Q3 2024 Alcon Inc Earnings Call

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Speaker Change: Greetings and welcome to the ALCON Third Quarter 2024 Earnings Conference 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.

Speaker Change: As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Dan Cravens, Vice President, Investor Relations.

Dan Cravens: Thank you, sir. You may begin. Welcome to ALCON's 3rd Quarter 2024 Earnings Conference Call.

Speaker Change: Yesterday, Alcon was alerted that our third quarter earnings press release and interim financial report were inadvertently posted early to our investor website. We immediately accelerated our disclosure process.

Speaker Change: The NYSE briefly halted trading pending the issuance of the release.

Speaker Change: Trading was resumed on the NYSE shortly after the release crossed the newswire. In addition, earlier today we also 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 alcon.com.

Speaker Change: 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.

Speaker Change: Please note that we expressly disclaim any obligation to update forward-looking statements as a result of new information or future developments except as required by law.

Speaker Change: Our actual results may differ materially from those expressed or implied in our forward-looking statements, and as such, you should not place undue reliance on any forward-looking statements.

Speaker Change: These non-IFRS financial measures should be considered along with, but not as alternatives to, the operating performance measures as prescribed per IFRS.

Speaker Change: Please see a reconciliation between our non-IFRS measures with directly comparable measures presented in accordance with IFRS and our public filings.

Speaker Change: For discussion purposes, our comments on growth are expressed in constant currency.

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

David Endicott: Thanks Dan and thanks everyone for joining today's call. I'm pleased to report another solid quarter with sales of 2.4 billion dollars and sales growth of 6 percent.

David Endicott: Core diluted earnings were 81 cents per share which grew 25% and core operating margin was 20.6%.

David Endicott: Additionally, we generated 1.3 billion of free cash flow in the first nine months of this year, which is a record for this company.

David Endicott: These results demonstrate our ability to continue to outpace our markets, driven by our broad geographic footprint, our innovative portfolio, and our category leadership.

David Endicott: In addition to our ongoing focus on operational excellence, this quarter we continue to prepare for a series of product launches that will drive growth.

David Endicott: We intend to discuss many of these in detail at our upcoming Capital Markets Day this March.

David Endicott: Today I'll start with our recently announced launch of Precision 7.

David Endicott: Precision 7 is a new one-week replacement contact lens that provides 16 hours of outstanding comfort and precise vision

even on day seven.

David Endicott: Most optometrists agree that a one-week replacement schedule is more intuitive for patients as compared with a two-week schedule. The two-week category is well-established and represents a meaningful growth opportunity for us.

David Endicott: Precision7 offers a breakthrough in comfort by leveraging our proprietary active flow system.

David Endicott: Active flow is a unique combination of a moisturizing agent embedded in the lens and a replenishing agent that continually releases moisture to the surface over seven days.

David Endicott: Select optometrists in the United States began fitting both the SPHERE and the TORC modalities earlier this year and feedback has been extremely positive.

Speaker Change: We plan to make this lens fully available in the U.S. beginning in January 2025 with markets outside the U.S. to follow later.

Speaker Change: At Ternidocular Health, where we have several exciting developments, I'll start with Sustain, the world's leading over-the-counter artificial tear.

Speaker Change: Sustain had its fifth consecutive quarter of double-digit growth driven by our multi-dose preservative-free formulations.

Speaker Change: Now, we're going to strengthen the Sustane brand with the launch of Sustane Pro Preservative-free, our newest and longest lasting formulation that hydrates, restores, and protects dry eyes.

Speaker Change: Importantly, this formulation includes nano-sized lipids and hyaluronic acid to both reduce tear evaporation and provide long-lasting hydration.

Speaker Change: Based on market research, we're seeing very strong interest to purchase from consumers and intent to recommend from eye care professionals.

Speaker Change: We look forward to bringing this eyedrop to the U.S. in the first half of next year.

Speaker Change: Moving to pharmaceutical eyedrops, I'm pleased to announce that we recently finalized our strategic arrangement with OccuMention Therapeutics in China.

Like Alcon, OccuMention is singularly focused on eye care.

Speaker Change: As a China-based company, OccuMention has demonstrated success in identifying, developing, and commercializing ophthalmic pharmaceuticals.

Speaker Change: We believe this expertise, paired with AcuMention's local presence and established capabilities, will help maximize the value of our dry eye products and procedural eye drops, including the Sustane family.

Speaker Change: Importantly, OccuMention is committed to develop and commercialize AR15512 in China.

Speaker Change: In exchange for the divestiture of approximately $40 million in annual iDrop sales, Alcon received approximately 17% of the equity and occupation, royalties on the existing business, as well as royalties and sales milestones on 512.

Speaker Change: Now I'll discuss the anticipated U.S. launch of 5.1.2, for which Phase III pivotal studies were presented at the American Academy of Ophthalmology.

Speaker Change: 512 is a novel prescription candidate for the treatment of dry eye and we estimate the US prescription dry eye market is worth about 1.4 billion dollars.

Speaker Change: 5.1.2 works by stimulating receptors on corneal sensory nerves to rapidly increase natural tear production.

Speaker Change: As we mentioned in our last earnings call, we have received our PDUFA date of May 30th, 2025 and look forward to bringing the medication to the U.S. market in the second half of next year, pending FDA clearance.

Speaker Change: We've already started developing our launch strategy and engaging with payers. Given the timing of a mid-year launch, we do not expect meaningful revenue contribution before 2026.

Speaker Change: Now I'll transition to surgical where I'll start with implantables. I've been particularly pleased by the international uptake of our ATIOLs where we're seeing high single-digit or double-digit growth in most regions.

Speaker Change: I expect the international market to remain our main growth driver in implantables as we've seen penetration in these markets drive ATIO growth in recent quarters.

Speaker Change: In particular, we continue to see positive momentum in China on both share and penetration as we work through VBP implementation.

Speaker Change: International penetration growth combined with consistent market share growth should enable us to continue to offset the slower market conditions in the U.S.

Speaker Change: I'm also excited to announce that we've completed the migration of all of our interocular lenses including Panoptix, Vividi, and their toric modalities to the Clarion material.

Speaker Change: Our lenses are now available on the Clarion platform in most markets globally.

Speaker Change: As a reminder, Clarion is a unique material formulation that provides excellent visual performance and sets a new standard for Iowa clarity characteristics.

Speaker Change: It has amongst the lowest levels of surface haze and subsurface nanoglistenings of any IOL material.

Speaker Change: We're also excited to announce that we are continuing to expand our ATIOL offering in major markets across the globe with Autonomy, the first and only automated preloaded delivery system.

Speaker Change: Notably, we're finishing the inventory build for the launch of Clarion Autonomy Torque in the U.S., and rounding out our torque offering in Japan.

Speaker Change: Next, I'll turn to surgical equipment where we have several exciting launches including Unity VCS and the Voyager DSLT system.

I'll start with UnityVCS, our combined FACO and VITREP platform.

Speaker Change: This system builds on Alcon's expertise in surgical equipment with pioneering innovations to deliver breakthrough workflow efficiencies that enable excellent outcomes for the patient and the practice.

Speaker Change: For cataract surgery, Unity leverages a novel ultrasound modality to deliver up to two times faster FACO removal with 40% less energy into the eye as compared to Centurion.

Speaker Change: In vitro retinal advancements this new technology provides up to one and a half times faster vitrectomy with cutting speeds of up to 30,000 cuts per minute, which is significantly faster than Constellation's hypervit probe.

Speaker Change: I will continue to work with surgeons for final user experience testing ahead of the expected commercial launch in the second quarter of 2025. Additionally, we expect to receive CE mark in the first quarter of 2025.

Speaker Change: Now I'll discuss the Voyager direct laser trabeculaplasty device formerly known as the Belkan Eagle.

Speaker Change: We demonstrated this device at the recent AAO conference in Chicago and saw strong interest from our core customer base.

Speaker Change: Voyager delivers laser energy to the verbicular meshwork using proprietary robotic eye tracking technology for accurate automated treatment.

Speaker Change: This eliminates the need for a gonioscope or manual aiming, which is necessary with traditional SOT.

Speaker Change: This design is friendly for both patients and physicians. It's precision and streamlined workflow position Voyager to become a first-line treatment for glaucoma.

Speaker Change: Voyage is already available in certain markets in the EU, and we plan to launch this device in the U.S. in the first quarter of 2025.

Finally, I'll briefly discuss market dynamics for the third quarter.

Speaker Change: In cataract, we estimate that the global procedures grew approximately 4%.

Speaker Change: Additionally, global ATI well penetration was up approximately 200 basis points year over year, primarily driven by international markets.

Speaker Change: In contact lenses, we estimate the retail market was up approximately 5%. This growth was mainly driven by pricing and lens trade-up.

Speaker Change: To wrap up, we have one of the most exciting product pipelines that we've had in years, and we're looking forward to bringing them to market over the next 12 to 24 months.

Speaker Change: With that, I'll pass it to Tim. We'll take you through our financial results to provide more color on our outlook. Thanks, David. We're pleased to report third quarter sales of $2.4 billion, up 6% versus prior year, on both a reported and constant currency basis.

Tim Stonesifer: This growth is primarily driven by strength in our innovative contact lens portfolio and consumables.

Tim Stonesifer: In our surgical franchise, revenue was up 5% year-over-year to $1.3 billion.

Tim Stonesifer: Implantable sales were $422 million in the quarter, up 5% year-over-year, mainly driven by our advanced technology, intraocular lenses, and international markets, including a benefit in China primarily related to volume-based procurement.

Tim Stonesifer: This is partially offset by slower market conditions in the United States.

Tim Stonesifer: In consumables, our third quarter sales were up 6% to $701 million, driven by VITREC consumables in international markets, Cataract consumables, and price increases.

Tim Stonesifer: In equipment, sales of $215 million are up 1% year-over-year, in line with our expectations. We continue to expect equipment sales growth to be broadly flat until after the planned commercial launch of Unity VCS.

Tim Stonesifer: Turning to Vision Care, third-quarter sales of 1.1 billion dollars were up 7%.

Tim Stonesifer: Contact lens sales were up 8% to $664 million in the quarter.

Tim Stonesifer: Our innovative lenses, including torque and multifocal modalities, continue to win in the market. Additionally, we had another quarter with solid contribution from Price.

Tim Stonesifer: In ocular health, third quarter sales of $431 million were up 4% year-over-year. We saw strong performance in our portfolio of eye drops, including another quarter of double-digit growth was sustained.

Tim Stonesifer: This growth was partially offset by declines in contact lens care in international markets.

Now, moving down the income statement.

Tim Stonesifer: Third quarter core gross margin was 63.2%, broadly in line with last year.

Tim Stonesifer: Looking to the fourth quarter, similar to last year, we expect to see normal seasonal pressure in the gross margin as we perform annual preventative maintenance at many of our plants around the end of the year.

Tim Stonesifer: Core operating margin was 20.6%, up 120 basis points year over year. Driven by operating leverage and SG&A from higher sales, partially offset by investment in R&D, particularly in surgical.

Tim Stonesifer: Third quarter interest expense was $49 million, broadly in line with last year.

Tim Stonesifer: Other financial income and expense was a net benefit of $10 million compared to a net expense of $8 million in the third quarter of last year.

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

Tim Stonesifer: The third quarter average core tax rate was 12.8% compared to 17.2% in the prior year period. The decrease in tax rate was primarily driven by favorable geographic mix of profit and higher discrete tax benefits in the current year.

Tim Stonesifer: Turning to cash, on a year-to-date basis, free cash flow was a record 1.3 billion dollars compared to 592 million dollars in 2023. This improvement was mainly driven by higher cash from operations.

Tim Stonesifer: As you've seen in prior years, we expect to see a meaningful step up in CAFX in the fourth quarter during our plant's annual maintenance period.

Now moving to 2024 guidance.

Tim Stonesifer: Our current outlook now assumes that markets grow in line with recent quarters and exchange rates as of the end of October hold through year end.

Tim Stonesifer: Starting with sales we are updating our full year revenue guidance range to 9.8 to 9.9 billion dollars and our constant currency sales growth rate to six to seven percent.

Tim Stonesifer: 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.

Tim Stonesifer: Turning to profitability, we are tightening our guidance range to 20.5 to 21 percent and are trending toward the low end of the range. This reflects 30 basis points of pressure from the inventory provision we recorded in the second quarter as well as our planned investment behind new product launches.

Tim Stonesifer: Moving down the income statement, we now expect interest and other financial expense to be between $155 million and $165 million.

Tim Stonesifer: This improvement is primarily due to higher interest income as a result of a higher cash balance and higher interest rates.

Tim Stonesifer: Turning to tax, given the discrete benefits we've received this year, we now expect our full year core effective tax rate to be approximately 19%.

Tim Stonesifer: Based on all these factors, we are tightening our core diluted earnings guidance range to $3 to $3.05 per share, which corresponds to 15 to 17 percent constant currency growth over 2023.

Tim Stonesifer: Given recent movements in foreign currency, we are absorbing approximately 8 cents of FX-Hedwin versus the guidance we issued in February.

Speaker Change: To wrap up, I want to thank the entire ALCON team for another great quarter, and with that, I'll turn it back to David.

David Endicott: Thanks, Tim. And to wrap up, our investments in R&D have created one of the most productive periods since our spin, and I want to thank the teams working on innovation and manufacturing excellence for their dedication and efforts to making these projects successful.

David Endicott: These projects will drive meaningful long-term growth across both our franchise and we look forward to solving some of the most complex challenges in eye care. With that let's open up the line for Q&A.

Speaker Change: 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.

Speaker Change: We ask that you limit your questions to one and a follow-up so that others may have an opportunity to ask questions.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

while we poll for questions.

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

Thank you for watching. Bye-bye.

Speaker Change: Hi guys, thanks for taking my question and just as we as we look into next year and obviously the stock is weak there I suspect given

Speaker Change: people are slightly worried about the slower growth in Q4 so

Speaker Change: When we think about the exit rates in terms of top line for Q4

Speaker Change: Would you be comfortable talking about the incremental growth we can get next year when we think about VBP and product launches?

Speaker Change: just to give us a sense as to whether a 789 sort of growth rate next year is is doable and maybe just a quick one on the margins because you can contextualize again how we think about investments next year versus margin expansion. Thank you.

Speaker Change: sampling into the market will, you know, obviously dampen revenue reported units and our audited data, you know, does that so you see a 1.5 percent growth in the U.S. it's probably dampened by whatever was going on in that in that sense and I think

Speaker Change: that should stabilize. Our sense of the market, particularly in cataracts, is it's very stable over the long term, and I think you have very good international growth for us. You know, the market internationally was up, I think, 5 percent, and so...

Speaker Change: You know, I expect that, you know, over the long haul, these are very stable, very, you know, normal markets, but

Speaker Change: Obviously, it was a weird one for us in the third quarter and in the U.S. in specific. But after that, I mean, I think what we would say about new product flow is we're excited about it. I do think that you need to be careful about how you cadence it, because a lot of these products are coming out second, third quarter.

Speaker Change: and so you won't get a full year impact. The first full year impact is going to be 26, but obviously it contributes to the back half growth of next year. So perhaps think about the front half as a little bit more in line with where we've been in the back half, a little bit more aggressive as we get products into play.

Speaker Change: And then on the margin front, you know, we'd expect to continue to get operating leverage next year. I mean, if you look at the last couple of years...

Speaker Change: We've expanded margins by call it 150 basis points a year and constant currency

Speaker Change: I do think next year will be a little bit less than that given the investments we want to make, you know, so think about 512, think about Unity VCS.

Speaker Change: Precision 7 but you know we're committed to making the appropriate investments to drive the long-term revenue growth but overall we expect to see nice operating leverage next year and you know we continue to be comfortable with the long-term margin goals we discussed at our last capital markets day.

That's really helpful. Thanks a lot, guys.

Thank you.

Speaker Change: Our next question comes from Jack Reynolds-Clark with RBC Capital Markets. Please proceed with your question.

Speaker Change: Could you go and talk about what drove the demand for vet consumer boards here? Is something out of the ordinary going on there? On Voyager, how well recognized are the potential benefits of DSLT in your customer base and what's the plan to roll out here from a kind of geographic perspective and what kind of launch curve are you expecting next year? Thank you.

um

Speaker Change: Yeah, Jack, thanks for the question. I think on consumables, we had, you know, we had a nice quarter with BitRet, and I think that was positive. Obviously, we had a solid quarter for, you know, the global consumables in

Speaker Change: you know, in cataract as well. Retina, sorry, refractive was soft. So, you know, a little bit of an offset there, but I think directionally, very good consumables number for us given where the market was, again, growing faster than the market in consumables.

Speaker Change: On Voyager, I think, you know, SLT is very well accepted as an idea, and I think if you ask...

Speaker Change: glaucoma folks and you know really general ophthalmologists whether the data is there to believe that SLT is the right place to start almost everyone agrees

Speaker Change: I think it is really great. What has not been agreed is how it's not an easy thing to do and a lot of people don't do it and I think that's really what the DSLT has an opportunity to fix, which is

Speaker Change: This is a product that fundamentally has an eye-tracking robotics that gives an accurate and automated delivery of laser light.

Speaker Change: into the trabecular meshwork, whereas opposed to what you have to do now, which is manually hold a gonioscope

Speaker Change: anesthetize the eye. It's a bit of an exercise to really get it done right now and I think what we believe is

Speaker Change: We can make this a good bit more acceptable for patients and for physicians. So over time, you know, we think this is a positive change and I think directionally that adds to our glaucoma portfolio where

Speaker Change: you know, we see an algorithm that is very widely accepted, I think, which will be SLT drops, you know, indehydrous. I mean, really, that is what we're trying to create is a new and recognized algorithm that, you know, drives real benefits to patients.

Speaker Change: That's okay, thank you. Sorry, just on the geographic launch, or launch in kind of geographic perspective... Oh, yeah, yeah, sorry, Jack.

Jack Reynolds-Clark: Yeah, indeed. We'll start with the US and we'll have there is some product available in the European markets now So it's CE marked already

Jack Reynolds-Clark: But I think directionally, we're going to put most of the inventory we have at the U.S. market in the beginning, and then we will, as we lift...

Jack Reynolds-Clark: The ability to, you know, in our capacity to make the product will move market to market, but largely Europe after the U.S.

Great. Thank you very much.

Speaker Change: Our next question comes from David Saxon with Needham. Please proceed with your question.

David Saxon: Great. Good morning, David and Tim. Thanks for seeing my questions. I just have two kind of product pipeline related questions. The first is on AR-512. Just thoughts about

David Saxon: The adverse events, the stinging and burning, how much does that impact opportunity? And then it sounds like you're expecting immaterial revenue contribution next year when it launches, kind of mid-year. How should we think about the level of investments?

David Saxon: needed to support kind of the second half launch and then I'll have one follow-up.

Speaker Change: Yeah, so burning and stinging is, you know, very common with eye drops, as you probably know. I think it was about 50% in the trial, so, but 97% of that was mild and I don't think anybody, maybe one patient or something, you know, got knocked out of the trial. So, I think we believe it to be very, very manageable and obviously what really matters is how well it works. And I think what we're after is something that works much more quickly than the alternatives that are out there. That is the data that we seem to have right at this point.

Speaker Change: Instead of waiting a month to figure out, or even two or three, to find out whether something's working or not, I think you can find this out quite quickly, which is good for payers, good for patients.

I think we'll see some very positive response to that.

Speaker Change: The revenue contribution, obviously, we get it out mid-year. By the time we get it out and start working with payers in earnest, you're really not going to see much in the back half of next year. What we have said is we're going to be...

Speaker Change: thoughtful about our promotion as we kind of move forward. We'll put certainly more folks on the ground behind this and there'll be more, you know, advertising promotion, but we're gonna be thoughtful about the timing of all that and we'll work our way through next year and I think think about this as a full-speed idea in really in 26.

Speaker Change: Okay, great. That's helpful. And then my second question is just on Panoptix Pro. When will we hear which of the two lenses?

Speaker Change: that are currently approved will be the one you ultimately go through with commercializing. And then kind of thoughts around launching that in the U.S. while it seems like the U.S. market is kind of softer. Thanks so much for taking my questions.

Speaker Change: Yeah, look, I mean, I think we have a lot of market share in the U.S., and so we're obviously very interested in getting here first.

Speaker Change: We'll certainly take it around the world as we get approvals and CE marks for it. But in this case, you know, we should have a decision made in the first quarter. We'll certainly manufacture it as quickly as we can and get it out quickly.

Speaker Change: You know, my hope is that we've got it out, you know, end of the first quarter, early second, something in that zone.

Speaker Change: We should be, you know, ready to go. But, you know, we're excited about what we've got. We've got two very good ideas, and it is very difficult. I mean, I think one of the cool things about, you know, Panoptix has been, it's a very, very good lens. I mean, if you want a true multifocal, you know, this is the lens out there that provides

Speaker Change: tremendously positive near-term, mid-range, and distance vision without a lot of visual disturbance and that's something everybody else has got to come to. We're going to improve on it. I don't think people have gotten there yet.

All right, thank you.

Speaker Change: Harry Beagleson with the Wells Fargo. Please proceed with your question.

Speaker Change: Good morning. Thanks for taking the question. Maybe, Tim, could you give a little bit more color on the factors that led to the top-line guidance reduction? The reported range came down by about $150 million at the midpoint. Constant currency range, maybe $50 bps.

Speaker Change: Just a little bit more granularity on the guidance change, just bridge from the old to the new. And I had one follow-up.

Speaker Change: Yeah, sure. Thanks Larry. You know if you look at the beginning of the year, you know markets were pretty good Our performance was very good

Speaker Change: And, you know, that's why we increased the guide after the Q1 call.

Speaker Change: You know, when you get into Q2, we started to see a little softness in the U.S. surgical market, probably in the June timeframe. That softness continued in Q3, so that's really what drove the adjustment to the revenue guide.

Speaker Change: And that $40 million in the divestiture of the iDrop sales, Tim, where does that show up? And just for my follow-up, David, maybe just give us an update on the Unity VS soft launch and feedback so far.

Speaker Change: And if we should expect above average growth next year, you know, for your equipment and surgical businesses given that launch, understanding that that will probably accelerate through the year, David, as you said, it's the second quarter launch. Thank you.

Speaker Change: The $40 million is an annualized number that'll show up in the Ocula Health segment.

Speaker Change: And then on the Unity VCS stuff, you know, the software's been great. I mean, you know, we've really, you know, we've been patient with this because, you know, we've got two really terrific products out there in Constellation and Centurion. And as I said in the prepared remarks, you know, this product is doing, you know, really amazing things.

Speaker Change: and I think we've had a very positive set of feedback and a lot of good input too on

Speaker Change: you know, just the way it's set up in the, you know, the software and how it looks to the surgeons. So we're making some small changes as we go through this, but all things that I think are

You know, I would just call them cosmetic or small-ish.

Speaker Change: which is exactly what we wanted to find out. So, you know, where we are right now is feeling very good about this launch. And I would say that, you know, you expect in a 10-year cycle to see, especially when you get the new thing out, a little bit more accelerated growth in the first couple of years.

Speaker Change: Last couple of little soft, you know, as you see right now this year is going to be a little soft for us on equipment

Speaker Change: all kind of expected as you normally cycle through, you know, equipment like this. So, I do think that the growth will certainly accelerate in the back half of next year, as opposed to the front half, because it'll take us a while to kind of get things moving and get everything going. So, but yeah, I mean, equipment should pick up next year from this year for sure.

Thank you.

Speaker Change: Our next question comes from Patrick Wood with Morgan Stanley. Please proceed with your question.

Beautiful, thank you.

I'd love on the OUS and ex-China ATIOL business.

Speaker Change: I mean, it's been strong for a little while now and definitely above trend. Could you unpack that for us a little bit? I mean, Vividium Panoptix has been in the market a while. There's not been a huge change in structure. We're not really seeing that increased adoption in other areas of medtech. So what do you think is driving that strength and how sustainable is it ex-China, OUS?

Speaker Change: Well, look, I mean, you know, if you take apart the international businesses, you know, in surgical, the ATI well penetration is probably what's driving.

Speaker Change: the overperformance. So there's some share movement in here, positive for us for sure. And I would call that, we start with a much lower share historically. We were later to market in Europe and in Japan and in Eastern Europe and the rest of Asia. So all those markets I think are still on the rise and they continue to grow nicely. And remember too, we didn't really get Vividi out there in every market everywhere. So we're still, for example, we got Japan autonomy to go with Vividi.

Speaker Change: So there's a bit of a sequencing that goes on as we kind of put capacity out there in all of the markets. So that's part of it. So the share growth, I think, internationally was very solid, but penetration in Europe, for example, was up 70 basis points. It was up 30 basis points in Japan. It was up.

Speaker Change: you know, a lot in China, you know, it's really been a positive everywhere on penetration.

General AIPAC was up 120.

that would include Korea.

You know, there's a general movement from a lower base.

into a

more aware market that is

you know, very interested in these.

Speaker Change: cash-paying products that do more than what the government's going to pay for.

Speaker Change: And so I think you see kind of a, they start from a low base and the kind of low teens and then depending on which market you're in, they're moving up towards where the U. S. is obviously U. S. is more like nineteen. But, but I think it's, you know, I think that's mostly penetration. And then there's, you know, there's a fair bit of share on our benefit because we're putting products out there and we start again from a lower, a lower starting point.

Speaker Change: Got you. And then maybe just as a quick follow up, like, what's the holistic appetite internally around, you know, slightly more therapeutic assets? I mean, I know you've got your stake in Orion, you know, on the cell therapy side, like, is that generally a direction of travel that you want to take the business in totality? Or is it more of a sort of, I don't want to say side venture, but you know, how's the appetite for more pharma-like assets?

Speaker Change: I think it's, you know, appropriately sized. I think we have a, you know, a desire to get back into biopharma. I think we are capable of it in quite a significant way. Ariane has given us a real beachhead there with our glaucoma drops.

Speaker Change: I think if you kind of think through what we're doing now, you know, we're doing, you know, we're very patient around this, but I think we are very interested in.

Speaker Change: you know, what's the front edge of what happens next? And, you know, we certainly like things like cell therapy. We do like small molecules still, but formulation, you know, is probably where we've always had our strength. So, you know, think about drug delivery as a primary idea. Think about, um,

Speaker Change: you know, other kinds of ideas that, you know, that we would patiently develop over time. So, I would think long-term, absolutely interested and would like to build a business there, not in a hurry to do it. We got a great plan right now.

Love it. Thanks, guys.

Speaker Change: Our next question comes from Ryan Zimmerman with BTIG. Please proceed with your question.

Speaker Change: Good morning. Thanks for taking my questions. Sorry to be a little myopic here, Dave and Tim. I want to ask about the fourth quarter. If you look last year in terms of 3Q to 4Q, there's been a less pronounced

Speaker Change: step up from 3q to 4q, about 1.3%. This year your patient of maybe a little over 3%.

Speaker Change: which, based on my model, is evident in equipment and ocular health. But I'm wondering if you can kind of talk about kind of how you see...

and what's...

Speaker Change: underline your assumptions for the fourth quarter, maybe from a segment perspective.

Speaker Change: Well, I mean, let me try and kind of give you a broad sense, Ryan.

Speaker Change: And myopic is always the right word for us. You know, we spent a lot of time on that topic. We, you know, when you look at implantables and our consumables business, it is dependent on the procedural growth. And so, you know, based on what we've seen,

Speaker Change: you know, in the, you know, kind of end of the second quarter and the third quarter. You know, we're just being, you know, appropriate, I think, in the way we're thinking about the fourth quarter volumes.

Speaker Change: I mean, that drives obviously those two categories, you know, they run very close, you know, we're going to grow faster than the market. But but we're, you know, we're, you know, we lose one point on the market. And all of a sudden that that affects us. It's a difference between six and seven. So, you know, I think that's one element. I think the

Speaker Change: When you get to equipment, I think there's a natural tendency right now to wait for a lot of things that we've got going on, so I think you've just got to chuck that one up, too. If we hold at stable, which has been our goal this year, and we've done a little better than that,

Speaker Change: You know, that's really what's going on in that market. It's not a market phenomenon. It's not really a capital thing It is really, you know, we've got some awesome technology coming and I think people are waiting for it

Speaker Change: And we kind of knew that was what was going to happen. It's happened in prior launches.

Speaker Change: And then when you move to vision care, you know, Contact Lens was pretty solid, actually. So I think, you know, we look at Contact Lens.

Speaker Change: We had a little less price in the third quarter and the fourth quarter should be pretty solid So I don't really anticipate a lot of change there And I think ocular health has been beset a little bit by some one-offs, right? so you've got a contact lens care problem that we had, you know with some

Speaker Change: inventory in China last year that we're wrapping around as a comp, and then we had, of course, a bit of a mistake with a vendor, you know, in the third quarter on

Speaker Change: on the gross margin with the product that we had to spoil.

Speaker Change: So, you know, I think, you know, in the fourth quarter, we should be kind of relatively stable in those markets.

Speaker Change: look fine to us, and our performance has been really, even despite that, quite good in the Sustane product, for example, which has been double-digit. So, you know, I think.

Speaker Change: segment-to-segment, you know, if you cut it all there, it should be pretty close to what we're describing. We, you know, we have a pretty good read on it. So, you know, again, I think it's good. You know, we'll grow faster than the market. We hope the market grows well.

Okay.

Speaker Change: And then, I got a lot of questions. I'm going to actually ask about P7, just because it's, it is such a, you know, paradigm shift in contact lens adoption. And so, if you could spend a minute kind of, you know, is the target to switch to two-week wears? Is the target to go, you know, the initial target, you know, on the monthlies? How are you thinking about kind of segmenting the market, I mean, in order to drive what is, you know, essentially a new category in contact lenses?

Speaker Change: Yeah, it's an interesting question and it's a really good one. That's why we've been a little bit careful with this product. We've talked about it really for maybe 18, 24 months because we had the idea some time ago but we wanted to test it.

Speaker Change: We've had it in the market now for about six months with maybe 30 to 50 KOLs that we really think a lot of.

Speaker Change: I think what we believe is that everybody believes that dailies should be the product people should use because they're healthier, they're easy to use, all of those things.

Speaker Change: But not everybody can afford it, and today, still, you know, about half the market goes into a reusable lens, which is usually a monthly lens, sometimes a two-week lens.

Speaker Change: As a consequence of that, you know, what we have asked ourselves is, well, is that is there something in between there? And the answer is, we believe so. And it is.

Speaker Change: basically, you know, this two-week market or the monthly market that we're thinking about because

Speaker Change: A one-week lens is certainly more intuitive. You know, every Monday, every Sunday, whatever you want to do, you take it out, you toss it, and then you use it, you know, reusably, you know, all week, and you get rid of it. But that's a much more intuitive replacement profile. It's healthier. It's a lot more comfortable than a monthly lens, especially as you get to the end of the month or you get to the end of the two weeks.

Speaker Change: You know, what we believe is that putting this lens in every week.

Speaker Change: gives you a fresh lens every day and at day seven. So at the core of that is, we think there's a price point and a comfort benefit, a wearability benefit that is very meaningful to the two-week wearer and the monthly wearer. So that's roughly how we see it. For everybody who can't afford dailies, this is going to be the best lens for them.

Thanks for taking the question.

Speaker Change: Our next question comes from Jeff Johnson with Baird. Please proceed with your question.

Speaker Change: Thank you. Good morning, guys. I was wondering if I could ask maybe two clarifying on the model and then just a contact lens question. On the model itself, you know, 4Q implied guidance seems to be kind of a broad range in 5% to 9% at the organic growth level. Tim, can you, you know, kind of narrow us into that 5% to 9%? What would it take to be at the bottom end of the range, at the top end of the range? Is that the right range doing the math? And I guess I'll listen there and then ask one other question. Thanks.

Speaker Change: Yeah, I mean, as far as the ranges go, to David's point, I think he laid out sort of the sequential growth that we're expecting. I think what moves that market would be one of them. Again, we've assumed the market will be consistent with what we saw in Q3. So if that's a little bit softer than we thought, that would bring you down. If it's a little bit better than we thought, that would bring you up.

Speaker Change: and then again performance. I mean again we have a lot of momentum internationally, contact lenses to David's point. Internationally a lot of momentum there, gaining a lot of share. Ocular health we have we have a favorable comp. So those would be the movers.

Speaker Change: All right, fair enough. And David, I think I heard you say, correct me if I'm wrong, kind of whatever this second half is, where fourth quarter shakes out with the third quarter, you'd be somewhat comfortable with that being kind of the stepping up off point for the first half of next year, and then maybe some acceleration on top of that. Is that correct, number one? And number two, just on the contact lens market, the 5% growth you cited for the market this quarter seemed to maybe a point softer than the first half. Anything to read into that? Our recent survey picked up maybe a point of softening as well. So just wondering if anything's changed in the market, or if that's just kind of normal variability by quarter. Thanks.

Speaker Change: Jeff, I think that for the second part, I mean, you know, we've always said the contact lens market runs between four and six percent, you know, it's right in the middle of that right now, so I would call that normal.

David: You know, I think the first part of your question, front half versus back half, you know, what I was really trying to imply was, you know, we really have a lot of stuff coming in in the front half, but it doesn't really generate full speed revenue until you start getting into the back half. So I would think about.

David: you know, the back half a little bit stronger than the front half next year. And that's really all we can guide you at this point until we get really into next year and, you know, have all our thoughts together on the market and how these things are gonna actually roll out.

Fair enough, thanks.

Speaker Change: Our next question comes from Anthony Patron with Mizzou Hoover. Please proceed with your question.

Anthony Patron: Thanks. Maybe one on IOL is just a broader new product question. You mentioned a couple of times, David, on competitive dynamics, but also the market's a little bit soft in the U.S.

Anthony Patron: Maybe if you segment between those, you know, how long do you expect trialing of competitive lenses? I think in the PCIOL side

Anthony Patron: Will that bleed into the first half of next year and then does it subside?

a little bit on those dynamics and just

Anthony Patron: That underlying market, you know, in the U.S. has been, I think, a little bit soft. So, is there any...

Anthony Patron: update on the state of the consumer and just sneak in the one on new products. You have three new products coming, you know, next year that are pretty substantial. When you think about contribution of new product growth,

Anthony Patron: You know, is that something that we should be thinking two to three hundred basis points or perhaps more as this gets going? Thanks.

Speaker Change: Yeah, let me let me take on the first one. Look, there's there's two dynamics. You're right. I mean, there's one that won't last that long. But but certainly it's hard. It's hard to know how big it is. And that is

Speaker Change: You know, competitive sampling, I mean, sampling takes out revenue units that should depress the market. So some of that is in there for sure, because there were two relatively new products into the market with competition in the third quarter. So start started kind of a second, but.

Speaker Change: And that could explain some of it. There's also a lot of other views on this, which is, you know, we can see that some of our largest accounts

Speaker Change: you know, have been a little bit less productive this year than they have been in the past. But the thing I'd tell you is, you know, there is no shortage of cataracts. There's plenty of cataracts to go. They can do as many as they want to do. The limiting factor is how long they're in the OR and how many they schedule.

Speaker Change: And so really, you know, I expect all this stuff to kind of naturalize into what has historically been the global growth rate. We kind of called that, you know, that four to five range globally is the right answer. So.

Speaker Change: You know, we're on the low end of that because, you know, the U.S. was a little bit soft, but the international was solid. They were right in the middle of where they should be. They were five, I think.

So I think, you know, we were.

Speaker Change: You know, we were, you know, pleased with, I think, what happened in international, continue to see strong growth out there. It's been the U.S. dynamic that we're just trying to figure out, you know. How long does it last? I don't know. I mean, but I wouldn't really worry about it over the long haul. I think if you're in this for the long haul, like we are, you know, cataracts come back. You know, this is a 3% growth market in the U.S. has been for a long time, so.

Speaker Change: I wouldn't expect it to be different than that over the genuine long-term horizon. On the other piece, you mentioned on the consumer, you know, I would really take the consumer out of this. You know, the consumer is...

Speaker Change: really not part of the cataract surgery discussion, really. I think we know there's a lot of headroom for ATOLs. We know there's a line of, right now, I think the wait times, even in the US, have gotten to be four and five months.

Speaker Change: So, you know, there's a significant amount of wait time out there, plenty of consumers who will come and pay for.

Speaker Change: On the last bit on product growth for new products, give us a little bit of time to think that through. We need to position that a little bit better, but

Speaker Change: You know, I think what we're trying to figure out as we get into next year will be how much we're going to put into that, when they launch and how to think about that. But as I said before, what I give you right now is back half is probably stronger than the front half.

Thank you.

Speaker Change: Our next question comes from Tom Stefan with Stiegel. Please proceed with your question.

Great, hey guys, thanks for taking the questions.

Speaker Change: Two on the consumables opportunity for Unity. I'll ask both up front. I think it's understood price is a potential growth driver for Unity consumables. What about the share gain opportunity? David, can you talk about that a bit?

Speaker Change: And I guess if and how that can also drive consumables growth. And then second, my tack on, you know, is there any sort of tail or lag on the consumables revenue from Unity compared to system placements?

Speaker Change: Yeah, the last one's pretty easy. There isn't really a lag, you know, different than what you'd see on our normal, you know, sales and we do, but you do see a, you know, when you bring a new machine in

Speaker Change: There is a cutover period, so you start a little bit slower and then it accelerates up. So just, you know, you're going to have to put in a, you know, a lag of growth to full speed.

Speaker Change: but that's not different than what we would sell now, so I would think about it that way. We've been very fortunate the last couple of years. We've gained share in our,

Speaker Change: So I think we've gained one or two share points of platform.

Speaker Change: around the world, largely international, I would say, and a little bit in the U.S., but

Speaker Change: I think there is some share in the U.S. to be had. I would not say there's a lot. I would really think about it as a replacement cycle for our current machines with a premium to that replacement, both on the consumables and the consoles. Internationally, I do think there's a share opportunity, but again, you know, you have to divide the world up into the...

Speaker Change: kind of, you know, world that can afford this machine and the world that is using, you know, very kind of inexpensive, you know, what they can afford machines where we really don't compete and that's a significant part of the international share as you would look at it. So you'd think about India, you'd think about developing markets where, frankly, there'd be some of our machines in there, but only in very large centers in very large metro areas. So we tend to have a very low share in some of those developing markets. But, you know, those are opportunities for us. They're probably opportunities for others of our products. So, say, our legacy brands and or our

Speaker Change: our Legion product. And I think that was probably what it was, but I think directionally the growth is going to be positive in consumables because, of course, you know, we're looking to get a premium on the PAX as we go forward.

Thanks.

Speaker Change: Our next question comes from Brett Fishman with KeyPink Capital Markets. Please proceed with your question.

Speaker Change: Hey guys, thank you very much for taking the questions. Just had a brief one on the contact lens business trend. So I think you annualized one of two pricing increases that you took last year and still grew approximately 8% constant currency in the subsegment. So just curious how much of that performance was tied to volume and mix versus pricing growth this quarter.

Speaker Change: Yeah, I think you've got it exactly right. We've got, we had a lot more price last quarter than we did this quarter. And obviously, you know, I think we grew 9% last quarter contact lens were great this time. So you know, I think there was a slight, you know, I think you can attribute that 1% certainly the price that was in last quarter.

Speaker Change: And then, you know, I'm not sure we've broken down in general what the price element of the lens category was, but I would think about it as generally the category runs a third, a third, a third, which is, you know, for us, a third volume of coming from share, a third of trade up and about a third of price.

Speaker Change: All right, helpful. And then just one more kind of clarifying question on operating margin. So you started the year with guidance of 20.5 to 21.5, and now trending toward the lower half of that range. I was just curious if you could hit on kind of like the biggest moving pieces there, other than, you know, a little bit less sales leverage, and then specifically the estimated FX impact versus the original guidance. Thank you very much.

Speaker Change: yeah well we had roughly 30 basis points of pressure driven by the supplier issue that we had in Q2 so you know if you kind of take that out then you're right but you're right in the middle of the range that we had guided before and from an FX pressure let me see

Roughly 40 basis points.

Thank you. Bye bye.

Speaker Change: Our next question comes from David Adlington with J.P. Morgan. Please proceed with your question.

David Adlington: Hey guys, thanks for the questions too please. Firstly on Chinese and the VVP I just wondered if you help us...

David Adlington: Trying to quantify what sort of tailwind you're seeing in China and how you expect that to evolve from here. Should we see a bigger tailwind?

David Adlington: developing from here. And then secondly on 512, just in your discussion with payers, just wondering how the early onset of action is resonating with payers and is it enough to see 512 as first-line therapy? Thanks.

Um...

Speaker Change: On the China piece, I think, you know, we're exactly where we'd hope to be right now. We feel really good about our progress.

Speaker Change: As you know, you've got to, you know, get the products listed, you've got to get them, you know, inventoried into the hospital, and then you've got to convert.

surgeons, you know, to, you know, a new method.

Speaker Change: Many of these surgeons have never had the opportunity to use Aviviti, although they've obviously heard about it around the world, same thing with Panoptix.

Speaker Change: You know, for us, this is an exciting time and we're moving nicely.

Speaker Change: through our Cadence of Activity, and I think we're kind of, as I would say, you know, full year effect next year is probably the thing to think about. We're getting some effect on it this year, but largely it's distribution and, you know, the inset of inventory into, and we're getting some pull through right now, which has been great. But I think,

Speaker Change: You know, our share is moving nicely, but again, relatively early days for us there. Look for next year to be a bigger step forward.

Speaker Change: I think on 512, the payers piece of it, I think, has been pretty good. You know, again, we're very early in this conversation, so I would say...

Speaker Change: You know, we have a thesis on this that we are testing. It seems to work well. I do think that first-line therapy is going to be almost always given to a generic if there's one available in many of the payers. And you need to be thoughtful about that because you're going to have to clear that hurdle. And.

Speaker Change: That, you know, that's not new news. I think what's exciting about this, though, is that

Speaker Change: Even in that circumstance, the economics of knowing that something works in a week versus knowing that something might work a month from now and then having to have another visit around it, I think has a real opportunity to save money to the system.

and to the patients, and, you know, obviously...

if you can create a substantial impact early on.

Speaker Change: You know, that is our economic thesis right now. And I do think it certainly resonates. We're going to need to make sure that we can make that come alive for people as we go forward. I think First Line will be, you know, largely driven by historically lower-priced products as it is today. And we'll be competing for, you know, what happens right after that or how do we compete with that.

Sure, love it. Thank you.

Speaker Change: Our next question comes from Guy Nguyen with Citi. Please proceed with your question.

Guy Nguyen: Hey guys, thank you for taking my questions. I have two please. So the first thing is could you just

Guy Nguyen: Give us a quick update on how the penetration of ATLLs in the U.S. trended in the quarter and if you're seeing anything different in the first half of Q4.

Guy Nguyen: And then the second question is on the contact lens business. Seeing that the organic growth has been trending down over the course of the last three quarters, aside from pricing, is there anything else that you would like to call out about this business? Thank you.

Speaker Change: On the penetration in the US, it was up about 70 basis points. So I think nice.

Speaker Change: Nice movement up. I think it was in the 19 low 19s So again, you know kind of returning back to where it was after a bit of a hiatus there So we were pleased with the sequential growth and the year-over-year both of them were up. I think directionally that

Speaker Change: The contact lens organic growth trending down I think probably has more to do with price

Speaker Change: then it does anything else. I think underneath that trade-ups are pretty solid.

Speaker Change: and, you know, again, mix has been good for us. So, again, we're getting some good reusable mix in here, which is good for profit. You will have seen our sector profit up. And I think directionally, you know, our contact lens business seems like it's doing quite well, both on a share basis, but also on a, I'll call it trade up and our prices seem to be holding nicely.

Speaker Change: Thank you. And if I could just quickly follow up, what is your view on pricing going forward into the new year?

Speaker Change: We take that kind of quarter by quarter. You know, what we're looking at is obviously our input prices first. So, you know, what does it cost us to make this product? And what's the inflation from suppliers? So.

Speaker Change: We take that into account. We're also looking at, very quickly, every quarter, we look at what the trade-up looks like, so is there any hesitation as prices moved up from consumers?

Speaker Change: trading from a reusable lens into a daily lens because we don't want to price anybody out and obviously, you know We're always sensitive to our you know, are we the reasonable value relative to competitors? So, you know, that's what we're trying to figure out So we'll reserve judgment on what we're going to do forward, you know as we collect that information in the new year

Thank you.

Speaker Change: Our next question comes from Issy Kirby with Red Bird Atlantic. Please proceed with your question.

Speaker Change: Hey guys, thanks for taking my question. I was just wondering if you could talk to some of the dynamics supporting the sustained growth. This has been, you know, very impressive growth for some time now. Just wondering if you could help us understand the extent to which this is share gains versus market transition into preservative-free and the sustainability of that growth into next year.

Speaker Change: And then my follow-up is on the surgical margins, which were a little bit softer this quarter. Just if you could talk to some of the moving parts within that surgical contribution margin, if it is mixed pressure coming through from the implantable slowdown, and how we should be thinking about that division into 25. Thanks.

Speaker Change: Yeah, well, thanks for noticing the sustained growth. It has been terrific and I think

Speaker Change: Probably an underappreciated asset for us. One of the things that we have noticed, you know, obviously, when we put this product out was the preservative-free multi-dose

Format is a very attractive format for people and...

Speaker Change: The unit dose preservative-free products are good products, and what was surprising to us is that those have...

Speaker Change: really persisted pretty well. I think some people find them convenient.

Speaker Change: But what's exciting is that most of the market, I think, has taken to the...

Speaker Change: the multi-dose version of the preservative-free product quite well. And it- we have always thought that it would kind of approximate the international markets in its penetration ultimately. So I would say it's a little bit of share gain, but it's a lot of movement to preservative-free multi-dose on the sustain piece. Now, you know, we hope that the share gain will pick up as well next year as we launch, um, Sustain, what we're calling Sustain Pro.

Sustane Pro has hyaluronic acid in it which is

As most people know, it's a really popular...

lubricant and does a lot of really nice hydrating qualities.

Speaker Change: if you include it in a tier. And so we've been able to formulate.

Speaker Change: Sustain Complete with Hyaluronic Acid and some other kind of clever ideas that the folks have come up with.

Speaker Change: to really give us a very durable comfort which I think gives Sustain another boost as we go forward next year on a share basis. So we're excited about that. It comes out in the first quarter and so I would look for steady growth in Sustain.

Speaker Change: you know, in through next year. And if you look at the surgical margins, there was a little bit of pressure and gross margin, which is primarily mixed. That was a piece of it, but it was really predominantly incremental R&D.

Speaker Change: okay that's helpful thank you and if I can just squeeze in a clarification I think at the start you mentioned one and a half percent growth in the U.S. I just wanted to confirm was that an implant or broader surgical?

Speaker Change: That's surgical procedures as we define them, and that's largely around implants.

Okay, great. Thank you.

Speaker Change: Our next question comes from Sajid Aznar with HSBC. Please proceed with your question.

Speaker Change: Hi, thanks for taking my questions. One, on the tax and cash flows, tax rate was lower and cash flows were much stronger than Q3. So the question is, is there any pull-forward effect? Should we expect a normalization of that? And will there be a phase B going into 2025?

Speaker Change: And the second question is, can you give us some more color about how...

Speaker Change: value-based procurement has evolved for you. Maybe some insight into the share gains and whether that had any impact on the lower surgical margins that you had this quarter. Thank you.

David Endicott, Daniel Cravens

Speaker Change: Yeah, on the tax front, we did settle some tax disputes, one in the U.S., I think one in Germany. So, we had some discreet benefits, so that's what you're seeing in Q3. So, you know, the overall tax rate that we updated, moving it from 20% to 19%, that was really driven by the fact that we had more favorable discreets.

Speaker Change: that we had anticipated. And then on the pre-cash flow, yes, you know, we're excited about the pre-cash flow performance.

Speaker Change: We've been talking about this step-up. We actually saw that in Q3. And what you're basically seeing is now that we're done with separation, now that we're done with transformation, we've flowed through the higher cost inventory that we bought when inflation was a problem and supply was a problem. You're sort of seeing all that flow through right now. So we're getting to a much more normalized free cash flow, and we'd expect that to continue to grow as we improve our operating performance going forward.

Yeah, and on...

Speaker Change: On the global share, I would just say, you know, we have, you know, our global total IOL share has been relatively flat, you know, so we are trading international share for U.S. share, and I think as a consequence, there is some price erosion around that. Now, we're making that gross margin up in productivity, you know, inside of the manufacturing groups. So, again, you don't really see a net effect in gross margin on that. But it is obviously a lower price on the European stage and on the, you know, China stage, for example.

Speaker Change: Our share gains have been meaningful in China, but it's hard to tell right now whether or not, you know, what they are because the data is a little bit muddy, I would just say. So, you know, we're very pleased with our performance. It's exactly what we'd hoped for. But I would just say I wouldn't want to overread, you know, the positives we're getting.

Thank you very much.

Speaker Change: Our next question comes from Falco Fedricks with Deutsche Bank. Please proceed with your question.

Speaker Change: Firstly, on the U.S. market, I think you said that you noticed that it turned a little bit softer in June. Did this get worse throughout the third quarter, or did it just stay on this slightly softer level in June? So essentially, did the U.S. market deteriorate further in Q3, or did it just sort of stay on a stable, softer level that you saw in June?

Speaker Change: And then my second question is, if the root cause of this lower U.S. growth is IOL customer sampling competitive products,

Speaker Change: Isn't there a risk that some of those customers stay with a competitive product, in which case your implantable growth might be a little bit slower structurally heading into next year?

Speaker Change: or asking it differently, what gives you confidence that you can keep your share in the IOL market in the U.S.? Thank you.

Speaker Change: Well, first of all, on the tempo, it was slightly slower in June and it pretty much stayed there. It was pretty, you know, kind of just stable through the third quarter. So nothing, you know,

Speaker Change: to really write home about, I would just say it was, you know, a low end of normal is what I would typically say.

Speaker Change: And, you know, on the, you know, I think the question ultimately is if it's really sampling then, you know, you're going to have to stop, people have to stop sampling at some point and try and make some money.

Speaker Change: So I suspect that when they have to pay for the lens, it'll be a little bit of a different story because at some level, you know, you've got to be better than the lens that I'm putting in. And, you know, we feel very confident about the performance of Panoptix and Vividi against all of the competitive lenses.

Speaker Change: So, you know, there's going to be a market for price, there's certainly a market for free, and I think, you know, what we believe right now is that, you know, we'll do well when it comes time to, you know, really perform.

Speaker Change: I'm sorry, what was the question again? Market was closer to.

Speaker Change: The recent quarter, I think you said, yeah, you said market growth is closer to what you've seen over the recent quarters rather than what you've seen historically. Can you put a number on that? Is that, do you mean 3%? No, we're in the middle of the quarter right now, but I give you the third quarter, it was 1.5 in the U.S. and it was solid overall, it was 4.

Speaker Change: globally, five international. So those are the numbers that you had in the third quarter. They were, you know, a little bit softer than the second quarter.

Speaker Change: Okay, and that's just a little bit less than the 4-5% for the market you've seen historically.

Speaker Change: on average. I guess that's what you want to say, right? Okay. Yes. Thank you.

You bet.

Speaker Change: There are no further questions at this time. I would now like to turn the floor back over to Dan Cravens for closing comments.

Dan Cravens: Well, great. Thanks, everybody, again, for joining us. If you have any follow-up questions,

certainly reach out to either Alan Trang or myself.

Dan Cravens: And also, just as a reminder, as David mentioned, we are planning our next Capital Markets Day for the end of March of 2025, and that'll be at our Fort Worth campus in Fort Worth, Texas, and we'll plan on distributing the save-to-dates closer to the end of the year. Thanks again, and enjoy the rest of your day.

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