Alcon (SIX Swiss: ALC) Q1 2026 Earnings Call

0:01 Greetings. Welcome to Alcon's First Quarter twenty twenty six Earnings Call. At this time, all participants are in listen only mode. The question and answer session will follow the formal presentation. Please note that this conference is being recorded. At this time, I'll turn the conference over to Dan Cravens, Vice President and Global Head, Investor Relations. Thank you. You may now begin. Welcome to Alcon's first quarter twenty twenty six earnings conference call. Yesterday, we issued our press release, interim financial report and earnings presentation. All these documents are available on our website at investor.alcon.com. Joining me on today's call are David Endicott, our Chief Executive Officer and Tim Stonesipher, our Chief Financial Officer. Before we begin, please note that our press release, presentation and remarks today will include forward looking statements, including statements regarding our future outlook.

1:02 We undertake no obligation to update these statements as a result of new information or future events, except as required by law. Actual results may differ materially from those expressed or implied in these forward looking statements. Please do not place undue reliance on them. Important factors that could cause actual results to differ are included in our Form 20 F earnings press release and interim financial report, each of which is on file with the Securities and Exchange Commission and available on their website at sec.gov. We will discuss certain non IFRS financial measures. These measures may be calculated differently from and may not be comparable to similar measures used by other companies. They should be considered in addition to and not as a substitute for IFRS prescribed performance measures. Reconciliation between our non IFRS measures and the most directly comparable IFRS measures can be found in our earnings press release.

2:01 For discussion purposes, our comments on growth rates are expressed in constant currency. In a moment, David will begin with highlights from the first quarter. After his remarks, Tim will walk through our financial performance and outlook for the remainder of 2026. David will then return with closing comments before we open the line for Q and A. Before I turn the call over, I'd like to share that Alan Train has accepted a new finance leadership role within Alcon, supporting our surgical business in Singapore. On a personal note, I want to thank Alan for his deep expertise, sound judgment, and the partnership and friendship he has brought to our team and to our engagement with the investment community. He has made a meaningful impact on Alcon. And while we'll miss him in his current role, we're excited to see him take on this next chapter within the company. And we expect to announce Alan's replacement in the near future. With that, I'll turn the call over to our CEO, David Endicott.

2:57 Good afternoon, and thanks for joining us. Let me start by recognizing the incredible work of our talented teams around the world. Your ongoing dedication, innovation and commitment to our customers continue to move Alcon forward and make a meaningful difference in patients' lives. Now the first quarter was an important step forward for our new products demonstrating strong market acceptance and share gains. In a quarter marked by uneven market conditions particularly in cataract our team stayed focused and delivered results that reflect the strength of our innovative portfolio. Our recent product launches contributed meaningfully to top line growth in the first quarter and we expect that contribution to continue to build as the year progresses. Importantly, we're seeing market share gains across key categories, particularly in U. S. ATIOLs, surgical equipment and consumables and contact lenses as well as dry eye.

3:53 That momentum was clear at the ASCRS meeting last month. Across more than 60 presentations and peer to peer sessions we saw strong surgeon engagement driven by impactful scientific data and hands on demonstrations. Discussions focused on consistency, workflow integration, and matching technology to patient and doctor needs. This real time feedback reinforces our confidence in our ability to translate innovation into real world clinical value. I'll now move to discussing recent innovations starting with our Unity Facovit device. As we've discussed in the past, the Unity platform represents our most significant equipment upgrade opportunity in more than a decade and the scientific community continues to recognize that.

4:39 In addition to previous top innovation awards, I'm pleased to report that Uniti VCS was named an Edison Award winner last week. This is one of the most recognized honors for market ready innovation and reflects its meaningful impact on surgical technology. Launched in 2025, Unity VCS is engineered to enhance surgeon control, improve efficiency and streamline the surgical workflow. VCS has been introduced across most major markets worldwide and continues to build momentum and performed well in the quarter. In late last year, we expanded the platform with Unity CS, our standalone cataract system. It's designed to increase surgical throughput while maintaining precision and safety. Unity CS has also been very well received.

5:24 Surgeons have noted its seamless workflow and next generation energy delivery that help optimize case efficiency without compromising outcomes. With a substantial installed base of legacy machines and a compelling value proposition across both efficiency and clinical performance, Unity represents a significant technology upgrade. Beyond the replacement market, Unity is also showing strengthening share and actually expanding our installed base. As a result, our order pipeline remains robust, especially post ASCRS. We're continuing to work closely with customers to manage OR installations with the quality, service and support they expect from Alcon. Now, I'll turn to implantables where our innovation is strengthening our competitive position and driving solid performance. In fact, in The U. S, we gained share in every IOL category in the first quarter.

6:17 I'll start with PanOptix Pro, our latest Trifocal IOL. Pro builds on the proven success of PanOptix, which is already the world's number one most implanted trifocal with over 4,000,000 implants. Pro introduces new features that reduce light scatter and delivers greater quality of vision. In The U. S, this lens has helped to drive almost two share points of growth in the PCIOL category. Internationally, we're just getting started. We recently had an upcoming launch in Australia, Japan, South Korea, and now Europe. Feedback from these launches have been positive and we're confident that Pro will bolster our presbyopia correcting IOL leadership globally. Building on PanOptix Pro's momentum, we launched TruPlus, our new enhanced monofocal IOL.

7:04 This lens extends the range of vision of a traditional monofocal providing enhanced intermediate vision without compromising distance performance. TruPlus is designed for surgeons who want an enhanced monofocal option. It enables us to compete more effectively while defending our Clarion monofocal base. Importantly, TRuPlus launches with a toric version from day one and having a toric modality is a meaningful advantage for competing in the astigmatism correcting segment and growing our AT IOL share. Finally, we remain on track to launch an upgraded version of Vivity, our extended depth of focus IOL in early twenty twenty seven. With more than 2,000,000 implants, Vivity is already the world's most implanted EDOF lens and this enhancement is designed to improve near vision while preserving Vivity's low visual disturbance profile.

7:56 Now I'll move to retina where Veleta, our photobiomodulation device for intermediate dry AMD continues to see encouraging early adoption. Beleta is the first and only therapy clinically shown to maintain vision improvement in dry AMD patients with some patients achieving about a one line gain in visual acuity. This technology uses three specific wavelengths of light to improve mitochondrial activity and retinal health giving retina specialists a non invasive treatment option for dry AMD that they never had before. Importantly, reimbursement is progressing with all but one Medicare administrative contractor covering Veleta and we're actively engaging private payers and expanding physician education. Veleta complements Voyager by expanding our office based procedures, enabling practices to operate more efficiently while offering patients convenient non invasive options.

8:52 Now I'll move to contact lenses where we continue to gain traction with our innovative reusable portfolio. More than half of new wearers start in reusables, which is a segment that supports strong patient retention and delivers highly attractive margins. Given our under indexed share position, this category remains an important growth opportunity for us. Our reusable portfolio is anchored by Total thirty, the industry's first and only monthly lens with water gradient technology, which delivers exceptional comfort for thirty days of wear. Last year, we expanded the Total 30 family to cover all major modalities: sphere, toric, and multifocal. And in February, we introduced Total 30 multifocal for astigmatism, which is our first multifocal toric contact lens. This lens fills an important unmet need for presbyopic patients with astigmatism, a group that historically has had very few options.

9:45 Initial feedback has been excellent with ECPs highlighting crisp vision at all distances and long lasting comfort. Alongside Total 30, PRECISION seven broadens our portfolio with a high quality, accessible, one week replacement lens. Designed for patients where daily disposables are not an option, PRECISION seven delivers a comfortable experience at an attractive price point while introducing a replacement schedule that many optometrists view as more intuitive than traditional two week lenses. Combined, these innovations drove share gains in the quarter and we are expected to continue to do so in this category. Now finally, in Ocular Health, we continue to strengthen our leadership in the expanding dry eye category through innovation in both our over the counter and pharmaceutical products.

10:31 On the over the counter side, our sustained family of artificial tears delivered another quarter of high single digit growth. Most notably, last year we launched SUSTAIN Pro, our most advanced artificial tear. Its triple action formula is designed to hydrate, restore, and protect the ocular surface delivering long lasting relief. Early performance has been strong contributing to continued share gains in U. S. Artificial tears and reinforcing our leadership as that category expands. In pharmaceuticals, continues to perform well. Doctors appreciate its rapid onset and novel mechanism of action. Importantly, Tripteer is already capturing share with approximately four share points in just eight months into the launch.

11:17 We've also made great progress with payers. In the first quarter, we expanded coverage to more than half of our commercial lives. Our focus for the remainder of the year is on broadening the prescriber base and securing future Medicare Part D coverage which will significantly expand patient access and make Tripteer easier to prescribe. Tripteer and SustainPro together represent significant innovation in dry eye, extending our reach across the full spectrum of dry eye sufferers and reinforcing Alcon's leadership in this category. Looking ahead, our innovation pipeline remains strong with upcoming launches including a new entry into the eye whitening category as well as Unity M, our newest microscope, and Unity DX, our whole eye diagnostic device. And these programs build on the momentum we're seeing across the portfolio and reflect our continued focus on advancing differentiated innovation.

12:10 Together, they reinforce our confidence in the durability of our pipeline and our ability to drive sustained growth over time. Now, I'd like to turn to operational improvements where we are making a number of things happen internally. As we scale innovation across the portfolio, artificial intelligence has become an important enabler at Alcon, helping us operate faster and make better decisions. We started applying AI selectively where it enhances productivity, quality, and speed. In R and D, we've deployed solutions that we expect will increase speed to approval while working on AI enabled modeling and simulation for accelerating design and development. In operations and quality, we are leveraging AI solutions to improve yield and perform automated inspections.

12:58 And on the commercial side, AI assisted analytics are enabling deeper customer insights and more personalized engagement. So while it's still early in our journey with AI, these advancements are fortifying foundation at a pivotal moment and enabling us to leverage a more stable cost structure and seize emerging opportunities. Now before I close, I want to share a few observations on the market environment. In cataract surgery, consistent with prior quarters, we estimate the global procedure volumes grew low single digits. While this relative softness has persisted for several quarters, we continue to believe that market growth will return to historical levels as healthcare systems adapt to increasing demand. However, for 2026, our guidance continues to assume that current trends continue.

13:44 On the other hand, we estimate that global ATIOL penetration was up 130 basis points to approximately 17%. There was broad based strength in most regions of the globe, which was pressured by weakness in China. If you would exclude China, global penetration was up approximately two twenty basis points. In contact lenses, we estimate the global market grew at the low end of mid single digits led by strength in The United States. In summary, while market conditions remain mixed, our strong portfolio of innovation is performing well and continues to deliver solid results. We're operating from a position of greater strength backed by a deeper innovation engine and a more resilient commercial model. This positions us to deliver durable, profitable growth and create meaningful long term value for shareholders.

14:35 And with that, I'll turn the call over to Tim who will walk you through the financials. Thanks, David. Our first quarter sales of $2,700,000,000 were up 6% versus prior year. In our surgical franchise, revenue was up 6% year over year to $1,500,000,000 Implantable sales were $438,000,000 in the quarter, up 1% versus the prior year period. As David mentioned, PanOptix Pro continued to perform well. We saw solid growth in IOLs in The U. S, partially offset by ongoing competitive pressures internationally. We also saw some pressure in surgical glaucoma. In consumables, first quarter sales of $769,000,000 were up 4%, which reflects softer than historical market conditions as well as price increases.

15:21 In equipment, we saw another quarter of accelerating growth with sales of $253,000,000 up 23%, driven by strong momentum from Unity. Early adoption has been encouraging and we're seeing Unity act as a meaningful catalyst for equipment growth. Turning to Vision Care, first quarter sales of $1,200,000,000 were up 6%. Contact line sales were up 4% to $738,000,000 This growth was primarily driven by product innovation and price increases, partially offset by declines in legacy products where we've limited our promotional activity. In ocular health, first quarter sales of $487,000,000 were up 10%, led by continued strength of our dry eye portfolio, including Tripteer and Sistain.

16:08 Tripteer continues to perform well with strong refill rates and broad prescriber enthusiasm. As access expands and awareness builds, we continue to expect Tripteer to be a meaningful growth driver this year. And as David mentioned, our sustained family of eye drops also had another great quarter with high single digit growth. Within that portfolio, our multidose preservative preformulations contributed nicely, growing more than 20% year over year. Now moving down the income statement. First quarter core gross margin was 63%, down 40 basis points year over year. This is primarily due to 120 basis points of pressure from incremental tariffs. Core operating margin was 21.2%, which was flat year over year. Improved operating leverage from higher sales and manufacturing efficiencies were partially offset by the pressure from tariffs that I just mentioned as well as investment behind new product launches and R and D.

17:04 First quarter interest expense was $52,000,000 and other financial income and expense was a net benefit of $2,000,000 The average core tax rate in the first quarter was 19.7%, down from 21% in the prior year. And finally, core diluted earnings were $0.85 per share in the quarter. Turning to cash, we generated $279,000,000 of free cash flow in the first quarter, which was flat when compared to the same period last year. Lastly, with respect to tariffs, we incurred $33,000,000 of incremental tariff related charges in the first quarter, which was recognized in cost of sales. Now moving to our outlook for the remainder of the year. Our outlook assumes that aggregate high care markets grow 3% to 4% for the year, that exchange rates as of the end of April hold through year end.

17:55 And regarding tariffs, we are now assuming that an average tariff rate of approximately 10% on U. S. Imports holds for the remainder of the year versus our previous assumption of 15%. We also assume retaliatory tariffs remain unchanged. This change results in an estimated $25,000,000 reduction in tariff expense versus our February guidance, which we would expect to reinvest back into the business. Based on these assumptions and our performance through the first quarter, our guidance is as follows: We continue to expect constant currency sales growth of between 57%. Turning to margin, we continue to expect core operating margin expansion of between seventy and one hundred and seventy basis We expect the majority of this expansion to occur in the second half of the year.

18:44 As in prior years, SG and A is expected to peak in the second quarter due to normal seasonality with incremental spend this year in support of product launches. Accordingly, we expect second quarter core operating margin to be below the prior year period. And lastly, we now expect core diluted EPS growth of between 1013%. Moving on, I'm happy to announce that our Board has approved a new $1,500,000,000 share repurchase program to be executed over the next three years. This authorization reflects the strength of our balance sheet and robust cash flow generation and is fully aligned with our long standing capital allocation priorities. We will continue to prioritize investment and top line growth through R and D and disciplined bolt on M and A.

19:30 This program enables us to return incremental capital to shareholders in a measured and disciplined way without constraining our ability to fund growth or maintain a healthy deal pipeline. And before I wrap up, I'm also pleased to report that at our Annual General Meeting last week, our shareholders approved a dividend of $0.28 per share, which we expect to pay on or around May 7. I'd like to thank our shareholders for their continued support. Lastly, I'd also like to extend my thanks to our more than 25,000 associates across the organization for their dedication and hard work. And with that, I'll turn it back to David. Thanks, Jim. To close, the first quarter underscored the strength of our business. Our steady cadence of innovation, balanced portfolio and strong execution are driving durable performance across the company.

20:23 New product launches are gaining traction. Our pipeline continues to advance and we're utilizing tools like AI to help us operate with greater speed, precision and scale. Taken together, these advantages position Alcon to navigate the environment with confidence and deliver steady profitable growth and long term value for our shareholders. With that operator, please open the line for questions. Thank you everyone. We'll now be conducting a question and answer session. A confirmation tone will indicate your line is in the question queue. You may press 2 if you like to remove your question from the queue. Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

21:09 To allow as many as possible to ask questions, we ask you please limit yourself to one question and one follow-up. Thank you. And our first question today is from the line of Ryan Zimmerman with BTIG. Please proceed with your questions. Good morning, David and Tim. Thanks for taking the question. Maybe to start with the implantable category growth for a minute here, David. If you look at the growth over the last five quarters or so, you think about the peers in the category, it's been a bit below that market rate. And so I'm wondering how much you is surgical glaucoma dragging down your growth given what you're seeing in PanOptixPro and the Clarion launch? And if you could kind of parse out what China VBP versus glaucoma versus maybe more of your core ATIL adoption?

22:04 Yes. Thanks, Ryan. Really good question. Look, the 1% growth on the implantables broadly is made up of a number of things. And one of the reasons we've kind of called out glaucoma implantables is because as you know, the reimbursement changed this year and we also had about a $3.4000000 dollars kind of supply issue on hydrous kind of late in the quarter. So our core growth there actually when you back just the hydrous piece out is about 3%. If you looked at it in The U. S, it was 6%. So we had a very good quarter in The U. S. And if you look at it without China, it gets higher because China we had as we kind of move forward with BBP last year, we had some inventory come in. So the comp is a little bit big. So we've actually had a pretty good quarter in implantables around the world various markets.

22:54 I think as we go forward, PanOptix Pro really looks to be doing very well. I think in The U. S. In particular, we gained share in the implantables. It was a we gained an 80 IOLs more than a share point of 1.4. I think we were up total IOLs 2.2. We've stabilized that market a bit. And I think we're feeling like once we get pro into Europe, which is just launching this month, it's had a nice reception in Japan, but we just got that in I think in February. So we're getting a number of other markets now as we've launched those doing well. And I think when you add to that TruePlus and then you think about going forward at the end of the year, we've got a Bivity Pro. We won't have the same kind of exposure for long duration periods to competitive products. Most of price you're seeing right now come in the market we've seen for a long time. So we've got a number of new things right now coming in that are hopefully going to offset it. Make no mistake, it's going to be competitive.

23:53 And I think what we've said in the past and I still would reiterate is, I think we grow at market rate here, but it's going to be competitive. The best thing that happened honestly was ATIOLs was up two thirty basis points in The U. S. Really nice movement around the world on ATIOL penetration and we seem to be doing pretty well right now in The U. S. We'll see how that takes shape as other price launch, but I generally think it's going to be a competitive fight, but pretty healthy position we're in. Understood. And maybe for Tim, gross margins came in a bit better than I think the Street was looking for here. It sounds like some of that was priced. You have a little bit less of a tariff impact. You're not assuming refunds. I'm just wondering kind of with gross margins trending higher than maybe the Street was looking for, one, what are your expectations there? But two, why can't that flow through at a higher level margin line and subsequently EPS?

24:53 Yes. I think you got the pieces of the pie correct. I mean, we did see we did still see tariff pressure. So when you look at it from a year over year perspective, the rate cuts that we talked about, those really will hit in the back half of the year starting, I think it's in March. But listen, we're seeing some nice when you take into account projects we're working on our manufacturing plants from a productivity perspective. To your point, we are still getting price. So I'd expect those margins the gross margin to continue to be in that neighborhood of 63% as we go out through the course of the year. Thank you. Our next questions are from the line of Veronika Dubjova with Citi. Please proceed with your question.

25:41 Hi guys and thank you for taking my questions. Just first one kind of how you think about the market momentum, I guess, lots of moving parts obviously in Q1, especially on the surgical side with weather and some strikes that some of your peers have called out. I'm just curious, think you described the market growing as three percent in Q4, Sounds like maybe Q1 on the surgical side was a little bit softer. What's your degree of confidence that we're going to be within that 3% to 4% range that you guided for, for the year? And I guess to what extent you're seeing a momentum that has improved looking at March and April? If you can comment on that, that'd be super helpful. And then my second question is on contact lenses. We've seen the gap between you and the market really narrow and looking at the last couple of quarters, certainly on a sort of selling perspective, it seems to be that you are tracking market very, very closely.

26:34 I was just hoping there that you can talk about how you feel about the competitive dynamics there and your degree of confidence in your ability to outgrow that market as we look through the remainder of the year? Thanks, guys so much. Yes. Thanks, Veronica. Let me start with the surgical market. Yes, there were strikes, there was weather, there was all that stuff going on. And I do think some of that had some effect. But I think the way to think about this market is kind of as we described it, 3% to 4% remember is the aggregate market number for us. So that is contact lenses, grows 4% to 6% generally, The contact the cataract market, which again, it generally grows kind of in that three percent range. And then you've got the pharmaceutical markets and the OTC markets and those grow right now a little bit better than that. So we are confident in that 3% to four range. In the quarter, were on the lower end of that because frankly The U. S. Market in surgical was soft. And so we can put it in the weather, we can put it on stretch, we can do any of that stuff. But I think at the core of it, there is a lot of demand for cataracts that is not currently being met. The demand for cataract is very high.

27:41 Number of days of wait time has gone up. And I think what's really happening and we've been seeing it for a while is this kind of restructuring of the service, the workflow here. Surgeons are hiring optometrists, they're using office based surgery, they're finding more ASC time in other places. But to do that, it takes a little bit of time. And I think as they work through to try and capture the economics of what is kind of a I don't want say an unlimited demand, but there's plenty of cataracts out there to do. They need to find more OR time and they do more in a day. And that's what they're working through right now. So as we see three to four going forward, I don't really think there's a big change in The U. S. Cataract market this year. We kind of called the market as we saw it at the beginning of the year. We think that continues all year.

28:28 But I do think we feel comfortable with that range in aggregate. So again, there'll be some markets that bounce around a little bit more than others, but that's where we are right now. On the other point on the contact lenses, what I'd say is that we've done real well with a lot of our products. I think reusable one of the things you'll notice that, for example, we gained I think a share point change on reusables, but our dailies business was a little bit flat. It was slightly up. I think we were the only one of two, I think, of the bunch of us that gained share. So we are gaining share, but it is more modest than it was when we first came out with P1 or with T30. We're getting a lot of share in The U. S. Right now in reusables. We're getting a lot of share in dailies in the international markets.

29:15 And then we're kind of losing we're kind of flattish in The U. S. On dailies. So I would say it's a mixed bag. But I do think that if you look at where we are with, for example, Precision seven and Total thirty, we're continuing to grow the market. I think the drawdown on dailies has been our legacy business. So if you think about that legacy business, which is kind of getting smaller and smaller, the front half is bigger than the back half, obviously. And so our comp gets a little easier as you move to the back. And that's kind of the that's really the story of the year, which is pretty level loaded year broadly. I think what's important to know is that the acceleration of new products really takes off kind of front half, let's call it a third or a little bit more than that and the back half kind of two thirds a little bit more than that. That's the truth on all the new products.

30:05 Got it. Thanks guys. Our next question comes from the line of Matt Miksic with Barclays. Please proceed with your questions. Hey. Thanks so much. Can you hear me okay? Yeah. Yep. Great. Thanks. So listen, appreciate the color on the market and congrats on the progress on PanOptix Pro. I was just wondering if you could talk a little bit about the effect of some of the pull through that you've seen from these from the Unity renewals in terms of either kind of locking down or taking more share in monofocal IOL growth?

30:52 And then I had one quick follow-up. Well, it's a really good question, Matt, because we did actually see and I didn't really mention it, but we took a fair bit of share in monofocal actually in the quarter globally. And some of that has to do with our presence in the OR. And when you're selling more stuff in the OR, then you can generally sell more stuff. So that's the view that we have on that. So it is connected at one level because we've got a lot of people in the OR right now with a lot of new products. So I think that's been a very positive. I would just say that the ATIOL business is still the one we pay most attention to because globally we've got a challenge I would say in the international markets and we're stabilized and kind of beginning to grow again in The U. S. Market. But again, there's more competition coming.

31:38 So I'd say the fight is really ATIOLs, but you're not wrong. We are gaining a good bit of share in the monofocal business. On the Unity process itself, obviously, the other thing that helps is we just launched CS. And so the benefit of that is, of course, it's a little easier to install, it takes a little less time, it's a less complicated machine and requires a little less handholding. So we're looking forward to and then a lot of cataract surgeons. So just in terms of total sheer number of placements, we're in a lot more ORs right now as we start to expand beyond retina and really kind of begin to sell the CS machine. So that again gives us an opportunity to sell viscoelastic, sell BSS, sell all kinds of stuff that we generally do. So a really good important point you're making.

32:31 Our next questions come from the line of Jack Reynolds Clark with RBC Capital Markets. Please proceed with your question. Hi there. Thanks for taking the questions. My first was just coming back to the kind of surgical the cataract market. With these waiting lists so long, what is it that can you just kind of just talk us through exactly what needs to happen for this demand to translate into a high market growth and when that's going to happen? Okay. Is it going to be a twenty seven, twenty eight thing? Kind of what are the drivers there? And then on ATI oil penetration, so could you just remind us what it was in Europe and how you see that progressing over the next kind of couple of years? Do expect to catch up with The U. S. Or something like that? Thank you.

33:20 Yes. Look, I mean, I think let me answer the second one while I've got the data in front of me. I mean, I think the Europe PC, ATIOL penetration was pretty good on the quarter. Directionally, it was 16.1% and it was up two sixty basis points. So almost the same as The U. S, a little better than that. It was two thirty in The U. S. The only thing that kept it down was China went the wrong direction because there was a recall from one of our competitors. So the data looks a little weird there. But fundamentally, most markets are beginning to catch up to The U. S. So I think U. S. Is sitting somewhere in the 20s, like 21 or something. And so you've got a relative comparison.

34:08 I do think that historically this market penetration has grown 50 to 100 basis points. I would still draw that line. I think what you're seeing right now is a lot of promotion from a lot of companies and that's moving people towards ATIOLs, which is a good thing. There's a lot of room in this market to grow. And I think the upper limit, I think we've said in the past is maybe mid-30s to upper level, high 30s, but that's the ceiling. So it's not everybody going to use one of these, but they're worth a lot more to us on a value basis. So moving this market along, I think is a very positive sign. On the other point you make, which is the surgical market and what it takes to translate demand into revenue, I think that's the big question that most PE guys have in The U. S.

34:54 Is what all the big practices are working on. At the core of it, it really is freeing up time to do more surgery. I mean, it's just that simple. But that's not so easy when you're competing with, for example, a hospital OPD who wants to give that time to a more productive, more economically valuable procedure somewhere else. So certain parts of the market are shrinking for available time and certain parts are growing. So what's really happening right now is you're seeing this rotation into things like office based surgery, which is very popular right now, is gaining some momentum in The U. S, where they're putting office facilities in play that can carry our machines, microscopes, they're setting them up to do surgery. It's a friendlier environment. The reimbursement is still complicated, but I would just say that that's creating more capacity and more flexibility for the surgeon.

35:45 I think the other thing that happens is you see a lot more ODs entering practices with large group practices, PE groups, even small practices that I was in one recently in Boston, where they were just hired two ODs, and they're doing some primary care work and some pre post op work, and that frees the surgeon to do more time in the OR. So that's the adaptation of practice pattern that has to occur. And it's going to take some time. I mean, I think that's really why we've seen kind of unabated growth by bringing down the time in surgery. The time in surgery is going to only get better by a little bit now. We're flipping rooms just a little bit of almost as fast as we can. We'll get a little bit better there with our machine. But I think the opportunity here is really now to see more days in surgery from core surgeons.

36:35 That's very clear. Thank you. The next question is from the line of Susanna Ludwig with Bernstein. Please proceed with your question. Thanks. Good afternoon and thanks for taking my questions. I guess my first is just on contact lenses. If you could talk a little bit more on the drivers of growth and the contribution from volume, price and the mix shift to dailies. And then maybe just a little bit about your performance geographically in The U. S. Versus Europe versus Japan? And then second, just to follow-up on the questions on IOLs, you have noted sort of heightened competitive pressure in IOLs and international markets for several quarters now. Could you talk maybe about how this pressure has progressed sequentially and when you will start to lap some of that pressure?

37:27 Yeah, let me take them on first with the first bit of that which was the contact lens market. Historically, I think the way to think about the contact lens market is we've always just got a mid single digit grower 4% to 6%. Price is 2% to 3%, mix is 2% to 3%, volume basically has been flat. Pick up 14 year olds, you lose 40 year olds probably about the same rate. What I think is happening right now and most recently has been the resistance to price internationally in particular, where chains in the internet have a bigger participation in the process and they're very sensitive to consumers. So I would say, what's really gone on is there's a pause in the ability to push price into the market.

38:13 That's certainly what we see. I think that's really what's driving a little bit of a slower market. But again, we're still in the normal range. I would just say we're on the low end of the normal range there. So going forward, I think what you're going to see is as the consumer gets a little bit stronger and as you see new products and mix in particular for us, the mix to reusables, mix to dailies generally allows us to help outperform. We're also gaining share there. So I think both of those will allow us to kind of grow a little faster than that market. On the geographic performance outside The U. S, the IOLs, our share in The U. S. Has been stabilized principally on the back of PanOptix Pro. And we really didn't have a new product in the international market until really Japan in the beginning of this year. So I think what you're going to see is a similar playback where you've got some other pressures coming in. Think Odyssey will come in. But again, think we've seen both of these products in the past in different markets and we've got data now on them, which I think will help manage, let me just say the impact on that. So the shared movements have always been a little bit more significant outside The U. S. Where we have, I think a more competitive market where there's more products.

39:33 And so I think we continue to believe that the introduction of products that meaning specifically PanOptix Pro then TruePlus then Vivity, the next Vivity 2.0 I guess, that's the way out of this thing. And so it looks pretty good to us. Great, thanks. Our next questions are from the line of Graham Doyle with UBS. Please proceed with your question. Hi, guys. Thanks for taking the question. It's it's just one. In the context of the phasing, through this year, you just printed a six against what we think is a sort of the easiest comp in the year, at least optically. And therefore, I think there's you can see the share price there is disappointment that maybe we're looking at sort of slowing growth or no improvement from here. Is that a reasonable way of thinking or is there actually scope here for growth to improve as you go through the quarters? It'd be good to get that sense, please.

40:30 Well, Graham, let me just let's clarify the comp itself and the number itself. We had a number of things happen that would have, I think, maybe changed the optics on this a little bit. The Middle East piece of this is that disruption was worth $11,000,000 in shipping to us, which is probably 50 basis points of growth. And then I think if you take the hydrous piece, there's another 10 basis points. So I think on sixone, which is where we ended, we would have been something closer to like 6.7, 6.8, something like that. I I think candidly, we've had a level loaded plan for a while. And what you really see is that the front edge of this the front half of this year is going to be a lower amount of new products and the back half is going be a much higher amount of new products. And so you're going to see that acceleration kind of coming around on the next comp, which is slightly better than last than the front half on a comp basis. That's how you make up for it. So I think we've had a point of view on this one from the beginning that we were pretty close to the right answer from the beginning of the year, which is markets are going to be kind of three to four, which is a little softer than we've seen in the past, but new product flow is going to make up for it and it accelerates in the back half.

41:46 Okay. So fair to say you'd hope to maintain this momentum and avoid the sort of hydration Middle East shipping issues in the next few quarters effectively? Yes. I mean, think that's probably fair, right? I mean, I don't think we believe that we're going to have that challenge. Of them was an outage that we created. So I mean that's a solved problem with hydrants already. And then I think the other piece is we'll have to see but I'm not a prognosticator on The Middle East. What I would say is we just watch and see but that was obviously a problem for us. That's super helpful. Thanks a lot guys. The next questions are from the line of David Saxon with Needham and Company. Please proceed with your questions.

42:31 Great. Thanks guys for taking my questions. Congrats on the quarter. I wanted to ask on Tripteer, David or Tim, maybe you can talk about the contribution to growth there. What kind of traction you're seeing in existing accounts and kind of how you're positioning it for expanding the prescriber base as you kind of move into the next wave? Yes, David, we're very excited about what's going on with Tripteer and the response. I mean, don't know that we knew precisely. You never know for sure until you get a product into the market and you have an opportunity to watch it for a while. I think we're at a place now where we have a pretty good feel for it. Our refill rates are 70 plus, which is really great. I mean, I think there was some criticism I think about the comfort of this product. I think what patients are finding is that it is worth it does have a little bite to it when we put it in, but at the same time feel relief quickly And that relief day one is worth it.

43:30 And so I think what we're seeing is two things, patient acceptance as a function of refill rates and then the breadth of prescribing now has gone very wide. So I think we're getting a lot of trial from the full audience. And so I think our sales force done a terrific job of getting out to everybody. But also you're seeing kind of repeat prescriptions and refills come nicely along. So that I mean, the big thing here, like all pharmaceutical products is going to be reimbursement. We're about 55% of commercial lives right now covered. We expect that to grow throughout the rest of this year. And obviously, we go into next year, we're expecting to have Medicare coverage come through. So that will be kind of positioned for a full run next year, but definitely on plan for us, maybe a little bit better than expected.

44:18 Okay, great. Thanks for that. And then just on implantables, know a lot of focus is on PanOptix Pro and Vivity, but would love to hear how you're thinking about the TruPlus launch, kind of frame it in terms of how meaningful that could be to recapture some of the share you lost to kind of the competitive Monofocal Plus launches from the last couple of years? Thanks so much. Yes, it's a good question. I'm going to I'll just tell you this much. I think the TruePlus brand is a terrific product. And this product actually has got better intermediate than alternatives out there. And it has the same kind of monofocal distance that you would expect that you want from a monofocal.

45:04 If you're going to use and charge a patient, particularly a toric patient for a monofocal plus product, this is going to be, I think, a terrific choice for you because it's going to give them a little bit more intermediate than what's available without compromising any of the kind of monofocal qualities that we would want. I do think we did lose in the toric business in particular, we lost in The U. S. I don't know about 10 share points to toric competitors. And I think that internationally, the market size is little bit bigger than that. I don't know that this is going to be a big product incrementally. I do think it will cannibalize and sustain our core business. And so think about it maybe more as an upgrade to our current toric monofocal, our current monofocal with a slight price increase and a real safety margin for competitive intrusion because I don't think anybody's going to be able to match this particular brand in the Clarion platform.

46:00 Great. Thanks for that. The next questions are from the line of Steven Lichtman with William Blair. Please proceed with your question. Thank you. Hi, guys. Maybe start, Tim, it with was one quarter complete here. I'm wondering if you can provide any more color on the operating margin guidance range and whether you see it trending toward upper half or lower half for the year. You know, it seems like FX will be less of a tailwind, but you have the efficiencies kicking in. And I think you said QQ will be down year over year, so put more emphasis on second half. Any further color within that range would be helpful. Then I have one quick follow-up. I mean, the 70 to 170 basis point improvement that we guided towards, we're very comfortable with. That's in constant currency. So just keep that in mind. Q2 will be light as we've talked about. And as you've seen, if you go back and look at our historical financials, it's a heavy investment period for us from an SG and A perspective when you think about back to school programs and other programs like that. So first half op margin will be lower than the second half. That will start to accelerate in Q3 and Q4.

47:11 But overall, we feel very good about the 71, 70 basis point improvement. Okay. And then just quickly on the accommodating tunable IOL, any further color when we could see that early data? I think you talked maybe another 2Q call or 3Q call? Yes, I think somewhere between here and the next call. I think we certainly expect that data to come through. I think we've got most of it in house now. We're looking at it probably midyear, as I think I said last call. Okay, great. Thanks guys. The next question is from the line of Young Lee with Jefferies. Please proceed with your questions. Great. Thanks for taking the questions. I guess to start, maybe just one more on the guidance.

47:58 So 1Q was the easiest comp of the year. It seems like Unity and Frontier are doing better than expected, hitting the midpoint of full year guidance implies a pretty sizable ramp against public comps. I guess can I just maybe push you on thoughts on which segments gets meaningfully better from here and which segments are going to be the laggards? Well, I mean, would think about I would go to the new product flow. The easiest way to think about it is, I think we have I can't count the number of at this point, but I think there's 10 maybe six that are big new products.

48:44 Almost all of them came out middle of last year. So if you think about the back half of last year and product flow, really, we got a little bit in the third quarter. We got a little bit more in the fourth quarter. But what really you're seeing now is a pickup that's meaningful for the full year effect. And so by the time you get to the fourth quarter, you're kind of eighteen months into some of these products, which is really we should be moving quite well. I would say most of the big ones, let's call it Unity, Tripteer, Pro, and I think don't forget our OTC brands, those are doing really well right now. I think one of the underestimated parts of our business tends to be the ocular health business. It's the same size as the implantables and similar profitability and it's growing I think at 10%.

49:35 So I do think that if you just kind of go through the list of products and think about when they were launched and what they're wrapping around on the back half of last year, you'll find where the growth comes from because the core business is going to continue to grow roughly at the core market, slightly better maybe because we gained some share, that's basically where we are. Very helpful. And I guess on the implantables growth there wasn't a competitive launch in 1Q. Going forward, there will be. You know, for this year, I think you're expecting around 2% growth. How much competitive trial in is baked into that number? Is 2% still the right number for annual growth?

50:26 Yes, we haven't I don't know that we've guided individual categories, but I would just say that we're very excited about our competitive launch of PanOpix Pro in Europe because I think we some will positive momentum for Europe, which really has needed it. And I guess you're thinking probably about The U. Launch of other products and same thing Europe competitively. My own point of view is we know both those products really well and I think we've got them pretty much dialed into the forecast as we gave it. My hope is that we see with TruePlus and PanOptix Pro that we do a little better than expected, but we'll see. These have been aggressive markets and aggressive competitors and we wouldn't expect any less.

51:15 But we're doing well right now. Thank you very much. The next question is from the line of Richard Felton with Goldman Sachs. Please proceed with your question. Thanks very much. Thanks for taking my questions. Two for me, please. First one is on China IOLs. I know historically, it was a relatively small part of your business, but I guess there's been a lot of growth for H IOLs and share gains for Alcon post VBP. So any sense of how material that market is for you guys currently? And linked to that, any expectations for the upcoming round of China IOL VBP? And the next one, it would be great to get an update on ORION, please. What's the feedback been like on the commercial launch in Japan? Any incremental data or insights on efficacy versus the transplants?

52:03 And if possible, can you give us an update on the timeline for Phase three trials in The U. S, please? Thank you. Yes. Just on China. Yes, the IOLs are about the same as the full business, which is about 5%. So I would think about it as that. One point, we really didn't have much of an IOL business there. It was a small bit, but I think we have had a nice run with the VBP piece. It's picked up. Our share is pretty good. We'll see what happens. That VBP rolls around again in the middle part of the year. So we'll certainly look forward to that. I think on the AURYON piece, what I would say is that we've started the Phase three already. We had our first dosing, I think last earlier last month, so middle of last month.

52:50 So we're excited about that. That's a product that I think if they finish the trial this year, we have a potential to file it next year. That's a really exciting opportunity for us to help a lot of patients avoid a corneal transplant and do something really special for these patients. Thank you. Our next questions are from the line of Larry Biegelsen with Wells Fargo. Please proceed with your question. Hi. It's Leigh calling in for Larry. Thanks for taking the questions. I'll ask both upfront, please. Just on the Unity, you sound very excited by the launch. It seems to be doing well. Can you just talk about, you know, how you think about equipment growth for the remainder of the year with both of these products?

53:41 And if you can give a timing update and whether it's U. S, OUS for some of the new Unity products that are coming to the market like DS, etcetera? And my second question is around M and A. You know, Alcon has recently exited two deals, I mean, for different reasons, obviously. Do you think this phase has become tougher in terms of M and A, maybe given Alcon size or anything about evaluation environment? Anything you're thinking differently in terms of how Alcon is approaching MA going forward? Thank you. Yes. On Unity, we expect Unity to continue to grow. I think we had talked a little bit last year about the number of placements. We're still kind of that mind. I don't know that we want to run through the whole thing, but remember, we've got 30,000 ish of a base that we will replace over ten years. That's the normal cycle. You put a little more upfront, you take a little away on the back end and that's what we'll probably see in terms of placements. Now, most of those are sold units, some of them are rental units, some of them are leased. Those are all things that go on. But we feel really good about where we are relative to what we've said in the past on Unity and both its timing.

54:55 To be honest, Unity CS piece is also exciting because we've kind of gotten through the heavy lifting on the retina side and we can do more of that, but there will be more of that. But I think we're now selling the cataract unit, which will be fun too. I think on the other pieces of that, Unity M is late this year. I would think about it as a first phase of a multi phase launch. We are excited about it. This is going to be an exciting scope. We'll talk about it later in the year. And DX, think is slated for next year. We will see you'll start to see it later this year, but we're really doing a controlled launch on that one to make sure that that one's perfect. So I think we're going be patient with DX and make sure that we get that one tied into our Audi Planner and the microscope and a lot of the other stuff that it needs to integrate with. So we're being careful around that one.

55:46 On M and A, I would just say that we haven't changed anything on M and A really. Our own point of view is still that most of what we are interested in are kind of single product companies that are nice tuck ins. They probably range and we've often said this kind of 50 to 500 range is still pretty much the majority of what we do. We're very capable of doing something a bit larger than that, but we don't see any need to do that. And there frankly aren't that many targets that we pay attention to that are like that. So I would just say that STAR was one of the bigger ones that we talked about, why that didn't happen. And LENSAR was just another one of these kind of smaller things that, again, I will see what happens on that one, but I think that's a miss in terms of the opinion of where that sits in the market. I think unfortunately, there's a short life at this point for FemTel relative to robotics and we're really, we're moving on to robotics at this point.

56:48 Thank you. Our last question comes from the line of Brett Fishman with KeyBanc Capital Markets. Please proceed with your question. Alright, great. Thanks for squeezing me in. I'll try and keep it fairly brief. So you took the tariff estimate down by $25,000,000 within the guide and mentioned that the plan would be to reinvest within the business. So just curious where you saw incremental need for greater investment activity rather than potentially letting that drop down to earnings? Yes. Think a majority of that you're going to see in the R and D line. There's some innovation that we're very excited about. And again, that drives the whole revenue thesis that we have. So we're going to continue to back that when we can. All right, great. And then just follow-up on margins. You kept the 70 to 170 basis points core operating margin expansion guide.

57:37 But I think since the last call, there have been noise around the macro, especially energy prices and concerns around inflation. So just curious how that's contemplated in the guide and any general thoughts on Alcon's exposure to those items? Thank you. Yes, it's a great question. It's not really that material for us. It's primarily transportation and resins. So we will see we've assumed that oil is at a certain price and maintains that price through the course of the year. We bake that into our guide. But it's not a material amount at this stage. All right, great. Thank you. Thank you. At this time, I'll turn the floor to Dan Cravens for closing remarks. Okay, thanks Rob and thanks everybody for joining us.

58:24 If you have any follow-up call questions, please don't hesitate to call either Alan Drager or myself. Thanks again for your time. Appreciate it. Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may now disconnect your lines at this time and have a wonderful day.