative consumables that drive incremental benefits for the surgeon.

Speaker Change: The launch of these instruments will help us secure the next decade of our consumables business, which is a large recurring and profitable revenue stream.

Speaker Change: Now I'll move to Implantables, where we continue to outpace market growth and are particularly pleased by our performance in international markets.

David J. Endicott: Panoptix is the most implanted trifocal in the world, thanks in part to a patented design that optimizes the intermediate focal point at 60 centimeters, which is the most common middle vision sight. Additionally, data presented at the recent ASCRS conference shows that PET optics delivers high patient satisfaction, partially due to the low incidence of visual disturbance. This is a critical factor as surgeons and patients consider any advanced technology. Building on this success, we recently received pre-market approval from the FDA on two separate innovations that improve panoptic performance. Preference studies will begin in the second half of 2024 with the goal of bringing a next-generation Panoptix to market within the next 12 to 18 months.

David J. Endicott: Panoptix is the most implanted trifocal in the world, thanks in part to a patented design that optimizes the intermediate focal point at 60 centimeters, which is the most common middle vision sight. Additionally, data presented at the recent ASCRS conference shows that PENOptics delivers high patient satisfaction, partially due to the low incidence of visual disturbance. This is a critical factor as surgeons and patients consider any advanced technology. Building on this success, we recently received pre-market approval from the FDA for two separate innovations that improve panoptic performance. Preference studies will begin in the second half of 2024 with the goal of bringing a next-generation Panoptix to market within the next 12 to 18 months.

Speaker Change: I'll start with Penn optics Genoptix is the most implanted trifocal in the world. Thanks in part to a patented design that optimizes. The intermediate focal point at 60 centimeters, which is the most common middle visions say distance.

Speaker Change: Additionally data presented at the recent <unk> conference shows that Penn optics delivers high patient satisfaction, partially due to the low incidence of visual disturbances.

Speaker Change: This is a critical factor as surgeons and patients consider any advanced technology labs.

Speaker Change: Building on this success, we recently received premarket approval from the FDA on two separate innovations that improve pant optics performance.

Speaker Change: Preference studies will begin in the second half of 2024 with a goal of bringing our next generation Pan optics to market within the next 12 to 18 months.

David J. Endicott: Now I'll turn to Vividi, which recently passed more than 1 million implants, making it the most implanted extended-depth-of-focus lens worldwide. Vividi's success is underpinned by our patented, non-defractive technology that stretches and shifts light without splitting it. The optic delivers excellent distance and intermediate vision as well as functional near vision.

David J. Endicott: Now I'll turn to Vividi, which recently passed more than 1 million implants, making it the most implanted extended-depth-of-focus lens globally. Vividi's success is underpinned by our patented, non-defractive technology that stretches and shifts light without splitting it. The optic delivers excellent distance and intermediate vision as well as functional near vision.

Speaker Change: Now I'll turn to <unk>, which recently surpassed more than 1 million implants, making it the most implanted extended depth of focus lens globally.

<unk> success is underpinned by our patented non diffractive technology that stretches and shifts slight without splitting it.

The optic delivers excellent distance and intermediate vision as well as functional near vision.

David J. Endicott: It's designed to simplify presbyopia correction, prioritizing patient satisfaction while minimizing surgeon and clinic chair time. The lens's performance has been confirmed by large-scale, real-world data that includes patients with common comorbidities such as post-refractive eyes. We're excited to further expand on the success of both of these lenses around the world. In China, our team is working hard in preparation for the Volume-Based Procurement Award. We expect a gradual ramp-up of activity starting in the second half of the year as the award will be implemented province-by-province.

Speaker Change: It's designed to simplify presbyopia correction prioritizing patient satisfaction, while minimizing surgeon in clinic chair time.

Speaker Change: The lenses performance has been confirmed by large scale real world data that includes patients with common comorbidities such as post refractive eyes.

Speaker Change: We're excited to further expand on the success of both of these lenses around the world.

Speaker Change: In China, our team is working hard in preparation for the volume based procurement award, we expect a gradual ramp up of activity starting in the second half of the year as the award will be implemented on a province by province basis.

Speaker Change: Okay.

David J. Endicott: Next, I'll briefly discuss our digital innovations in the surgical field. Recently, the first ever study to evaluate the impact of our Smart Cataract Planner on patient outcomes demonstrated refractive target accuracy and excellent distance visual acuity. Now, with this study and our earlier time and motion study, we have data showing that smart cataract drives meaningful efficiencies for surgeons and their staff. Importantly, as this program grows, so will its capabilities, including leveraging AI-driven algorithms to improve outcomes for surgeons and patients.

Next ill briefly discuss our digital innovations in the surgical space.

Speaker Change: Recently, the first ever study to evaluate the impact of our smart cataract planner on patient outcomes.

Speaker Change: Demonstrated refractive target accuracy and excellent distance visual acuity.

Speaker Change: Now with this study and our earlier time and motion study, we have data showing that smart cataract drives meaningful efficiencies for surgeons and their staff.

Speaker Change: Importantly, as this program grows so too its capabilities, including leveraging AI driven algorithms to improve outcomes for surgeons and patients.

David J. Endicott: Now I'll move to contact lenses, where I continue to be extremely pleased with our performance. As we've talked about previously, we've made significant investments in this business over the past several years to drive commercial innovation, expand our manufacturing capacity, and add profitable growth. The foundation of our success is our proprietary manufacturing technology. This innovation gives us the agility to produce a variety of products, including different materials, chemistries, and geometries on the same line.

Speaker Change: Now I'll move to contact lenses, where I continue to be extremely pleased with our performance.

Speaker Change: As we've talked about previously we've made significant investments in this business over the past several years to drive commercial innovation expand our manufacturing capacity and add profitable growth.

Speaker Change: The foundation of our success is our proprietary manufacturing technology.

Speaker Change: This innovation gives us the agility to produce a variety of products, including different materials Chemistries and geometries on the same lines.

David J. Endicott: This has enabled rapid innovation, demonstrated by the six new contact lens platforms we've launched since 2020, including the Precision 1 family, the Total 30 family, and Daly's Total 1 for astigmatism. Importantly, our innovations are always developed with the patient and the eye care practitioner in mind. One example of our surface chemistry innovation is our water gradient technique.

Speaker Change: This has enabled rapid innovation demonstrated by the six new contact lens platforms, we've launched since 2020, including the precision one family. The total 30 family and dailies total one for astigmatism.

Speaker Change: Importantly, our innovations are always developed with the patient and the eye care practitioner in mind. One example of our surface chemistry innovation is our water gradient technology with this technology the water content at the outer surface of the lids reaches almost 100%, which is nearly the same as the surface of the cornea.

David J. Endicott: With this technology, the water content on the outer surface of the lens reaches almost 100%, which is nearly the same as the surface of the cornea. Additionally, it enables excellent oxygen transmissibility to deliver exceptional comfort even after a full day of wear. We feature this technology on Daily's TotalOne and Total30 contact lens families. Another area we're innovating is in specialty lenses. In particular, we've brought three new TORC lenses to market over the past four years. This is important because of the significant unmet need.

David J. Endicott: With this technology, the water content on the outer surface of the lens reaches almost 100%, which is nearly the same as the surface of the cornea. Additionally, it enables excellent oxygen transmissibility to deliver exceptional comfort even after a full day of wear. We feature this technology on Daily's Total One and Total 30 Contact Lens families. Another area we're innovating is in specialty lenses. In particular, we've brought three new TORC lenses to market over the past four years. This is important because of the significant unmet need.

Speaker Change: Additionally, it enables excellent oxygen transmissibility to deliver exceptional comfort even after a full day of wear.

Speaker Change: We feature of this technology on dailies total one and totaled 30 contact lens families.

Speaker Change: Another area, we're innovating as in specialty lenses and particular, we brought three new toric lenses to market over the past four years. This is important because of the significant unmet need our estimates show that toric is the fastest growing segment of the contact lens market.

David J. Endicott: Our estimates show that TORIC is the fastest-growing segment of the contact lens market. This presents a large opportunity since a low number of astigmatic patients are currently wearing TORIC contact lenses. These lenses leverage our proven precision balance technique. This proprietary design features anchor points that deliver exceptional stability for the patient and a smooth fitting process for the physician.

David J. Endicott: Our estimates show that TORC is the fastest-growing segment of the contact lens market. This presents a large opportunity since a low number of astigmatic patients are currently wearing TORC contact lenses. These lenses leverage our proven precision balance technique. This proprietary design features anchor points that deliver exceptional stability for the patient and a smooth fitting process for the physician.

Speaker Change: Presents a large opportunity sets a low number of asthmatic patients are currently wearing toric contact lenses.

These lenses leverage our proven precision balanced technology. This proprietary design features anchor points that deliver exceptional stability for the patient and a smooth fitting process for the physician.

David J. Endicott: So based on our recent results, it's clear that our investments in innovation and in manufacturing have paid off and are driving market share and significant growth. I'll start with the over-the-counter portfolio, which includes the sustained family of artificial tears, which grew double digits in the first quarter. With Sustain, we're continuing to win with our multi-dose preservative-free innovation, which is driving market expansion as we launch around the world.

Speaker Change: So based on our recent results, it's clear that our investments in innovation and in manufacturing that paid off.

Speaker Change: Driving market share and a significant growth.

Speaker Change: And finally, I'll turn to ocular health I'll start with the over the counter portfolio.

Speaker Change: Which includes the sustained family of artificial tears, which grew double digits in the first quarter.

With sustained we're continuing to win with our multi dose preservative free innovation, which is driving market expansion as we launched around the world.

David J. Endicott: We've launched in more than 40 countries, and in low-penetration markets like the U.S., we're seeing the preservative-free category continue to expand. In our pharmaceutical business, I continue to be pleased by the total prescription growth of roclotan and ropressin. In particular, Rakuten TRX grew approximately 9% year over year, while the broader glaucoma market was flat.

Speaker Change: We've launched in more than 40 countries and a low penetration markets like the U S. We're seeing the preservative free category continued to expand.

Speaker Change: In our pharmaceutical business I continue to be pleased by the total prescription growth of <unk> and Rhopressa and.

Speaker Change: In particular, <unk> grew approximately 9% year over year, while the broader glaucoma market was flat.

David J. Endicott: At the recent ASCRS conference, phase 4 data presentations further supported the intraocular pressure lowering efficacy of roclatan while maintaining the convenience of a once-daily dose. In the coming months, we will continue to focus on expanding market access for these important medications. Lastly, on our dry eye pharmaceutical candidate, AR15512, we are in the process of preparing a new drug application for submission to the FDA, which we expect to submit in the coming months.

David J. Endicott: At the recent ASCRS conference, phase 4 data presentations further supported the intraocular pressure lowering efficacy of roclitan while maintaining the convenience of a once-daily dose. In the coming months, we will continue to focus on expanding market access for these important medications. Lastly, on our dry eye pharmaceutical candidate, AR15512, we are in the process of preparing a new drug application for submission to the FDA, which we expect to submit in the coming months.

Speaker Change: At the recent ASRM conference Phase four data presentations further supported the intra ocular pressure lowering efficacy of Rockwood 10, while maintaining the convenience of a once daily dosing.

Speaker Change: In the coming months, we will continue to focus on expanding market access for these important medications.

Speaker Change: Lastly, on our dry eye pharmaceutical candidate <unk> 105, 512, we are in the process of preparing the new drug application for submission to the FDA, which we expect to submit in the coming months.

David J. Endicott: Next, I'll briefly talk about market dynamics for the first quarter. For Cataract, we estimate global procedures were up approximately 2%, slightly softer than historical levels. Additionally, global ATI well penetration was up approximately 130 basis points year over year, mainly driven by international markets. In contact lenses, we estimate the retail market was up approximately 7%, driven by pricing and continued steadyware trade-ups. Now, before I turn it over to Tim, I want to briefly comment on our planned acquisition of BelkinVision and its innovative technology, the BelkinVision Eagle.

David J. Endicott: Next, I'll briefly talk about market dynamics for the first quarter. For Cataract, we estimate global procedures were up approximately 2%, slightly softer than historical levels. Additionally, global ATI well penetration was up approximately 130 basis points year over year, mainly driven by international markets. In contact lenses, we estimate the retail market was up approximately 7%, driven by pricing and continued steadyware trade-up. Now, before I turn it over to Tim, I want to briefly comment on our planned acquisition of BelkinVision and its innovative technology, the BelkinVision Eagle.

Speaker Change: Next I'll briefly talk about market dynamics for the first quarter.

And cataract, we estimate the global procedures were up approximately 2% slightly softer than historical levels.

Speaker Change: Additionally, global Hei, well penetration was up approximately 130 basis points year over year, mainly driven by international markets.

Speaker Change: Contact lenses, we estimate the retail market was up approximately 7% driven by pricing and continued steady where trade up.

David J. Endicott: With this potential acquisition, Alcon will further our commitment to the glaucoma space and pioneer the expansion of interventional glaucoma globally with the EGLE device. We expect the transaction to close during the third quarter, and we look forward to welcoming Belcom Associates to the Alcon family. With that, I'll turn it over to Tim, who'll take you through our financial results and give you more color on our outlook.

Speaker Change: Now before I turn it over to Tim I want to briefly comment on our planned acquisition of Bell can vision and its innovative technology the bell conversion Eagle.

David J. Endicott: With this potential acquisition, Alcon will further our commitment to the glaucoma space and pioneer the expansion of interventional glaucoma globally with the EGLE device. We expect the transaction to close during the third quarter, and we look forward to welcoming the Belcom Associates to the Alcon family. With that, I'll turn it over to Tim, who will take you through our financial results and provide more color on our outlook.

Speaker Change: With this potential acquisition outcome will further our commitment to the glaucoma space and pioneer the expansion of interventional glaucoma globally with the Eagle device.

Speaker Change: We expect the transaction to close during the third quarter and we look forward to welcoming the bulk of associates to the <unk> family and 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 first quarter sales of $2.4 billion, up 7% versus the prior year. This growth is primarily driven by strength in our innovative CAP contact lens portfolio and in ocular health. Our first quarter U.S. dollar sales growth included approximately 200 basis points of pressure from foreign currency.

Timothy C. Stonesifer: Thanks, David We're pleased to report first quarter sales of $2 4 billion up 7% versus prior year.

Timothy C. Stonesifer: This growth is primarily driven by strength in our innovative kept contact lens portfolio and in ocular health.

Timothy C. Stonesifer: Our first quarter U S. Dollar sales growth included approximately 200 basis points of pressure from foreign currency.

Timothy C. Stonesifer: In our surgical franchise, revenue was up 6% year-over-year to $1.3 billion. And plannable sales were $433 million in the quarter, up 6% year-over-year, mainly driven by our advanced technology intraocular lenses, including Vividi, Panoptix, and our monofocal TORX in international markets. And consumables, our first quarter sales were up 7% to $686 million. In the quarter, we saw strong demand for VitPets and Cataract consumables, particularly in international markets.

Timothy C. Stonesifer: In our surgical franchise, revenue was up 6% year over year to $1.3 billion. And plannable sales were $433 million in the quarter, up 6% year over year, mainly driven by our advanced technology intraocular lenses, including Vividi, Panoptix, and our monofocal TORX in international markets. And consumables, our first quarter sales were up 7% to $686 million. In the quarter, we saw strong demand for VitPets and Cataract consumables, particularly in international markets.

Timothy C. Stonesifer: In our surgical franchise revenue was up 6% year over year to $1 3 billion.

Timothy C. Stonesifer: Implantable sales were $433 million in the quarter up 6% year over year, mainly driven by our advanced technology, intraocular lenses, including devotee and optics and our mono focal talks and international markets.

Timothy C. Stonesifer: And consumables are first quarter sales were up 7% to $686 million.

Timothy C. Stonesifer: In the quarter, we saw strong demand for <unk> and cataract consumables, particularly in international markets. We also saw some contribution from price.

Timothy C. Stonesifer: We also saw some contribution from price. In equipment, sales of $219 million were up 2% year over year. This is consistent with our expectations that we discussed on our last earnings call as we lagged strong performance in 2023 and are in the late stages of the international upgrade cycle. We continue to expect equipment sales growth to be largely flat for the remainder of the year until we begin to roll out the new Unity platform.

Timothy C. Stonesifer: And equipment sales of $219 million were up 2% year over year.

Timothy C. Stonesifer: This is consistent with our expectations that we discussed on our last earnings call as we lap strong performance in 2023 and are in the late stages of the international upgrade cycle.

Timothy C. Stonesifer: We continue to expect equipment sales growth to be largely flat for the remainder of the year until we begin to rollout the new unity platform.

Timothy C. Stonesifer: During division care, first quarter sales of $1.1 billion were up 10%. Contact line sales were up 11% to $671 million in the quarter. As David mentioned, our innovation, including torque and multifocal modalities, continues to win in the market.

Timothy C. Stonesifer: Turning to vision care first quarter sales of $1 $1 billion were up 10% contact lens sales were up 11% to $671 million in the quarter as.

As David mentioned, our innovation, including Toric and multifocal modality continues to win in the market. Additionally, we saw strong contribution from price in the quarter.

Timothy C. Stonesifer: Additionally, we saw strong contribution from Price in the quarter. In ocular health, first quarter sales of $435 million were up 8% year over year. This was driven by our portfolio of eyedrops, including the sustained family of artificial tears, which saw another quarter of double-digit growth.

Timothy C. Stonesifer: In ocular health first quarter sales of $435 million were up 8% year over year.

Timothy C. Stonesifer: This was driven by our portfolio of eyedrops, including the sustained family of artificial tears, which saw another quarter of double digit growth.

Timothy C. Stonesifer: I want to briefly discuss how pleased I am with the improvement in vision care profitability. As David mentioned, we have made significant investments in this franchise. These investments, coupled with strong commercial execution, have enabled us to grow the franchise's segment contribution margin from a low point of 16.6% in 2022 to 23.8% in the first quarter of 2024. The robust sales growth we've delivered over the past several years is driving significant operating leverage. While we expect to see normal seasonality throughout the year, we look forward to continued year-over-year improvement in vision care profitability.

Speaker Change: I want to briefly discuss how pleased I am with the improvement in vision care profitability.

Speaker Change: As David mentioned, we have made significant investments in this franchise. These investments coupled with strong commercial execution have enabled us to grow the franchise segment contribution margin from a low point of 16, 6% in 2022 to 23, 8% in the first quarter of 2024.

Speaker Change: The robust sales growth we delivered in the past several years is driving significant operating leverage while we expect to see normal seasonality throughout the year. We look forward to continued year over year improvement in vision care profitability.

Timothy C. Stonesifer: Now, moving down the income statement. In the first quarter, core gross margin was 63.4%, broadly in line with last year. This was better than we anticipated, mainly due to the timing of Customs Duties refunds, which positively impacted gross margin by approximately 50 basis points. For the full year, we continue to expect gross margins to be broadly in line with 2023. Core operating margin was 22%, up 260 basis points year over year, driven by operating leverage from higher sales and the timing of certain discretionary spending, including R&D and SG&A expenses.

Speaker Change: Now moving down the income statement first.

First quarter core gross margin was 63, 4% broadly in line with last year.

Speaker Change: This is better than we anticipated mainly due to the timing of customs duties refunds, which positively impacted gross margin by approximately 50 basis points for the full year. We continue to expect gross margins to be broadly in line with 2023.

Speaker Change: Core operating margin was 22% up 260 basis points year over year, driven by operating leverage from higher sales and the timing of certain discretionary spend including R&D and SG&A expense.

Timothy C. Stonesifer: First quarter interest expense was $45 million, broadly in line with last year. Other financial income and expense was a net benefit of $12 million compared to a net expense of $8 million in the first quarter of last year. This improvement was primarily driven by higher interest income and lower foreign currency losses. The first quarter average core tax rate was 23.2%, compared to 18.4% last year. The first quarter was impacted by net expense from discrete items.

Speaker Change: First quarter interest expense was $45 million broadly in line with last year.

Speaker Change: Other financial income and expense was a net benefit of $12 million compared to a net expense of $8 million in the first quarter of last year.

Speaker Change: This improvement was primarily driven by higher interest income and lower foreign currency losses.

Speaker Change: The first quarter average core tax rate was 23, 2% compared to 18, 4% last year.

Speaker Change: The first quarter was impacted by a net expense from discrete items for the full year. We continue to expect the core effective tax rate to be approximately 20%.

Timothy C. Stonesifer: For the full year, we continue to expect the core effective tax rate to be approximately 20%. Core diluted earnings were at $0.78 per share in the quarter, up 21% 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 the quarter was an inflow of $229 million compared to an outflow of $19 million in 2023.

Speaker Change: Core diluted earnings were at 78 per share in the quarter up 21% from last year.

Timothy C. Stonesifer: This improvement was driven by higher cash from operations. For the full year, we continue to expect a meaningful step up in free cash flow versus 2023. Before I move to our outlook, I'm pleased to report that at our annual general meeting last week, shareholders approved the dividend of 24 Swiss cents per share in line with our payout policy of approximately 10% of the previous year's core net income. I want to thank our shareholders for their continued support. Now, moving to the 2024 guide.

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

Speaker Change: Free cash flow for the quarter was an inflow of $229 million compared to an outflow of $19 million in 2023.

Speaker Change: This improvement was driven by higher cash from operations.

Timothy C. Stonesifer: This improvement was driven by higher cash from operations. For the full year, we continue to expect a meaningful step up in free cash flow versus 2023. Before I move to our outlook, I'm pleased to report that at our annual general meeting last week, shareholders approved a dividend of 24 Swiss cents per share, in line with our payout policy of approximately 10% of the previous year's core net income. I want to thank our shareholders for their continued support. Now moving to the 2024 guide.

Speaker Change: For the full year, we continue to expect a meaningful step up in free cash flow versus 2023.

Speaker Change: Before I move to our outlook I am pleased to report that at our annual General meeting last week shareholders approved the dividend of <unk> 24, Swiss <unk> <unk> per share in line with our payout policy of approximately 10% at the previous year's core net income.

Speaker Change: Want to thank our shareholders for their continued support.

Now moving to 2024 guidance, our current outlook assumes that markets will grow in line with historical averages of mid single digits and exchange rates as of the end of April hold through year end.

Timothy C. Stonesifer: Our current outlook assumes that markets will grow in line with historical averages of mid-single digits and exchange rates as of the end of April hold through year-end. As such, we're maintaining our full-year top-line guidance of $9.9 to $10.1 billion. Additionally, we are increasing our constant currency sales growth guidance of 7-9%. However, given the recent strengthening of the U.S. dollar, we now expect an incremental $100 million of top-line foreign exchange pressures versus our outlook in February.

Speaker Change: As such we're maintaining our full year top line guidance at nine 9% to $10 1 billion.

Speaker Change: Additionally, we are increasing our constant currency sales growth guidance of 7% to 9%.

Speaker Change: However, given the recent strengthening of the US dollar we now expect an incremental $100 million of topline foreign exchange pressures versus our outlook in February.

Timothy C. Stonesifer: If April rates persist, we will likely trend toward the lower end of our guidance range. Moving to operating expenses, we continue to expect full-year core R&D expense to be toward the high end of the range of 7-9% of sales. Turning to profitability, despite continued currency headwinds, we are maintaining our full-year core operating margin outlook of 20.5% to 21.5%. Despite approximately 60 basis points of pressure from FX, we are currently trending toward the midpoint of the range.

Speaker Change: If April rates persist, we will likely trend towards the lower end of our guidance range.

Speaker Change: Moving to operating expenses, we continue to expect full year core R&D expense to be toward the high end of the range of 7% to 9% of sales.

Speaker Change: Turning to profitability. Despite continued currency headwinds, we are maintaining our full year core operating margin outlook of 25% to 21, 5%.

Despite approximately 60 basis points of pressure from FX, we're currently trending toward the midpoint of the range.

Timothy C. Stonesifer: Moving down the income statement, we now expect interest and other financial expenses to be between $180 and $200 million. As I mentioned earlier, we continue to expect our full-year core effective tax rate to be approximately 20%. In terms of phasing, we expect the core tax rate to be slightly higher than 20% in the first half of the year and slightly lower in the second half. Based on all of these factors, we're maintaining our core diluted earnings guidance range of $3 to $3.10 per share, which now corresponds to 15% to 18% constant currency growth over 2023.

Speaker Change: Moving down the income statement, we now expect interest and other financial expense to be between $180 million and $200 million.

Speaker Change: As I mentioned earlier, we continue to expect our full year core effective tax rate to be approximately 20%.

Speaker Change: In terms of phasing, we expect the core tax rate to be slightly higher than 20% in the first half of the year and slightly lower in the second half.

Speaker Change: Based on all of these factors, we're maintaining our core diluted earnings guidance range of $3 to $3 10 per share, which now corresponds to 15% to 18% constant currency growth over 2023.

Timothy C. Stonesifer: Despite the FX headwind I mentioned previously, we are absorbing an incremental 8 cents of FX pressure versus our guidance in February and are currently trending towards the midpoint of our guidance range. In terms of phasing, we expect most of the incremental FX pressure in the second and third quarters.

Speaker Change: Despite the FX headwind I mentioned previously we are absorbing an incremental <unk> <unk> of FX pressure versus our guidance in February and are currently trending towards the midpoint of our guidance range.

Speaker Change: In terms of phasing, we expect most of the incremental FX pressure in the second and third quarters.

David J. Endicott: Finally, I want to thank the entire Alcon team for a great start to 2024. With that, I'll turn it back to David. Thanks, Tim.

Speaker Change: Finally, I want to thank the entire icon team for a great start to 2024.

Speaker Change: With that I'll turn it back to David.

David J. Endicott: Thanks, Tim. To conclude my remarks, I want to thank the team once again for a strong start to the year. These results reflect the hard work and commercial expertise of our team, our broad and balanced portfolio of products, and the durability of our end markets. As we look to the remainder of the year, we continue to be excited about our strong in-market performance and our robust pipeline of products. We've got a number of growth drivers and have positioned Alcon nicely to expand sales faster than our markets, deliver operating leverage, and long-term shareholder value. With that, let's open the line for Q&A.

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

David J. Endicott: These results reflect the hard work and commercial expertise of our team are broad and balanced portfolio of products and the durability of our end markets.

David J. Endicott: As we look to the remainder of the year, we continue to be excited about our strong end market performance and a robust pipeline of products.

David J. Endicott: A number of growth drivers in a position to alcon nicely to expand sales faster than our markets deliver operating leverage and long term shareholder value with.

Speaker Change: With that let's open the line for Q&A.

Operator: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. We ask that you limit your questions to one and a follow-up so that others may have the opportunity to ask questions. You may re-enter the queue by pressing star 1. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.

Thank you at this time, we'll be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.

Speaker Change: You May press Star two if you would like to remove your question from the queue. We ask that you limit your questions to one and a follow up to that others may have the opportunity to ask questions. You may reenter the queue by pressing star one for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for.

Operator: One moment, please, while we poll for questions. Our first question comes from Graham Doyle with UBS. Please proceed with your question.

Speaker Change: <unk>.

Speaker Change: Our first question comes from Graham Doyle with UBS. Please proceed with your question.

Graham Doyle: Morning guys, thanks for taking my questions. It was very helpful to get some color on the Unity launch and also on the progress with Panoptix 2.0. Would you be able to give us a bit more color as to your expectations around power vision, so the accommodating lens, and how you're thinking about timelines in terms of sharing data on that? And then also just a refresher of where we are on dry eye and when we might submit that?

Graham Doyle: Good morning, guys. Thanks for taking my questions.

Graham Doyle: It was very helpful to get some color on the.

Graham Doyle: You need launch and also on the progress with Pan optics to point out.

Graham Doyle: Would you be able to give us a bit more color as to your expectations around high revision so the accommodating lens.

Graham Doyle: Timelines in terms of sharing data on that.

Graham Doyle: And then also just a refresh of where we are on trial.

Graham Doyle: When we might have thought.

Graham Doyle: And then lastly, just if you could give us a little bit of color on contact lens pricing versus volume and where you might think that goes for the rest of the year. Thank you very much.

Graham Doyle: And then lastly, just if you could give us a little bit of color on the contact lens pricing versus volume.

Graham Doyle: Where you might take that goes through the rest of the year. Thank you very much.

David J. Endicott: Yeah, thanks, Graham. Just on Unity and Panoptix.

David J. Endicott: Yeah, thanks, Graham. Just on Unity and Panoptix, as I said, we're excited about Unity being approved probably in the next couple of months here, maybe sooner. We submitted it late last year, usually about six months or so to get it back from FDA. So I think we're in a pretty good place there.

Speaker Change: Yes, Thanks, Graham just on European patent optics as I said, we're excited about.

David J. Endicott: As I said, you know, we're excited about Unity being approved probably in the next couple of months here, maybe sooner. We submitted it late last year, usually about six months or so to get it back from FDA. So I think we're in a pretty good place there. We will be careful with that launch. Obviously, it's a very important part of what we're going to do next, so we will put it in the hands of some folks.

Speaker Change: Unity being approved probably in the next couple of months here, maybe sooner we submitted it late last year, usually about six months or so to get it back from FDA. So I think we're in pretty good place. There we will be careful with that launch obviously, it's a very important part of what we're going to do next so we will.

David J. Endicott: We will be careful with that launch. Obviously, it's a very important part of what we're going to do next. So we will put it in the hands of some folks, see how it runs for a while before we fully launch it really next year. So think about revenue as next year. Panoptix Pro is also, it's similar in many ways, because we've got two approved ideas.

Speaker Change: Put it in the hands of some folks.

Speaker Change: How it runs for a while before we fully launch it really next year.

So think about revenue as next year Panoptic Pro is also it's similar in many ways because we've got two approved ideas, we want to improve this product we're going to have a really good look at those and make sure that.

David J. Endicott: Let's see how it runs for a while before we fully launch it really next year. So think about revenue as next year. Panoptix Pro is also – it's similar in many ways because we've got two approved ideas. We want to improve this product.

David J. Endicott: We want to improve this product. We're going to have a really good look at them and make sure that whatever the surgeons really feel like is going to be the most important idea gets to market. So we're working through that preference testing over the next six or twelve months. So, directionally, expect that again next year. PowerVision, we should have some data late this year. Our first in-human trial should be back to us sometime in the fall, and I think we'll either present it at a meeting or we'll present it at one of these calls.

Speaker Change: Whatever those surgeons really feel like is going to be the most important idea gets to market. So we're working through that preference testing over the next six or 12 months. So directionally expect that again next year power vision, we should have some data late this year.

David J. Endicott: We're going to have a really good look at those and make sure that whatever the surgeons really feel like is going to be the most important idea gets to market. So we're working through that preference testing over the next six or 12 months. So directionally, expect that again next year. PowerVision, we should have some data late this year. Our first in-human trial should be back to us sometime in the fall, and I think we'll either present it at a meeting or we'll present it on one of these calls, but we'll get that data out as soon as we have a complete data set.

David J. Endicott: 5.1.2 is in – should be submitted shortly. We're kind of, again, this summer is the right time to think about it. And again, that would be about a year's PDUFA, so expect that again in the middle of next year.

Speaker Change: Our first in human trial should.

Speaker Change: It should be back to us sometime in the fall and I think we'll either presented at a meeting or will presented at one of these calls, but we will get that data out as soon as we have a complete dataset 512 is in we should be submitted shortly.

David J. Endicott: But we'll get that data out as soon as we have a complete data set. 5.1.2 should be submitted shortly. We're kind of, again, this summer is the right timing to think about it. And again, that would be about a year's PDUFA, so expect that again in the middle of next year. So a nice series of innovation agenda items coming in the near term, really helping us in 2025.

Speaker Change: We're kind of again this summer is the right timing to think about and again that would be about a year's paducah. So expect that again middle of next year. So a nice nice series of innovation agenda items coming in the near term really helping us in 2025 on price and volume I would just say the contact lens price I think was around half.

David J. Endicott: On price and volume, I would just say the contact lens price, I think, was around half to a third of the volume, you know, somewhere in that zone versus the volume. So I think, directionally, you know, it was some good price movement for us, but the volume was also very strong. I think we were one of the few people that grew share in the quarter, and directionally, our unit volume, as a consequence of that, was up.

Speaker Change: Third somewhere in that zone versus the volume.

Speaker Change: So I think directionally it was.

Speaker Change: Some good price movement for us, but the volume was also very strong I think we were one of the only few people that grew share in.

Speaker Change: In the quarter and Directionally, our unit volume as a consequence of that was up.

Graham Doyle: Awesome, that's really helpful. Thanks a lot, guys.

Speaker Change: Awesome, that's really helpful. Thanks, a lot guys.

Veronika Dubajova: Our next question comes from Veronika Dubajova with Citi. Please proceed with your question.

Operator: Our next question comes from Veronika Dubajova with Citi. Please proceed with your question.

Speaker Change: Our next question comes from Veronica do you believe you have one.

Veronica: With Citi. Please proceed with your question.

Veronica: Hey, guys. Good morning, good afternoon, and thank you for taking my questions.

Veronika Dubajova: Everyone's favorite topic. I just wanted to circle back on USATI and maybe kind of push you, David, a little bit on what you are seeing in terms of penetration and why do you think we are so stagnating at the levels that we've been at now for six, seven quarters? What is it going to take for things to get better?

Veronica: Everyone's favorite topic I, just wanted to circle back on.

Veronica: U S <unk>.

Veronica: And maybe kind of push you David a little bit on what you are seeing in terms of penetration and why do you think we are sales stagnating.

David J. Endicott: At the levels that we've been at now for six seven quarters, what is it going to take for things to get better and then maybe just some thoughts on the competitive environment.

David J. Endicott: And then maybe just a thought on the competitive environment. We continue to get lots of questions on some of the new products that are coming in. What you are seeing out there and hearing from folks would be very helpful. And then my just a quick second question is on the guidance upgrade to constant currency revenue growth. If you can tease out for us whether surgical or contact lenses or ocular health are the biggest driver of that, if you can give us some specificity around that. Thanks guys.

David J. Endicott: Lots of questions on some of the new products that are coming in.

Speaker Change: What are you seeing out there in hearing from folks.

Speaker Change: That's very helpful. And then Mike just a quick second question is on the guidance that Greg <unk> constant currency revenue go ahead, if you can.

Speaker Change: <unk>, while our surgical or contact lenses or ocular health I think it's driver of that.

Mike: If you could give us some specificity around that thanks.

Mike: Thanks, guys.

David J. Endicott: Yeah, Veronika, let me try and get to the implantables question. You asked a lot about that one, and I'll try to unpack it as best I can. You know, I think directionally implantables was, you know, obviously a very strong quarter for us in ATI Wells internationally. We've got a lot of opportunity there with the China VVP coming. That's an important play for us.

Mike: Yes, Veronika, let me, let me try and get to the Implantables question.

Mike: You asked a lot of that one and I'll try and unpack it best I can.

Speaker Change: Yes, I think Directionally Implantables was obviously, a very strong quarter for us in Agi wells internationally, we've got a lot of opportunity there with the China Pvp coming.

Speaker Change: An important play for us, but also Europe was very strong we gained share in <unk> as we gained share.

David J. Endicott: But also Europe was very strong. We gained a share, you know, in PCI Wells. We gained share around the world, and we are still introducing vividly in some markets. So there were some really strong performances, I think, internationally. The U.S. was solid. I mean, you know, the U.S. market was a little bit soft in the U.S. I think it was two percent overall, and it was low in the U.S. I think it might have been one in the U.S.

Speaker Change: Around the world and we are introducing <unk> still in some markets. So there is some some really strong performance I think internationally. The U S with solid I mean, the U S was the market was a little bit soft in the U S. I think it was 2% overall and it was low in the U S. I think it might have been one in the U S. So it was a little bit soft, but I think directionally, what you're really getting at it.

David J. Endicott: So it was a little bit soft. But I think directionally, what you're really getting at is, you know, what does the competitive set look like? And look, there are a number of new products coming in. J&J's got stuff, B&L's got stuff, but nothing that we didn't anticipate. And so I think directionally, you know, we're very comfortable with the share that we've got. We actually, in the U.S., gain share in monofocal. We gain share in PCI Wells. We're still well over 80 percent. And it's really the Torex that are in the fight.

Speaker Change: What's the competitive set look like and look there are a number of new products coming in J&J has got stuff <unk> got stuff, but nothing that we didn't anticipate and so I think directionally, we're very comfortable with the share that we are that we have.

Speaker Change: Got we actually in the U S. We gained share in mono focal we gained share in PCI OLS, we're still well over 80% and it's really the <unk> that are the fight and so I think youre going to see more of that we expected and it's what we're geared up for.

David J. Endicott: And so I think you're going to see more of that. We expect it. And it's what we're geared up for relative to the second question, which was kind of new products. You know, I don't know that there's anything new down the road in front of us other than a couple of things that, you know, are probably next year or later.

David J. Endicott: And so I think you're going to see more of that. We expect it. And that's what we're geared up for. Relative to the second question, which was kind of new products, I don't know that there's anything new down the road in front of us other than a couple of things that, you know, are probably next year or later.

Speaker Change: Relative to the.

Speaker Change: The second question, which was kind of new products.

Speaker Change: No that there is anything new down the road in front of us other than a couple of things that are probably next year or later, so I'll, let the competitors kind of brief those for you on the constant currency revenue growth look what's driving it. This year is obviously, we're outperforming on the contact lenses and we were excited to see the share movements we've been.

David J. Endicott: So I'll let the competitors kind of brief those for you on the cost of currency revenue growth. Look, what's driving it this year is obviously we're outperforming on the contact lenses, and we were excited to see the share movements. We've been pleased with the Torex uptake, in particular. And I do think that as you reflect on where we're going forward, as I've said for a while, the broad portfolio that we have, both geographically and across our businesses, gives us a lot of stability, you know, going into these markets.

David J. Endicott: So I'll let the competitors kind of brief those for you on the cost of currency revenue growth. Look, what's driving it this year is obviously we're outperforming on the contact lenses, and we were excited to see the share movements. We've been pleased with the Torex uptake, in particular. And I do think that as you reflect on where we're going forward, as I've said for a while, the broad portfolio that we have both geographically and across our businesses gives us a lot of stability, you know, going into these markets.

Speaker Change: Pleased with the toric uptake in particular and I do think that as you reflect on where we are going forward as I've said for a while the broad portfolio that we have both geographically.

Speaker Change: And across our businesses gives us a lot of stability going into these markets. So if we have market to grow mid single digits and we outperformed that again, that's kind of our thesis going forward. In this particular moment international is doing very well and that's helping us relative to the U S and contact lens in vision care is doing very well. So again I would look for those who.

David J. Endicott: So if we have markets that grow mid single digits and we outperform that, again, that's kind of our thesis going forward. In this particular moment, international is doing very well. And that's helping us relative to the U.S., and contact lens and vision care is doing very well. So, again, I would look for those to continue. Yeah. And as far as the foreign exchange, Veronica, it's pretty much.

David J. Endicott: And as far as the foreign exchange is concerned, Veronika, it's pretty much evenly distributed across the categories.

Speaker Change: Yeah, and as far as the foreign exchange were on it it's pretty much evenly distributed across the categories.

Speaker Change: Excellent thanks, guys.

Operator: Our next question comes from Ryan Zimmerman with VTIG. Please proceed with your question.

Speaker Change: Our next question comes from Ryan Zimmerman with.

Speaker Change: Please proceed with your question.

Ryan Benjamin Zimmerman: Good morning. Thanks for taking the questions. I want to ask two.

Speaker Change: Good morning, Thanks for taking the question.

Ryan Benjamin Zimmerman: Wanted to ask two the first on Belkin vision and then second on price. So the first one on belkin.

Ryan Benjamin Zimmerman: The first one on Belkin Vision, and the second on Price. So the first one on Belkin. You know, they sell the direct SLT device for the office setting. Just, David, I'd love to get your thoughts on kind of where you see DSLT fitting in terms of your glaucoma treatment portfolio, but also in the context of, you know, other treatments for glaucoma. You know, is this what you want to do with the device? Is there more to using the Eagle device beyond DSLT when you think about its benefits for glaucoma patients?

Ryan Benjamin Zimmerman: They sell the direct esselte device for the office office setting.

Ryan Benjamin Zimmerman: The first one on Belkin Vision, and the second on Price. So the first one on Belkin. You know, they sell the direct SLT device for the office setting. David, I'd love to get your thoughts on kind of where you see the SLT fitting in terms of your glaucoma treatment portfolio, but also in the context of, you know, treatments for glaucoma. You know, is this what you want to do with the device? Is there more to using the Eagle device beyond the SLT when you think about its benefits for glaucoma patients?

David J. Endicott: David I'd love to hear your thoughts on kind of where you see <unk> fitting in terms of your glaucoma treatment portfolio, but also in the context of treatments in glaucoma.

David J. Endicott: Is this what you want to do with the device is there more to using the eagle device beyond <unk>, when you're thinking about kind of its benefits.

Speaker Change: Benefits for glaucoma patients.

David J. Endicott: Yeah, Ryan, it's a great question. And, you know, look, we see an emerging consensus out there amongst the leaders in glaucoma that the right place to start patients is with SLT. And DSLT in particular, we think it's more convenient, it's easier to use. It's a really, I think, exciting kind of advance, if you will, to make this kind of surgeon pick up the SLT idea, where it's relatively difficult right now. You got to hold a gonioscope, you got to get into the angle. It's tricky to do it with a normal laser that you have today, but this is a much simpler idea.

David J. Endicott: Yeah, Ryan, it's a great question. And, you know, look, we see an emerging consensus out there amongst the leaders in glaucoma that the right place to start patients is with SLT. And DSLT in particular, we think it's more convenient, it's easier to use, and it's a really, I think, exciting kind of advance, if you will, to make this kind of surgeon pick up the SLT idea, where it's relatively difficult right now. You have to hold a gonioscope, you have to get into the angle. It's tricky to do it with a normal laser that you have This is a much simpler idea.

Ryan Benjamin Zimmerman: Yes, Ryan it's a great question.

David J. Endicott: Look we see an emerging consensus out there amongst the leaders in glaucoma that the right place to start patients is with esselte and DSL team. In particular, we think is more convenient it's easier to use it's a really.

Ryan: I think exciting kind of advance if you will to make this kind of the surgeons pick up the the esselte idea, where it's relatively difficult right now you've got a hold of <unk>.

Speaker Change: Scope, you've got to get into the angle, it's tricky to do it with a normal laser that yesterday. This is a much simpler idea and we think will advance the treatment, but the key to that really is that most people. In there was there is a piece of work that I think anybody can find its called the light study was done several years ago, but it basically argues that the <unk>.

David J. Endicott: And we think it will advance the treatment. But the key to that really is that most people, and there was, you know, there's a piece of work that I think anybody can find, it's called the light study. It was done several years ago, but it basically argues that, you know, the first thing we should be doing, and sooner rather than later, is treating glaucoma patients with, you know, laser trabeculatomy, so, or sorry, tra

David J. Endicott: And we think we'll advance the treatment. But the key to that really is that most people, and there was, you know, there's a piece of work that I think anybody can find. It's called the light study was done several years ago. But it basically argues that, you know, the first thing we should be doing, and sooner rather than later, treating glaucoma patients with, you know, laser trabeculatomy. So, or sorry, trabeculatomy.

David J. Endicott: So, this is, I said, sorry, it's trabeculoplasty, but the idea, of course, is that this is a big part of us starting down a glaucoma idea where we have drops, we have laser therapy, we have an intervention with a stent. We think this is good white space for us, and glaucoma is a really large category. So, directionally, you know, this is a good start for us into the beginning parts of where the patient journey begins.

Scope: First thing, we should be doing and sooner rather than later is treat glaucoma patients with laser trabeculectomy, so or sorry, a lot of me so.

David J. Endicott: But the idea, of course, is that this is a big part of us starting down a glaucoma idea where we have drops, we have laser therapy, we have an intervention with a stent. We think this is good white space for us. And glaucoma is a really large category. So, directionally, you know, this is a good start for us into the beginning parts of where the patient journey begins.

Scope: This is sorry, it's peripheral plasty.

Scope: But the idea of course is that this is a big part of US starting now to glaucoma idea, where we have drops we have laser therapy, we have an intervention with a stent. We think this is good white space for us in glaucoma is a really large category. So directionally. This is a good start for us into the beginning parts of where the patient <unk>.

Speaker Change: Any begins.

Ryan Benjamin Zimmerman: Got it. And just a quick one on that. Do you have to do any more clinical studies? I mean, I've looked at the studies for Belkin. You know, it's pretty on par with SLT.

Speaker Change: Got it.

Speaker Change: Just.

Speaker Change: Quick one on that.

Speaker Change: Do you have to do any more clinical studies I mean, I've looked at the studies for Belkin.

Speaker Change: Pretty on par with Esselte do you feel like you need to do any more clinical studies for that and then I will.

David J. Endicott: Do you feel like you need to do any more clinical studies for that? And then I'll just ask a second question up front, but you know, you got a price on consumables as well. You called out the pricing on contact lenses. Curious what the pricing benefit was on consumables. And how to think about the benefit of consumable pricing next year, conceivably, when unity is available? I imagine that's going to be a nice growth driver. Thanks for taking the question. Of course, yeah.

David J. Endicott: Do you feel like you need to do any more clinical studies for that? And then I'll just ask a second question up front, but, you know, you got some prices on consumables as well. You called out the pricing on contact lenses. Curious what the pricing benefit was on consumables. And how to think about the benefit of consumable pricing next year, conceivably, when unity is available? I imagine that's going to be a nice growth driver. Thanks for taking the question. Of course, yeah.

Speaker Change: Just ask the second question upfront, but you've got some price on consumables as well you called out the pricing on contact lenses.

Speaker Change: What the pricing benefit wasn't consumables and how to think about the benefit of consumable pricing next year conceivably when unity is available I imagine that's going to be a nice growth driver in the consumables segment. Thanks for taking my questions.

David J. Endicott: Of course, yeah. For the clinical studies around Belkin, you know, we don't really anticipate anything for approvable status. I mean, it's approved at this point in the United States and also in Europe, so we're satisfied with that process. We will probably, I'm sure, want to do more work around this to support the intervention earlier and the success of that intervention with patients and, frankly, the ease and ease of use for the surgeon.

Speaker Change: Of course, yes on the clinical studies around Belkin, we don't really anticipate anything for approvable status I mean, it's approved at this point.

Speaker Change: In the United States and also in Europe. So we're we're satisfied with that process, we will probably I am sure want to do more work around this to support the intervention earlier and the success of that intervention with patients and frankly that the ease and.

Speaker Change: Ease of use for the surgeon. So directionally I think we're excited about <unk> and I would just say that we look forward to getting that into the field probably late this year early next when you get to the consumables business. There was a little bit of pricing consumables, but again I wouldn't think of that as a major driver what's been driving consumables.

David J. Endicott: So directionally, you know, I think we're excited about Belkin and I would just say that, you know, we look forward to getting that into the field probably late this year or early next. When you get to the consumables business, you know, there was a little bit of price in consumables, but again, I wouldn't think of that as the major driver. What's been driving consumables for us has been the footprint growth that we've had on the equipment side over the last couple of years. I think you'll note that if we go back, we had a really good run with Constellation and with Centurion, and our share of FecalPaks has gone up, even despite the last two launches against us.

David J. Endicott: So, directionally, you know, I think we're excited about Belkin, and I would just say that, you know, we look forward to getting that into the field probably late this year or early next. When you get to the consumables business, you know, there was a little bit of price in consumables, but, again, I wouldn't think of that as the major driver. What's been driving consumables for us has been the footprint growth that we've had on the equipment side over the last couple of years. I think you'll note that if we go back, we had a really good run with Constellation and with Centurion, and our share of FecalPaks has gone up, even despite the last two launches against us.

Speaker Change: For us has been the footprint growth that we've had on the equipment side over the last couple of years I think Youll note that if we go back we had a really good run with constellation and with.

Speaker Change: So ensuring and our share of <unk> has gone up.

Speaker Change: Even despite the last two launches against us so directionally, we're picking up a little bit of volume and then we pick up a little bit of price as we mix to kind of the more modern equipments and think of that as like the hand pieces and the devices that we used to open and close the eye and so blades and is everything else that goes with it generally speaking.

David J. Endicott: So, directionally, we're picking up a little bit of volume, and then we pick up a little bit of price as we mix in the kind of the more modern equipment. Think of that as, like, the hand pieces and the, you know, the devices that we use to open and close our eyes, and so blades, knives, everything else that goes with it. You know, generally speaking, the folks on the ground are always trying to improve the speed and the safety of the procedure. So, usually, it's the mix that's driving the price piece of it. And our consumables for next year, look, I mean, I think we haven't priced the consumables or the Unity unit yet.

David J. Endicott: So directionally, we're picking up a little bit of volume, and then we pick up a little bit of price as we mix in the kind of the more modern equipment and think of that as like the hand pieces and the, you know, the devices that we use to open and close our eyes and so blades, knives, everything else that goes with it. And generally speaking, the folks on the ground are always trying to improve the speed and the safety of the procedure. So usually it's the mix that's driving the price piece of it. And our consumables for next year, look, I mean, I think we haven't priced the consumables or the Unity unit yet.

Speaker Change: Folks on the ground are always trying to improve the speed and the safety of the procedure. So usually it's mix that's driving the price piece of it and.

Speaker Change: In our consumables for next year look I mean, I think we haven't priced the consumables or the or the unit to unit yet we're thinking hard about it as a lot of work going on to figure out really what's the optimized value here.

David J. Endicott: We are thinking hard about it. There's a lot of work going on to figure out, really, what's the optimal value here. A lot of what we're trying to figure out in the near term is how much efficiency can we generate for the surgeon. How much faster can you be with this? How much safer can you be with this?

David J. Endicott: We are thinking hard about it. There's a lot of work going on to figure out really, you know, what's the optimized value here. A lot of what we're trying to figure out in the near term is how much efficiency can we generate for the surgeon. How much faster can you be with this? How much safer can you be with this?

Speaker Change: What we're trying to figure out in the near term is how much efficiency can we generate for the surgeon how much faster can you be with this how much safer can you be with us and if we can really improve our efficiency in the or than again that helps the economics of the surgeon in the facility and obviously, we would choose to want to share in that so we're working through.

David J. Endicott: And if we can really, you know, improve our efficiency in the OR, then again, that helps the economics of the surgeon and the facility. And obviously, we'd choose to want to share in that. So, you know, we're working through the math on that right now.

David J. Endicott: And if we can really, you know, improve our efficiency in the OR, then, again, that helps the economics of the surgeon and the facility. And, obviously, we'd choose to want to share in that. So, you know, we're working through the math on that right now.

Speaker Change: The math on that right now.

Operator: Our next question comes from Richard Felton with Goldman Sachs. Please proceed with your question.

Speaker Change: Our next question comes from Richard Felton with Goldman Sachs. Please proceed with your question.

Richard Felton: Thank you very much for taking the questions. Two from me, please, both on the margin. Tim, I think you said on your Q4 call that you expected H1 margin to be down by 100 basis points year on year. However, obviously, Q1 has come in a lot stronger than that. My question is, heading into Q2, is that 100 bps guide still relevant, and should we expect a much softer Q2 from a margin perspective, or has the underlying momentum been a little bit better than you had previously expected?

Richard Felton: Thank you very much for taking the questions. Two from me, please, both on the margin. Tim, I think you said on your Q4 call that you expected H1 margin to be down by 100 basis points year on year. Obviously, Q1 is coming a lot stronger than that. My question is, heading into Q2, is that 100 bps guide still relevant, and should we expect a much softer Q2 from a margin perspective, or has the underlying momentum been a little bit better than you had previously expected?

Richard Felton: Thank you very much for taking the questions. Two from me. Please both on margin. So Tim I think you said on your Q4 call that you expect <unk> margins to be down by 100 basis points year on year. Obviously Q1 has commented a lot stronger than that.

Richard Felton: Question is heading into Q2 is that 100 bps guide still relevant.

Richard Felton: And we should expect a much softer Q2 from a margin perspective or is the underlying momentum being a little bit better than you had previously expected.

Richard Felton: And then also for the follow-up, also on margin, you referenced the timing of discretionary spend as a driver of margin year on year. Are you able to quantify the impact of that, please, and also say what part of your business that is affected? Thank you.

Richard Felton: And then also for the follow-up, also margin, you referenced the timing of discretionary spend as a driver of margin year on year. Are you able to quantify the impact of that, please, and also say what part of your business that is affected? Thank you.

Richard Felton: Also as a follow up or so margin you referenced the timing of discretionary spend does it drive the margin year on year.

Richard Felton: To quantify the impact of that please and what to say what parts of your business that impacted thank you.

Timothy C. Stonesifer: Yeah, so, starting with the 100 basis points that we referred to in the last call, that was related to gross margin. So if you look at gross margin year over year, it was flat.

Timothy C. Stonesifer: Yeah, so, you know, starting with the 100 basis points that we referred to in the last call, that was related to gross margin. So, if you look at gross margin year-over-year, it was flat. We have about 50 basis points in there that was really timing of the duties that we called out. So, I would step that margin rate down by call it 50 basis points, and as you think about the progression throughout the rest of the year, Q2 sequentially will probably be down a little bit more as we have more inventory flowing through that higher cost inventory that we spoke about, and then it'll start ramping up in Q3 and Q4, but again, total year-year-over- year should be relatively flat, and as far as the discretionary, I mean, I would call out the 50 basis points on the duties, so that's obviously in the gross margin section of the P&L, and then I would look at R&D.

Richard Felton: Yes, so starting with the 100 basis points that we've referred to in our last call that was related to gross margin. So if you look at gross margin year over year.

Speaker Change: It was flat we have about 50 basis points in there that was really timing.

Timothy C. Stonesifer: We have about 50 basis points in there that were really timing of the duties that we called out. So I would step that margin rate down by calling it 50 basis points. And as you think about the progression throughout the rest of the year, Q2 sequentially will probably be down a little bit more as we have more inventory flowing through that higher-cost inventory that we spoke about, and then it'll start ramping up in Q3 and Q4. But again, total year, year over year, should be relatively flat. And as far as the discretionary spending, I mean, I would call out the 50 basis points on the duties.

Speaker Change: The duties that we called out so I would step that margin rate down by call. It 50 basis points and as you think about the progression throughout the rest of the year.

Speaker Change: Q2 sequentially, we'll probably be down a little bit more as we have more inventory flowing through that higher cost inventory that we spoke about and then it will start ramping up in Q3, and Q4, but again total year year over year should be relatively flat and.

Speaker Change: And as far as the discretionary I mean, I would call out the age of 50 basis points on the duties.

Timothy C. Stonesifer: So that's obviously in the gross margin section of the P&L. And then I would look at R&D. I mean, R&D was a little bit light in Q1. We came in at about 8% of revenue, as we talked about in the original guide. We're guiding for 7% to 9%. We think we'll be at the high end of that. So I would expect a little bit more R&D flowing through the P&L in quarters Q2 through Q4.

R&D: So thats obviously in the gross margin section of the P&L and then I would look at R&D R&D was a little bit light in Q1, we came in at about 8% of revenue as we talked about in the original guide.

Timothy C. Stonesifer: I mean, R&D was a little bit light in Q1. We came in at about 8% of revenue, as we talked about in the original guide. We're guiding 7% to 9%. We think we'll be at the high end of that, so I would expect a little bit more R&D flowing through the P&L in quarters Q2 through Q4.

Richard Felton: Great, thank you very much.

Speaker Change: <unk>, 7% to 9%, we think we'll be at the high end of that so I would expect a little bit more R&D flowing through the P&L in quarters Q2, Q2 through Q4.

Richard Felton: Great, thanks very much.

Speaker Change: Alright, Thank you very much.

Operator: Our next question comes from Larry Biegelsen with Wells Fargo. Please proceed with your question.

Lawrence H. Biegelsen: Our next question comes from Larry Biegelsen with Wells Fargo. Please proceed with your question.

Lawrence H. Biegelsen: Our next question comes from Larry <unk> with Wells Fargo. Please proceed with your question.

Lawrence H. Biegelsen: Good morning. Thanks for taking the question. So, David, Unity, you know, is a big opportunity for you. How far behind is the FACO-only clearance in the U.S.? I heard it's a 26-launch, but just the clearance, how far behind is it? And we estimate the Unity platform can contribute to above-average growth in equipment and surgical procedures as soon as 2025. Would you agree, and what are the margin implications?

Lawrence H. Biegelsen: Good morning, Thanks for taking the question.

Lawrence H. Biegelsen: So David Unity is a big opportunity for you how far behind it.

Lawrence H. Biegelsen: <unk> only clear into the U S. I heard at the 26 launch, but just the clearance how far behind it and we estimate the unity platform can contribute to can contribute to above average growth in equipment and surgical as soon as 2025 would you agree and what are the margin implications and I had one follow up.

David J. Endicott: Yeah, well, the last one's easy because the margin on equipment's always a little bit lower, so it's on the low end of what we sell. So, you know, think about that as a, you know, on the tick-to-gross margin, you know, a slight downside. But I think directionally and realize that you're right, revenue growth is going to drive a lot of profit growth, and that's what we'll be looking at is, you know, UPS growth on this thing.

David J. Endicott: Yeah, well, the last one's easy because the margin on equipment's always a little bit lower, so it's on the low end of what we sell. So, you know, think about that as a, you know, on the tick-to-gross margin, you know, a slight downside. But I think directionally realize that you're right, revenue growth is going to drive a lot of profit growth, and that's what we'll be looking at is, you know, UPS growth on this thing.

Speaker Change: Yes, well the last one is easy because the margin on equipment is always a little bit lower so its on the low end of what we sell so think about that.

Speaker Change: On to gross margin.

Speaker Change: A slight downside, but I think directionally realize it youre right. The revenue growth is going to drive a lot of profit growth.

Speaker Change: What we'll be looking at is EPS growth on this thing over time.

David J. Endicott: Over time, you know, we expect this to be, you know, a relatively stable market upgrade. So think of it, you know, really as a 10-year cycle with the first couple of years being a little bit more aggressive than the later years because people are going to want the new stuff. But they're also, those that bought, you know, a Constellation or a Centurion, you know, not too long ago, they're still working, and they'll go for another seven, eight years. So, directionally, you know, think of the trajectory that way.

Speaker Change: We expect this to be a relatively stable market upgrades. So think of it really is a 10 year cycle with the first couple of years being a little bit more aggressive than the outer years, because people are going to want the new stuff, but there are also those are bought constellation or since you're in.

Speaker Change: Not too long ago, there is still working and they will go for another seven or eight years. So directionally think of the trajectory that way.

David J. Endicott: I think on the other piece of it, CS is behind on approval, and I don't know that we've commented on it exactly, but directionally think of it as a 26 kind of revenue idea. So, you know, we don't think we're that far behind with CS, maybe six months to a year. But again, we'll let you know as we get closer to it. The combined machine is obviously a big advantage internationally because most of the international markets, you know, share ORs, and we think that that has a real appeal. The speed and simplicity of our new FIG emulsification method is really exciting, and the fluidics, you know, are down around physiological IOP.

Speaker Change: On the other piece of it.

David J. Endicott: I think on the other piece of it, CS is behind on approval, and I don't know that we've commented on it exactly, but directionally, think of it as a 26 kind of revenue idea. So, you know, we don't think we're that far behind with CS, maybe six months to a year. But again, we'll let you know as we get closer to it. The combined machine is obviously a big advantage internationally because most of the international markets, you know, share ORs, and we think that that has a real appeal. The speed and simplicity of our new FIGO emulsification method is really exciting, and the fluidics, you know, are down around physiological IOP.

Speaker Change: <unk> is behind and approval and all that we've commented on it exactly but directionally think of it as a 26 kind of revenue idea. So we don't think we're that far behind with see us maybe six months to a year, but again, we'll let you know as we get closer to it.

Speaker Change: The combined machine is obviously, a big advantage internationally, because most of the international markets share <unk> and we think that that has a real appeal.

Speaker Change: Feed and simplicity of our new.

Speaker Change: Single, most suffocation method is really exciting and the fluidics are down around physiological IOP. So we're we think the not just the sea us, but really the joint machine has a lot of efficiency gain for for the market. So we're excited about it.

David J. Endicott: So we're, you know, we think the not just the CS but really the joint machine has a lot of efficiency gains for the market. So we're excited about it. And then just above average growth in 25, yeah, we had said at Capital Markets Day that the market will probably pick up because, to a large degree, in the equipment market, we have been a large part of that. And so I think, from our point of view, the market will likely grow into the mid-single-digit range, whereas historically, it's been a little bit below that.

David J. Endicott: So we think that not just the CS but really the joint machine has a lot of efficiency gains for the market. So we're excited about it. And then just above average growth in 25, yeah, we had said at Capital Markets Day that the market will probably pick up because, to a large degree, in the equipment market, we have been a large part of that. And so I think, from our point of view, the market will likely grow into the mid single-digit range, whereas historically it's been a little bit below that.

Speaker Change: And then just above average growth in 'twenty, one yes, what we had said at capital markets day, Youll remember that the market will probably pick up because to a large degree in the equipment market. We have been a large part of that and so I think from our point of view the market will likely grow into the mid single digit range, whereas historically, it's been a little bit below that will obviously be a big.

David J. Endicott: We'll obviously be a big part of that growth and probably be real close to the market growth because, you know, again, to a large degree, we're a big part of it. I would just make one other comment on equipment since you mentioned it. You know, we had a very good quarter for our biometer and also for our microscopes. So one of the, you know, positive things I think hidden down in the equipment is that we're having a nice impact, you know, on the share of those products.

David J. Endicott: We'll obviously be a big part of that growth and probably be real close to the market growth because, you know, again, to a large degree, we're a big part of it. I would just make one other comment on equipment since you mentioned it. You know, we had a very good quarter for our biometer and also for our microscopes. So one of the positive things I think hidden down in the equipment is that we're having a nice impact, you know, on the share of those products.

Speaker Change: Big part of that growth in.

Speaker Change: And probably be real close to the market growth.

Speaker Change: Again to a large degree were big part of it I would just make one other comment on equipment. Since you mentioned it we had a very good quarter on our Biometer and also on our microscopes. So one of the positive things I think kidding down and the equipment is we're having a nice impact with the share of those products.

Lawrence H. Biegelsen: That's super helpful. And Tim, it's unclear to me, did you raise the constant currency revenue guidance or not? Because I heard you say, you know, obviously, the numbers are higher at the midpoint, but you pointed to the low end of the new range. And what's assumed for implantables in that? Should we be thinking about low single-digit growth for the rest of the year?

Lawrence H. Biegelsen: That's super helpful. And Tim, it's unclear to me whether you raised the constant currency revenue guidance or not. Because I heard you say, you know, obviously the numbers are higher at the midpoint, but you pointed to the low end of the new range. And what's assumed for implantables in that? Should we be thinking about low single-digit growth for the rest of the year?

Speaker Change: That's super helpful. Tim.

Tim: It's unclear to me did you raise the constant currency revenue guidance or not because I heard you say you are.

Timothy C. Stonesifer: Thank you.

Tim: We see the numbers are higher at the midpoint, but you pointed to the low end to the new range and whats assumed for Implantables in that should we be thinking about low single digit growth for the rest of the year. Thank you.

Lawrence H. Biegelsen: Yeah, so we raise constant currency, and on the absolute dollars, obviously, you have to triangulate the currency rates with the absolute dollars. If rates stay where they are in April, you know, we're trending more towards the lower end of that. But given the midpoint of everything else, you know, we're at the midpoint of the EPS guide. I'm sorry. What was your second question?

Speaker Change: Yes, so we raised constant currency and on the absolute dollars. Obviously, you have to try and triangulate the currency rates with the absolute dollars.

Speaker Change: Stay where they are in April we're trending more towards the lower end of that.

Speaker Change: But given the mid point of everything else, we're at the midpoint of the EPS Guide.

Speaker Change: And I'm sorry, what was your second question.

Timothy C. Stonesifer: Yeah, no, so I understand when you were pointing to the low end, Tim, you were talking about dollar sales; you weren't talking about the low end of that 7 to 9 percent. Correct. Okay, thanks. Implantables, just kind of, should we be thinking about low single-digit growth for the rest of the year? Yeah, I would.

David J. Endicott: Yeah, so I understand when you were pointing to the low end, Tim, you were talking about dollar sales. You weren't talking about the low end of that 7 to 9 percent. Correct. Okay, thanks. Implantables, just kind of, should we be thinking about low single-digit growth for the rest of the year? Yeah, I would.

Speaker Change: Yes, so I understand when you were pointing to the low end and Tim you were talking about the dollar sales you were talking about the low end correct correct.

Speaker Change: Okay. Thanks.

Tim: <unk> just kind of should we be thinking about low single digit growth for the rest of the year. Thank you.

Lawrence H. Biegelsen: Yeah, I would think about the, whatever the market sits at, you know, again, I suspect it's kind of in the mid-single digits or to the low end of that. You know, usually a normal global market is going to run 4-5%, so, you know, I would think about it, you know, right around there, plus or minus a little bit in the U.S., and I think directionally international should grow a little bit faster than that. Our next question comes from Jack Reynolds-Clark with RBC Capital Markets. Please proceed with your question.

David J. Endicott: Yeah, I would think about the, whatever the market sits at, you know, again, I suspect it's kind of in the mid-single digits or to the low end of that. Usually, a normal global market is going to run four or five percent. So, you know, I would think about it, you know, right around there, plus or minus a little bit in the U.S., and I think, directionally, international should grow a little bit faster than that. Our next question comes from Jack Reynolds-Clark with RBC Capital Markets. Please proceed with your question.

Tim: Yes, I would think about the whatever the market sits at again I suspect it's kind of in the mid single digit towards the low end of that.

Speaker Change: Usually a normal global market is going to run 45%. So I would think about it right around there plus or minus a little bit in the U S and I think directionally.

unknown: International should grow a little bit faster than that.

unknown: Thank you.

Speaker Change: Our next question comes from Jeff Arnold Clark with RBC capital markets. Please proceed with your question.

Speaker Change: Hi.

unknown: <unk>.

Speaker Change: Are you seeing any impact.

Speaker Change: It can.

Speaker Change: Can be smooth, China business and do you have any kind of updates about kind of what you are hearing about that ahead of <unk>.

Speaker Change: PBT Rollouts.

Jack Reynolds: Hey Jack, the first bit of that was cut off, can you start over just a little bit because we missed the first bit? I got the China VVP piece, was there anything else? Um, no, that was it. I mean, are you seeing any impact ahead of that? and then any update to your assumptions.

Jack Reynolds-Clark: Hey Jack, the first bit of that cut off, can you start over just a little bit because we missed the first bit. I got the China VVP piece, was there anything else? Um

Speaker Change: Hey, Hey, Jack the first bit of that cut off can you start over just a little bit because we missed the first bit of I got the China <unk> was there anything else.

Speaker Change: No.

Jack: Are you seeing any impact.

Jack: Ahead of that coming in and then any update to your assumptions around that.

David J. Endicott: No, China had it. We had a good quarter in China. I mean, it grew, you know, kind of in the low teens, I think, mainly based on consumables and refractive equipment for us. But, you know, our business was pretty stable because it's principally in the private markets, or has been historically. And so I think directionally, you know, we didn't see much, I think, you know, there is, you know, there is some activity in China as people are exiting the VVP.

Jack: China had a we had a good quarter in China I mean, it grew kind of low teens, I think mainly based on consumables and refractive equipment for us but.

Jack: Our business was pretty stable because it's principally in the private markets or has been historically and so I think directionally. We didn't see much I think there is there is some some activity in China as people are exiting the BBB.

David J. Endicott: And again, I think there'd be some noise in the system, if that's what you're referring to, as people kind of load up some of the distributors for their last sale, you know, and try to push that along. So, you know, but again, that didn't affect us in any way.

Jack: And again I think there'll be some noise in the system, if that's what you're referring to as people kind of load up some of the distributors for their last sale.

Jack: And trying to push that along so but.

Jack: Again that did affect us in any way.

Jack: Great. Thanks.

Operator: Our next question...

Jack: Our next question comes from David Saxon with Needham <unk> Co. Please proceed with your question.

David James Adlington: Great. Thanks, and good morning, David and Tim. Thanks for taking my questions.

David Joshua Saxon: Great. Thanks, and good morning, David and Tim Thanks for taking my questions.

David Joshua Saxon: Wanted to ask about sustained.

David Joshua Saxon: Another really strong quarter here. So can you talk about the durability of growth for sustained how much runway do you have with either product iterations or geographic expansion.

David Joshua Saxon: To drive growth in that product line.

David J. Endicott: I wanted to ask about sustain, another really strong quarter here. So can you talk about the durability of growth for sustain? How much runway do you have with either?

David: Yes, it's a really good question, David and sometimes an underappreciated element of our business that brand is is well over one $5 billion for us and I think people may not understand just quite how good that is.

David James Adlington: Yeah, it's a really good question, David. And sometimes an underappreciated element of our business; that brand is well over a half a billion dollars for us. And I think people just may not understand just quite how good that is. Directionally for us, the Sustain brand has benefited from the preservative-free form and format. Internationally, preservative-free products have been around for a long time, and the U.S. market has not had them. What we had anticipated was that we would cannibalize some of our own business. It just doesn't look like that's happening.

David Joshua Saxon: Directionally for us.

David Joshua Saxon:

David Joshua Saxon: The sustained brand it has benefited from the preservative free.

Speaker Change: Form and format internationally preservative free products have been around for a long time in the U S market has not had them.

Speaker Change: What we had anticipated was that we would cannibalize some of our own business. It just doesn't look like that's happening so in the.

David J. Endicott: So in the Sustain brand, we have a value brand, we have a kind of a middle brand, and then we have our top end, which is preservative-free and complete. So Sustain, complete, preservative-free. And we're selling all three of those quite well, so I think we've kind of got the retail piece of this right. The consumer is sensitive these days. Some people want the less expensive version.

Speaker Change: Sustained brand we have.

Sustained brand: We are a value brand, we have a kind of a middle brand and then we have a.

Sustained brand: Kind of our top end, which is the preservative free complete sustained complete preservative free and we're selling all three of those quite well. So I think we've kind of got the retail piece of this correct. The consumer is is sensitive and some days some people want the less expensive version and some people want.

David J. Endicott: Some people want the preservative-free product, and it is, quite frankly, the best one. So we're excited about what's going on there. We have launched preservative-free in most markets, and as I think I said, nearly 40 markets around the world. There are still a few that are in the early phases of that, but the U.S. has still got plenty of runway. I would say if you were to try and model it, I'd model it against where the penetration of preservative-free products is in Europe and where it is in the United States, and then just compare those numbers. It would show you that we have a pretty good runway. And the real question is only how much of our own brands will we cannibalize along the way. But directionally, as I said, we were at mid-teens growth on a pretty big number.

Sustained brand: The preservative free product and it is it is quite frankly, the best ones. So we're excited about what's going on there we have launched preservative free in most markets I think.

Speaker Change: As I think I said nearly 40 markets around the world. There are still a few that are in the early phases of that but the U S is still got plenty of runway I would say if you were to try and model. It I'd model it against where the penetration of preservative free products is in Europe, and where it is in the United States and then just compare those numbers.

Speaker Change: It would show you that we have a pretty good runway and the real question is how much of our own brands, where we cannibalize along the way, but directionally as I said, we were mid teens growth on a pretty big number.

David James Adlington: Okay, super helpful. Thanks for that, David.

Speaker Change: Okay Super helpful. Thanks for that David just a follow up on that maybe can you remind us where penetration is.

David J. Endicott: Just a follow-up on that. Maybe can you remind us where penetration is for the preservation free in the US and Europe? And then my follow-up is probably for Tim. So when AR-512 does get approved and launched, how are you thinking about marketing and promotional spend that will be required to drive that launch? How much of a drag would or could those launch investments have on margins?

Speaker Change: For the person.

Speaker Change: Preservation free in the U S and Europe and then my follow up is probably for Tim.

Speaker Change: When.

Speaker Change: Sure.

Tim: <unk> does get approved and launch how are you thinking about marketing and promotional spend.

Tim: That will be required to drive that launch how much of a drag would or could those launch investments have on margins. Thanks. So much.

David J. Endicott: Yeah, on the penetration for the multidose preservative-free, I think the preservative-free brands in Europe are about half the market. I'm going to get this mostly right, so, you know, again, you may want to check the data, but and then in the U.S., it's about 25 percent, so probably half of the penetration that is currently in Europe.

David James Adlington: Thanks so much. Yeah, on the

Tim: Yes on the penetration for the multi dose preservative free I think the preservative free brands in Europe are about half the market I'm going to get this mostly right. So again, you may want to check the data but.

Speaker Change: And then in the U S. It's about 25% so probably half of that penetration that is currently in your in Europe.

David J. Endicott: Oh, and 512, yeah, just on the investment there, we really haven't decided that yet, so give us a little longer to kind of work through that. I think what we're trying to figure out is, you know, we're thinking through and learning a lot about access right now, and until we really get that nailed down, I think we're going to be careful about what we say. So give me another quarter to work on that, and we'll get back to you. Okay, thanks. Our next question comes from Michael Sarcone with Jeffries. Please proceed with your answer. Good morning, and thanks for taking the time to take

Speaker Change: Well, if I went too yes, just on the on the on the investment there, we really haven't decided that yet so give us a little longer to kind of work through that I think what we're trying to figure out as we're thinking through and learning a lot about access right now until we really get that nailed down I think we're going to be careful about what we say so give me another.

Speaker Change: Quarter to work on that and we'll get back to you.

Speaker Change: Okay. Thanks.

Operator: Our next question comes from Michael Sarcone with Jeffries. Please proceed with your question. Good morning and thanks for taking the questions. Do you think, just to start, can you talk more about the China VBP opportunity, specifically?

Speaker Change: Our next question comes from Michael Sarcone with Jefferies. Please proceed with your question.

Michael Sarcone: Good morning, and thanks for taking the question.

Michael Sarcone: Do you think just to start can you talk more about the China GBP opportunity specifically can you help us understand what you may have baked in for.

Michael Sarcone: Contribution in terms of the 2024 guide and then how you see that potentially ramping in 2025.

Michael Anthony Sarcone: Yeah, let me try and give you some directional help without necessarily telling you what we put in the numbers here. I think, you know, the thing to remember about the China VBP is, you know, there's a committed volume to competitors, there's a committed volume to us, and then there's an up for grabs bid, and it's kind of a third, a third, a third, roughly speaking. And so remember, too, that this is a province by province thing. So it's going to, you know, ramp up through the back half of this year, and then obviously, we'll have a full year effect for next year. That's much more, I think, than a natural number.

Michael Sarcone: Yes, let me try and give you some directional help without necessarily tell you what we put in the numbers here I think the thing to remember about the China <unk>.

Speaker Change: There is a committed volume to competitors Theres, a committed volume to US and then there is an up for grabs bid and it's kind of a third a third a third.

Speaker Change: <unk> speaking.

Speaker Change: And so remember too that this is a province by province things. So it is going to it's going to ramp up through the back half of this year and then obviously, we will have a full year effect for next year. That's much more I think a natural number so again, we'll see how fast this moves and again, what we're excited about truthfully is it <unk> hasnt been in the <unk>.

David J. Endicott: So you know, again, we'll see how fast this moves. And again, you know, what we're excited about, truthfully, is that Vividi hasn't been in the Chinese market until recently, and that putting it onto the VBP, I think, along with Panoptix, gives the Chinese market the two best products in the world, you know, and they really haven't had that before. So I think, you know, they've been using a lot of older products that are bifocals.

Speaker Change: Wanna market until recently and that putting it onto the.

Penn Optics: GDP I think along with Penn optics gives the Chinese market.

Speaker Change: Two best products in the World.

Speaker Change: And they really haven't had that before so I think they've been using a lot of older products that are bifocal by focal is one of the largest segments, but you'll get some of that market is going to be committed to the competitors who have had those in place for a while so again I think theres a lot of things moving this is our first run at this as well and so we will have to learn a little bit from it with.

David J. Endicott: Bifocal is one of the largest segments, but you know, again, some of that market is going to be committed to the competitors who've had those in place for a while. So again, I think there are a lot of things moving. This is our first run at this as well, and so we'll have to learn a little bit from it with you, but we'll try and keep you up to speed on what's going on as we go.

Speaker Change: But we'll try and keep you up to speed on what's going on as we do.

Michael Anthony Sarcone: That's really helpful. And then just the second one, again, sticking with China, you know, you've got the public market now with VBP. Do you expect that being in the public markets with VBP could help your private business in any way? Well, probably not.

Speaker Change: Got it that's really helpful. And then just the second one again sticking with China.

Speaker Change: You've got the public market now with GBP.

Speaker Change: Do you expect that being.

Speaker Change: Being in the public markets with GBP could help your private business in any way.

David J. Endicott: You know, I think directionally what we've experienced, when we weren't in the public market, was that the private business was very aware of the public market, partly because, even though we call it private, you know, a lot of these private hospitals, the largest group, in particular, take a lot of public patients and are under a public DRG for those patients. So, they are very aware of what the pricing and the VVP is and whether you're participating or not.

Speaker Change: Well probably not.

Speaker Change: I think directionally, what we experienced when we werent in the public market was the private business was very aware of the public market and partly because.

Speaker Change: Even though we call it private a lot of these private hospitals the largest group in particular it takes a lot of public patients and is under a DRG.

DRG: DRG for those patients. So they are very aware of what the pricing and the VIP is and whether you are participating or not so there is a bit of an.

David J. Endicott: So, there's a bit of an equilibrium that gets struck here that, you know, what you're doing in the public environment is largely similar to what you're doing in the private environment, although there are, you know, there are obvious exceptions to that. But I think, in the main, I would say, doesn't really help us in the private business.

DRG: The equilibrium that gets structure that.

DRG: What youre doing in the public environment is largely similar to what youre doing in the private environment. Although there are obviously exceptions to that but I think in the main I would say doesn't really help us in our private business were fairly competitive there already.

Operator: We're fairly competitive there already, and, you know, again, we intend to continue. Great, thank you. Our next question comes from Brett Fishbin with KeyBank Capital Markets. Please proceed with your question. Hey guys, thank you so much for taking the questions. I just had one on contact lenses, so pretty impressed by the 11% constant.

Speaker Change: Again, we intend to continue.

Speaker Change: Great. Thank you.

Brett Adam Fishbin: Our next question comes from Brett Fishbin with KeyBank Capital Markets. Please proceed with your question. Hey guys, thank you so much for taking the questions.

Brett Adam Fishbin: Our next question comes from Brett <unk> with Keybanc capital markets. Please proceed with your question.

Brett Adam Fishbin: Hey, guys. Thank you so much for taking the questions just had one on contact lenses, so pretty impressed by the 11% constant currency growth this quarter on a pretty tough comp.

Brett Adam Fishbin: You called out a couple of the new products in <unk> and multifocal, just curious if you could call out which of those launches youre seeing the most success with right now and then maybe just as a follow up a little bit of a more general update on how youre viewing the competitive environment in contact lenses and if theres any differences in how you are thinking about market growth in that sub segment relative to your comments for the whole <unk>.

Brett Adam Fishbin: Relatively in line with market growth. Thank you very much.

Operator: Yeah, look, I mean, we obviously were pleased with the Contact Lens performance this quarter. I mean, it was around the world, you know; we gained quite a little bit of share globally, in TORIX in particular. You know, we moved very quickly.

Speaker Change: Yes look I mean, we obviously were pleased with the contact lens performance on the quarter I mean it was.

Speaker Change: Around the world, we gained quite a little bit of share globally in <unk> in particular.

David J. Endicott: So I would say, you know, if I were calling out anything right now, I would say that the TORIX business for us has been a real hit. And certainly, P1 TORIX might be the one that's most obvious. But, you know, we didn't have DT1 TORIX for a really long time.

Speaker Change: We moved very quickly so I would say if I was calling out anything right now I would say that the toric business for us has been a real hit.

Speaker Change: Certainly <unk> toric might be the one that's most obvious but we didn't have <unk> toric for a really long time and I think getting.

David J. Endicott: And I think that getting it to market and seeing it succeed as well as it does, you know, has a lot to do with the brand itself. But I think directionally, both of those products have been particularly good for us. I would also, I just wouldn't lose the notion that Total 30, which is a bit of a sleeper in people's minds, you know, because it's reusable, isn't that exciting.

Speaker Change: Getting it to market.

Speaker Change: And seeing it succeed as well as it does it has a lot to do with the brand itself, but I think directionally. Both had been those two products I think had been particularly good for US I would also I just wouldn't lose the notion that total 30, which is a bit of a sleeper in people's minds, because it's reusable aren't that exciting we've got this water gradient now that <unk>.

David J. Endicott: You know, we've got this water gradient now that makes this lens so comfortable on the 30th day that people really like it. And I would tell you that the TORIX for that brand and the multifocal for that brand have done some good for us. So, you know, I hate to say it's kind of across the board because it doesn't really answer your question, but it is kind of across the board. With maybe the biggest call out, you know, numerically, would probably be the Precision One brand because it's moving the fastest and it's quite large at this point.

Speaker Change: Makes this lands so comfortable on the 30 day that people really like it and I would tell you that the toric for that brand and the multifocal for that brand has done some good for us so.

Speaker Change: I hate to say, it's kind of across the board that doesn't really answer your question, but it is kind of across the board.

Speaker Change: With maybe the biggest call out numerically it would probably be the precision one brand because it's it's moving the fastest and it's quite large at this point. So I think we're doing doing really well there with that one and then on the competitive environment. This is a very competitive environment generally.

David J. Endicott: So I think we're doing really well there with that one. And then, on the competitive environment, you know, this is a very competitive environment generally. And so, you know, certainly, the folks that we compete with are good at what they do.

Speaker Change: And so certainly.

Speaker Change: The folks that we compete with are good at what they do in.

David J. Endicott: And directionally, they have different strategies around the market. We feel good about, you know, where we're positioned, both in terms of the value of each product and its pricing relative to consumer need and the proposition that it exudes. So, you know, our P1 product handles easier. It's a lower price point than DT1, but it still has a water gradient, so maybe it isn't as comfortable.

Speaker Change: Directionally they have different strategies around the market we feel good about.

Speaker Change: Where we're positioned.

Speaker Change: Both in terms of the value of each product in its pricing relative to consumer need and the proposition that it exudes so.

Speaker Change: <unk> one product is handles easier, it's a lower price point than <unk>, but it still has water gradient, maybe it isn't as comfortable it's great for kids great for teenagers great for kind of young adults, who maybe can't afford the GT one, but our total one product is if you've got a problem with dry eyes.

David J. Endicott: It's great for kids, great for teenagers, great for kind of young adults who, you know, maybe can't afford the DT1. But our Total One product is, you know, if you've got a problem with dry eye or anything, as you age just a little bit older, you know, that's a great product for those patients because it is so comfortable. And, you know, it's more expensive, and people can afford it at that age. So, directionally, we've positioned these products, I think, very appropriately for the groups of folks that we know use them.

Speaker Change: <unk>, just a little bit older.

Speaker Change: That's a great product for those patients because it is so comfortable.

Speaker Change: It's more expensive and people can afford it at that age. So directionally. We've positioned these products I think very appropriately for the groups of folks that we know use them.

Speaker Change: And I think the last one was on the toric market growth in the tort market growth.

David J. Endicott: And I think the last one was on the TORIC market growth. And the TORIC market growth, I'd have to look at it specifically, but I think, yeah, it was about 11% for all lenses. And in the daily disposables, I'm looking at it now, there was a 27% growth in the silicone hydrogel market. So, like we said, you know, and I just did, if you look at all the dailies, it was 17%.

Speaker Change: I'd have to look at it specifically, but I think it was about 11% for all lenses and in the daily Disposables Im looking at it now it was a 27% growth in <unk>.

Speaker Change #100: <unk> hydrogel was the market.

Speaker Change: So like we said.

Speaker Change: Just if you look at all dailies. It was 17%. So we grew very very quickly because we're in the we were growing share in kind of the fastest growing sectors of the market. If you will.

David J. Endicott: So, you know, we grew very, very quickly because we were growing share in kind of the fastest growing sectors of the market, if you will. And that's kind of been our strategy, right? Get into where we are under indexed and grow there, and then get into the fastest parts of the market and grow there.

Speaker Change: And that's kind of been our strategy right.

Speaker Change: Get into to where we are under indexed and grow there and then get into the fastest parts of the market and grow there.

Operator: Our next question comes from Issie Kirby with Redburn Atlantic. Please proceed with your question.

Speaker Change: Our next question comes from EC Kirby with Redburn Atlantic. Please proceed with your question.

Operator: Issie, are you there? Can't hear you Issie.

Speaker Change: And Syria, there can't hear Yossi.

Operator: Okay, we'll move to the next analyst then. Our next question is from Anthony Petrone with Mzuhu Group. Please proceed with your question.

Issie Kirby: Okay, we'll move to the next analyst.

Issie Kirby: Our next question is from Anthony Petrone with Mizuho Group. Please proceed with your question.

Anthony Charles Petrone: Thanks and congrats here on the quarter. One on contact lenses and then one on the margins. Just on contact lenses, wondering where the manufacturing capacity or utilization, I should say, on the DSM flex lines is today, so what percent of overall volume is running through those new manufacturing lines, and is there still more margin upside to be had as you transition more volume there? And then just the broader margin question is on just sort of the outlook for the year, so overall corporate adjusted operating margin comes in at 22, with 130 basis points of FX headwinds impacting that.

Issie Kirby: Thanks, and congrats here on the quarter.

Anthony Charles Petrone: One on on contact lenses and then one on margin.

Anthony Charles Petrone: Contact lens, just wondering where the manufacturing capacity or utilization I should say on the DSM flex lines is today. So what percent of overall volume are running through those new manufacturing lines in there or is there still more margin upside to be had as you transition more volume there.

Speaker Change #103: And then just the broader margin question is on <unk>.

Speaker Change #105: Sort of the outlook for the year. So overall corporate adjusted operating margin comes into 'twenty to be at 130 basis points of FX headwinds impacting that so.

Anthony Charles Petrone: So 23.5%, and the guide is unchanged here. So maybe just a little bit on what amount of FX headwind is baked into the guidance at the margin level and what is just additional spend and maybe, you know, some headwinds at the mix front perhaps. Thanks again.

Speaker Change: So 23, 5% in the guide is unchanged here, so maybe just a little bit on what.

Speaker Change: What amount of FX headwind is baked into the guidance at the margin level in what is just additional spend in and maybe.

Speaker Change: Some some some headwinds that the mix front, perhaps thanks again.

David J. Endicott: Yeah, thanks Anthony. Let me take the first one, and Tim can grab the margin piece.

Anthony Charles Petrone: Yes, Thanks, Anthony let me take the first one and Tim Congrats on the margin piece the.

Timothy C. Stonesifer: The contact lens business, you know, is really strong for us, and I would read the DSM flex lines as producing the Total 30 and the Precision One brands and all the different forms of them. So, you know, Torex, Sphere, and Multifocal. So I think that's probably what I would give you there in terms of directional capacity. We are, we've got plenty of capacity, and we have plenty of machines on order to the extent that we continue to see demand, you know, as robust as it has been.

Anthony: The contact lens business.

Tim: Is is really strong for us and I would read the DSM flex lines is producing <unk>.

Tim: Total 30.

Tim: And the precision one brands in all the different forms of them, so toric sphere and multifocal, So I think.

Tim: That's probably what I would give you there in terms of directional capacity.

Speaker Change #101: We are we've got plenty of capacity and we have plenty of machines on order to the extent that we.

Tim: Continue to see demand.

Timothy C. Stonesifer: So I don't think there's any concern there. I do think there will be more operational efficiency as we learn to get these machines up faster. It doesn't take us quite as long as it used to to get them up to design speed, and then, you know, as these machines mature after a couple of years, we continue to improve the overall output. So I think you're not wrong to think about the slow, steady improvement on the Vision Care margin from the gross margin side, but I would say that our thesis on most of that business is operational leverage. So less gross margin and, you know, think more about the operational leverage where sales are growing a good bit faster than cost. Yeah, and I would just say, Anthony,

Tim: Robust as it has been.

Tim: So I don't think Theres any concern there I do think there is more operational efficiency as we learn to get these machines up faster it doesn't take us quite as long as it used to do to get them up to design speed and then.

Speaker Change #102: These machines mature after a couple of years, we continue to improve the overall.

Tim: Output, so I think you.

Not specified: Youre not wrong to think about the slow steady improvement on the vision care margin from the gross margin side, but I would say that our thesis of most of that business as operational leverage so less gross margin and think more about the operational leverage where sales are growing a bit faster than costs.

David J. Endicott: Yeah, and I would just say, Anthony, on the margin front, you know, that incremental FX, the vast majority of that is going to hit in Q2 and Q3 when you think about the total year. As we talked about earlier, when you look at the 22%, you know, there is some timing in there if you think about the duties I mentioned and the fact that we plan on spending at the high end of the R&D as a percent of revenue, so that will cause a little bit of pressure as you go out through the course of the year.

Tim: And I would just say Anthony on the on the margin front.

Tim: As that incremental FX, a vast majority of that is going to hit in Q2 and Q3. When you think about the total year.

Tim: As we talked about earlier when you look at the 22%.

Anthony: There is some timing in there if you think about the duties I mentioned and the fact that we plan on spending at the high end of the of the R&D as a percent of revenue so that will cause a little bit of pressure as you go out through the course of the year and then also as you know Q2 is an example of just typical seasonality that has a heavy M&A spend for us as we get ready for back to school. So those are.

David J. Endicott: And then also, as you know, Q2, as an example, just typical seasonality, that is a heavy M&S spend for us as we get ready for back to school, so those are kind of the pressure points that you'll see as we go through the course of the year, but we feel very good about the guide out there, and as I said, we're trending toward the midpoint right now.

Anthony: The pressure point that Youll see as we go through the course of the year, but we feel very good about the guide out there and as I said, we're trending towards the midpoint right now.

Anthony: Thanks again.

Operator: Our next question comes from Sergei Osner with HSBC. Please proceed with your question.

Sergey <unk>: Our next question comes from Sergey <unk> with HSBC. Please proceed with your question.

Sergei Osner: Hi, thanks for taking my questions. One on high interest rates, please. Do you think that the slowness in ATIOL penetration in the U.S. has anything to do with high interest rates or does it have more to do with competition? That's number one. And number two would be in contact lenses. Do you think you've grabbed market share sustainably in Detroit products and where do you see your market share now?

Sergey <unk>: Hi, Thanks for taking my questions one on.

Sergey <unk>: High interest rates do you think that this slowness in ATI hei penetration in the U S has anything to do with high interest rates all right does it have more to do with competition, that's number one and <unk>.

Speaker Change #113: Number two would be in contact lenses.

Speaker Change #107: Do you think you.

Mark: <unk> grabs mark could share sustainably in Detroit products, and where do you see our market share now thanks.

David J. Endicott: Yeah, I mean, the second one first, sustainability of market share is very durable in contact lenses. So new wearers, in particular, are kind of the whole game. You can get switch wearers, and those are, you know, you can get them, but they're hard.

Mark: Yes.

Mark: Second one first sustainability of market share is very durable in contact lenses. So new wearers in particular are kind of the whole game you can get switch, whereas in those or you can get them, but theyre hard.

David J. Endicott: But once you have a patient, typically, they stay in the lenses they're in if they're comfortable. If they're not having a problem, you know, almost always you get, you know, four or five years out of that patient. I think, on average, we use something like four and a half as the average wearer.

Mark: But once you have a patient typically they stay in the lenses.

Mark: And if they're comfortable they are not having a problem almost always you get four or five years out of that patient I think on average we use something like four five is the average where you see patients in the same lens as they've been in for 20 years. So again there is a really really nice market is the challenge of course is.

David J. Endicott: But, you know, you see patients in the same lenses they've been in for 20 years. So again, there's a really, really nice market. The challenge, of course, is that market shares move slowly. The benefit, however, is that they move slowly.

Speaker Change #110: Market shares move slowly the benefit is is that they move slowly and so you end up really with a very sustainable market position, which is what we're excited about really with the contact lens business that we see now.

David J. Endicott: And so you end up, you know, really with a very sustainable market position, which is what we're really excited about with the contact lens business that we see now. I would say on the interest rates, really, neither competition nor interest rates are related to ATI well penetration. I would just say, you know, everybody who is involved in the ATI well market has watched this over the years, would say that, you know, look, it has historically been the case that when there are new products that have a benefit, they would move penetration up meaningfully for a short period of time, then it would kind of settle in for a little bit, and then it would start moving again.

Mark: I would say on the on the interest rates really neither competition, nor interest rates related to the agi well penetration I would just say.

Speaker Change #121: Everybody is involved in the <unk> market.

Speaker Change #111: Watched this over the years would say that it has historically been the case that when there are new products. They would cut that had a benefit they would move penetration up meaningfully for a short period of time and then it will kind of settle in for a little bit and then it would start moving again and historically if you took and drew a line for the last 20 years on Hol's you'd find about 50 basis points a year we ran.

David J. Endicott: And historically, if you took and drew a line for the last 20 years on ATI wells, you'd find about 50 basis points a year. We ran through about 300, 400 basis points when we launched Panoptix and Vividi. I think the market is settling into that composition right now, and I think as new surgeons come on and become more equipped to do ATI wells, we'll be able to move the penetration. But I would think about it going forward as largely around this 50 bps a year because that's the, that's kind of the historical rate. So, you know, I think that's the short version.

Hol: Through about three to 400 basis points, when we launched Pan optics and <unk>.

Mark: I think the market is settling into that composition right now and I think as new surgeons come on and become more equipped to do.

Mark: <unk> will be able to move the penetration, but I would think about it going forward is largely around this 50 bps a year because that's the that's kind of the historical rate. So I think that's the short version.

Mark: Thanks, So much just a small follow up there do you see the interest rates.

Sergei Osner: Thanks so much. Just a small follow-up there. Do you see interest rates playing any role at all in the equipment business? Because some of your peers have been talking about interest rates being high and limiting capital appetite, or CapEx appetite, for customers.

Speaker Change #114: And you all that's all in the equipment business because some of your peers have been.

Speaker Change #128: Talking about interest rates being high and limiting capital appetite capex appetite for our customers.

David J. Endicott: It hasn't been an effect for us, but you know again, I would just say that you know our equipment business You know, we had a really big quarter last year on equipment and we still grew equipment even despite You know, I think some hesitation around wanting to buy new FACO equipment But I think you know, we've also got some new equipment that we're taking share with that has been helpful so our handpiece and our microscope and our biometer and You know a number of other products I think have been you know doing quite well So I think directionally I think we're performing against what could be you know interest rates and equipment have historically been related But I haven't we just haven't seen it lately

Speaker Change #127: It hasnt been in effect for us, but again I would just say that our equipment business, we had a really big quarter last year on equipment and we still grew equipment, even despite I think some hesitation around wanting to buy a new vehicle equipment, but I think we've also got some new equipment that we're taking share with that has been helpful.

NR Biometer: Our <unk>, our microscope NR Biometer and.

Speaker Change #118: Number of other products I think have been doing quite well. So I think directionally, we're performing against what could be interest rates and equipment have historically been related but I haven't we just haven't seen it lately.

Sergei Osner: Perfect. Thanks so much.

Speaker Change #114: Perfect. Thanks, so much.

Operator: Our next question is from Issie Kirby from Redburn Atlantic. Please proceed with your question.

Herbie: Our next question is with Herbie from Redburn Atlantic. Please proceed with your question.

Herbie: Okay.

Operator: Hi guys, sorry about that. Can you hear me now?

Speaker Change #117: Hi, guys, sorry about that can you hear me now.

Operator: Yeah, we'll get it if we can.

Speaker Change #117: Yes, we can.

Issie Kirby: Great, thank you so much. Apologies if this has been answered while I fix my headset, but I just wanted to dive into the vision margins a little bit more. Obviously, you had a really nice step up there, queue on queue. I'm just wondering, I guess, around the sustainability of that margin, both throughout the rest of the year and then as we look forward sort of towards the midterm plan as well, given just the strength this quarter.

Herbie Redburn: Great. Thank you very much I apologize. If this has been answered while FX might have sat Bob I just wanted to dive into the vision margins a little bit more obviously, you had a really nice step back Q on Q I'm, just wondering I guess around the sustainability of that margin throughout the rest of the year and then as well.

Speaker Change #126: So, let's sort of towards the mid term plan as well given the strength this quarter.

Issie Kirby: And then secondly, within that vision margin, it would be really helpful if you could give us some color, both, I guess, in terms of the margin level, but also the direction between contact lenses and ocular health as well, given what I understand is quite a big differential between the margin profiles of those two businesses. Thank you.

Speaker Change #120: And then secondly within that vision margin it would be really helpful. If you could give us some color I guess.

Jack Reynolds-Clark: In terms of the margin level, but also the direction between contact lenses.

Speaker Change #122: Wow, Okay, then from what I understand there's quite a big differential between the margin profile.

Speaker Change #123: Thank you.

Timothy C. Stonesifer: Yeah, so as far as sustainability, so to your point, we had a very nice quarter that we were pleased with. We were up 450 basis points in constant currency, so that would be 400 basis points in USD.

Jack Reynolds-Clark: Yes, so as far as the sustainability so to your point, we had a very nice quarter that we're pleased with where we're at 450 basis points.

Speaker Change #132: In constant currency, so that would be 400 basis points.

Timothy C. Stonesifer: There is some phasing in there. Again, the duties would heavily impact the vision care margins. Some of that R&D would be in the vision care margins as well. So there are some headwinds or tailwinds in that, I should say.

Speaker Change #125: And USD there.

Speaker Change #124: There is some phasing in there again the duties would heavily impact the vision care margins some of that R&D would be in division care margins as well so.

Speaker Change: So there is it is.

Timothy C. Stonesifer: If you look at the total year, we feel very comfortable that we will increase margins year over year as we did last year. So we have a lot of momentum in that business. As we said in the prepared remarks, a lot of the investments we've made are starting to come through in the P&L, which is nice to see. As far as the margin level for contact lenses versus ocular health, I would say ocular health for the most part is above company average, and contact lenses, you know, are a little bit below, depending on whether it is dailies or reusable.

Speaker Change #124: There are some headwind or tailwind in that I should say if you look at the total year, we feel very comfortable that we will increase margins year over year as we did last year. So we have a lot of momentum in that business. As we said on the prepared remarks, a lot of investments. We've made are starting to come through in the P&L, which is nice to see as far as the March.

Speaker Change #124: The level of contact lenses versus ocular health.

Speaker Change #124: I would say ocular health for the most part is above company average in contact lenses.

Jack Reynolds-Clark: So there's a little bit below depending on whether it is dailies or reusable.

Timothy C. Stonesifer: Yeah, we probably have a little bit of a mixed benefit, but I wouldn't read a lot into that. I mean, you know, there's some that could have helped. Eye drops have done well for us, and so have reusables. And again, both of those would be higher-margin than the daily disposables. But dailies, you know, are still the mainstay of our contact lens business and the vision care business.

Speaker Change #124: Yes, we probably have a little bit a mixed benefit, but I wouldn't read a lot into that.

Jack Reynolds-Clark: I'm not going to help to eyedrops have done well for us and so is reusable and again both of those would be higher margin than the daily disposables, but dailies.

Jack Reynolds-Clark: Still the mainstay of our contact lens business and the vision care business.

Speaker Change: Okay, Great. That's helpful. Thanks, guys.

Operator: Our next question comes from Tom Stephan with Stiefel. Please proceed with your question.

Issie Kirby: Okay, great. That's helpful. Thanks, guys. Our next question comes from Tom Stephan with Stiefel. Please proceed with your question. Great. Hey, guys. Thanks for squeezing me in.

Speaker Change #124: Our next question comes from Tom Stefan with Stifel. Please proceed with your question.

Operator: Two questions on contact lenses.

Speaker Change: Great Hey, guys. Thanks for squeezing me in two.

Thomas M. Stephan: Two questions on contact lenses.

Speaker Change: Strong performance in the quarter David.

David: David You gave some great color on the drivers I guess my question is is continued low double digit growth.

Richard Felton: Maybe the right bar to think about for 2024.

Jack Reynolds-Clark: Notably as comps actually ease a little bit rest of the year and then my follow up is just on precision seven.

Jack Reynolds-Clark: Can you update us on what the latest is with timing there. Thanks.

Thomas M. Stephan: Yeah, look, I mean, I think the best I could do with the forward look is what we always kind of say, and I don't mean to be vague, but I would think about the market. The market grew 7% in the first quarter. So, you know, we were pleased with, you know, the 11, and we are growing faster than the market. So, you know, I do think that you should start with what you think the market's growth is going to be, and we would say, you know, on the high end of mid single digits.

Speaker Change #130: Yes look I mean, I think the best I can do with the forward look is what we always kind of say and I don't mean to be vague, but I would think about the market. The market grew 7% in the first quarter. So we were pleased with the 11.

Jack Reynolds-Clark: And we are growing faster than the market and a fair bit.

Jack Reynolds-Clark: No.

Speaker Change #131: Do think that you should start with what do you think market growth is going to be and we would say.

Jack Reynolds-Clark: On the high end of mid single digits, and then I think directionally. After that we continue to gain share. If you believe that then we will grow faster than that and the benefit of that is of course that as I said earlier, a good bit of the mix right now is coming from higher valued products. So think about the <unk> as being more valuable than the sphere I think about the reusable as being more valuable.

Thomas M. Stephan: And then I think, you know, directionally after that, we continue to gain share. If you believe that, then we'll grow faster than that. And the benefit of that is, of course, that, as I said earlier, a good bit of the mix right now is coming from higher-valued products. So think about the Torex as being more valuable than the Sphere.

David J. Endicott: Think about the reusables being more valuable to us profitably than the dailies. But P7 will also benefit us because, of course, it's a reusable lens at the one week frame. And, you know, the timing on that, you know; we've been slow to bring it out. But we've made it. It's ready to go. It's been approved. We've been holding it, I think, to a large degree to allow Salesforce to continue with the very busy schedule they have promoting, you know, the products we've got.

Jack Reynolds-Clark: To us it properly then.

Jack Reynolds-Clark: And then the dailies, but <unk> will also benefit us because of course, it's a reusable lenses.

unknown: At the one weak framing the timing on that we have been slow to bring it out we've made it's ready to go it's approved we've been holding it I think to a large degree to allow the sales force to continue with the very busy schedule they have promoting.

Jack Reynolds-Clark: The products that we've got so we're making such good progress right now.

David J. Endicott: So we're making such good progress right now on so many fronts that we'd like to kind of hold this one off. I think we're probably going to do something with it later this year and then probably think about it as a full launch next year.

Graham Doyle: On so many fronts.

Speaker Change: <unk> that wed like to kind of hold this one off I think we're probably going to do something with it later this year and then probably think about it as a full launch next year.

Jack Reynolds-Clark: Helpful.

Daniel Cravens: We have reached the end of our question and answer session. I would now like to turn the floor back over to Dan Cravens for closing comments.

We have reached the end of our question and answer session I would now like to turn the floor back over to Dan Cravens for closing comments.

Operator: Great, thanks again for joining us today. If you have any follow-up questions, certainly reach out to the Investor Relations Department for investors or corporate communications for the media. Thanks.

Speaker Change: Great. Thanks, again for joining us today, if you have any follow up questions certainly reach out to the Investor Relations Department for investors or corporate communications.

Speaker Change: For media. Thanks, I appreciate the interest.

Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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Jack Reynolds-Clark: Yes.

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