Q4 2024 Alcon Inc Earnings Call
To answer session will follow the formal presentation should anyone 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 VP of Investor Relations. Thank you you may begin.
Dan Cravens: Welcome to <unk> fourth quarter and full year 2024 earnings conference call yesterday, we issued a press release interim financial report annual report and a supplemental slide presentation on our website.
Dan Cravens: Today's call you can find all these documents in the Investor Relations section of our website at Investor <unk> Dot outcome Dot Com <unk>.
We love you, Carver! Gone! Gone!
Speaker Change: Joining me on today's call are David Endicott, Our Chief Executive Officer, Tim Stones, and Tim Stonesifer, Our Chief Financial Officer. Please.
Speaker Change: Please note that 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.
David Endicott, Timothy Stonesifer
Speaker Change: Greetings and welcome to the Alcon fourth quarter and 2024 earnings call.
Speaker Change: At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. Should anyone require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.
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 important factors that could cause our actual results to differ from those in our forward. Looking statements are included in our form 20-F earnings press release and interim.
Speaker Change: It is now my pleasure to introduce your host, Dan Cravens, VP of Investor Relations. Thank you. You may begin.
Welcome to ALCON's fourth quarter and full year 2024 earnings conference call.
Speaker Change: The annual report, which are all on file with the Securities Exchange Commission and available on their website at SEC Gov non.
Speaker Change: Yesterday, we issued a press release, interim financial report, annual report, and 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.
Speaker Change: Non <unk> financial measures used by the company, maybe calculated differently from and 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 <unk>.
Speaker Change: Joining me on today's call are David Endicott, our Chief Executive Officer, and Tim Stonesifer, our Chief Financial Officer.
Please note that 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 development, except as required by law.
Speaker Change: Please see a reconciliation between our non <unk> measures with directly comparable measures presented in accordance with us <unk> in our in our public filings for.
Speaker Change: For discussion purposes, our comments on growth are expressed in constant currency in a moment David will begin by recapping highlights from the fourth quarter. After his remarks, Tim will discuss our performance and outlook for 2025, then David will wrap up and we will open the call for Q&A with that I'll now turn the call over to our CEO David Endicott.
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.
Important factors that could cause our actual results to differ from those in our forward-looking statements are included in our Form 20-F.
Speaker Change: Thanks, Dan and thanks, everyone for joining us today.
Earnings Press Release and Interim Financial Report
Speaker Change: <unk> 2024 was another solid year for Alcon, we ended the year with sales of $9 8 billion and above market sales growth of 6%.
which are all on file with the Securities Exchange Commission.
and available on their website at scc.gov.
Non-IFRS financial measures used by the company may be calculated differently from and may not be comparable to similar measures used at other companies.
Speaker Change: We grew core diluted EPS by 16% to $3 <unk>.
Speaker Change: And generated a record $1 6 billion of free cash flow.
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: In 2024, we also continued to live out our purpose of helping people see brilliantly.
Speaker Change: <unk>, we hope to improve the vision of more than 1 million patients in low and middle income countries.
Please see a reconciliation between our non-IFRS measures with directly comparable measures presented in accordance with IFRS and our public filings.
Speaker Change: Additionally, we screened over 31000 children for refractive error and provided spectacles were required.
Speaker Change: None of these accomplishes would've been possible without the focus of our more than 25000 associates, who worked tirelessly to make a difference for our customers their patients and the communities we serve.
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 fourth quarter. After his remarks, Tim will discuss our performance and outlook for 2025. 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.
Speaker Change: Equally important we laid the groundwork in preparation to launch one of the richest product pipelines in <unk> history.
Speaker Change: Additionally, we realigned our leadership team and organizational structure to increase our focus on innovation.
David Endicott: Thanks Dan and thanks everyone for joining us today. 2024 was another solid year for Alcon. We ended the year with sales of 9.8 billion dollars and above market sales growth of 6 percent.
Speaker Change: Operational excellence and speed to market.
We will talk about all of this and more at our upcoming capital markets day.
Speaker Change: However, I would like to share a bit of a preview with you now.
Speaker Change: We grew core diluted EPS by 16% to $3.05 and generated a record $1.6 billion of free cash flow.
Speaker Change: In surgical we will show you our upcoming equipment launches as well as our connected equipment ecosystem we.
Speaker Change: We will also provide an update on our IL portfolio, including some insight on our accommodating programs.
Speaker Change: In 2024, we also continued to live out our purpose of helping people see brilliantly. Concretely, we helped improve the vision of more than a million patients in low- and middle-income countries. Additionally, we screened over 31,000 children for refractive error and provided spectacles where required.
Speaker Change: In vision care, and we'll talk about our focus areas, including our innovation in specialty contact lenses.
Speaker Change: In ocular health will discuss our strategy around accelerating growth with our over the counter assets such as sustain as well as our pharmaceutical pipeline.
Speaker Change: None of these accomplishments would have been possible without the focus of our more than 25,000 associates who worked tirelessly to make a difference for our customers, their patients, and the communities we serve.
Speaker Change: And finally, we'll provide more color on our long term innovation as we attempt to tackle some of the most challenging problems in eyecare.
Speaker Change: With all this coming in a month's time today I will highlight just a few of these innovations in my prepared remarks, I'll start with surgical.
Speaker Change: Equally important, we laid the groundwork in preparation to launch one of the richest product pipelines in Alcon's history.
Speaker Change: We're particularly excited about unity vcs are upcoming FICO hit device unity was designed with safety and efficiency in mind and this is the most efficient piece of physical equipment Alcon has ever created.
Speaker Change: Additionally, we realigned our leadership team and organizational structure to increase our focus on innovation, operational excellence, and speed to market.
Speaker Change: In cataract. This efficiency has enabled by FICO that is twice as fast as its predecessor, while using 40% less energy.
Speaker Change: We'll talk about all of this and more at our upcoming Capital Markets Day. However, I'd like to share a bit of a preview with you now.
Speaker Change: Additionally, <unk> unit of ECS brings new innovation with vitreous cutting that is one and a half times faster than constellation.
Speaker Change: In surgical, we will show you our upcoming equipment launches as well as our connected equipment ecosystem.
Speaker Change: We'll also provide an update on our IOL portfolio, including some insight on our accommodating programs.
Speaker Change: And both cataract and <unk> also enables efficiency through streamlined setup, and teardown, which directly supports rapid or turn as well as intraoperative workflows.
Speaker Change: In vision care, we'll talk about our focus areas, including our innovation and specialty contact lenses. In ocular health, we'll discuss our strategy around accelerating growth with our over-the-counter assets, such as Sustane, as well as our pharmaceutical pipeline.
Speaker Change: Importantly, this next generation console comes with next generation consumables.
Speaker Change: These include premium cassettes, and less invasive instrumentation, which are designed to increase our efficiency and improve the surgeon and patient experience.
Speaker Change: And finally, we'll provide more color on our long-term innovation as we attempt to tackle some of the most challenging problems in eye care.
Speaker Change: We received FDA clearance for unity Vcs in the Standalone cataract devices in 2024.
Speaker Change: With all this coming in a month's time, today I'll highlight just a few of these innovations in my prepared remarks. We'll start with surgical.
Speaker Change: Additionally, we anticipate receiving CE mark in the coming weeks.
Speaker Change: We're particularly excited about UnityVCS, our upcoming FACO VIT device. Unity was designed with safety and efficiency in mind and this is the most efficient piece of FACO equipment Alcon has ever created.
Speaker Change: And we're in the final stages of our user experience testing ahead of a full commercial launch expected in may.
Speaker Change: Next I'll discuss Panoptic pro our latest <unk> innovation.
Speaker Change: In cataract, this efficiency is enabled by FACO that is twice as fast as its predecessor while using 40% less energy.
Speaker Change: I'm pleased to announce that we're moving forward with a lens design that significantly reduces light scatter.
Speaker Change: Surgeons remains foremost interested in improving patient outcomes, which includes reducing the incidence of visual disturbances.
Speaker Change: Additionally, in VitRet, UnityVCS brings new innovation with vitreous cutting that is one and a half times faster than Constellation.
Speaker Change: Panoptic Pro was designed with that outcome in mind and ingeniously uses more light with less scatter.
Speaker Change: In both Cataract and VitRet, Unity also enables efficiency through streamlined setup and teardown, which directly supports rapid OR turn as well as intraoperative workflows.
Speaker Change: I look forward to sharing more information on this product with you at CMT in March ahead of our commercial launch again in May.
Importantly, this next generation console comes with next generation consumables.
Speaker Change: Now I'll touch on the Voyager direct selective laser trabeculoplasty device, which is already available in certain EU markets and the U S.
Speaker Change: These include premium cassettes and less invasive instrumentation, which are designed to increase OR efficiency and improve the surgeon and patient experience.
Speaker Change: Since introducing the Voyager into the U S. We've received very positive feedback from doctors and have seen a strong initial demand. We're now focused on ramping up production of the device.
Speaker Change: We received FDA clearance for Unity VCS and the standalone cataract device, CS, in 2024. Additionally, we anticipate receiving CE mark in the coming weeks.
Speaker Change: Voyager offers a novel way of lowering intraocular pressure by delivering laser energy to stimulate fluid outflow.
Speaker Change: And we're in the final stages of our user experience testing ahead of a full commercial launch expected in May.
Speaker Change: This device Leverages proprietary eye tracking technology for accurate automated treatment.
Speaker Change: Next I'll discuss Panoptic Pro, our latest PCIOL innovation. I'm pleased to announce that we're moving forward with a lens design that significantly reduces light scatter. Surgeons remain foremost interested in improving patient outcomes, which includes reducing the incidence of visual disturbances.
Speaker Change: It's streamlined workflow eliminates the need for <unk> or manual aiming, making it a patient and physician friendly solution, particularly when compared to manual esselte.
Speaker Change: <unk> is already a well regarded procedure by glaucoma specialists and has well established reimbursement mechanisms in many markets. We're excited to bring the benefits of this procedure to even more patients.
Speaker Change: Panoptix Pro is designed with that outcome in mind and ingeniously uses more light with less scatter. I look forward to sharing more information on this product with you at CMD in March ahead of our commercial launch again in May.
Speaker Change: Now moving on to contact lenses I am pleased to announce that our latest innovation precision seven is now widely available throughout the U S.
Speaker Change: Precision seven targets the reusable lens category, which we estimate is worth approximately $3 8 billion.
Speaker Change: Now I'll touch on the Voyager Direct Selective Laser trabeculaplasty device, which is already available in certain EU markets and the U.S.
Speaker Change: And where alcon is under indexed.
Speaker Change: This market segment has been underserved by innovation for years.
Speaker Change: Since introducing the Voyager into the U.S., we've received very positive feedback from doctors and have seen a strong initial demand. We're now focused on ramping up production of the device. Voyager offers a novel way of lowering interocular pressure by delivering laser energy to stimulate fluid outflow.
Speaker Change: This lens is groundbreaking one week replacement modality offering 16 hours of exceptional comfort and precise vision even on day seven.
Speaker Change: Precision seven delivers a breakthrough and comfort by utilizing our proprietary active flow system, which combines a moisturizing agent and are replenishing agent that continually releases moisture to the surface of the lens over a seven day period.
Speaker Change: This device leverages proprietary eye-tracking technology for accurate, automated treatment. Its streamlined workflow eliminates the need for a goniolens or manual aiming, making it a patient and physician-friendly solution, particularly when compared to manual SLT.
Speaker Change: Early Doctor and where feedback has been extremely positive, whereas like the feel of the lens and eye care professionals. Appreciate it's eased a fit and intuitive compliance, particularly when compared to a two week schedule.
Speaker Change: SLT is already a well-regarded procedure by glaucoma specialists and has well-established reimbursement mechanisms in many markets. We're excited to bring the benefits of this procedure to even more patients.
Speaker Change: Now I'll turn to ocular health, where we have several exciting developments I'll start with sustained the world's leading over the counter artificial tear which achieved its fourth year of double digit growth driven by our multi dose preservative free formulations.
Speaker Change: Precision 7 targets the reusable lens category which we estimate is worth approximately 3.8 billion dollars and where Alcon is under indexed. This market segment has been underserved by innovation for years.
Speaker Change: We're continuing to invest behind sustained.
Speaker Change: We're bolstering the sustained brand with the launch of sustained pro preservative free our latest and longest lasting triple action formula that hydrates restores and protects all types of dry eye.
Speaker Change: This lens is groundbreaking one-week replacement modality offering 16 hours exceptional comfort and precise vision even on day seven.
Speaker Change: Sustained pro is now available at retailers throughout the U S and we will continue to expand its availability throughout the year.
Speaker Change: Precision 7 delivers a breakthrough in comfort by utilizing our proprietary active flow system which combines a moisturizing agent and a replenishing agent that continually releases moisture to the surface of the lens over a seven day period.
Speaker Change: This product incorporates nano sized lipids and how youre on eight to reduce tier evaporation and provide prolonged hydration.
Speaker Change: Turning to prescription eyedrops I continue to be pleased by the performance of Rockwell 10, one of our glaucoma medications in the fourth quarter tiara extra this product grew mid teens.
Speaker Change: Early doctor and wear feedback has been extremely positive. Wear is like the feel of the lens and eye care professionals appreciate its ease of fit and intuitive compliance, particularly when compared to a two-week schedule.
Speaker Change: Regarding our 15512, we continue to expect that we are prepared and are preparing for a U S launch in the second half of the year pending FDA approval.
Speaker Change: Now I'll turn to Ocular Health, where we have several exciting developments. I'll start with Sustain, the world's leading over-the-counter artificial tear, which achieved its fourth year of double-digit growth, driven by our multi-dose preservative-free formulations.
Speaker Change: Looking toward the launch I'm increasingly encouraged by the strength of the U S prescription dry eye market, which we estimate is worth approximately $1 4 billion.
Speaker Change: In particular I'm pleased to see strong uptake of new branded Rx products, which we think is a positive indicator for the potential of 501 too.
We're continuing to invest behind SUSTAIN.
Speaker Change: We're bolstering the Sustane brand with the launch of Sustane Pro Preservative Free, our latest and longest lasting triple action formula that hydrates, restores, and protects all types of dry eye.
Speaker Change: More importantly, <unk> has some important differentiators from the currently marketed products, including onset of action.
Speaker Change: Finally, I will briefly discuss market dynamics for the fourth quarter.
Speaker Change: Sustain Pro is now available at retailers throughout the U.S. and we will continue to expand its availability throughout the year. This product incorporates nano sized lipids and hyaluronate to reduce tear evaporation and provide prolonged hydration.
Speaker Change: And cataract, we estimate that global procedures grew approximately mid single digits.
Speaker Change: Additionally, global Hei will penetration was up approximately 180 basis points year over year in.
Speaker Change: In both cases, the main driver of growth was international markets.
Speaker Change: Turning to prescription eye drops, I continue to be pleased by the performance of Roclatan, one of our glaucoma medications. In the fourth quarter, TRX for this product grew mid-teens.
Speaker Change: In the U S. We saw another quarter of slower market growth with dynamics similar as Q3.
Speaker Change: We believe this was driven in part by competitive Trialing and sampling, which are not captured in our third party data.
Speaker Change: Regarding AR15512, we continue to expect that we are preparing and are preparing for a U.S. launch in the second half of the year pending FDA approval.
Speaker Change: In contact lenses, we estimate that the retail market was up mid single digits. This growth was mainly driven by pricing and lens trade up.
Speaker Change: Looking toward the launch, I'm increasingly encouraged by the strength of the U.S. prescription dry eye market, which we estimate is worth approximately $1.4 billion.
Speaker Change: And with that I'll pass it to Tim will take you through our financial results and discuss our outlook for the year. Thanks, David.
Speaker Change: In particular, I'm pleased to see strong uptake of new branded RX products, which we think is a positive indicator for the potential of 512.
Speaker Change: To report fourth quarter sales of $2 5 billion.
Speaker Change: Up 6% versus prior year this.
Speaker Change: This growth was primarily driven by strength in our innovative contact lens portfolio and consumables.
Speaker Change: More importantly, 512 has some important differentiators from the currently marketed products, including Onset of Action.
Speaker Change: In our surgical franchise revenue was up 5% year over year to $1 4 billion in.
Finally, I'll briefly discuss market dynamics for the fourth quarter.
Speaker Change: Implantable sales were $456 million in the quarter up 2% year over year.
Speaker Change: In Cataract, we estimate that global procedures grew approximately mid-single digits. Additionally, global ATI well penetration was up approximately 180 basis points year-over-year. In both cases, the main driver of growth was international markets.
Speaker Change: International uptake of our advanced technology iOS continues to drive growth.
Speaker Change: In the quarter growth was partially offset by the solar market conditions in the U S that David mentioned earlier as well as competitive pressures.
Speaker Change: In the U.S., we saw another quarter of slower market growth with dynamics similar as Q3.
Speaker Change: And consumables are fourth quarter sales were up 7% to $738 million, driven by <unk> and cataract consumables, including price increases.
Speaker Change: We believe this was driven in part by competitive trialing and sampling, which are not captured in our third-party data. In contact lenses, we estimate that the retail market was up mid-single digits. This growth was mainly driven by pricing and lens trade-up.
Speaker Change: And equipment sales of $229 million were up 2% year over year in line with our expectations.
Speaker Change: Turning division care fourth quarter sales of $1 1 billion were up 7%.
Speaker Change: And with that, I'll pass it to Tim who will take you through our financial results and discuss our outlook for the year. Thanks, David. We're pleased to report fourth quarter sales of $2.5 billion, up 6% versus prior year. This growth is primarily driven by strength in our innovative contact lens portfolio and consumables.
Speaker Change: Contact lens sales were up 11% to $638 million in the quarter.
Speaker Change: This growth was driven by our innovative lenses, including toric and multifocal modalities, which continue to win in the market.
Speaker Change: Additionally, we had another quarter with solid contribution from price, which we expect to moderate going forward.
Speaker Change: In our surgical franchise, revenue was up 5% year-over-year to $1.4 billion.
Speaker Change: An archive of health fourth quarter sales of $416 million were up 2% year over year, we saw strong performance in our portfolio of eyedrops, including another quarter of solid growth from sustain.
Speaker Change: And plannable sales were $456 million in the quarter, up 2% year over year.
Speaker Change: International uptake of our advanced technology IOLs continues to drive growth. In the quarter, growth was partially offset by the solar market conditions in the U.S. that David mentioned earlier, as well as competitive pressures.
Speaker Change: This growth was partially offset by declines in contact lens care with.
Speaker Change: We also saw approximately one point of pressure following this strategic transaction with Archie mentioned in China, which we expect to continue through the third quarter.
Speaker Change: In consumables, our fourth quarter sales were up 7% to $738 million, driven by VitRet and Cataract consumables, including price increases.
Speaker Change: Now moving down the income statement.
Speaker Change: Fourth quarter core gross margin was 62, 7% up 70 basis points, reflecting favorable product mix and manufacturing efficiencies in vision care, partially offset by surgical gross margin.
Speaker Change: and equipment, sales of $229 million were up 2% year over year, in line with our expectations.
Speaker Change: Turning to vision care, fourth quarter sales of $1.1 billion were up 7%.
Speaker Change: Core operating margin was 21% up 130 basis points year over year, driven by improved gross margin and improved operating leverage in SG&A from higher sales, partially offset by investment in R&D, particularly in surgical.
Speaker Change: Contact lens sales were up 11% to $638 million in the quarter.
Speaker Change: This growth was driven by our innovative lenses, including torque and multifocal modalities, which continue to win in the market. Additionally, we had another quarter with solid contribution from price, which we expect to moderate going forward.
Speaker Change: Fourth quarter interest expense was $48 million broadly in line with last year.
Speaker Change: In Ocular Health, fourth quarter sales of $416 million were up 2% year-over-year. We saw strong performance in our portfolio of eye drops, including another quarter of solid growth from Sustain.
Speaker Change: Other financial income and expense was a net benefit of $9 million also broadly in line with last year.
Speaker Change: The fourth quarter average core tax rate was 26% compared to 13, 8% in the prior year period.
Speaker Change: This growth was partially offset by declines in contact lens care.
Speaker Change: For the full year, our average core tax rate was 19%.
Speaker Change: We also saw approximately one point of pressure following this strategic transaction with AccuMention in China, which we expect to continue through the third quarter.
Speaker Change: Core diluted earnings were <unk> 72 per share in the quarter up 3% from last year.
Speaker Change: Now, moving down the income statement. Fourth quarter core gross margin was 62.7 percent, up 70 basis points, reflecting favorable product mix and manufacturing efficiencies in vision care, partially offset by surgical gross margin.
Speaker Change: Turning to cash on a year to date basis free cash flow was a record $1 6 billion.
Speaker Change: Compared to $730 million in 2023.
Speaker Change: This improvement was mainly driven by higher cash from operations and a decrease in capital expenditures.
Speaker Change: Our operating margin was 20.1%, up 130 basis points year over year, driven by improved gross margin and improved operating leverage in SG&A from higher sales, partially offset by investment in R&D, particularly in surgical.
Speaker Change: Now moving to the 2025 guidance.
Speaker Change: Our current outlook assumes at the aggregate global eye care market grows 4% to 5% and exchange rates as of the end of January hold through year end.
Speaker Change: Fourth quarter interest expense was $48 million, broadly in line with last year.
Speaker Change: Starting with sales, we expect our full year revenue to be between $10, two and $10 4 billion.
Speaker Change: Other financial income and expense with a net benefit of $9 million, also broadly in line with last year.
Speaker Change: Which includes two points of foreign exchange headwind.
Speaker Change: On a constant currency basis, we expect our sales growth rate to be between six and 8%.
Speaker Change: The fourth quarter average core tax rate was 20.6%, compared to 13.8% in the prior year period. For the full year, our average core tax rate was 19%.
Speaker Change: In terms of phasing given the timing of the new product launches, we continue to expect sales growth to accelerate in the second half of the year.
Speaker Change: Moving to operating expenses as we continue to invest behind innovation, we've increased our targeted R&D investment range by one point and expect R&D expense to be at the midpoint of the range of 8% to 10% of sales.
Speaker Change: Four diluted earnings were $0.72 per share in the quarter, up 3% from last year.
Speaker Change: Turning to cash, on a year-to-date basis, free cash flow was a record 1.6 billion dollars compared to 730 million dollars in 2023. This improvement was mainly driven by higher cash from operations and a decrease in capital expenditures.
Speaker Change: Turning to profitability, we expect our core operating margin to be between 21 and 22%.
Speaker Change: As I've mentioned before this reflects our planned investments behind new product launches throughout the year. These.
Speaker Change: Now moving to the 2025 guidance. Our current outlook assumes that the aggregate global eye care market grows four to five percent and exchange rates as of the end of January hold through year-end.
Speaker Change: These investments will be mainly front end loaded and as such we expect to see operating leverage accelerate in the second half of the year.
Speaker Change: Moving down the income statement, we expect nonoperating income and expense to be between 200 $220 million.
Speaker Change: Starting with sales, we expect our full year revenue to be between $10.2 and $10.4 billion, which includes two points of foreign exchange headwinds.
Speaker Change: This measure is new to our guidance and includes interest expense other financial income and expense as well as the impact of certain equity investments.
Speaker Change: On a constant currency basis, we expect our sales growth rate to be between 6 and 8 percent.
Speaker Change: Turning to tax we expect our full year core average tax rate to be approximately 20%.
Speaker Change: In terms of phasing, given the timing of the new product launches, we continue to expect sales growth to accelerate in the second half of the year.
Speaker Change: Based on all of these factors, we expect our core diluted earnings guidance range to be between $3 15.
Speaker Change: Moving to operating expenses, as we continue to invest behind innovation, we've increased our targeted R&D investment range by one point and expect R&D expense to be at the midpoint of the range of eight to ten percent of sales.
Speaker Change: The $3 25 per share, which corresponds to 8% to 11% constant currency growth over 2024.
Speaker Change: This guidance reflects approximately 15 or foreign exchange pressure.
Speaker Change: Turning to profitability, we expect our core operating margin to be between 21 and 22 percent.
Speaker Change: Most of which we expect in the first half of the year.
Speaker Change: Before I wrap up I am pleased to announce that our board of directors has proposed an increase in our dividend to <unk> 28 <unk> per share. This.
Speaker Change: As I've mentioned before, this reflects our planned investments behind new product launches throughout the year.
Speaker Change: These investments will be mainly front-end loaded, and as such, we expect to see operating leverage accelerate in the second half of the year.
This is in line with our payout policy of 10% of the previous year's core net income.
Speaker Change: Shareholders will vote on this proposal at our upcoming annual general meeting in May.
Speaker Change: Moving down the income statement, we expect non-operating income and expense to be between $200 and $220 million.
Speaker Change: Additionally, I am pleased to report that our board has also authorized a share repurchase program of up to $750 million to be completed over the next three years.
Speaker Change: This measure is new to our guidance and includes interest expense, other financial income and expense, as well as the impact of certain equity investments.
Speaker Change: This program is designed to offset future dilution from associate equity based incentive plans our priority for capital allocation will continue to be investing for top line growth both internally and externally.
Speaker Change: Based on all these factors, we expect our core diluted earnings guidance range to be between $3.15 to $3.25 per share, which corresponds to 8% to 11% constant currency growth over 2024.
Speaker Change: And finally I'd like to thank the entire alcon team for another great year there.
Speaker Change: Their passion and dedication to our purpose is what differentiates <unk> from other companies and with that I'll turn it back over to David.
Speaker Change: This guidance reflects approximately 15 cents of foreign exchange pressure, most of which we expect in the first half of the year.
Speaker Change: So to wrap up I'm proud of the significant progress we've made in 2024, our strong financial performance bolstered by our strategic investments in operational efficiency underscores the bold action thoughtful planning and solid execution by our talented teams across the globe.
Speaker Change: Before I wrap up, I'm pleased to announce that our Board of Directors has proposed an increase in our dividend to 28 Swiss centimes per share. This is in line with our payout policy of 10% of the previous year's core net income.
Speaker Change: Looking forward 2025 will be a pivotal year for alcon.
Speaker Change: We are launching a wave of new products across each franchise that will position us for durable long term growth.
Speaker Change: Shareholders will vote on this proposal at our upcoming Annual General Meeting in May.
Speaker Change: Additionally, I'm pleased to report that our board has also authorized a share repurchase program of up to 750 million dollars to be completed over the next three years.
Speaker Change: We will continue to invest behind customer driven innovation drive operational excellence and create value for our shareholders. Once again. Thank you for your support and we look forward to giving another update at our capital markets day in March with that let's open it up for Q&A.
Speaker Change: This program is designed to offset future dilution from associate equity-based incentive plans.
Speaker Change: Our priority for capital allocation will continue to be investing for top-line growth both internally and externally.
Speaker Change: Thank you we will now be conducting a question and answer session. Please limit yourself to one question and one follow up.
Speaker Change: And finally, I'd like to thank the entire Alcon team for another great year. Their passion and dedication to our purpose is what differentiates Alcon from other companies. And with that, I'll turn it back over to David.
Speaker Change: 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: Press Star two if you would like to remove your question from the queue for participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys.
Speaker Change: So to wrap up, I'm proud of the significant progress we've made in 2024. Our strong financial performance, bolstered by our strategic investments and operational efficiency, underscores the bold action, thoughtful planning, and solid execution by our talented teams across the globe.
Speaker Change: One moment please poll for questions.
Speaker Change: The first question is from David Saxon from Needham <unk> Company. Please go ahead.
David Saxon: Oh, great Good morning, David and Tim Thanks for taking my questions and congrats on the quarter I wanted to start on the U S. H O L. API all business been getting some questions. There on just some recent competitive launches. So can you talk about specifically how that business did in the quarter did it grow year on year and then.
Looking forward, 2025 will be a pivotal year for Alcon.
Speaker Change: We are launching a wave of new products across each franchise that will position us for durable long-term growth.
Speaker Change: We will continue to invest behind customer-driven innovation, drive operational excellence, and create value for our shareholders. Once again, thank you for your support. We look forward to giving another update at our Capital Markets Day in March. With that, let's open it up for Q&A.
David Saxon: What do you see in terms of the impact from competitive Trialing and kind of what are your expectations for how that extends into 2025 as you launch pant opex growth.
Speaker Change: Thank you. We will now be conducting a question and answer session. Please limit yourselves to one question and one follow-up.
David Saxon: Well look the U S. <unk> market I think was had some small growth in it yes, I think directionally, though there's a lot of noise in the data and so I think what people are finding is that there was a lot of competitive trialing. Some of that was sampled and so that affects some of the year on year change if you look.
Speaker Change: If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
David Saxon: At our consumables business in the U S, which is a pretty good indicator of of procedural growth. We think it was a relatively normal quarter, maybe a little bit light probably in the 2% to 3% range.
One moment, please, while we poll for questions.
Speaker Change: The first question is from David Saxon from Needham and Company. Please go ahead.
Speaker Change: and their family. Thank you. Thank you. Thank you. Thank you.
David Saxon: Oh, great. Good morning, David and Tim. Thanks for taking my questions and congrats on the quarter. I wanted to start on the U.S. ATIOL business and getting some questions there on just some recent competitive launches. So, can you talk about specifically how that business did in the quarter? Did it grow year on year? And then, you know, what do you see in terms of impact from competitive trialing and kind of what are your expectations for how that extends into 2025 as you launch?
David Saxon: So that said.
David Saxon: I think directionally, we've been very comfortable with the progress we've been making against competition I think our total share.
David Saxon: Foldable grew in our <unk> business grew its just that it grew principally outside the U S and in the U S. We lost a little bit of share to competition, which is as we would've expected. So I think we're in a very positive frame as we kind of move into this pan optics Pro launch we feel good about where we are and kind of as expected as Wes said.
Panoptic's Pro.
David Saxon: Okay, great. Thanks, Thanks for that and then maybe for Tim just.
Speaker Change: Well, look, the U.S. ATIO market, I think, had some small growth in it, yes. I think directionally, though,
Speaker Change: On the margin so.
David Saxon: The comments around.
Speaker Change: There's a lot of noise in the data and so I think what people are finding is that there was a lot of competitive trialing some of that was sampled and so that affects
David Saxon: Operating margins should accelerate in the back half.
David Saxon: If I look at the first half I mean, do you expect to see expansion I know the first quarter and just kind of a tougher comp but.
Speaker Change: some of the year-on-year change. If you look at our consumables business in the U.S., which is a pretty good indicator of procedural growth, you know, we think it was a relatively normal quarter, maybe a little bit light, probably in the 2 to 3 percent range.
David Saxon: I mean can you see expansion starting in the second quarter or should we think about that.
David Saxon: Really just a second half dynamic thanks, so much.
Speaker Change: So that said, you know, I think directionally we've been very comfortable with the progress we've been making against competition. I think our total share, you know, in foldables grew and our ATI well business grew. It's just that
David Saxon: Yes, I think we'd probably start to see a little bit of expansion in the in the back half of the first half if that makes sense to your point Q1, we had a very strong Q1 in 2024, I Wouldnt anticipate that.
David Saxon: Expanding given the investments that we're making.
David Saxon: But we should see expansion throughout the course of the year.
David Endicott, Timothy Stonesifer
Speaker Change: The next question is from Jeff Johnson from Baird. Please go ahead.
Jeff Johnson: Thank you David maybe I can push in just a little bit on your U S. ACI, while comments there I think in the past you've given our market shares on the <unk> side is there anything you could update there I mean, I think we've all seen youre going to lose a little bit of share maybe even a little more than a little bit of share here over the next few quarters until pro launches, but any update on where you think that share.
Speaker Change: Potential could trend down to over the next couple of quarters until prolonged.
David Endicott, Timothy Stonesifer
Speaker Change: Well I think I think what Youre seeing right now is a relatively stable share globally.
Speaker Change: With the Chinese market for example, doing quite well we did we had a very significant share growth there.
Speaker Change: And an offset in the U S. Obviously, so we continue to see competition.
Speaker Change: Pricing in a way that makes it very attractive for people to try so I think as that settles down I think we will see.
David Endicott, Timothy Stonesifer
Speaker Change: A return to stability in the market globally.
Speaker Change: And I do think that the challenge in the financial pieces of course at the price in the U S.
Speaker Change: Higher than the price in China, So even though we're growing units globally, we're not getting as much price out of that so that's really what I think most people are observing in the 2% so.
Speaker Change: Good quarter for us generally in this area and I think as we launched pro people are going to be excited about what we can do with that.
Speaker Change: Alright, and then maybe just on top of that or a similar follow up just 2% Implantables number.
Speaker Change: Maybe before you attempt should we expect that.
Speaker Change: Maybe competitive Trialing goes up in the U S over the next quarter or two does that 2% potentially soften a little bit from there before we see it reaccelerate in the back half or do you think 2% is kind of the trough.
Speaker Change: Growth in that segment I know you don't guide by segment, but just generally speaking how you think that that segment could play out here over the next few quarters. Thanks.
David Saxon: We're not really going to get into guiding by quarter by segment. So to David's point, we're very excited about Pan Opex Pro and I think as we launch that youre going to see you're going to see those results on the revenue growth line our revenue growth.
Speaker Change: The next question is from Ryan Zimmerman from BTG. Please go ahead.
Ryan Zimmerman: Good morning, Thanks for taking the questions David I appreciate it.
Speaker Change: Avoid the ATI all questions.
Ryan Zimmerman: Talk a bit about price if we could in the quarter.
Ryan Zimmerman: And just a broader question for the industry, because I think price has been a meaningful driver on the top line, but when you adjust for price dynamics can.
Ryan Zimmerman: Can you comment more from a volume perspective, how would you characterize the growth, particularly in the contact lens segment of the business where price has been a meaningful driver.
Ryan Zimmerman: Yeah, Thanks, Ryan and I think the quarter for US I think directionally is pretty close to where the year was with about a third of our growth coming from price. So.
Ryan Zimmerman: It is meaningful and we have had pricing power for the last several years. So I think if you cut it down into kind of segments I would say the contact lens business has benefited a lot in the last year or so from price, but it always has I mean, historically you see about a third of the value coming from trade up or mix and a third of the value coming from price.
Ryan Zimmerman: And then a third coming from.
Ryan Zimmerman: The unit growth and so typically that's made a market of mid single digits and so we would just.
Ryan Zimmerman: I think that that continues going forward I don't know that it will be nearly as substantial as it was last year or the year before and I think if thats, where youre going I think we are not optimistic necessarily about.
Ryan Zimmerman: Big price increases given where we are right now we think it's pretty well priced and are priced appropriately for the consumer.
Speaker Change: Okay very helpful. And then 10 in the presentation I think.
Speaker Change: All about some higher inventory build is just a headwind to gross margins in the fourth quarter.
Speaker Change: Given the product cycle that you have this year.
Speaker Change: Would that continue I mean can you elaborate just on kind of whether that may or may not prohibit.
Speaker Change: Gross margin expansion specifically in 2025.
Speaker Change: Relative to maybe the core operating margin.
Speaker Change: Expectations that youre, calling out in guidance.
Speaker Change: Yes, I think gross margin for 25 versus 24, we might see a slight improvement.
Speaker Change: You still have a little bit of higher cost inventory flowing through into 2025.
Speaker Change: Other thing to think about is as we launched unity and sell more equipment that is going to be a little bit put a little bit of pressure on the on the gross margins, but I would I would.
Speaker Change: It adds gross margins flattish a little bit of an improvement.
Larry: The next question is from Larry <unk> from Wells Fargo. Please go ahead.
Speaker Change: Good good morning, Thanks for taking the question.
Speaker Change: Tim I wanted to ask about the key assumptions in the 6% to 8% constant currency guidance.
Speaker Change: You've talked about the phasing and the acceleration through the year could.
Speaker Change: Similar to margins do you expect first half to be within that range or towards the low end or below it.
Speaker Change: The second half of the year was about 6% so the midpoint of the guidance implies an acceleration.
Speaker Change: What segment is it basically driven by an acceleration in <unk>.
Speaker Change: And I had one follow up.
Speaker Change: Yes, I would say from a phasing if I think about the P&L, Larry I think about it first half second half. So if you look at revenue.
Speaker Change: Couple of things to think about and surgical as an example.
Speaker Change: Implantables you know the.
Speaker Change: Market softness in the U S.
Speaker Change: The competitive pressures that we've been talking a lot about the last couple of quarters. We started to see those in kind of the May June timeframe of 24. So that is that's going to be a tougher comp. If you look at contact lenses as an example on the revenue front.
And 24 in the first half we had the benefit of a couple of price increases just due to the timing of when we went out with those increases so those won't repeat you've got a bit of a structural change with Archie mentioned right, we announced that in the second half of 'twenty. Four. So you had revenue last year that you don't have this year.
Speaker Change: But on the upside if you think about China of EVP that came out in Q2 of 24, So we will get a little bit of a benefit there as you think about the first half so given all those dynamics I would expect revenue to be around the low end of that guide in the first half and then I would expect it to be at the high end of the guide as you think.
David: About all of the launches that David talked about in his prepared remarks.
Speaker Change: As we see the as we go through the rest of the year.
Speaker Change: That's very helpful. I wanted to ask one on unity.
Speaker Change: David.
Talk about the feedback so far.
Speaker Change: And how we should think about the growth cadence in the equipment business through the year should we we've seen years, where equipment sales even when you didn't have a major launch like this at over 10%, even just two years ago. It was over 10%.
Speaker Change: Should we think about equipment being.
Speaker Change: <unk> growth in that business. Thank you.
Speaker Change: Well look it's certainly going to be an increase year on year, Larry I think the thing that's been exciting about the equipment businesses, we've done very well with biometry, we've done very well with microscopes.
Speaker Change: When you add Voyager into it we think that adds some benefit to it and then of course, we've got.
Speaker Change: A generational change in FICO and fit and so we feel like the equipment business will be very strong for us this year.
Speaker Change: Thank you.
Speaker Change: We're launching.
Speaker Change: Unity Vcs really in May, let's say, so think about that really as a back half idea.
Because by the time, we get it out there and get it trained into the ore is youll see a steady movement, but we're going to be patient with it we don't see a huge need to be aggressive necessarily with that launch what we want to do is make sure that the surgeons are trained efficiently to use and maximize the value of this and if they do that if we do that.
Speaker Change: Right, we're going to see a lot of value that it moves into doing more cataracts and a day doing more of that.
Speaker Change: <unk> in a day.
Speaker Change: Which creates value for the ASC creates value for the surgeon and actually helps a lot of patients get the therapy faster. So we're excited about the back half in particular.
Speaker Change: Thank you.
Speaker Change: The next question is from Anthony Petrone from Mizuho Group. Please go ahead.
Speaker Change: Anthony Petrone your line is open.
Speaker Change: Okay, we'll move on to the next question the.
Speaker Change: The next question is from Julien <unk> from Bank of America. Please go ahead.
Julien: Thanks, Good morning, everyone. So my my my first question is about China can you give us a bit more details about the IOL market momentum you've seen China, what kind of magnitude of share.
Share gains you will.
Julien: How about the moment and what do you expect for <unk> any I.
Julien: I mean any equity that you could comment about that.
Julien: Maybe people 2025.
Julien: Super helpful. Thanks.
Speaker Change: Yeah, obviously, we expect China to do quite well this year we had.
Speaker Change: About a half a year of impact last year as it took off in the middle part of the year, we had not participated in the program in the past. So there was some.
Speaker Change: Some inventory that was built in the second quarter, but I think in the first quarter wrap around for example, and then even in the second quarter Youre going to see.
Speaker Change: Some benefit from China on the volume.
Speaker Change: Do think that the share has been very significant relative to where we were you remember that I've said in the past we were in the high single digits I think originally.
Speaker Change: We're significantly higher than that at this point and that was really with only about six months of effort. So.
Speaker Change: I hesitate to give a share number because it's probably got a lot of noise in it that data is not super great, but we're doing quite well and I would just say that.
Speaker Change: Penn optics in particular has.
Speaker Change: As just kind of gotten its feet under it and <unk>, which is really the one that's taken off in China for us.
Speaker Change: <unk> has been a very positive.
Speaker Change: Momentum gainer for Us I would just remind people, though that the China pricing is European pricing and so even though we're gaining units globally and our share is relatively stable globally I think the value that you're seeing that come through as a little bit less because I wells in the U S are very different price than they are in Europe, and the rest of the world. So.
Speaker Change: Expect that we're going to do well in China, but also expect that.
Speaker Change: That's largely front half and then a stabilizing piece of this has been the back half.
Speaker Change: Perfect. Thanks, and just haven't put a tweet.
Speaker Change: Squeezing could you maybe comment about the like the margins for surgical.
Speaker Change: Do you see given your growing nicely in China and you have also talked him put adventures and equipment do.
Speaker Change: Do we expect margin expansion in surgical as well.
Speaker Change: Yes, we will see we will see a little bit of expansion I think one of the things that you have to take and I think Larry you hit on this is there will be a little pressure given the fact that.
Speaker Change: The equipment sales will be increasing.
Speaker Change: So we're excited about that launch that will drive a lot of revenue growth in the back half, but that does put a little pressure on the margins, but we will continue to get some operating leverage as well. So we feel very good about the surgical margins.
Speaker Change: Thank you very much.
Speaker Change: The next question is from Patrick <unk> from Morgan Stanley. Please go ahead.
Speaker Change: Beautiful, thanks, I'll keep it to one and a slightly esoteric one but I'm curious is there any interest on your end within the Iowa market to go for the kind of drug delivery side using the haptics, obviously, we've seen some on the private side going this pathway in glaucoma management and a bunch of areas. It feels like if you could add a lot of value to the franchise over time going not.
Speaker Change: I'm just curious if that's something you guys discuss internally with what about partnerships that thanks.
Speaker Change: Yes, Patrick we've looked at those talk technologies, we're aware of them and have explored them, but I would just say that we're probably a fast follower in that space, we'd like to see that market develop and <unk>.
Speaker Change: Particularly we'd like to see reimbursement stabilize and in both of the I would say the.
Speaker Change: The intra ocular drug delivery, even in glaucoma, I think it'll be interesting to see over time, how that stabilizes.
Speaker Change: I would put that in the same category as the Iowa delivery. So we'll likely watch this one for a while and we certainly can get into it very quickly if we needed to so.
Speaker Change: Misting idea for sure but.
Speaker Change: Yet to be played out.
Speaker Change: Super helpful. Thanks, guys.
David Adlington: The next question is from David Adlington from Jpmorgan. Please go ahead.
David Adlington: Hey, guys. Thanks for the question high level one.
David Adlington: Revenue guidance is 6% to 80% of it was this time last year, but you've got a number of new products launching and Chinese GDP.
David Adlington: I was wondering how we should be thinking about the offsets from the downside is that entirely down to the softness in the Io market or things, we should be thinking about.
David Adlington: Well I think the offsets to growth are really the the legacy brands and to a certain degree what happens in the market will always be the one of the main points of the range.
David Adlington: I think in truth, if you look at the global markets. They were relatively stable last year I mean, the the difference was the U S didn't have a great implantables year, but international really did and so when you look at the number globally. The unit volumes were solid for us and really what it was is a difference in pricing that you see between the international markets in the U S Thats really.
David Adlington: What made the difference in value. So I think directionally, we would expect that.
David Adlington: That to be continuing I mean, I think the U S is going to continue to be a little bit softer as it has been because theres a lot of new competitive activity expected. This next year.
David Adlington: And I think international continue to be strong, but the the only other offsets I can tell you that sit in this market are really the how does the contact lens market develop and what happens in the equipment market or the capital purchasing markets, which again I don't think you have typically we're not really been affected by those but.
David Adlington: I would point you towards general market conditions more than anything else.
Speaker Change: Okay, and then maybe one quick follow up as we get to this time next year when the exit rate in the second half and as always products start to ramp.
Speaker Change: Foster growth rate in 2026 tons 25.
Speaker Change: Well you know when we get through 'twenty five we'll talk about 'twenty six.
Speaker Change: Whats the reason the range is a little bit wide six to eight is because we're obviously very interested in how these new products take off but we're very optimistic about them there.
Speaker Change: There is not a one of them that I'm not excited about actually so.
Speaker Change: We're hoping that that of course youre implied idea here is going to come through but we don't know that so we'll see how how these ramp and how the market picks them up and we'll see what the markets do and we will obviously comment on that as we get into late next year.
Speaker Change: Okay. Thanks, so much.
Speaker Change: The next question is from Brett Fishbein from Keybanc capital markets. Please go ahead.
Speaker Change: Hey, guys. Thank you very much for taking the questions maybe a little bit of a follow up to the last one just a little bit more specific in the contact lens side could you talk a little bit about the recent launch of precision seven sphere and toric over the past two calls I'm curious if you can just expand a little bit on some of the optometrist perception to the launch and how Youre thinking I know you.
Speaker Change: It's kind of a tam opportunity, but maybe just talk a little bit more on how you're thinking about like the ramp of that product and what it can contribute over the next couple of years. Thank you.
Yes, it's an interesting one.
Speaker Change: Brett It was it was a product that we have had for a while and we've held partly because we had a lot of other stuff to sell in launch and we were testing it we actually tested that product for almost a year before we put into the market.
Speaker Change: And I'll tell you. The reception has been really terrific I just spoke with our U S folks yesterday and one of the things I heard which was exciting was the were getting more than half of our of this coming from the two week and other reusable market. So I think thats, what we had hoped for.
Speaker Change: That's exactly what we're looking at which is the notion of a two week replacement is not intuitive right in a patient's forget docks worry about that and what happens in truth. I think is when their lenses get real gritty they decided to replace them instead of doing something thats, a little bit healthier for them when you get into a much more intuitive.
Speaker Change: Replacement schedule every Monday every Sunday whatever it is you know it becomes a much more reliable idea and that is what they're reacting too because optometrists are principally concerned with the safety of these patients and how they handle the health of their eye and so if you can get them on a schedule, that's a shorter but to be still affordable.
Speaker Change: And C. Then remember ball if you will that is a very appealing idea to most optometrists and I think thats, what they are feeding back to us so.
Speaker Change: With that said I did comment on the size of the market it's meaningful.
Speaker Change: We will see how this takes shape.
Speaker Change: I am <unk>.
Speaker Change: Positively predisposed to believe this is a good product to launch and will give us a nice incremental contribution to the reusable space.
Speaker Change: Alright, Thank you very much I appreciate it.
Speaker Change: The next question is from Harry <unk> from Citi. Please go ahead.
Speaker Change: Hi, guys. Thanks for taking my question just back on the U S dynamics in the John Alright, well market.
Speaker Change: Conducting sampling so how long do you see this lasting and is there anything you can do about the connected sampling or do we just have to wait for the launch of the new fixed product.
Speaker Change: Yeah.
Speaker Change: Well this has been going on for a while right I mean, we've known for some time that we weren't going to be the only ones in the <unk> space in the U S with meaningful products. So we saw this coming from Europe and other markets.
Speaker Change: And so as we said I think probably for the last 18 months or so we expected to lose some share in the U S too good products that people would try and so I think that's exactly what we expect to see again through the through this year. There are a number of products that we anticipate launching later this year.
Speaker Change: And I think the way that we believe this thing plays out is it.
Speaker Change: When people are given the opportunity to try things, particularly if theyre free or very inexpensive they're going to try and see how they work it's responsible to do that so once they decide what they're going to do and decide to purchase it that becomes a slightly different answer. So I think things will stabilize but it is going to be a full year of next of this year.
Speaker Change: That we deal with a couple of new competitors and more coming so.
Speaker Change: I feel good about our ability to put that off known with with Panopticon Pro I think nobody is really has the profile, we have with pan optics, and especially now that we squeeze out in front of it.
Speaker Change: With this ability to really use 100% or nine hundreds of but a high percentage of the 90% of the light and limit the light scatter.
It's a very different experience I think for patients than what youre going to see with <unk>.
Speaker Change: Some of the other products that are out there. So we are.
Speaker Change: We're feeling pretty good about that and that that product launches only a couple of months away. So we're building the product now we've made the choice we've kind of walked everybody through how we did that we studied it with a lot of surgeons. We've got very good feedback on this particular <unk>.
Speaker Change: Design.
Speaker Change: Our teams have been trained on it. So we're ready to go we just need to make it and get it out there now.
Speaker Change: Great. Thank you.
Speaker Change: Your margin guidance of 21% to 22% next year could you just break that down for us.
Speaker Change: So in effect from gross margin and Opex.
Speaker Change: Yes, we don't we don't really break it down that way, but again I think.
Speaker Change: If you look at the margin expansion the point I'd make is it will be more back half loaded just given the investments that we're making on these new product launches, but we expect to continue to see nice margin improvement.
Speaker Change: Alright, thank you.
Speaker Change: Yeah.
Speaker Change: The next question is from Tom Steffen from Stifel. Please go ahead.
Tom Steffen: Great Hey, guys. Thanks for the questions I'll start with Hydrus, David can you remind us of the size of that business, maybe in 2024 and your outlook here in the U S. Just given the LCD noise that has surfaced.
Tom Steffen: And then where do we stand with O U S expansion, a hydrogen as well and I think a follow up.
Tom Steffen: Yes.
Speaker Change: We generally don't comment on the size of products I'd, just say, it's a little under 100, but.
Tom Steffen: The product has done pretty well and obviously the LCD.
Tom Steffen: The combined use of products has been a preference to us of surgeons.
Tom Steffen: We look to help them reverse that we'll see if that happens, but we hope that that is something that can can take shape in the next couple of years.
Tom Steffen: I don't know that it will but even if it doesn't I think what we're excited about with hydrus is it has proven out I think for everybody who is used to be the most effective way.
Tom Steffen: Of treating.
Tom Steffen: If you're going to use a mig this is the one that really does work, particularly well.
Tom Steffen: That's pretty well established with both the data.
Tom Steffen: The long term visual field data.
Tom Steffen: Also what was the experience with docs has been so we feel like that if youre going to make a choice. That's the right choice to make and so that's certainly where we're headed outside the U S. We've got.
Tom Steffen: Interesting opportunities in Japan, France, Spain, and China, we will see how that takes shape with reimbursement so again.
Tom Steffen: <unk> is the main thing in these markets and that will be it.
Tom Steffen: Is still to be determined in a number of markets, but we look forward to trying to build that brand outside the U S as well.
Tom Steffen: Got it that's great and then just on contact lenses dependent a bit for.
Tom Steffen: For 2025 kind of end market growth, David I think you talked about maybe price potentially moderating a bit but can.
Tom Steffen: Can you just discuss your view on the trade up aspect of market growth sort of what do you think that looks like in 'twenty five versus 24, maybe just kind of that dailies versus reusable.
Tom Steffen: Growth dynamic thanks.
Speaker Change: Yes, it's really steady I mean, if you look back over the years it stays steady and so.
Speaker Change: I don't really believe it's going to change I think people prefer a daily and I think the dailies have gotten a little bit less expensive and there are different price points now for people, who want to get into dailies. So we've got a value product and precision one which we get really excited about it's probably the best value out there for a dailies brand dailies total.
Speaker Change: One if you if you really are you want the best comfort out there, that's a little bit more expensive, but a great product on both of those draw the reusable patients in because they're more convenient to where once a day and toss them and there are a lot more comfortable particularly at the end of the reasonable where cycle. So you're just getting a better product. If you can afford it we <unk>.
Recognize not everybody can afford that and and we make reusable as a consequence, we've obviously slipped P. Seven in between the $2 30.
Speaker Change: Our our dailies lenses, but we aren't we don't anticipate that the amount of energy we're putting on reusable. For example is going to have any real effect on the dailies trade up we in fact, we expect it to continue on while we take share in the reusable so.
Speaker Change: I would say continued steady trade up to dailies and we'll still see some price in 25 I think it just won't be what it was in 'twenty four 'twenty three.
Speaker Change: Great color Thanks, David.
Speaker Change: The next question is from Eze Kirby from Redburn Atlantic. Please go ahead.
Eze Kirby: Hi, guys. Thanks for taking my question I, just wanted to touch upon dry eye and some of the investments that youre, making that I was wondering if you could talk about the prescriber base.
Eze Kirby: And the extent to which you already call on that existing prescribing base.
Eze Kirby: Your products brought that product portfolio and how you can potentially in that Ritchie Bros is an account or offering to win that.
Eze Kirby: Yes.
Eze Kirby: Interesting question, we spent a lot of time as of late thinking about the deployment for.
Eze Kirby: 512, and I think there is a significant opt to metric audience here that we are intending to cover and again, we will do that.
Eze Kirby: But it is different than some of our other eye drops. So for example, <unk> much more of a traditional ophthalmology audience somewhat optometry, but not a lot of what you see with the high prescribers as there are some concentrated high prescribers in optometry that we would want to cover and we are expanding our sales force to do that so.
Eze Kirby: As I've said in the past we were going to look at whats the optimum way to maximize the value here of our launch out if I want to and we are adding a sales force to get coverage of not just of ophthalmologists, who are high prescribers, but also.
Eze Kirby: Optometrists, who will fit in that category as well and that will give us room to continue to promote our glaucoma drops and some of our other eye drops that we have and the leverage obviously it comes from.
Eze Kirby: On ability to self sustained preservative free power today in a number of other OTC products. So your point on OTC as well made we do have a lot of opportunity to kind of leverage that and help build the demand coming from the surgeon side or the dark side of this in addition to obviously continuing to build our consumer effort. So.
Eze Kirby: Good question, and we're headed that way.
Eze Kirby: Great. Thanks for that color and then just as a follow up on contact lenses and as it relates to Capex, just wondering how youre feeling from a capacity standpoint at the moment and how we should think about contact lens margins into next year, yes.
Eze Kirby: Yes, Capex for US continues to be kind of a mid single digit ideas, we're going to try and stay in that range I think thats the right level of recap and the right level of expansion and I think that is.
Eze Kirby: Is relatively steady and consistent with what we've said in the past in terms of capacity on contact lenses I would tell you that we've done a really great job our manufacturing guys that we were just actually out in.
Eze Kirby: In our German facility and they have done a tremendous job of improving our outputs on these lines and so we're well past the original design speeds, which has contributed to a reduction in our need to add new lines.
Eze Kirby: We're getting tremendous productivity in our flexibility in those lines has given us a lot of room. So we can make things like <unk> seven.
Eze Kirby: We don't have to create a new line to do that too.
Eze Kirby: <unk> hundred 30.
Eze Kirby: Precision seven precision one they all come off the same line and as we're working forward were looking to create more products that come off those same lines because.
Eze Kirby: Between the manufacturing and R&D teams, we've figured out how to keep the capital really useful and repurpose lines, if we need to but generally they are flexible enough to make different modalities different finishes different surface surfaces. So.
Eze Kirby: That's been particularly effective for efficiency of capital.
Eze Kirby: Great. Thanks, so much.
Speaker Change: The next question is from caveat that spend from UBS. Please go ahead.
Coffee: Hi, This is coffee from UBS. Thanks for taking my question and I was just wondering about the bell conversion product and how significant you think this technology can be and how we should think about the ramp here. Thank you.
Speaker Change: Okay.
Speaker Change: Yeah, It's a really great question.
Speaker Change: The ramp is the tricky part I think I think we think this is probably in the kind of 75 to 150 range I mean, I put it a wide range like that because there is an emerging consensus that SLT is the right place to start with almost every glaucoma patient.
Speaker Change: The challenge has been it's a difficult procedure to take on if you don't have something like Voyager and so the gap that we're filling is.
Speaker Change: The need to use a ghanaian lens the need to physically aim this thing.
Speaker Change: And if you do traditional esselte those are not easy and they take time and it's difficult for the patient and the doctor to get that done. However, if you ask most.
Speaker Change: Ophthalmologists in most glaucoma specialists in particular, they will tell you that <unk> is their preferred idea.
Speaker Change: Typically don't do a lot of it now the beauty of Voyager is where we're making that a lot more friendly to the patient a lot more friendly to the surgeon the glaucoma apologists, who wants to do this but I think it's been reluctant at this makes it easier.
Speaker Change: And I think we will see how fast that moves up so I think the desire is there the market is there.
Speaker Change: It's obviously, a big Tam for us, but I would just say the ramp on this will be the question and we'll have to see but we are fully going out. This right now we've got a glaucoma team that does hydrous and is also now working on this so we are moving down a path of a.
Speaker Change: What is we think the most current view of how you should be treating glaucoma patients, which is start with esselte move into drops think about Migs and you work your way through the life of that glaucoma patient, let's let's keep them seeing as long as we can.
Speaker Change: Thank you.
Speaker Change: The next question is from Jack Reynolds Clark from RBC capital markets. Please go ahead.
Speaker Change: Hi, there thanks for taking the questions I had another one on Voyager.
Speaker Change: I'm just wondering.
Speaker Change: Appreciate youre ramping in the U S.
Speaker Change: How near term do you see the opportunity to ramp.
Speaker Change: For example in Europe, and then how should we think about the kind of medium to longer term value prop in terms of capital versus click fee.
Speaker Change: Well, yes, I mean.
Speaker Change: I think the idea of course would be long term the click fee as the reusable element of this that that we would see is the the majority of the revenue.
Speaker Change: You buy one of these units you should be able to use it quite some time. So we expect to place as many as is appropriate but I think the the click fee will be the the value over the long haul and frankly, great margin for us relative to the capital so.
Speaker Change: Over the long haul we think this becomes a profitable very nice business for us.
Speaker Change: On the European ramp I would just say that.
Speaker Change: This will largely be a function of how fast we can build product. This was a company that we had been partnering with for some time out of Israel, we've been in the process of working with them too.
Speaker Change: <unk> managed the difficult situation that exists over there and also move that manufacturing.
Speaker Change: One of our facilities and augment their efforts.
Speaker Change: So as we get through that we will bring more to Europe, but our primary objective right now is to launch in the U S.
Speaker Change: And we will send product as fast as we can into Europe Europe's been approved for some time has product available now.
Speaker Change: Just isn't going to be as aggressive a launch I think there is we will see in the U S where we will go first.
Speaker Change: Okay. Thanks, very much and then.
Speaker Change: Follow up my line dropped so I apologize. If this question has already been asked but just on international.
Speaker Change: And can you give any color on that.
Speaker Change: Which geographies were the major drivers, which meant that I think is that was that kind of basically a function of China were there other things going on as well.
Speaker Change: Well, we had a couple of very good markets.
Speaker Change: Southeast Asia, Latam did really well both of them.
Speaker Change: China was a standout by far.
Speaker Change: By Hei will penetration drove most of the global penetration gain and.
Speaker Change: Also for US it really held our unit share up.
Speaker Change: Meaningful way, so I would say we.
Speaker Change: We like what's going on in China for US right now, it's pretty much as expected I would say the U S. As also as expected and we are getting a little bit of a nice lift out of.
Speaker Change: I would just call it other markets.
Speaker Change: Latin America did pretty well, Japan has done pretty well recently and we feel pretty good about all that.
Speaker Change: That's great thanks very much.
Speaker Change: The next question is from Chris Pascal from Nephron Research LLC. Please go ahead.
Chris Pascal: Thanks, Dave I wanted to follow up on the comments about the contact lens market, if volume and trade ups are steady and price moderates that implies slower market growth.
Speaker Change: Our sense is that the incremental price tailwind over the past few years has probably added about two points of market growth relative to pre pandemic. So is your expectation that the market decelerates by that magnitude in 2005 versus 24.
Speaker Change: Not really no I mean, our expectation is a mid single digit kind of growth, which is pretty much. The normal growth. We would expect so I know there are other estimates out there that people talk about we've been pretty consistent in the way we talk about the contact lens market and I would I think it's kind of a 4% to six grower.
We call mid single digits, and so we'll see.
But I think thats pretty much what it grew this year and pretty much what we expect to grow next year.
Speaker Change: Okay.
Speaker Change: And I am curious why now in terms of the price tailwind monitoring has been stronger the last several years. It looks like this was another good quarter for both the market and your own business and <unk>. So are you picking up signs of pushback from patients or softness in the consumer environment more broadly just what drives the thinking that 25 is different on that particular dynamic.
Speaker Change: Well I think what youre going to see right now is there's a great deal of competition, particularly in the U S market.
Speaker Change: And when you look at what's happening with competitors. They are beginning to respond to the success of our new products have had and they're responding with price and they're responding with discounts and so when the when those discounts are available and there was significant amount of discounting that went on in the fourth quarter from some of our competitors.
Speaker Change: It makes it a little bit trickier to handle.
Speaker Change: So I think we're not looking to raise price necessarily we're looking to manage the consumer very carefully and.
Speaker Change: And we feel like that's the appropriate thing to do I would also say that as we were coming off of 'twenty. Three 'twenty four we were trying to catch up and a lot of people were.
Speaker Change: Two the inflation that had happened and our core cost of goods and I think that was kind of a one off if you will that most of us got through the consumers largely accepted and I think we should be sensitive to the notion that.
Speaker Change: That we want continued trade up and that's what we're getting we think we've got a price right.
Speaker Change: Thanks.
Next question is from Anthony Petrone from Mizuho Group. Please go ahead.
Speaker Change: Thanks, sorry, just top of between earnings calls policies for that so so one on when we look ahead to the unity launch just wondering Dave when we think about.
Speaker Change: The path to acquisition to these systems.
Speaker Change: It's an upgrade or outright purchase will will the company pursue like bundled deals in other words, if they purchase the capital can you actually gain sharing consumables Nols into those cycles and then really quickly on the follow up just a little bit on the U S. Striae Tam the latest numbers that you have there.
Speaker Change: And if you can how <unk> will be differentiated versus what's out there in the market. Thanks.
Speaker Change: Yeah, I mean look.
Speaker Change: The idea that we have with unity in particular is that this adds tremendous efficiency into the or and I think it'll be interesting to see what the upgrade and what the new machines.
Because there is some real value I think in having a combined machine. If you only have let's say you have a constant <unk> constellation, which is really there is that's an aging fleet right now.
Speaker Change: Do you buy the joint unit I think a lot of people will.
Speaker Change: And I do think that when we look at that the consumables add a lot of value to that process.
Speaker Change: That's a standalone idea generally and I think directionally people will make choices at the ASC that really reflect how they see the value playing out and that's what we're going to try and point to which is you can do more surgery and a week with our unit in our consumables you could turn to ours faster with our unit in our consumables and you got less footprint.
Speaker Change: To worry about because you got one unit instead of two so I think theres a lot of value in just selling those things straight in and I think the customers are going to want it that way on the dry item I think the.
Speaker Change: It is.
Speaker Change: Good market for us and we're excited to see some of the other products that have been launched recently do well with reimbursement, we think thats a positive sign.
Speaker Change: That a product that works faster makes a material difference to the corneal surface.
Speaker Change: And shows really significant improvement in patient.
Speaker Change: Signs I think is a really exciting idea.
Speaker Change: There arent many products who've been able to demonstrate what we've been able to demonstrate and so we're encouraged about what.
Speaker Change: The potential is for the product and again it will take us a little time, so I'm always cautious about where we are in.
Speaker Change: A mid year launch cycle, which will largely manifest in 26 revenue so I'd be careful not to put too much in it on 25, but I would just say that.
Speaker Change: We've got the right energy and we're getting really good feedback from payers and we're getting really good feedback from.
Speaker Change: The clinical trial sites that have fed back to us what's happened with these patients. So we like this product.
Speaker Change: We're excited about.
Speaker Change: Thank you.
Speaker Change: The next question is from Michael Sarcone from Jefferies. Please go ahead.
Speaker Change: Hey, Thanks for squeezing me in just one for me can you maybe talk about how youre thinking about potential <unk>.
Speaker Change: <unk> risk and whether.
Speaker Change: If there is anything you can call out on the risk side around supply chain.
Speaker Change: Yes, Michael it's certainly a very pertinent question. These days and the dynamic is hard to read so I would just say that we're fortunate in many ways that we manufacture inside of the regions. We delivered two mostly.
Speaker Change: That doesn't limit our supplier tariff risk so we do buy.
Speaker Change: From markets all over the world supply.
Speaker Change: For our products, we manufacture most of them in the markets, where we manufacture most of U S. In the U S. We met most of Europe in Europe, we mess, we manufacture a lot of.
Speaker Change: Asia product.
Speaker Change: For us in Singapore, but I would just say that.
Speaker Change: We will have to play that one out and just see what happens I do think we have.
Speaker Change: Identify those risks and created plans around if we needed to move things we could.
Speaker Change: We probably will wait and see how long these things last and obviously everybody is exposed to the same kind of deal, but maybe we're in a little bit better position than most because of the nature of the location of our facilities. I would also just say, though that the beauty of one of our of our business is the diversity of markets and the diversity of products that we make and so when you kind of.
Speaker Change: Cut through the the broad strokes of our business we've got.
Speaker Change: Countries all over the world that we can benefit from sort of one country increases tariffs, we may be able to make it up somewhere else. The same thing with our product lines. You know, we've got a little bit of implantable pressure in the U S. But we're doing really well in China. So it is a matter of geographic diversity and category diversity that really drives our stead.
Speaker Change: Growth going forward.
Speaker Change: Alright, thank you.
Speaker Change: There are no further questions at this time I would like to turn the floor back over to Dan Cravens for clothing closing comments.
Speaker Change: Thanks, everybody again for joining us this morning for any follow up questions certainly reach out to either Allen trying or myself and Investor relations.
Speaker Change: For media questions feel free to reach out to our corporate communications team.
Speaker Change: Thanks, again and have a great rest of your day thanks, everyone.
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.