Alcon Aktie

Greetings. Welcome to Alcon's Second Quarter 2026 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. At this time, I'll turn the conference over to Dan Cravens, Vice President and Global Head of Investor Relations. Thank you. You may begin.

Welcome to Alcon's Second Quarter 2026 Earnings Conference Call. Yesterday, we issued our press release, interim financial report and earnings presentation. All of 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 Stonesifer, our Chief Financial Officer.

Before we begin, please note that our press release, presentation and remarks will include forward-looking statements including statements regarding our future outlook. 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. So please do not place undue reliance on them. Important factors that could cause actual results to differ materially are included in our Form 20-F, earnings press release and interim financial report, each of which is available on file with the Securities and Exchange Commission and available on their website at sec.gov.

We'll also 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.

For discussion purposes, our comments on growth rates are expressed in constant currency. In a moment, David will begin with highlights from the second quarter. After his remarks, Tim will walk through our financial performance and outlook for the remainder of 2026. And Dave will then return with closing comments before we open the line for Q&A. So with that, I'll turn the call over to our CEO, David Endicott.

Thanks, Dan, and good morning, everyone. Our second quarter results demonstrate the strength of our new products and the benefits of our innovation investments. We delivered 7% sales growth, which was broad-based across both franchises and geographies and reinforcing the impact of our diverse portfolio and our commercial reach. Now I'll start my remarks today with Unity, which is one of the clearest examples of our innovation translating into commercial success.

Demand for Unity VCS remains robust, reflecting its versatility across both cataract and vitreoretinal procedures. Surgeons are experiencing firsthand the benefits of Unity CS, including its advanced energy delivery for [ DPCO ], improved [ fluritics ] and streamlined workflow. Now encouragingly, Unity ASPs have exceeded our expectations and underscore our customers' belief in the platform's differentiated value. With strong customer engagement and a healthy sales funnel, we have clear visibility into our second half placements.

Turning to implantables. As we highlighted in our earnings release, we made the decision to discontinue our work on the [ PowerVision ] IOL programs following the analysis of the latest clinical study data. This data demonstrated persistent unpredictable shifts in postoperative distance vision in a subset of patients that remain unresolved after multiple developmental efforts. As a result, the programs did not meet our standards for visual performance and patient outcomes.

Although we are disappointed that the programs ultimately did not advance, they generated valuable insights into accommodation, tunability, and long-term visual outcomes that will inform future innovation efforts.

Looking at our performance in the quarter, implantables grew 1% with IOLs up 2% despite new competitive launches. The PanOptix family grew double digits in the quarter, driven by strong adoption of PanOptix Pro. Building on the foundation of PanOptix, the world's most implantable trifocal IOL, PanOptix Pro enhances quality of vision through its advanced optical design and continues to gain traction with surgeons globally.

In the U.S., adoption has exceeded expectations. Nearly all PanOptix accounts have been converted to PanOptix Pro with the platform now representing approximately 90% of PanOptix implants. Feedback on visual performance and reduced light scatter remains very encouraging.

We expect this momentum to extend internationally as we roll out PanOptix Pro and continue to build on the strength of [ Clarion ] Toric. Early launches in Japan, Canada, Australia and more recently in Europe, have been well received, supporting our confidence in share stabilization and long-term growth. And we're also excited about the acceleration of our pipeline of new IOLs. We've begun a KOL launch of True Plus in the U.S. and recently received CE Mark for Europe. This leads is an important addition to our portfolio and provides an entry point into the monofocal Plus segment. We intend to phase these launches deliberately as we continue to prioritize the scale-up of PanOptix Pro in international markets and prepare for the introduction of Vivity Pro.

Expected to launch with KOLs late this year, Vivity Pro builds on the success of the Vivity platform through a next-generation lens that is designed to extend the range of vision and enhances near performance. The new lens is designed to deliver up to one additional line of near vision while maintaining Vivity's strong distance and intermediate vision performance and its clinically proven low visual disturbance profile.

Importantly, [ True Plus ] and Vivity Pro represent only the next wave of innovation from our IOL portfolio. Our pipeline remains robust, and we expect to continue to deliver a steady cadence of new technologies and product enhancements in the years ahead.

Beyond cataract surgery, we continue to see enthusiasm from Valeda, our first-of-its-kind treatment for dry AMD. This technology uses three specific wavelengths of light to improve mitochondrial activity in retinal health. Importantly, clinical studies showed that more than 80% of patients maintained or improved their vision at approximately 2 years. Adoption accelerated during the quarter as we expanded the installed base and increased utilization across existing accounts. We were also encouraged by continued progress with the Medicare administrative contractors, which we believe will further support access to this therapy.

Based on current adoption trends, clinical experience and reimbursement progress, we continue to believe the platform has the potential to generate sales of between $100 million and $150 million over time.

Turning to contact lenses. Innovation continues to drive growth across our portfolio. The overall contact lens market remained healthy in the second quarter, providing a supportive backdrop for continued category expansion. Against that backdrop, we achieved a record global market share position supported by strong U.S. share gains and continued momentum across both dailies and reusables.

In Dailies [ Total1 ] and [ PRECISION1 ] remain important growth drivers and continue to gain share in one of the largest, fastest-growing market segments. We're also encouraged by the momentum in reusables. Total30 continues to perform well across the family, supported by the recent launch of Total30 multifocal for astigmatism, which expands our reach into an attractive and underserved segment. In addition, [ PRECISION7 ] sales have more than doubled versus the prior year, reflecting strong adoption of the weekly replacement category and providing another meaningful avenue for growth.

With multiple platforms across dailies and reusables, we believe we are well positioned to continue capturing share and pursuing attractive growth opportunities across the contact lens market.

And finally, in ocular health, execution remains strong across both our prescription and consumer dry eye franchises. Tryptyr, our novel prescription treatment for dry eye disease continues to gain momentum. Market Access now includes nearly 2/3 of commercial lives and more than 20% of Medicare lives, including the recent addition of Humana Medicare Part D. Less than a year post launch, Tryptyr has already captured approximately 5% market share reflecting strong early adoption in a market that's growing double digits.

On the OTC side, Systane continues to perform well, delivering another quarter of double-digit growth and share gains, further strengthening its leadership position in artificial tears. Given the strength of the franchise and the opportunities we see ahead, we believe Systane remains well positioned on this path towards becoming a $1 billion brand in the coming years.

As we look ahead, we see a robust pipeline of growth catalysts across both our Surgical and our Vision Care franchises. Beyond the positive contributions from our recent launches, we're preparing for the introductions of Vivity Pro, as well as the planned launch of our new Eye [ Whitener ], among others. In addition, I'm pleased to report that we recently made our first sale of Unity M, our new microscope and are beginning to ramp up our commercialization efforts. Together, these near-term opportunities are expected to support steady future growth across our portfolio and further strengthen our market positions.

We're also excited about the potential of our recently announced collaboration with RxSight. While still in the early stages, the collaboration combines Alcon's expertise in advanced optics and lens architecture with RxSight's adjustability platform. Together, we aim to develop a next-generation lens designed specifically for the platform, with the potential to further enhance the visual performance and refractive precision.

Before discussing the individual markets is worth highlighting the attractiveness of Alcon's portfolio. We participate across a variety of surgical and vision care markets, including cataract, vitreoretinal, refractive contact lenses, ocular health and dry eye, among others. Each of these markets is supported by unique growth drivers ranging from procedural growth to innovation, premiumization and increasing adoption of advanced technologies. Taken together, we estimate these aggregated markets grew approximately 3% to 4% in the second quarter.

Within Cataract, we estimate global procedure volumes grew low single digits in the quarter, led by strength in international, while the U.S. was flat. This was a sequential improvement compared to the first quarter. Importantly, AT-IOL penetration increased by approximately 110 basis points globally and 180 basis points in the U.S. In contact lenses, we estimate the global market remained healthy and grew mid-single digits, led primarily by strength in the U.S. This was moderated by international markets where prices contributed less to growth.

In summary, our focus remains on disciplined execution of a steady flow of new product launches. Combined with our leading positions in a broad range of attractive eye care markets, we believe Alcon is well positioned to extend its leadership, capitalize on future growth opportunities and create long-term shareholder value. With that, I'll turn the call over to Tim, who will walk you through the financials.

Thanks, David. Beginning with the top line, our second quarter sales were $2.8 billion, up 7% versus prior year. In our surgical franchise, sales were up 7% year-over-year to $1.6 billion. Implantable sales were $466 million in the quarter, up 1% versus the prior year period. Within this, IOLs were up 2%, partially offset by lower sales in Surgical glaucoma.

As David mentioned, PanOptix Pro continued to perform well, growing nicely in the U.S. and Japan. Strong customer interest and continued commercial execution supported growth despite increased competitive activity.

In consumables, second quarter sales of $825 million were up 5%. This growth was driven by strong retro retinal market trends, healthy international cataract procedural volumes and favorable pricing and reflects softer U.S. cataract procedure volumes. For reference, 1 point of growth of the global cataract market including IOLs and consumables is worth approximately $10 million per quarter to Alcon, while 1 point of AT-IOL penetration is worth approximately $15 million.

In equipment, solid performance from our recent product launches including Unity, drove sales of $279 million, which were up 25% versus prior year. Unity adoption was strong throughout the quarter, underscoring the commercial traction we're seeing across markets.

Turning to Vision Care. Second quarter sales of $1.2 billion were up 7%. Contact lens sales were up 5% to $726 million, lapping a strong prior year period with 7% growth. Positive trends from our innovative product portfolio, including share gains and pricing were partially offset by declines in legacy products.

In ocular health, second quarter sales of $486 million were up 12% and as Tryptyr and Systane continue to drive meaningful growth in the category. Tryptyr continues to perform well with prescription demand growing steadily and high refill rates. We've made meaningful progress on market access, positioning us to increase investment behind the brand in the second half of the year. We believe the combination of improved access, growing awareness and expanded commercial efforts will support continued [ TRx ] growth while driving a more favorable payer mix over time.

Systane delivered another strong quarter with double-digit growth and remains a key contributor to ocular health. Growth was driven by continued share gains and strong momentum in our multi-dose preservative-free portfolio, which grew more than 40% during the quarter. Second quarter core gross margin was 64.7%, up 250 basis points year-over-year. This improvement reflected price increases and manufacturing efficiencies as well as $15 million in other revenue from a licensee. The prior year period also included higher inventory-related costs.

Moving to operating expenses. As noted on our first quarter call, we are investing behind new product launches, including Tryptyr, Unity and others, and we'll continue to prioritize investments to support near and long-term growth. Our results in core operating income was $574 million and 20.6% of sales, up 160 basis points versus the prior year on a constant currency basis. This improvement was driven by our strong revenue performance net of our targeted commercial investments and also benefited from the timing of the $15 million in other revenue that I referred to earlier.

Below the operating line, interest expense was $53 million during the quarter, broadly in line with the prior year. Turning to taxes. Our core effective tax rate was 20.7% in the second quarter which was broadly in line with our guidance. Finally, core diluted earnings were $0.84 per share in the quarter, up 9% versus prior year.

Turning to cash. We generated $693 million of free cash flow in the first half of the year, allowing us to return $538 million to shareholders through dividends and share repurchases over the same period.

Moving to our outlook for 2026. We continue to assume that aggregate eye care markets grow 3% to 4% for the year and exchange rates as of the end of July hold through year-end. We also assume the tariffs currently applicable to Alcon's business remain in effect through year-end, including U.S. import tariff rates of approximately 10% to 12.5%. This guidance also reflects an anticipated refund of approximately $60 million from the U.S. government in the third quarter, of which we plan to reinvest approximately 2/3 back into the business.

Based on these assumptions and our performance through the first half of the year, our guidance is as follows. We continue to expect constant currency sales growth of between 5% and 7%. For the second half of the year, we expect tougher equipment comparisons, partially offset by easier comparisons in contact lenses, particularly in the fourth quarter. We also expect launch contributions from Tryptyr, Valeda, Unity CS as well as PanOptix Pro in Europe to become more meaningful as we move through the balance of the year.

Turning to profitability. We are increasing our expected core operating margin expansion to a range of 90 to 190 basis points in constant currency, reflecting the strong first half operating performance. Gross margin will also benefit from the tariff refund of approximately $60 million. On SG&A, given the favorable response to our recent launches, we intend to reinvest a portion of the tariff refund to support growth. As such, we expect SG&A spending for the second half to be consistent with last year on a percentage of sales basis.

Lastly, we're increasing our core diluted EPS growth outlook to a range of 12% and to 15% in constant currency. This reflects our strong operational performance as well as the benefit from our share repurchase program.

In summary, we delivered another quarter of solid financial results. Sales grew 7%, earnings increased meaningfully, free cash flow remained healthy and we returned significant capital to shareholders. These results reflect the strength of our portfolio, the impact of recent launches and the dedication of more than 25,000 associates around the world. And with that, I'll turn it back to David.

Thanks, Tim. In closing, our recent launches are performing well. Our pipeline continues to progress, and we remain focused on executing against the opportunities in front of us. While we continue to operate in an evolving environment, we believe our portfolio innovation pipeline and disciplined execution position Alcon well for long-term growth. With that, operator, please open the line for questions.

[Operator Instructions] And our first question is from the line of Anthony Petrone with Mizuho Group.

Congratulations on the nice print here. I'll have one on equipment and one on IOLs.

Dave, just on equipment here, obviously, mid-20s, you're holding better priced than you had expected at the onset of the launch and the funnel looks good in the back half. Maybe -- you gave some data at the beginning of this cycle, 30,000 pieces of equipment by the end of this year, what percent will have upgraded to Unity VCS? And what will the cycle look like over the next 2 to 3 years, let's say? And then I'll have a follow-up on IOL.

Yes, Anthony, we have been pleased with the response that we've gotten out of VCS in particular. You that the ASPs have been solid, and I think that reflects customers' view that this is really a step change in what they can do in retina in particular, but also cataract. We are on track with our funnel. We are on track with what we've given to you in the past in terms of the movement of the base of product. We've actually gained some share in this market as well. So I think all things are kind of green light on the unit movement.

I think what I would tell you is that there certainly isn't a change in the way in which we thought about it. Over the 10 years, I'd divide it by 10, thousand at a little more upfront, take a little way on the back end, and then you're going to be kind of close to where we've always expected this to be. So in these first couple of years of launch, we'll do a little better, it will settle down a little bit and then will replace on a kind of a steady replacement basis. So that's probably the main thing. You got an IOL question, too.

Yes. Well, a little bit of improvement sequentially. PanOptix Pro is helping, but it's still lower than the historical growth rate. Maybe just the outlook on IOLs as it relates to surgeon capacity in the U.S. And where you think that business could trend to, let's say, in the 2027 time frame?

Sure. Yes. I think -- look, we're very pleased with PanOptix Pro. I mean the response to that product has been outstanding. I think we made a comment around 90% of our folks that used to use PanOptix are now using Pro, and that probably tells you all you need to know that's inside of a year. So the use of light in that lens is superior to just about everything out there. We're getting, I think, 93% of the light being used in productive ways, which creates less scatter. That has made a big difference.

And I think it also shrinks the market for things like Vivity penetration. We know Vivity is a good lens. We also know there's competitors to it. And again, we are chasing a new Vivity, which does even more than what Vivity did on its own. So again, we're looking for another line of vision at near out of Vivity. So we get that done. I think, again, we continue to push our lenses out in front of competitive lenses. And so we're very confident in our long-term share stabilization. I would say that we're getting towards the end of it, but we're not there. It's still a very competitive market out there. But we've seen now, I think in most of the rest of the world and in the U.S., pretty much the most difficult competitors we're going to face. And I feel pretty good about where we're headed.

So I think the only other thing I'd tell you is that relative to penetration and movement in implantables themselves, penetration matters a lot, and we're seeing a very positive trend right now in the United States. I think this is the second quarter in a row, we've seen more than 150 basis points in the U.S. move up. And I do think that for some surgeons doing more ATI wells is a very productive thing. They're kind of getting used to it. They're getting better at the diagnostics. And there's just a lot of promotion out there on this. So I think that's moving the market and that does help. And as we kind of settle out on share, and I think we will settle out on share, we benefit a lot from penetration. So I'd just keep that in mind.

Next question is from the line of Brett Fishbin with KeyBanc.

I'll just ask two, first on the tariff refund and reinvestment plans. I was just curious if you could give a little bit more color on where your driving that incremental investment into the business in 2H? And should we think of this step-up in investment activity as a little bit more onetime in nature, given the fact that it's tied to the tariff refund?

Yes, sure. Great question. So we are reinvesting back in the business. I would say that now that we have a better view on the new product launches, we're going to double down in a couple of the areas that we think that there's more opportunity.

We're also going to look at other OTC products, if you think about the ocular health business. We may have some opportunities there. But we're going to put the money to work. It's $40 million is relatively small if you look at our total marketing and sales spend. But nonetheless, we're going to put the money to work and some of that will drive some near-term revenue and then some of it will obviously drive long-term revenue.

All right. And then second question, just on the contact lens market. I think you might have used the word healthy describing the market in 2Q. So curious if there's any signals that things are picking up a little bit maybe closer to the mid-single digit or mid- to high end of the typical 4% to 6% range after what we viewed as some softer quarters.

Yes. I mean I think the Vision Care business on contact lenses was a bit mixed. U.S. had a very strong quarter. I think it was like 8%. International was more like 3%. So in aggregate, it was 6%. I would say 6% is very healthy globally. So what you're really seeing is the U.S. is bouncing some price. I think it's lapping two price increases. International is much more difficult to get price. So you're seeing much more mix there. So I would just say that in aggregate, it looks pretty normal in that 4% to 6% range. It's really on the high end of it.

The next question is from the line of Ryan Zimmerman with U.S. Bancorp.

With the write-down of [ PowerVision ] and the RxSight collaboration agreement, David, I want to get your thoughts on kind of what you hope to achieve now that you've made that decision to go purely an adjustable route versus maybe an adjustable and accommodative route? And how you think when it is available, how do you think it impacts your core franchise? And then I have a follow-up question.

Well, I would maybe change the premise a little bit. I don't think we've made a decision to do one or the other. I think we're -- we still think that adjustable accommodating is the best long-term answer we just couldn't get there with this particular technology.

So I think I would describe these as two different ideas. RxSight really is an idea about how do we take a step forward in tunability with an optic that we already have or one that we could design for it. And that's -- I would call that an intermediate step towards where I think we need to go, which is long term into an accommodating lens.

And so [ PowerVision ] was always a big idea. We learned a ton from it. We've got a lot of really great science and a lot of great scientists who I think have a better informed probably the world's best informed division of how it is that we could get to an accommodating lens. I just don't know that we have the technology yet. But we've probably been through I would say, a number of accommodating ideas over the last 4 or 5 years, including [ PowerVision ]. And we'll continue to look at it. There's still more out there. Somebody is going to figure this out. I suspect it will be us but we're watching very carefully. So I would think about accommodating and tunable as the endgame. It's just further out than we wish it was.

Helpful. And turning to surgical glaucoma. I mean, we've seen the changes you've made in [ Hydros ] over the last year or so continues to be a drag on the business. you've done a ton in terms of pharmaceuticals and glaucoma. So what are your thoughts at this point? And what are your plans potentially with surgical glaucoma, what do you want to do? Do you feel like you still need to be in that market? Just be good to kind of get your high-level thoughts there, David.

Well, I mean, obviously, the reimbursement arena there has changed the dynamic quite substantially. And I think we're obviously working on that dynamic, but I don't know that, that changes anytime soon. So I wouldn't count on that.

I think from our point of view, [ Hydro skill ] is the most effective implant out there, but it is used by a select group of folks who really understand that point of view. And so I think what we believe is that there are other parts of the glaucoma therapy in the algorithm of treatment that probably have more accessibility. So think about [ Voyager ]. We think that's a really good idea. We think everybody should be starting with [ SLT ]. I think that's a broadly accepted idea. I think we are excited about what we could do there. Again, [ Voyager ] has moved a little slower than we had hoped for because of the kind of frequency of the people use their own current Alcon leaders. But as people really understand that product, I think we're going to get better and better traction on it.

So we're opportunistic there. I think there are other technologies out there as well that we keep an eye on that I think could do some things in glaucoma interventions that are also maybe a little bit more on the horizon. But in terms of stents, stenting generally, I think, is pretty stable right now and is likely to kind of stay that way.

The next question is from the line of Graham Doyle with UBS.

Just a couple from me. Just firstly, on the top line guide, Tim, the 5% to 7%, is it still reasonable to think the 7% is plausible and on a reasonable case rather than best case for the full year? Obviously, the comps get a bit tougher. So just to get your thoughts on where you see that in terms of probability.

And then it's a good point on IOL. So another way of looking at this is when do you think you'll have PanOptix Pro, Vivity Pro and [ True Plus ] approved in U.S. and Europe, just in terms of competitive dynamics, it would be good to get that sense.

Yes, Graham, thanks for the question. Listen, I'll leave it to you as to what you think is plausible. We give a range of 5% to 7%. Historically, we have been kind of a midpoint type of company is what we try to say.

At the beginning of the year we thought -- we stated that the revenue would be relatively level loaded. I think that's still going to be the case. I mean we get a lot of questions on the comps to your point. And the way I'd think about it, just to give you a little more color, there will be a tougher comp in equipment with Unity VCS for sure, right, because we launched that sort of at the beginning of the second half of last year.

But -- and then when you look at some of the other launches, like Unity CS, as an example, that was launched this year. So we should get some benefit there. If you look at trip tier, that's accelerating. We continue to improve our market access. So that should be helpful. And Valeda continues to do well. So we didn't really kick that off until, call it, mid-second quarter of last year. So we do feel like the new product launches will carry us through. And that 5% to 7% guide, again, that assumes aggregate markets grow at 3% to 4%.

Yes. Graham, on the approvable front, PanOptix Pro is approved now in both U.S. and Europe. We are just launching it. I think we launched it in June in Europe, and we're still getting it out in major markets. So look for the back half to be a meaningful impact on Europe.

And then Vivity Pro, I would expect that late this year maybe early next. It just kind of depends. Neither the U.S. or Europe have that yet, but it's been submitted to both.

And on True Plus, both the U.S. and CE Mark, we have CE Mark approval. We just received it, I think, recently. But again, I would be careful with that one because we're managing that rollout carefully to not interfere with the PanOptix Pro and Vivity Pro. We'll -- we've got a lot to do right now, which is kind of exciting. But we're going to manage all three of those kind of carefully to prioritize Vivity and PanOptix.

The next question is from the line of Veronika Dubajova with Citi.

I have two. One is on equipment and the second one is on the gross margin. Just on equipment, Tim David, just curious if you could provide a little bit more color as to what the contribution from Valeda was in the quarter. and kind of to what extent it's actually visibly driving an acceleration in the equipment growth rate. I've not heard you guys articulate the peak sales potential before today. So it'd be really good to understand kind of what's on me there. And how much of a contributor is already being?

And then my second question is, Tim, for you. Just on the gross margins, really, really strong improvement year-on-year and also sequentially appreciate, obviously, the color on Q2 margins last year being very depressed. But just curious if you kind of feel the 64-ish level once we strip out the licensing income as a reasonable proxy for the remainder of the year? Or are there other things we have to be bear in mind as we look into the back half of the year? Obviously, I'm excluding the tariff refund because we all can do the math on that.

Yes. Veronika, on Valeda, we haven't really called out individual products. As you know, we tend not to do that. I would say that it contributed several points of growth in the quarter. But we're doing really well with a number of pieces of equipment.

Obviously, the main driver in equipment right now is Unity, CS and VCS. And I think over time, we think that's -- as we had -- we were trying to make sure we gave everybody some sense of what this product actually is. And so I think [ $100 million to $150 million ] was a nice number that we can kind of get to in that, let's call it, 3- to 5-year frame. So maybe think about it as a typical arc shape new product curve.

Yes. And as far as the gross margin goes, listen, we exited last year at roughly 63%. I'd say the first half of this year is probably in the 64% range, the tariff is a onetime benefit. So I would strip that out, but I would think that we're going to have probably a higher gross margin in Q3 given the -- assuming that the tariffs come in, and then that will probably dip down in Q4 to give you kind of a normalized rate.

The next question is from the line of David Saxon with Needham & Company.

Maybe two product-related questions. First on contact lenses. Maybe if you could peel back the onion are, like how much of contact lens growth was price versus volume? And then any way to break out the legacy decline -- legacy volume decline versus the core volume growth and how you're just thinking about the market's ability to take price in the back half and into '27?

Let me try and get at that a little bit. Price was about 4% in Q2. I think of the five, it was significant. I think our view on price in the U.S. in particular was that we were wrapping around, I think, two price increases. So we had a couple there that were meaningful. The important part of the U.S., I think, was that the share performance was outstanding. I think we had a almost 1.5 share point gain. And that is, I think, largely a function of continued promotion around our Dailies [ Total1 ], our [ P1 ] in categories that are growing very nicely.

We continue to see legacy value decline. We've had a very large legacy business, and it's always been a challenge for us to kind of manage that decline against that growth. And ultimately, as that goes away, you'll see more and more growth come to the surface. But I do think that was meaningful, and I would hesitate to answer your question directly because I'm not clear on exactly what that contribution was.

However, I would say broadly that what we're excited about is the breadth of what we've got going on. We've got reusables in categories now like P7 that creates a new avenue for growth. We've got data in multifocal astigmatic lenses which I think makes [ T30 ] a very unique lens and completes that family.

We've got a product in every category in almost every need. And I think we are, as a consequence of that, very effective on the ground, growing share. So I think we're in a pretty good place. As I said to you earlier, I think the U.S. market looked healthy. international, they have pretty good but maybe a little softer than normal, but I think it will be fine.

Okay. That was helpful. And then just on Tryptyr, any way to qualitatively talk about the contribution, either, I guess, sequentially. And then I know you've said IQVIA is not that accurate. But directionally, it looks like trends have been kind of picking up. So going from here, like how should we think about Tryptyr kind of trajectory going forward?

Yes. I think the one thing I'm going to look to -- Tryptyr, think is going into IQVIA July 10. So you can actually get the data now. So we -- I think we're giving them the data that we've got from the third party that we use. So I think they should have relatively accurate data for you to use on this one. Again, I think we're excited about it because of the share movement and also the refill rates. I think probably the thing that we were probably interested in, and we got a lot of feedback on was how will the patients like this and the refill rates seem to indicate that patients have -- are getting a great relief out of this and are happy to refill it. So we're very positive about where Tryptyr is headed.

The next question is from the line of Larry Biegelsen with Wells Fargo.

David, I haven't seen -- heard any update on Unity [ DX ] in a while. Actually, I think you got it cleared in the U.S. a while ago, and that seemed like a good opportunity for you. So just love to hear an update on the [ DX ] timeline, and then I have one follow-up.

Yes, you're right, Larry. We had an approval on [ DX ]. I think early -- maybe this year or maybe it was a little bit last year. We've had the product for a while. We believe that it's a great product. It was not just -- it was not enough manufacturable, a scalable manufactural condition when we got it. We've been working very diligently to make this a product that will have the kind of durability that our customers expect. And that means it isn't going to break inside of a year. It really has got reusable pieces, it's serviceable on the ground.

All of that stuff that is, I'll call it, made for manufacturability, that stuff was really not done in a way that we were comfortable with to launch it. So we've been working backwards from what is an excellent design and an excellent technology. It's hyper parallel OCT, which I think is going to be really great for pre-op cataract use.

That should be out later this year, I would say, pilot form. I think we've got a number of folks that we're going to put it in play with, along with our [ ADI ] platform. We've got a lot going on with the ecosystem around the microscope, which again we just talked about today for the first time, our new microscope is also approved, and we just sold one. We're not going to sell a ton of them this year. but we are going to get a few of them out there with [ DX ] and with Unity VCS. So the Unity platform wrapped around with the [ ADI ] system is now kind of complete. And as we learn through that, and it's going to take us a while I think what people are going to see is how exciting it is to work in a next century kind of idea, which is digitizing the whole of the ecosystem and really seeing what that can do in the OR to speed things up and create new efficiencies very exciting stuff, and [ DX ] plays a big role in that. I would expect revenue from that middle of next year kind of thing.

That's helpful. And just 1 follow-up on the Valeda. I mean the $100 million, $150 million peak sales, are you feeling better about like the high end there? And I think we bought the contribution was about $10 million to $15 million a year -- just where is that -- what's the run rate now?

Yes. We like the 100 to 150 range. I mean it's a brand-new product, and we've been selling it now for all of about months. So I think we're comfortable with that range. We have been very pleased with the uptake. And I think it makes sense, right? I mean there's very little for these patients that really improves vision. And so if you can improve them by a line and you can do that in a very kind of noninvasive way, it is an exciting idea.

So I think we'll see where this takes off. I think it's probably too early to give much more color than we think 3 to 5 years is peak revenue and 100, 150 seems like the trajectory it's on.

The next question is from the line of Steven Lichtman with William Blair.

David, coming back to end market health, are there any changes that you're seeing in U.S. consumer sentiment on the IOL side or within contact lenses. You mentioned premium IOL up year-over-year, so I assume that's okay. But any color on anything we should be keeping an eye on for the higher-end products in either category.

Not really. I mean we've been surprised, I think, -- both in terms of positive, we've always known that the eye care business was relatively independent of consumer confidence. But the contact lens business sometimes I think historically has had some stall out and trade up. So if you compare of reusable lenses and you can wait and you can put those dailies in on some other month. That's probably been the only sensitivity that we've seen.

We saw mostly trade up internationally that drove the market. And then in the U.S., we saw really steady trade-up and actual price went up meaningfully in the United States. So on the content lens business, I would say, relatively normal.

And on IOLs, I think you'd have to say, particularly in the U.S., with the penetration rate up 180 basis points or whatever it was, it's really -- we've said this for a long time, I mean this is really a the peak on the penetration should be somewhere in the high 30s, and we're still down in the 20s. So I think there's plenty of room to grow. We think consumers will pay for this. It's a great value long term, and I think surgeons know that.

That's helpful. And then, Tim, just following up some moving parts with operating expenses this year, including the reinvestment you talked about today from tariffs. Where does the new cost efficiency program stand that you talked about heading into the year. Are you still expecting $50 million in savings and $150 million in charges associated with that program overall?

Yes, we feel really good about it. In fact, a majority of the actions have already been taken. So we feel good about the $100 million run rate of $50 million this year. I would say a vast majority of that just due to the timing of the exits will occur in the second half of the year. So that's all on track, and the $150 million looks good from what we see so far.

The next question is from the line of Young Li with Jefferies.

Can I maybe double-click on the strong Unity upgrade and adoption a little bit and a little bit more than a year since the launch. I wanted to here are some of the key drivers for this adoption? Is it mostly converting older equipment? Is it the efficiency benefit, are Unity accounts experiencing, I guess, more procedures and shorter wait list from these efficiencies?

Young, yes, you've got most of it right there. I mean the big idea here has been conversion on retina procedures in the near frame. I mean in the first year, we spent a lot of time on the retina guys because it was a much different procedure than what we do with Constellation. So we changed almost everything. We changed the cut speed we changed the entry system. We changed the gauge of the instrumentation. We changed the fluidics. And as a consequence, we also changed the speed and the safety of what was going on. It's much safer.

And it's also -- we can -- if you were doing four or five vitrectomies in a day, you could probably do another one. That matters a lot. I mean, you're talking about a saving kind of 20% to 30% in time that effect when we got kind of people really wrapped their heads around the retina benefit that we had mattered a lot. And I think that's been a real positive halo going forward. In fact, I think that accounts for a lot of the reasons we've gotten such a nice mix right now of more VCS probably than we expected. CS is coming up the curve, but people are also electing to buy VCS because it's handy. And particularly in the international markets where ORs are shared by the retina folks and the cataract guys, you don't have to move one machine over, pull the other one in. It's just a better buy. So if you're in the market for it, I think it's very plausible and efficient, I think, to buy this one machine.

On the cataract side, I think equal story, same story, really, it's just different in the cancer already today is a very efficient surgery, but what you're seeing is the elegance of [ 40 Peco ]. And when you see the nucleus, just kind of stay in the center of the eye and not move, not get shoved away from the tip, and you see how easily the cut moves and how elegant the fluid stays in place. It's a really -- that's a beautiful thing to watch. And surgeons feel super comfortable with it because it looks and feels safer than just about anything they can be doing. And yet it's a good bit faster.

So again, if you could imagine doing 20 cataracts at a day, you probably do 21. You guys can do the math on all those. And I think we do the math for everybody who says, "Look, how do I pay for this?" And takes not take very long if you schedule correctly, so we're certainly replacing older machines that are going out of warranty and out of service. And we'll continue to do that, but we're also getting some modest share. We've got a lot of share. So it's -- I wouldn't say we're getting a huge much of new share. But we are very competitive with this machine. And again, it's doing what we hoped it would do.

Great. Very helpful. And maybe one more just on the RxSight partnership. Why do you think the shares have been kind of hovering around the 10% penetration rate in the U.S. what are some of the ways and opportunities that Alcon can potentially introduce down the line to increase this adjustable category penetration.

I redirect that question to [indiscernible] is over at RxSight. He's got the new position over there. He's a terrific guy. I think he'll do great there, and he's going to have a much better answer than I'll have for that one. So let me send it that way for you.

The next question is from the line of Jeff Johnson with Baird.

David, I just wanted to follow up on your comments. It sounds like you have great visibility in the second half here on the Unity order book that's encouraging number in it sounds like, which is good. How do we think about the size of the backlog? Obviously, 2Q delivered above, I think, what most of us were thinking about, but as you look forward, is the order book bigger, smaller today than it was maybe 6 months ago? And how to think about that backlog going into 2027? And then I have one follow-up. .

I think we're just working through the demand that we see out there. So I'm not sure it's bigger than it was in the first half. I think there was a fairly large bolus of people waiting actually as we kind of anticipated the product and talked about it before it was launched. So we've worked our way through that part of it. I think now it's -- I would just describe it as relatively uniform opportunity and uniform around the world. I think we're in every market now. We're with CS and VCS. We've got demo units everywhere. We're demoing them every day. And we've got a lot of good programs out there to make it easy for people to try and use and buy. So I would just call this business as usual at this point, and we feel pretty good about it.

Fair enough. Tim, maybe a guidance question for you. Just on the EPS guidance change. You raised a few pennies at the midpoint there on a constant currency basis. I think about the tariff refund, obviously, you're reinvesting 2/3 of that, so we can do the math on that. Share count now expected to be lower. You have been buying back aggressively there. that licensing fee in 2Q helps maybe a little bit on the year. But just help us maybe bridge the change in the EPS guidance change that you made today. Do you feel fundamentally kind of on the core underlying operational side of the business that, that has held in steady, and the EPS guidance change was just for those other factors? Or did those other factors outweigh maybe a little bit the size of the change and the core profitability may be coming down a little bit as you maybe reinvest in some of these product launches or anything like that? Just help us bridge kind of that change.

No. We feel pretty good about the investments and the underlying core operating margin. I think you have most of the components. I mean if you do the math on the buyback and the refund, that will pretty much get you there. I throw in the onetimer as well. But again, every year, we have onetimer. So that one, I'd be a little careful with. But for sure, the refund and the share buyback is flown through. But overall, we think that we continue to manage the cost with a lot of discipline we're making the appropriate trade-offs. Again, as we get that revenue growth, that gives you a little bit more operating leverage. So the fundamentals seem to be working right now.

Our next question is from the line of Tom Stephan with Stifel.

First one for me on Implantables Pro doing well. But growth in the segment a little subdued again this quarter against an easy comp. And as we think about competition accelerating from here, you're lapping the U.S. Pro contribution, [ China Vivity ] maybe delayed a bit. So David, maybe for you. Can you help us think about 2H growth in implantables. And then with Vivity Pro, what's your confidence 2027 implantables can maybe get back to market growth? And then I'll have a follow-up.

Well, I mean, the implantables growth is a function of three different things, right? It's -- if you look at our share all in, we've actually -- we were flat in share. So we were already stable. The problem is it was in it wasn't AT-IOLs that we were flat in and we were losing in AT-IOLs and gaining in monofocal.

So I think there's three pieces. One is market growth, one is penetration, one is share. And I think you got to take those three kind of independently. I think market growth in the U.S. has been below what we would normally expect. But again, we have forecasted that most of the year. So I don't think that was a surprise to us. I think on that one, we'll have to see where we sit next year. I think as we get into next year, we'll take a position on that. But for now, we don't anticipate any change for the rest of the year in the U.S.

I think the other one that is a little bit more positive is the penetration. And that was in the U.S., 180 basis points around the world, 110. That's probably 50 basis points higher than the we think the historical average has been. So people with promotion have obviously decided to use more [ IOLs ]. We like that move because I think, as Tim said, for 1 point of market growth for us affects us about $10 million, but a [ panopenetration ] is about $15 million. So we if you had to trade one of those for the other, you'd trade it that way.

Now we'll see where penetration goes, but we've had a couple of quarters now that look pretty good. I'd be generally on the positive side of that number.

And then share is a bit of a wildcard. I think this is a very competitive market, and people are trying lenses and the surgeons like to try lenses, and there's some good ones out there. So I think what we'll see is continued trial for the new lenses that come in. But I think the difference between today and maybe 2 years ago is, I think everybody knows we've got a steady lens cadence now of advances against the market-leading lenses, and those are very positive. So I would say PanOptix Pro is a significant improvement on PanOptix. It's doing really well for trifocal. I think it actually gained share if we're looking at the trifocal space.

Vivity has got a little bit of a gap here before we get to Vivity Pro. But Vivity Pro, I think, is going to find its way into a much better near vision than anything else out there in that space. And again, I think that's what people are looking for. They're looking for a better use of visual of the amount of light. So I think that will play well.

And then we've got a monofocal Plus for those folks who really are looking for a better monofocal and that market in Europe has been fairly positive.

So we got a little bit of everything for everybody. And I think going forward, I don't know that anybody can match what we've got on a cadence level going forward after that. So we're excited about where we're headed, but I would give ourselves some time here to weather the storm of many people entering this market. So be patient with it, but I think it's head of the right direction.

Got it. And then my follow-up, maybe just on kind of constant currency growth ex equipment. When I look at that number, I'm arriving at, I think, around 5% constant currency in the first half. With the 2-year CAGR closer to 4%. So David, I'll stick with you. How do we think about this 4% to 5% ex equipment growth moving forward, particularly in 2027, when you really fully lap Unity and especially relative to your 6% to 8% long-term target that you laid out last year, It'd be great if you can talk about that ex equipment growth in the 4% to 5% range, maybe reflect on the [ LRP ]? And then I guess the heart of my question would be like, why won't 2027 sales growth decelerate from 2026 levels as you lap Unity?

Well, I mean, the easy answer is new product flow. So just hanging there. We've got lots coming. So you don't get a full year of Tryptyr, for example. We're still fighting the reimbursement battle on Tryptyr. We've got another OTC product coming. We've got two new pieces of equipment. We've got another couple of IOLs. We've got Valeda, which is continuing to grow. We kind of -- I would just hang tight until we get to February. I will lay it out for you. But I think what you're going to hear is we've got good transition from old products to new products. All of them were getting better ASPs getting good lift year-on-year and then we got additional new products coming along.

The next question is from the line of Susannah Ludwig with Bernstein.

I have two, please. I guess, first one is ocular health system has been a key contributor to growth there with some multiple multi-dose preservative-free key driver. I guess could you share roughly what percent of the Systane business is now that multi-dose preservative-free? And how sustainable you see the broader sustained growth is?

And then after that, it would just be helpful to have a little bit more in depth on the U.S. cataract market conditions and whether this is just still surge in capacity or if there's anything else going on there?

On ocular health, we're scrambling to funds and numbers. On ocular health, I think I'll just tell you that this roughly 15% of Ocular health is the [indiscernible] is that right, guys?

Going on.

They're working on it. So Systane has been a double-digit grower for us...

15%.

And 15% is about the [ MDPF ] level. So I think we got that for -- the -- that category for us has been exciting. I would say that what you should see in the back half is also some increased promotion around this area. It seems like the more we talk about [ MDPF ], the better it goes, and I think the market wants it.

I'll just remind people, too, that the international markets are dominantly [ MDPF ], and the U.S. market is not, it's moving that way directionally, but we had known that for some time, and that's really the trend we're playing is the rest of world has been on the multi-dose preservative-free bandwagon for a while. We're just getting on there in the U.S. So it's a good opportunity for us.

On the other question you had was on the market. And if you're talking about the cataract market, I'll just make this point, the cataract market is certainly part of our business. But we talk about aggregate markets as growing 3% to 4% in the quarter, and that was pretty much where we were. It's certainly what we forecasted. Most of our markets who are growing in the mid-single digits. So if you take artificial tiers like we were talking or dry [ IRX ] or contact lenses or retina procedures or surgical equipment, all that stuff basically we've had pretty solid mid-single-digit growth, which is -- or higher.

What we continue to believe though is the U.S. is going to remain relatively flat to slightly up in the cataract market. And that's largely because what's going on is surgeons are incorporating optometrists and other professionals into their workflows to get them more surgical time. And as we do that, it's going to take us some time to do that, but that allows them then to find more time for more cataracts because the demand is certainly there. It is just a matter of retiring -- too many surgeons retiring and too many young folks take their places that aren't as productive as the ones retiring.

So that will change over time, but we see it pretty much as kind of these trends take some time to manage. They should recover to their historical rates at some point. We're not calling that this year. we'll update it obviously for next year when we get there. But the general trend underneath that for IOLs, as I just mentioned, was that AT-IOLs are up. International markets are healthy. And I think we feel pretty good about where we're doing with our product lines.

And I can maybe sneak in just a quick follow-up. Do you think the increase in AT-IOL adoption is having any effect on volumes, just given that's more time intensive?

Well, it could, but it's -- we -- actually, in our world, economically, you trade -- you make that trade, right? If you traded one monofocal surgery for one AT-IOL surgery Alcon would make more money as with most people. So you could actually make that trade successfully on an economic basis, even though that's not great for patients.

So I would say that maybe it has some effect, but I think really especially with the new equipment and certainly one of the reasons we're working on Unity [ DX ] is to make this a faster work up and make it an easier work up for people in a more automated digitized one. As we get down that path, I think these things will kind of equilibrate in terms of time spent. Certainly by the surgeon. But remember that a lot of the work up to needs to be moved to pair professionals, people around the surgeon who can do that work for them and then check it obviously do a good job with it. But that's what the -- I think that's the most productive way most practices can run.

Our final question is from the line of Issie Kirby with Redburn.

I wanted to ask about the either product that's been mentioned a couple of times. I'm not sure if you've given any time line around that, that would be helpful to know if you have. And then what's going to differentiate this product versus competitors in the sales given this to be quite a meaningful category for you guys?

Yes. We really haven't spent much time on it, but I would say that we're excited about it. It's just -- it's a next year product. So we should have an approval late this year. When we do have an approval, we'll look at the label and we obviously have an idea as to why this is better. We think it will be better than the market-leading competitor. But until we get our labeling, we'll need to keep that a dark secret and we'll relay it to you next time, hopefully.

Thank you. At this time, we've reached the end of our question-and-answer session. I'll hand the floor back to Dan Cravens for closing comments.

Great. Thanks, everybody, and thanks for joining us again this morning. If you have any follow-up questions, certainly reach out to Richard Born or myself and for media questions, reach out to our [ ORBCOMM ] team. Thanks, and have a great rest of your day.

Ladies and gentlemen, thank you for your participation. This concludes today's teleconference. You may disconnect your lines at this time, and have a wonderful day.

Greetings. Welcome to Alcon's First Quarter 2026 earnings call. [Operator Instructions] 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 of Investor Relations. Thank you. You may now begin.

Welcome to Alcon's First Quarter 2026 Earnings Conference Call. Yesterday, we issued our press release, Interim financial report and earnings presentation. All of 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 Stonesifer, 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. 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 inter 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. 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&A.

Before I turn the call over, I'd like to share that Alan Trang 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 Alen's replacement in the near future. With that, I'll turn the call over to our CEO, David Endicott.

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 teams 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. AT-IOLs, surgical equipment and consumables and contact lenses as well as dry eye. 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 innovation, starting with our Unity [indiscernible] device.

As we 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. In addition to previous top innovation awards, I'm pleased to report that Unity 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 stand-alone cataract system. It's designed to increase surgical throughput while maintaining precision and safety.

Unity CS has also been very well received. 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 all our installations with the quality, service and support they expect from Alcon. Now alternative plantable where our innovation is strengthening our competitive position and driving solid performance. In fact, in the U.S., we gained share in IOL category in the first quarter.

I'll start with PanOptix Pro, our latest trifocal IOL. Pro builds on the proven success of PanOptix, which is already the world's #1 most implanted trifocal with over 4 million 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 2 share points of growth in the PC-IOL 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 PanOptix Pro will bolster our presbyopia correcting Iowa leadership globally.

Building on PanOptix Pro momentum, we launched True Plus, our new enhanced monofocal IOL. 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 1 and having a toric modality is a meaningful advantage for competing in the astigmatism-correcting segment and growing our ATIL share.

Finally, we remain on track to launch an upgraded version of Vivity, our extended depth of focus well in early 2027. With more than 2 million 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.

Now I'll move to retina, where Valeda, our photo biomodulation device for intermediate dry AMD continues to see encouraging early adoption. Valeda 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 3 specific wavelengths of light to improve mitochondrial activity and retinal health, giving [indiscernible] a noninvasive treatment option for dry AMD that they've never had before.

Importantly, reimbursement is progressing with all but one Medicare administrative contractor covering Valeda, and we're actively engaging private payers and expanding physician education. Valeda complements Voyager by expanding our office-based procedures, enabling practices to operate more efficiently while offering patients convenient noninvasive options.

Now I'll move to contact lenses, where we continue to gain traction with our innovative reusable portfolio. More than half of new wearers started 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 30 of the industry's first and only monthly lens with water ingredient technology, which delivers exceptional comfort for 30 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 the stigmatism, a group that historically has had very few options. Initial feedback has been excellent with ECPs highlighting [indiscernible] Vision at all distances and long-lasting comfort. pAlongside Total 30, Precision7 broadens our portfolio with a high-quality accessible 1-week replacement lens. Designed for patients where daily disposables are not an option, Precision7 delivers a comfortable experience at an attractive price point while introducing a replacement schedule that many optometrists view as more intuitive than traditional 2-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. 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 SustainPro, our most advanced artificial tier. It's 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, Tryptyr continues to perform well. Doctors appreciate its rapid onset and novel mechanism of action. Importantly, Tryptyr is already capturing share with approximately 4 share points in just 8 months into the launch. 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 Tryptyr easier to prescribe. Tryptyr 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 a high whitening category as well as UnityM, our newest microscope and UnityDx, 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. 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&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.

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 our operational 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 that 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 health care systems adapt to increasing demand. However, for 2026, our guidance continues to assume that current trends continue. On the other hand, we estimate that global ATI well 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 220 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.

With that, I'll turn it over to Tim, who will walk you through the financials.

Thanks, David. Our first quarter sales of $2.7 billion were up 6% versus prior year. In our surgical franchise, revenue was up 6% year-over-year to $1.5 billion. Implantable sales were $438 million in the quarter, up 1% versus the prior year period. As David mentioned, PanOptix Pro growth 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 million were up 4%, which reflects softer than historical market conditions as well as price increases. .

In equipment, we saw another quarter of accelerating growth with sales of $253 million, up 23%, driven by strong momentum from Unity. Early adoption has been encouraging, and we're seeing Unity active and meaningful catalysts for equipment growth. Turning to Vision Care. First quarter sales of $1.2 billion were up 6%. The Contact lens sales were up 4% to $738 million. 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 million were up 10%, led by continued strength of our dry eye portfolio, including Tryptyr and sustain. Tryptyr continues to perform well with strong refill rates and broad prescriber enthusiasm. As access expands and awareness builds, we continue to expect Tryptyr to be a meaningful growth driver this year. And as David mentioned, our sustained family of eyedrops also had another great quarter with high single-digit growth. Within that portfolio, our multi-dose preservative-free formulations 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 lenses and R&D. First quarter interest expense was $52 million and other financial income and expense was a net benefit of $2 million. 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 million 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 million of incremental tariff-related charges in the first quarter, which is recognized in cost of sales.

Now moving to our outlook for the remainder of the year. Our outlook assumes that aggregate eye care markets grow 3% to 4% for the year at exchange rates as of the end of April hold through year-end, 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 million 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 5% and 7%. Turning to margin, we continue to expect core operating margin expansion of between 70 and 170 basis points. We expect the majority of this expansion to occur in the second half of the year. As in prior years, SG&A is expected to peak in the second quarter due to normal seasonality with incremental spend this year and 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 10% and 13%.

Moving on, I'm happy to announce that our Board has approved a new $1.5 billion share repurchase program to be executed over the next 3 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 investments in top line growth through R&D and disciplined bolt-on M&A. 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 our -- at our Annual General Meeting last week, our shareholders approved a dividend of $0.28 teams per share, which we expect to pay on or around May 7.

I'd like to thank our shareholders for their continued support. And 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, Tim. 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. 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.

[Operator Instructions]

And our first question today is from the line of Ryan Zimmerman with BTIG. .

Maybe to start with the implantable category growth for a minute here, David. If you look at the growth over the last 5 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 -- surgical glaucoma dragging down your growth, given what you're seeing in PanOptix Pro and the Clarion launch? And if you could kind of parse out what's China VBP versus glaucoma versus maybe more of your core AT-IOL adoption, I'd appreciate it. .

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 kind of called out glaucoma implantables is because, as you know, the reimbursement changed this year. And we also had about a $3 million, $4 million kind of supply issue on Hydrus kind of late in the quarter. So our core growth there, actually, when you back just the Hydrus 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 moved forward with [indiscernible] 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 in various markets. 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 maybe gained in AT-IOL more than a share point of 1.4. I think. We were up AT-IOL 2.2. So 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 launch those, doing well. And I think when you add to that True Plus. And then you think about going forward at the end of the year, we've got Vivity Pro, we won't have the same kind of exposure for a long duration of periods to competitive products.

Most of the products 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. And I think what we've said in the past, and I still would reiterate is I think we can grow at market rate here, but it's going to be competitive. The best thing that happened, honestly, was AT-IOL was up 230 basis points in the U.S. So really nice movement around the world on AT-IOL well penetration, and we seem to be doing pretty well right now in the U.S. We'll see how that takes shape as other products 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 do why can't that flow through at a higher level to the op margin line and subsequently EPS?

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 the projects we're working on in 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. .

Our next questions are from the line of Veronika Dubajova with Citi.

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, I think you described the market growing as 3% 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 would 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 sell-in perspective, it seems to be that you are tracking market very, very closely. I was just hoping 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?

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% to remember is the aggregate market number for us. So that is contact lenses, which grows 4% to 6% generally. The cataract market, which, again, generally grows kind of in that 3% 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 4% range.

In the quarter, we 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 [indiscernible]. You 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. 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 I don't want to 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 3% to 4% 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. 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 -- 1 of the things you'll note is 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 only 1 of 2, I think, of the bunch of us that gain share. So we are gaining share, but it is more modest than it was when we first came out with P1 or with or with 30. 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.

And then we're kind of losing -- were 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, Precision7 and Total30, we're continuing to grow that 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, 1/3 or a little bit more than that in the back half, kind of 2/3 a little bit more than that. That's the truth on all the new products.

Our next question comes from the line of Matt Miksic, Barclays.

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 the Unity renewals in terms of either kind of locking down or taking more share in in monofocal Iowa growth -- and then I had 1 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 d1 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 very positive. I would say that the AT-IOL business is still the one we pay most attention to because globally, we've got a challenge at, 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.

So I'd say the fight is really ATI wells, 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 there's 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.

Our next questions come from the line of Jack Reynolds-Clark with RBC Capital Markets.

My first was just coming back to the kind of surgical cataract market. With the waiting list long. What is it -- could you just kind of just talk us through exactly what has to happen for this demand to translate into a higher market growth when that's going to happen? Is it going to be '27, '28 kind of what are the drivers there? And then on AT-IOL well 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 you expect to catch up with the U.S. or something like that? .

Yes. Look, I mean, I think let me answer the second 1 while I've got the data in front of me. I mean I think -- the Europe PC AT-IOL penetration was pretty good on the quarter. Directionally, it was 1.1% and it was up 260 basis points. So almost the same as the U.S., a little better than that. it was 230 in the U.S. The only thing that cap 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. 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 AT-IOL, 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. is what all the big practices they're working on.

And at the core of it, it really is freeing up time to do more surgery. I mean that'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 the -- that's creating more capacity and more flexibility for the surgeon. 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, I was in one recently in Boston where they were -- just hired 2 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 and surgery is going to only get better by a little bit now. We're flipping rooms just a little bit 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 the core surgeons.

The next question is from the line of Susannah Ludwig with Bernstein.

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 a 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? .

Yes. 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 said it's kind of mid-single-digit grower 4% to 6%. And price is 2% to 3%, mix is 2% to 3%, volume basically has been flat. You pick up 14-year-olds, you lose 40-year-olds and 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 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, the 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 at 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, I think they obviously will come in. But again, I 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 share 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. And so I think we continue to believe that the introduction of products, meaning specifically PanOptix Pro than TruePlus than Vivity, the N20, I guess, that's the way out of this thing. And so it looks pretty good to us.

Our next questions are from the line of Graham Doyle with UBS. .

It's just one. In the context of the phasing through this year, you just printed a 6 against what we think is the easiest comp in the year at least optically. And therefore, I think there's -- you can see in the share price today, there's 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? .

Well, Graham, let me just -- let's clarify the comp itself and the number itself. We had a number of things happened 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 million in shipping to us, which is probably 50 basis points of growth. And then I think if you take the Hydrus piece, there's another 10 basis points. So I think on 6.1, which is where we ended, we would have been something closer to like 6.7%, 6.8%, something like that. I mean I think, candidly, we've had a level-loaded plan for a while. And what you really see is the front edge of this -- front half of this year is going to be a lower amount of new products, and the back half is going to 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 3% to 4%, 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. .

Okay. So fair to say you'd hope to maintain this momentum and avoid the sort of Hydrus and Middle East shipping issues in the next few quarters effectively. .

Yes. I mean I think that's probably fair, right? I mean I don't think we believe that we're going to have that challenge. One of them was an outage that we created. So I mean that's a solve problem with Hydrus. already. And then I think the other piece is, we'll have to see, but I'm not a prognosticator on the Middle East. So what I would say is we just watch and see, but that was obviously a problem for us. .

No, that's super helpful. .

The next question is from the line of David Saxon with Needham & Company.

I wanted to ask on trip to her, 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 Tryptyr in the response. I mean I 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 1 is worth it.

And so I think what we're seeing is 2 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 has 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, as we go into next year, we're expecting to have Medicare coverage come through so that we'll be kind of positioned for a full run next year. But definitely on plan for us, maybe a little bit better than expected.

Great. And then just on implantables, I know a lot of focus is on PanOptix Pro and Vivity. But would love to hear how you're thinking about the TruePluslaunch 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? .

Yes, it's a good question. And I'm going to -- I'll just tell you this much. I think the True Plus 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. So if you're going to use and charge a patient, particularly [indiscernible] patient, for a monofocal Plus product, this is going to be, I think, a terrific choice for you because it's going to get 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 a 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 is going to be able to match this particular brand in the Clariant platform.

The next question is from the line of Steven Lichtman with William Blair.

Maybe start, Tim, with with 1 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, it seems like FX will be less of a tailwind, but you have the efficiencies kicking in. And I think you said 2Q will be down year-over-year, so it puts more emphasis on second half. So any further color within that range would be helpful. And then I have one quick follow-up. .

Yes. 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&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. But overall, we feel very good about the 70 to 170 basis point improvement. .

And then just quickly on the accommodating tunable IOL. Any further color when we could see that early data. I think you talked maybe either Q2 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. .

The next question is from the line of Young Li with Jefferies.

Great. I guess start maybe just 1 more on the guidance. So 1Q was the easiest comp of the year. It seems like Unity and Tryptyr doing better than expected, but hitting the midpoint of the full year guidance implies a pretty sizable ramp against tougher comps. I guess, can I just maybe push you on thoughts on which segments get meaningfully better from here? And which segments are going to be the laggers? .

Well, I mean, I 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 at this point, but I think there's 10, maybe 6 that are big new products. 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 18 months into some of these products, which is really, we should be moving quite well.

I would say all of -- most of the big ones, let's call it Unity, Tryptyr, 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%. 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, but that's basically where we are.

Great. Very helpful. And then I guess on the implantables growth, there wasn't a competitive launch in 1Q. Going forward, there will be for this year, I think you're expecting around 2% growth. how much competitive [indiscernible] baked into that number? Is 2% still the right number for annual growth? .

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 PanOptix Pro in Europe because I think we will do some positive momentum for Europe, which really has needed it. And I guess you're thinking probably about the U.S. launch of other products and same thing with 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 True Plus and with PanOptix Pro that we do a little better than expected, but we'll see. I these have been aggressive markets and aggressive competitors, and we wouldn't expect any less. So we -- but we're doing well right now. .

The next question is from the line of Richard Felton with Goldman Sachs.

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 AT-IOLs and share gains for Alcon post [indiscernible]. 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? And if possible, could you give us an update on the time line for Phase III trials in the U.S., please? .

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 -- at one point, we really didn't have much of an IOL business there. We had a small bit, but I think we 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 Orion piece, what I would say is that we've started the Phase III already.

We had our first dosing, I think last -- earlier last month, so middle of last month. 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.

Our next questions are from the line of Larry Biegelsen with Wells Fargo.

It's Lei calling in for Larry. I'll ask both the upfront, please. Just on the Unity, you sound very excited about the launch and it seems to be doing well. Can you just talk about how you think about equipment growth for the remainder of the year with both of these products? And if you can give a timing update and whether it's U.S. OUS for some of the new Unity products are coming to the market like [indiscernible], et cetera?

And my second question is around M&A. Alcon has recently exited 2 deals, I mean, for different reasons, obviously. -- do you think the space has become tougher in terms of M&A, maybe given Alcon's size or anything about the valuation environment, anything you're thinking differently in terms of how Alcon is approaching M&A going forward? .

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 10 years. That's the normal cycle. You put a little more upfront, you take a little way 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 said in the past on Unity and both its timing. And to be honest, the 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 in 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 multiphase launch, we are excited about it. This is going to be an exciting scope. We'll talk about it later in the year.

At DX, I think, is slated for next year. We will -- 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 is perfect. So I think we're going to be patient with DX and make sure that we get that 1 tied into our [indiscernible] 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. On M&A, I would just say that we haven't changed anything on M&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, 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 on where that sits in the market. I think, unfortunately, there's a short life at this point for [indiscernible] relative to robotics, and we're really -- we're moving on to robotics at this point.

Our last question comes from the line of Brett Fishbin with KeyBanc Capital Markets.

Great. And I'll try and keep it fairly brief. So you took the tariff estimate down by $25 million 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. I think a majority of that you're going to see in the R&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 a follow-up on margins. You kept the 70 to 170 basis points core operating margin expansion guide. 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? .

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've baked that into our guide, but it's not a material amount at this stage. .

At this time, I'll turn the floor to Dan Cravens for closing remarks. .

Okay. Thanks, Rob, and thanks, everybody, for joining us. If you have any follow-up questions, please don't hesitate to call either Alan [indiscernible] or myself. Thanks again for your time. Appreciate.

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.

Greetings. Welcome to Alcon Fourth Quarter 2025 Earnings Call. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to Dan Cravens, Vice President and Head of Investor Relations. Thank you. You may begin.

Welcome to Alcon's Fourth Quarter 2025 Earnings Conference Call. Yesterday, we issued our press release, interim financial report and earnings presentation. We also published our annual report on Form 20-F. 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 Stonesifer, 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. 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 materially are included in our Form 20-F earnings press release and interim financial report, each of which is on file with the SEC and available on their website at sec.gov.

We will also 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. Reconciliations between our non-IFRS measures and the most directly comparable IFRS measures can be found in our earnings press release. For discussion purposes, our comments on growth rates are expressed in constant currency.

In a moment, David will begin with highlights from the fourth quarter. After his remarks, Tim will walk through our financial performance and outlook for 2026. David will then return with closing comments before we open the line for Q&A. With that, I'd like to turn the call over to our CEO, David Endicott.

Good morning, everyone, and thank you for joining us. Before we begin, I want to express my appreciation to our more than 25,000 associates. Your commitment to customers, your passion for innovation and your resilience continues to fuel our performance. Each advancement we'll discuss this morning begins with the work that you do every day. Now while our full year results reflect softer markets, the second half of 2025 and especially the fourth quarter demonstrated the strength and momentum of our business. I'm going to start my remarks today with innovation, which is the engine behind our growth.

Over the past 18 months, Alcon has entered one of the most productive launch cycles in our history. And today, I'll highlight a few of the most impactful advances. First, we're excited about the progress we're making with our Unity VCS and CS platforms.

Unity VCS, our next-generation vitreoretinal and cataract combination system was recognized recently by the Business Intelligence Group for outstanding technology achievements. This prestigious award recognizes companies, products and leaders that are transforming industries through applied innovation, intelligent platforms and measurable real-world impact. And we're honored that Unity was selected as this year's overall winner.

Surgeons have responded enthusiastically to Unity, highlighting its enhanced control, improved efficiency and integrated user experience. Since launching in mid-2025, Unity VCS has been introduced across most major markets worldwide and continues to build momentum. And Unity CS, our stand-alone cataract system was designed to increase throughput while maintaining precision and safety.

Early surgeon feedback has been encouraging, particularly regarding its seamless workflow and next-generation energy delivery, which helps optimize case efficiency without compromising outcomes. We launched CS late last year, and we will continue expanding its global availability throughout 2026.

The Unity platform represents one of the largest upgrade opportunities in our surgical portfolio in more than a decade. And with its large installed base and compelling value proposition, we continue to expect this platform to be a steady contributor to growth through the coming decade.

Now let me move to IOLs. In the coming years, we expect to launch a wave of new lenses that will expand our portfolio and strengthen our competitive position. I'll start with PanOptix Pro. PanOptix Pro is off to an excellent start and has meaningfully stabilized trifocal share in the U.S.

Building on the proven performance of PanOptix Pro reduces light scatter, a feature surgeons associate with an improved visual disturbance profile and delivers even greater quality of vision. Adoption in the U.S. has exceeded our expectations, and we're now rolling out the lens in Japan and Australia with more markets to follow pending regulatory approvals.

Adding to the strong momentum of PanOptix Pro, we're expanding our portfolio with Truel+, which recently received PMA approval from the FDA and is on track to launch at the ASCRS in April. Importantly, Truel+ strengthens our position in the Monofocal Plus segment, enabling us to more effectively convert competitive offerings while also defending and extending our Clareon base amongst surgeons seeking an enhanced monofocal option.

Truel+ is engineered to deliver enhanced intermediate vision compared to existing offers in this category without compromising the distance performance that surgeons expect from a monofocal. Truel+ will also launch with a toric option. Toric's availability is a meaningful lever to increase our ability to compete in the toric segment and grow AT-IOL share.

Next, later this year, we also expect to receive regulatory approval on an upgraded version of Vivity. Vivity is already the most implanted EDOF lens in the world, and this advancement will build upon its success. This improvement is designed to enhance near vision while preserving the visual disturbance profile that surgeons expect from Vivity.

We're excited to launch this innovation in most major markets in early 2027. Finally, we continue to advance our accommodating LEMS program. Last year, we extended the clinical program after seeing some refractive changes in a portion of patients in our early clinical work. As part of this extension, we amended the protocol to include changes in intraoperative and postoperative medications. Given these changes, we now expect to read out the complete data towards the middle part of 2026.

Switching now to retina. Valeda, our photobiomodulation device is showing encouraging adoption trends and is helping deepen our engagement in the dry AMD space. Valeda, uses 3 distinct wavelengths of light to improve mitochondrial activity and retinal health, giving clinicians a non-invasive treatment option they haven't had before.

This is the first and only treatment clinically shown to maintain visual improvement in dry AMD patients. We're excited about its long-term potential as treatment is now being reimbursed by 6 of the 7 MACs. Our team is continuing to build awareness and adoption within ophthalmology to complement our strong OR-based retina portfolio.

Moving to Vision Care. Reusable contact lenses continue to be a strategically important part of our portfolio, where we're under-indexed versus the market. More than half of new wearers start in a reusable lens, and this category offers long-term patient loyalty with attractive margins. Our growing reusable portfolio is anchored by TOTAL30, the industry's first and only monthly lens with water gradient technology.

The TOTAL30 family already includes Sphere, Toric and Multifocal lenses. And this month, we expanded the family with the introduction of TOTAL30 multifocal for astigmatism. This is Alcon's first multifocal toric lens and a key step in expanding our innovative monthly portfolio.

It positions us to compete strongly in the multifocal category, the fastest-growing segment in contact lenses by addressing presbyopic patients with astigmatism, a group that historically has had limited options. Now alongside the TOTAL30 family, PRECISION7 provides an accessible high-quality weekly option that broadens our reach within the reusable segment.

Launched early last year, PRECISION7 was designed to meet the needs of both eye care professionals and cost-conscious patients by delivering week-long comfort and consistent vision in spherical and toric modalities.

Combined, these innovations help drive significant share gains in the reusable category in 2025. And finally, in Ocular health, we continue to develop products that meet the needs of the expanding dry eye category. Dry eye remains one of the most prevalent and persistent ocular conditions worldwide, and our innovation continues to strengthen Alcon's leadership.

I'll start with the over-the-counter Systane family, where we saw a strong quarter of double-digit growth. This performance was supported by new formulations such as Systane Complete PF and our newest launch, Systane Pro.

In the fourth quarter, we also launched a direct-to-consumer advertising campaign on Systane Pro to help broaden awareness and drive trial.

Systane Pro is our most advanced artificial tear. It's designed to hydrate, restore and protect the ocular surface and deliver long-lasting relief. This multi-dose preservative-free formulation fills an important need in the U.S. market by offering a premium artificial tear without preservatives, a feature that clinicians and patients increasingly value.

In the pharmaceutical space, Tryptyr continues to perform exceptionally well. By year-end, it surpassed approximately 84,000 total prescriptions and achieved a 3% share of the U.S. market, which is a great result for a product only 5 months into its life cycle. Physicians appreciate its unique mechanism of action, which stimulates natural tear production as early as day 1.

Refill rates are high, signaling meaningful patient benefit and acceptance as well as strong engagement from eye care professionals. We've also made great progress with reimbursement from commercial carriers like Express Scripts, Kaiser Permanente and Highmark and now have more than 1/3 of commercial lives covered.

In 2026, our focus will be expanding the prescriber base and improving coverage. We continue to expect to expand Medicare coverage in the next 18 months. Systane Pro and Tryptyr represent significant innovation in the dry eye space, broadening our reach across the full spectrum of dry eye patients and reinforcing Alcon's leadership in this growing category.

And to bring this all together, Alcon is delivering sustained high-quality innovation across the company. We're advancing a portfolio of products across both of our segments, each with multiyear commercial potential. I'll close with a few observations on the market during the fourth quarter.

In cataract, we estimate that global procedural volumes grew approximately 3%. Additionally, AT-IOL penetration globally was up 90 basis points. In contact lenses, global market growth was approximately 4%, which was primarily driven by the strength in the U.S. With that, I'll turn it over to Tim, who will walk us through the financials.

Thanks, David. Our fourth quarter sales of $2.7 billion were up 7% versus prior year. In our Surgical franchise, revenue was up 6% year-over-year to $1.5 billion. Implantables sales were $474 million in the quarter, up 2% versus the prior year period.

As David mentioned, PanOptix Pro continued to perform well in the U.S., and we're in the early stages of launching it in select international markets. Even so, during the quarter, we continue to see an increasingly competitive IOL market. In consumables, fourth quarter sales of $794 million were up 5%, which reflects growth in cataract and vitreoretinal procedures as well as price increases.

In equipment, we saw another quarter of acceleration with sales of $277 million and growth of 18%, driven by the launch of Unity. Turning to Vision Care fourth quarter sales of $1.2 billion were up 7%. Contact lens sales were up 4% to $683 million in the quarter, primarily driven by price increases and product innovation, partially offset by declines in legacy products where we have limited our promotional activity. Please recall that this quarter, we faced particularly tough comparisons with double-digit sales growth in the fourth quarter of 2024.

In ocular health, fourth quarter sales of $474 million were up 12%, led by continued strength of our dry eye portfolio, including Tryptyr and Systane. As David mentioned, Tryptyr's launch is tracking ahead of expectations with strong early refill rates and broad prescriber enthusiasm.

As access expands and awareness builds, we expect Tryptyr to be a meaningful growth driver in 2026. Systane also had a great quarter with mid-teens revenue growth.

Now moving down the income statement. Fourth quarter core gross margin was 62.5%, down 50 basis points year-over-year, mainly driven by incremental tariffs, partially offset by price increases.

Core operating margin was 19%, down 160 basis points, driven by lower gross margin, increased sales and marketing investments behind new product launches and increased R&D investment. This was partially offset by favorability from lower annual incentive compensation compared to prior year.

Fourth quarter interest expense was $53 million and other financial income and expense was a net benefit of $6 million. The average core tax rate in 2025 was 17.5%, down from 19% in the prior year due to discrete tax benefits. Finally, core diluted earnings were $0.78 per share in the quarter.

Turning to cash. We generated $1.7 billion of free cash flow in 2025 compared to $1.6 billion in 2024. In addition, in 2025, our free cash flow as a percentage of core net income was 114%, well ahead of our long-range goal.

Our robust cash generation has enabled us to return $848 million to shareholders in 2025, comprised of $682 million in share repurchases and $166 million in dividend payments.

Moreover, I'm pleased to report that in January, we completed the repurchase program and returned the full $750 million to shareholders more than 2 years ahead of schedule. Regarding tariffs, we incurred $91 million of tariff-related charges in 2025, of which $67 million was recognized in cost of sales.

Now moving to our outlook. As I'm sure you've noticed, starting this year, we are updating the way we present guidance to more closely align with the framework we outlined at our last Capital Markets Day. Our outlook assumes that aggregate eye care markets grow 3% to 4% for the year, that exchange rates as of the end of January hold through year-end.

And regarding tariffs, this outlook assumes an average tariff rate of approximately 15% for imports into the U.S. for the remainder of the year. Additionally, we've assumed that retaliatory tariffs remain unchanged. Starting with sales, we expect top line growth of between 5% and 7%.

We believe this outlook reflects a balanced view of market conditions complemented by the steady progress of recent product launches. Although we had a strong fourth quarter exit rate, we feel this guidance is prudent given the soft market conditions in 2025.

Importantly, given our innovation pipeline and new product launches over the coming years, we remain committed to our long-range Capital Markets Day goals. In terms of phasing, we expect sales growth to be relatively level loaded throughout the year given the cadence of new product launches.

Turning to gross margin. While we're not providing formal guidance, we currently expect 2026 to look broadly similar to 2025. Efficiency gains and the launch of Tryptyr should continue to support margins, while headwinds from tariffs and the ramp of equipment launches largely offset those benefits.

Moving to operating expenses. We expect SG&A leverage to be the primary driver of operating margin expansion. R&D expense is expected to be approximately 9% of sales. Additionally, as we've discussed previously, over the past several years, we made significant investments in operational improvements and system enhancements to drive efficiencies. Building on this progress and as outlined in our earnings release, we've announced new efficiency measures to further optimize our cost structure and support long-term margin expansion.

We expect approximately $100 million in annualized run rate savings with about $50 million realized in 2026. This initiative is expected to cost approximately $150 million and be completed by year-end. So in aggregate, we expect full year core operating margin to improve by approximately 70 to 170 basis points.

Moving to the bottom line, we expect core diluted EPS to grow between 9% and 12% and in terms of phasing, given the cadence of product launches and the run rate savings, we expect the second half of the year to benefit from higher profitability than the first half.

Before I wrap up, I'm pleased to report that our Board has proposed a dividend of CHF 0.28 per share in April. And lastly, I, too, would 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, Tim. Before we open the line for questions, I want to briefly step back and summarize what we believe is most important. First, our fundamentals remain strong. We delivered solid fourth quarter performance, exited the year with momentum and continue to invest behind innovation that supports sustainable long-term growth. Our portfolio is broader, deeper and more differentiated than at any point in our history.

Second, our innovation engine is working. Across Surgical, Vision Care, including Ocular health, we are advancing multiple platforms with multiyear commercial potential. This breadth matters. It gives us a broad portfolio of potential revenue opportunities that reinforces our confidence in consistently creating value for shareholders. Third, we remain disciplined. As Tim just outlined, our 2026 outlook reflects a balanced view of market conditions while preserving our commitment to margin expansion, strong cash generation and shareholder returns.

We're investing where returns are highest while continuing to optimize our cost structure to support long-term performance. And finally, none of this happens without our people, and I want to thank our more than 25,000 associates again around the world for their dedication, resilience and focus on serving eye care professionals and their patients every day. With that, operator, please open the line for questions.

[Operator Instructions] Our first question is from Graham Doyle with UBS.

So the line is a little bit choppy, so I'm assuming you can hear me. Just a question on the guidance. So obviously, last year, we had a couple of missteps really around the market. Could you give us a sense as to how comfortable you are today in terms of visibility? Because when I look at sort of equipment and Tryptyr, it feels to me like you get halfway towards the midpoint of your guide already.

And then to Tim's comments on phasing, it strikes me that you should -- you've got some relatively soft comps Q1, Q2, and you've obviously exited quite a strong rate. So should you be kind of in the middle or the upper end of the revenue guidance range when we think of the first half?

Graham, thanks for the question. Let me -- just on the markets, the markets improved in the fourth quarter. They were improving most of the year as we kind of indicated. But they aren't quite back to normal yet. And so I think the balanced view that we have right now is that we should call it about where it finished.

And so when you look at this year, the way we see the market broadly is the Surgical market finished about 3. That's probably where we'll call it for next year. Vision Care was 4 and change. That's probably where we'll call it. So in aggregate, being in the 3% to 4% range for now makes a lot of sense to us. And maybe that's disciplined, but I think that's the right answer.

So that's how we're thinking about the market for the year. And on the front.

I mean I would just say on the phasing, Graham, I think surgical, to your point, is going to be driving that first half growth if you think about PanOptix Pro equipment is continuing to do well.

And then as you get in the back half, I think Vision Care is really going to be driving that. Tryptyr is really going to be building a lot of momentum. We're also going to see some nice growth in P7 and T30. So it should be relatively balanced for the year.

Our next question is from Larry Biegelsen with Wells Fargo.

Yes, I wanted to start with equipment, really strong growth, 18% in Q4. So any color on how much Unity contributed to equipment growth in Q4? If we look at year-over-year growth of about $48 million, was that mostly due to Unity? And how should we think about equipment growth in 2026?

David, you've talked about 3,000 placements per year just on average. How should we think about that in '26? And I had one follow-up.

Yes, Larry, we had a great quarter on equipment. Obviously, we got CS out in the quarter as well. So -- but if you look at year-on-year, for example, Unity for Retina, or VCS, our revenue doubled in that category. Now that's not the way you should think about the going-forward number, but I would just say that we had really strong demand. We filled that demand pretty well in the fourth quarter, and we really didn't get CS out.

So I would say we've got really good visibility to a funnel of contracts that are ready to go. We have visibility to the install rates. We feel really good about the number that we've given in the past. So I think if you're referring to the number we gave midyear last year, certainly on our -- exactly -- no change to that, I would just say.

And I think the kind of the important part of it is the feedback we're getting on the product itself is positive. And a little bit of that I commented on relative to the award we won from the BIG thing. The customer really appreciates at this moment in time, in particular, being able to do more surgeries in a day in a very safe way. And that's kind of the core of the proposition.

So we feel good about Unity right now, and it was a big part of the equipment growth.

That's helpful. And David, it looks like Tryptyr sales are actually tracking better than the IQVIA prescription data. I guess my question is, was there any stocking in Q4? And how should we think about Tryptyr in '26? Is $80 million to $100 million the right range? And are you still comfortable with that $250 million to $400 million peak sales?

Yes. Look, Tryptyr really has taken off nicely for us, and we're excited about the enthusiasm that I think the patients are describing, which is this kind of rapid onset and tolerance that we are kind of expected to see, but I think it's pleasing to see it. I think ophthalmologists and optometrists around the world, I think, are looking forward to this product. But I think in the U.S., where we see it now, it's exciting to watch. You can't track it in IQVIA because it's obviously flowing through a third party right now to kind of make sure that we handle reimbursement best.

But we're very comfortable with peak sales right now. In fact, I would say we probably are edging towards the higher end of the range we've given, which is that $250 million to $400 million range.

Our next question is from Veronika Dubajova with Citi.

Congrats on a strong finish to 2025. Two things, please, if I can. One, just, David, I'd like to circle back to your comments around the Unity order book. And I don't know if you can describe how much visibility you have at this point in time.

And I guess, sort of the demand CS versus VCS and how you kind of characterize your confidence in the sort of sustaining a healthy double-digit growth rate in equipment as we enter 2026.

And then my second question is for Tim, please. I noticed that the guidance assumes 498 million of shares. Obviously, we finished the year at 488 million. Any kind of reasons for that and then sort of indications around desire to do more buybacks as we move through this year, given that maybe there is a bit less M&A in the pipeline than there might have been before?

Yes. Veronica, thanks for the question. I would just say the key is we do have kind of very detailed view of our funnel and the order book, as you will, everything from prospects through to installations. So we track contracts, we track shipped products and all the way through to installation and follow-up.

So we're very confident in what we've got out there in terms of demand, and we expect the product to do really well this year.

Yes. And I would just say on the share buyback, the 498 million versus the 488 million, that's basically how the employee vesting is treated. So that's kind of the mechanics of the buyback. I would say, in general, on future buybacks, listen, our capital allocation philosophy hasn't changed. Our first priority is going to be investing in organic investments.

Again, if you think about PanOptix Pro, Vivity, those types of things, those are doing very, very well. At the same time, we realize that we can't develop everything. So we will continue to be active in BD&L and M&A. And then obviously, the third leg of the stool is the returning cash to shareholders.

So we review that every year with the Board when we do our strategic plan. So if we have any changes or any more buybacks, we'll certainly announce it as appropriate.

Our next question is from Matt Miksic with Barclays.

So I wanted to follow-up on some of the dynamics in the IOL market, the cataract market a little bit. If you could maybe elaborate on anything that you're seeing in market capacity, end market volumes, trends that could be improving there? And then anything in the pipeline, PanOptix Pro has been great and your market leadership is impressive.

But anything that you think could help sort of either expand laterally or penetration or drive share in other geographies or pick-up the growth a little bit closer to some of the competitors in that segment?

Yes. Thanks, Matt. And let me just comment a little bit on the IOL market broadly. It's kind of a -- this quarter, fourth quarter itself was a bit of a kind of a very different market for the U.S. and for the international group. I would say the U.S. market was solid.

The IOL market for us was very good. We had a very strong quarter in -- with PanOptix Pro kind of leading the way. And so we gained some share. AT-IOL penetration was high. And I think that is where I think the market will go. Look, there's going to be a continued competition in the [Technical Difficulty] for it.

We've got Pro doing very well. We've got Truel+ coming right now. We've got Vivity 2.0 at the end of the year. And frankly, over the longer haul, we've got a number of ideas on how to continue to stay out in front of competition on this one. So we feel pretty good about the U.S. We've weathered a bit of a storm there. And at this point, I think we feel like we've kind of got it under control, if you will.

Internationally, a little bit different, much more competitive. And I would just say we still haven't launched Pro, and we need to do that. We haven't got -- we will get Truel+ out, and we will get a new Vivity product late this year. But those products are yet to be seen into the market, and I think that's where we'll see a bit of turn there.

The other dynamic in the market for international was international was soft in Japan and soft in Asia, in particular, partly because China ran into some trouble with their AT-IOL market. So they hit a bit of a cap in the VBP where they run out of money at a hospital level.

Vivity had done so well during the year. They ended up using a lot of bifocal product towards the end of the year. And so we had a little bit of a challenge in the China market for us. That's a little bit different than the market per se, but the market, generally speaking, was soft. And generally speaking, China has made up a big part of that in terms of growth in AT-IOLs where it was soft. So if you look at that part of it, it needs to improve. But I think, generally speaking, we're well positioned.

Our next question is from Ryan Zimmerman with BTIG.

On the guidance, I want to ask a question. I think you kind of alluded to this, but I just want to be clear. Historically, we've thought about 200 basis points of innovation coming from Alcon on top of market growth. But if you look at the high end of the guide at 7% and given where you assume markets to be, that implies about 300 basis points.

So it's a little bit higher than what we've historically thought of on top of your market growth rates. And so if you can kind of bridge that 100 basis point delta for us, David, is that mostly Tryptyr and Unity? Or is there anything embedded in that higher growth rate at the top end of the guide that we're not thinking about from a product standpoint?

Yes. Look, we've been disciplined about the guide here. And I think what we're trying to do here is say, look, we think the prudent thing to do at this moment is pick up the fourth quarter rate. We don't think that's the normalized rate. But at the same time, that is what we've seen for the last couple of quarters. So let's start there.

To your point, we always say we got a couple of hundred basis points of new product flow, which should sit on top of that. So if you say 3% to 4%, which is where roughly the market was in the fourth quarter, then I think you add 200 basis points, and you're exactly right.

We've added a little bit on the top because we don't really know what the new product flow is going to do. And I think, look, if it does well, we'll be on the upper end of that, if it does kind of what we expected or a little bit -- any other kind of concerns that show up, we'll see it in that range.

So we've been, I think, disciplined about the way we think this went through.

Okay. And then, David, I'd like to ask maybe what is the strategy in refractive at this point? I know we went through the STAAR saga. There was a share buyback, obviously, on the back of that. But do you feel like -- and again, appreciating that it's not needed necessarily to achieve your growth targets, as you alluded to on the last call, but where do you stand on refractive? And what do you want to do at this point?

Well, I mean, first and foremost, we're excited about WaveLight. And WaveLight Plus, in particular, if you compare it to, for example, the competitive procedures, particularly the lenticular extraction procedure, we're getting a substantially better outcome.

And I think our main objective right now is for 6 and unders these minus 6 patients, they should be getting LASIK. LASIK is a better procedure in our minds, and I think the data bears that out. I think we had almost 50% or 60% at 2014 postoperative 100% at 2020 and something like 80% at '20 -- what was it, 2018, I think. So it was -- I mean, we're getting tremendous results from this customized LASIK.

We're going to keep moving down that path. We obviously would like to augment that with an ICL, whether that -- it doesn't look like it's going to be star at this point, but there's a lot of ICLs out there. And I think maybe the good news on this is we've got lots of other options out there. We're not in a hurry on refractive, but we are definitely moving down a path of committing to the refractive area, whether that's RLE, whether that's laser work, whether that's an ICL, there's a lot of options here that we are going to work at.

But refractive is clearly one of a number of white spaces for us that we're interested in glaucoma as well. In the Vision Care business, we've got a lot. Pharmaceuticals, we're interested in. So we are looking broadly at white space. Refractive is certainly one of them.

Our next question is from Jack Reynolds-Clark with RBC Capital Markets.

My first one is on implantables. Could you just remind us what your expectations are around the time lines of the launch of PanOptix Pro outside the U.S. And just to kind of dig in a bit deeper here, at what point do you expect growth in this segment to grow in line with the market?

Is it a 2027 thing? Is it '28 thing? And are launches sufficient to make that happen? Or is there something else that you think is needed to make that happen? And then sorry, just to ask again on the guidance. But it's a wide range on the revenue side for the year. Obviously, you've given the market growth range too. What is it that drives kind of revenues coming in at 5% constant currency growth versus the top end 7%.

Yes. The second one is pretty easy. Let me kind of give you where it is. I mean we basically are saying 3% to 4% with the market. If the market does better than that, that's -- or worse than that, that's the low and the high on the market. And then the new product flow trajectory, we've got 10 or actually more than that now, new products kind of in play that have variation around the mean.

So we're obviously going to have some variable answers there. Some of them are going to do better, some may not do as well as we expect. But how that mixes will also give us a high and a low around the range. So think about it as both a market dynamic and then also a new product trajectory dynamic.

On the implantables piece, look, we're launching PanOptix Pro in Japan right now in Australia right now. I think we're waiting on a regulatory approval in Europe. I think you're going to see Truel+ and Vivity 2.0, I think, late this year. So maybe it's early next year. But I would say that we've got lots coming ex-U.S. And I do think that, that will help a lot in our competitive fight out there.

Because I would just say this Truel+ product, we've kind of ignored the Multifocal plus category for a while. We found a very clever way to do something. I don't think anybody else can do with our optical design on that. And so we're excited about, particularly internationally, the toric monofocal plus and the monofocal plus base lens are relatively good sized. And so we like our chances in that market with new products. So we'll see how those go.

Our next question is from Anthony Petrone with Mizuho Group.

I actually had a question on the U.S. IOL cataract market. David, you spoke in the past about how surgeon capacity was constrained for a good part of 2025. Timing on that was a little bit opaque. So wondering where U.S. surgeon capacity is on the cataract side as we enter 2026. And I'll have a quick follow-up on margins.

Yes, Anthony, it's a really good question. We've been working on this one for a while. And I do think that surgeon productivity is the main dynamic. We've got -- now when you look out and you see where the practice of cataract surgery or ophthalmology is going, there are some practices, for example, in the Midwest that we follow very carefully.

And what they're doing is they're doing more surgery days right now by employing optometrists to do some of the pre-op work, some of the post-op work. They're using per professionals around the clinic days so that they've got more time to spend in the OR.

And then to a large degree, in states where you don't need a certificate of need to get an ASC, there's a lot of ASC movement right now. And then I would say, in other states where you do need a certificate of need and where hospital time has been difficult to get because there's so much other demand, you see the societies and the surgeons looking for alternative ways to get OR time.

And so I think the market is working it out, and it makes sense that they should because there's a lot of demand for cataract surgery right now. Days are actually going up in terms of wait time, not down. So there's a lot to be done out there and money to be made if the facilities can provide the time and the surgeons can provide the skill.

And so I think you're going to see that normalize as we said it would. But again, we're playing that just a little bit more balanced than perhaps we have in the past just because we haven't seen it happen yet. We expect it to, but we'll see when it happens.

Great. And then just a follow-up on margins would be, when you look at the high end of the range here, 170 basis points. I know you called out the restructuring program, $50 million this year, $150 million total. But you also have some pretty good new product mix. Tryptyr is doing well.

Unity is getting off and running. So I'm just wondering to what extent new products plus price is in that margin guide versus the $50 million cost-out program.

Yes. Again, I would say that we're going to continue to get price this year, probably not as much as we got last year, but we'll continue to get price. We're going to continue to get leverage out of the M&S. Again, think about -- we invested a lot in the new product launches last year. We're going to invest more this year. But when you look at it from a year-over-year comparison, we're not going to see as much pressure.

And then the new product launches, yes, again, to David's point, it just depends how that flows. Tryptyr should be favorable. The more equipment we do puts pressure on the overall margin rates, but we feel comfortable with the range we provided.

Our next question is from Patrick Wood with Morgan Stanley.

Just 2 quick ones. First one around Voyager, how you guys are feeling about things are going there? How it fits into glaucoma treatment and how that's gone recently?

Yes. Look, Voyager, we're excited about Voyager. SLT is one of those things that if you ask surgeons or ophthalmologists, generally speaking, should you do SLT, they'll all -- 100% of them, I think, will say, yes, that's where we should start. And then you ask the second question, which is how many of you all are doing it. And you get a kind of a mixed bag. And that's because it is a tedious procedure to sit and click from the kind of the traditional laser systems that are in the office.

So Voyager represents something that's very efficient, but really great for patients. And I think this is a move that is going to take some time, but I think the glaucoma community is definitely on board with this. We made a good move, I think, this year in the U.S., in particular, in consolidating Voyager with our Valeda product to improve our in-office coverage.

So remember, this is an in-office equipment. This is a piece of equipment that sits in the office, not in the OR. And I think one of the challenges we had last year with Voyager was we were in the OR because of Hydrus, and we were struggling to get everybody covered properly. So I think you see a nice move on Voyager and Valeda, both of which I think sit in that kind of efficiency play for in-office equipment, which, again, in the U.S., we're doing a lot with, and we'll see how that goes. Obviously, internationally, there's some reimbursement challenges that we're going to continue to work through. But we're very excited about Voyager directionally.

Makes a ton of sense. And then just quickly as a follow-up, you guys touch the consumer in a whole bunch of different categories in different ways, whether it's contacts or whether it's the non-Rx business in OH. Like what do you think you're seeing? How do you think the consumer's health is?

I know that's a very broad question, but is promotional activity going up on the retail side? I'm just curious, the big picture, how you think the consumer is doing based on the categories you guys are in.

Well, I think big picture, I'd say the U.S. is pretty okay for us. International, maybe a little bit more mixed. It's hard to tell. In the contact lens business, which is probably one of our -- if there was a sensitive business, it's probably that one. That particular business internationally has resisted price partly because it's chain dominant.

So if you look at the Europe market, you've got a lot of big chains who basically are telling us, we're not going to take price from you. And that is really what's causing the kind of a big chunk of the challenge in market growth in the international business.

I think the same is in Japan. Japan is a big contact lens market, and it has a lot of chains, which, frankly, just aren't going to take price right now.

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Business we had, I think, a 6% artificial tier growth in that market. That was a valuable market for us. And the promotional -- well, I would just say either the promotional efforts or the health of the consumer is driving AT-IOL penetration up significantly in the U.S. So U.S., I think, was up 100-and-some-odd basis points in promotion. So if there was really any consumer sensitivity, you'd see it in one of those categories in the U.S. and really hasn't appeared to us, at least in the data that's what's going on.

A little bit more sensitive maybe outside the U.S., but I think that's -- again, none of our markets are terribly sensitive to the consumer. Eye care, as you know, is obviously a very kind of inelastic demand.

Our next question is from Issie Kirby with Redburn Atlantic.

I wanted to start on Unity and the cataract system in particular. I appreciate it's only a couple of months in relatively early within the launch. But what are you seeing in terms of your placement rates? I know with VCS, perhaps there were some difficulties in getting doctors trained up.

Is that something you're seeing with the CS system? Just wondering about the momentum there. And then I have a follow-up on contact lenses.

Yes. Issie, like I said earlier, I would say the visibility to the order book is very high. And obviously, the cataract system is going to be the bigger of the systems. The VCS, which we spent most of last year on is really a retina system with, I think, some degree of -- actually, we sold a lot into mixed groups where there was a retina person and a cataract surgeon. So there was quite a little bit of that.

But I do think the volume is going to be in the cataract system because that's just naturally where most of the volume is. So we have real good visibility to that. And I would just say that the response has been excellent. I mean I think we're working our way through as fast as we can, getting these things installed, but the demand is high right now.

Great. And then actually, as my follow-up, just sticking on cataracts. Are you seeing any benefit really to the broader portfolio within particularly the implantables business when you are placing a cataract system. I'm just wondering if there's any sort of real halo effect coming through with having an Alcon rep in the door ramping the system up.

Well, I mean, obviously, all these decisions are independent on a product basis. And I think, certainly, one of the beautiful things about having a really important piece of equipment is that you get to be in the OR a lot. So you do have opportunities to talk with the staff and the surgeons a little bit more than perhaps people who aren't there every day.

But I do think that really what's driving our IOL share in the U.S. is PanOptix Pro. We had a really good quarter on Pro. Share was up and stabilized year-on-year. So I think we're feeling pretty good about the potential of that product around the international markets as we kind of get out there. So really, I think as we go forward, think about it mostly as discrete choice of is our lens better than their lens. And I think that's the fight we're really taking on most every day.

Our next question is from Tom Stephan with Stifel.

First one on cataract physician fee cuts just here in the U.S. David, maybe if you can talk about how you're seeing to date or expecting these dynamics to potentially impact different areas of the business like AT-IOLs, like capital equipment? And then I have a follow-up.

Yes. Oddly enough, I think cataract fee cuts, which, again, for the -- just for everybody who may not know this, physician fee came down, I think it's about $450 or something like that per procedure. Actually, facility fee went up 3%.

So just to be clear, there wasn't a cut in the facility fee and the facility is generally who purchases the AT-IOL. So just -- that's an important distinction. What's interesting, though, is penetration in the U.S., for example, was up 130 basis points for AT-IOLs. And I do think there's -- look, there's some promotional effect going on here.

But we've seen a couple of 3 quarters now where you're seeing very significant AT-IOL growth, but particularly in the fourth and first -- fourth quarter, we saw kind of a step-up in it. And I do think that people are aware that if they're going to do a limited amount of surgery and they're going to get paid $450 for it, they can make money getting the patient a better lens and kind of talking to them about what it looks like to invest a little bit more, but get them a better outcome.

And that is, I think, what's driving some of this. And I think some of that is actually coming off of these fee cuts that has kind of moved people to say, "Hey, I could do something else here".

Got it. That's great. And then my follow-up is just on contact lenses grew about 5% this year. So probably still above market, but maybe a smaller delta than usual. So David, to stick with you, I mean, can you talk about just your confidence in growing above market? And more importantly, what are the kind of incremental drivers, I guess, T-30 and PRECISION7. But just curious if you can speak a bit to how we should think about growth next year relative to market.

Yes. Really important comment. And I think probably we haven't talked enough about it. Look, the market was pretty solid. I mean it remained on the low end of normal, but I think it was probably 5% globally last year. And I would just be careful with our fourth quarter because we're wrapping around an 11% number from the prior year, which involved our P7 launch and some inventory there.

So again, I think if you normalize for all of that, we've been growing ahead of market most of the year. And you can see that we had a very good quarter in the fourth quarter in contact lenses. If you look at the audited data, our global share of contact lenses was up. Maybe we gained almost a full share point, like 70 basis points.

Our global share of reusables was well over that. Our daily disposable SiHy was double digits. We had a really nice share growth in DAILIES and reusables in the fourth quarter. So I think we're feeling good about contact lenses. And it's really coming from, I think, a combination of our ability to focus on both reusables and DAILIES.

So our -- obviously, our DAILIES TOTAL1 product, our P1 product, those are, we believe, really well positioned for both value and then premium markets. The reusable market is a very profitable and I think kind of underappreciated market because almost half of the patients are going into reusables.

So we're gaining a good bit of share there by focusing on it. I don't know that a lot of other people are. And that's been very positive for us. So we're continuing to work on our multifocal toric, which is exciting to get into that. But I would just say that, that -- if there's one place we're a little bit soft, it's probably in that multifocal area where we've been losing a little bit of share.

And I say all of that with the underlying belief that we have been letting go a little bit of our DACP product. So we've got some downward pressure from some of the older legacy brands that we trying to move away from and get them into the higher end, more profitable brands. So we had a good quarter in contact lens. Thanks for asking.

Our next question is from Susannah Ludwig with Bernstein.

I guess I wanted to follow-up in terms of international IOLs. You guys talked about China. Can you remind us what percentage of your implantables business, China is and what your expectations are for the upcoming VBP?

Yes. I don't think we break out -- we don't break it out at that level. I think China broadly is 5% or 6% of the total, and you can find that in the general financials of our total business. But -- and I would just also say that China is mostly a surgical business. Relative to the IOLs in China, what really went on, I think, was we had a really fast-growing business with Vivity that kind of hit a ceiling because there's a DRG level of reimbursement that comes to the hospital level -- the -- a lot of the hospitals ran up against and they kind of had to slow everybody down in the hospital. So they went to a lot of bifocal.

So when you look into it, monofocal growth was pretty high. Foldable growth was pretty high, but it wasn't coming out of AT-IOLs. I think that was a valuable lesson for us. The VBP expectation going forward, it's going to be tough. We expect some price erosion here. We expect to get into this and kind of continue to be roughly year-on-year, I would say, roughly, we -- flat would be a good number for us. So I think we'll get volume, but we're going to have to give up some price, and that assumes we win.

So again, all of those things are in play. Middle part of the year is the current expectations, but we'll see how that all plays out. It's an increasingly competitive market in China, but it's also a very big market. So we think volume will grow nicely and offset some of the pricing erosion.

And again, prices are still pretty good in China actually. So when you look at it relative to Europe, they're pretty similar.

Okay. And then I guess just as a follow-up to that, how do you guys think about sort of long term? Would you ever sort of look at long-term moving production to China given their focus on local production?

Well, we'll look at that every year and see. Right now, we don't produce in China. We are manufacturing a couple of things in the equipment land that we're thinking about it moving there because for exactly the reason you indicate, which is there is a by China rule there for folks that are making product there. There is a small advantage depending on what product we're talking about.

So we'll move a little bit of equipment there. But generally speaking, we're sourcing China out of other locations than the U.S. So I think we're trying to do that. There's obviously some challenge with that, particularly around equipment. But IOLs, I think we can move to a neutral location we're trying to avoid tariffs, if that's the purpose of your question.

But in terms of long-term production in China, good question. Not sure we've discussed it in a broad sense for anything other than equipment.

Our next question is from David Saxon with Needham & Company.

Just a couple of quick ones. Maybe starting with Tim. You talked in the script, I believe, about Tryptyr starting to benefit margins in the back half. So can you talk about just the magnitude of the investments you're making behind that product?

And once that does turn profitable, kind of the magnitude of the benefit you could see?

Yes. Again, we're not going to give product level margin analysis, but we're investing what we feel is appropriate to make sure that, that launch is successful. And as David said, right now, it's performing better than expectations.

Okay. Great. And then just on Unity, as it relates to consumables, I mean, how soon after unit is placed do you start to see those Unity consumables start flowing through? And if the market is growing 3%, I mean, can you get a couple or a few extra points from the Unity consumable pricing?

Yes. I mean I think, generally speaking, you can -- as I'll just call it a broad rule of thumb, and it depends on lots of things. But I would say we generally look at the market and say consumables will run a couple of points hotter than the market. That's generally what happens and has happened in the past. I would expect that to continue.

I wouldn't really interpret the Unity placements as driving a lot of additional above that. I think a couple of points above market growth would be the right way to think about it.

Our next question is from Jeff Johnson with Baird.

I'll be quick here with just 2 questions. David, going back just on your Truel+ comment, I think you alluded to this, but I don't believe you've ever had a monofocal plus. Can you just, one, confirm that? Two, can you remind us monofocal versus monofocal plus kind of mix in the U.S., but especially in some of the international markets, how much monofocal plus share has been taken over the last, call it, couple of years or something or what the current mix is? And remind me if you do get a little pricing premium on a monofocal plus over a monofocal.

Yes, you do get a little bit of a price premium. Let me start by saying in the U.S., the monofocal business -- monofocal plus business hasn't been a huge phenomenon. It probably had a biggest effect on the toric business. And I would say, partly because you can -- in the ad collect space, you can -- for a toric patient, you can collect extra money from them for an advanced technology lens like this. And so they position the toric lens, I think, with an increased amount of intermediate vision, which is really nice. And it's better than the monofocal. But the impact has been really in the toric space. So we lost a fair bit of share in the U.S. over the last several years in toric. And I think to some degree, it was to the monofocal plus.

So we're looking and specifically, that's the opportunity, I think, in the U.S. Internationally, a little bit different because they really, I think, had a price point challenge internationally and the monofocal plus did do a better job, I think, in the -- I just saw it somewhere between monofocal lenses and AT-IOL lenses. They carved out some space.

I'm not sure what the size of that was, but it's meaningful. And I do think that when you really think about it, this world may just turn into being a -- the monofocal business turns into monofocal plus. I mean I think it comes with a little bit of a premium, and this is a better lens than our core lens because you get more intermediate, but you don't give up much distance. So I'm excited about the opportunity. It's a modest one, but I think important in terms of our share in toric.

Fair enough. And then, Tim, just one quick question on EPS gating. I heard your comments on second half profitability higher than first half profitability, but you also are guiding to a couple of hundred basis points of FX tailwind to earnings to EPS growth, I'm sorry, this year. So I just want to make sure I'm understanding.

Gating of EPS because I think those currency tailwinds should be probably more first half weighted, should gating of EPS throughout the year be relatively flat or consistent even if profitability improves in the back half of the year?

Yes. Again, the EPS growth that we're talking about is in constant currency. But if you think about sort of phasing in general and profitability, I'll just go down the P&L. We talked about revenue. We talked about gross margin. Gross margin flat year-over-year. The only thing I would say there is the first half will be lighter than the second half, and that's because you have the impact of the tariffs coming through.

But overall, they should be flat year-over-year. SG&A will be a similar profile as last year when you think about it on a percent of revenue basis. Again, as we've seen in the last 2 or 3 years, be a little careful with Q2. That's a heavy M&S spend for us from a back-to-school perspective. So I go back and look at the prior years and see how much it's $40 million or $50 million, probably more in Q2 versus Q1.

The savings we talked about, that will be probably 60%, 70% back half loaded. So that's another driver why profitability is better and then you can work the rest of the P&L. But we feel pretty good about the guide, and we're going to continue to grow the business faster than the market.

We're going to continue to expand margins, and that should drop through some nice free cash flow.

Our next question is from Steve Lichtman with William Blair.

Tim, maybe a couple for you. First, any color you can give on free cash flow outlook for this year? You gave some inputs with CapEx and it looks like a restructuring charge. But any other color you could provide on puts and takes and where you could end up would be great.

Yes. Again, I think as we continue to drive margin expansion and grow the business, that's going to drop through some nice free cash flow. So I would expect it to be similar to what we had last year. That would include the restructuring charges that we talked about, but we feel pretty good about the free cash flow this business can generate.

Okay. Got it. And then are you still expecting some incremental spend on Aurion this year? It looks like you're talking about getting some leverage on the R&D line. So any update on where you're at with that program and the incremental costs?

Yes. There's still probably 40 basis points as we talked about last time. That really hasn't changed from the Aurion perspective. But again, we've talked about over the last, call it, 12 to 18 months about some of the efficiency programs that we're working on.

One of them is in the create to make space that we've talked about. Our internal goal there is about a 20% improvement of getting product to market faster.

Now some of that is in these numbers, which is why you're seeing a little bit of the leverage, but certainly not all of it. But we feel pretty good about the R&D spend and the innovation pipeline that we have, and we feel like we're investing appropriately behind it.

We have reached the end of our question-and-answer session. I would like to turn the conference back over to Dan for closing remarks.

Great. Well, thank you, and thanks again for joining us this morning. For any follow-up questions from an investor standpoint, please reach out to either Allen Trang or myself. And for media, reach out to our corporate comm department. Thanks again. Have a good day.

Thank you. This will conclude today's conference. You may disconnect at this time. Thank you for your participation.

Good morning, everybody. Welcome to day two of the JPMorgan Healthcare Conference. I'm David Adlington. I head up the European med tech and services research team in London for JP. It's my pleasure to introduce -- we've got David and Tim on stage.

Over to you, guys.

All right. Thanks. Let me start with just a little bit of introduction. If you're not familiar with Alcon, we are an eye care company. We do a little bit of everything in eye care. We have the pleasurable purpose of dealing with what is, generally speaking, one of the most severe concerns of elderly folks. After memory loss, vision loss is the #1 concern of folks as they age. And we work on refractive error, we work on presbyopia, dry eye, if it's in the eye or if it's abnormality from the eye, we are working on it.

We have a very, very simple strategy, which is we focus on eye care. We're a specialist. And what we're trying to do as a comparative advantage is to know more about the eye, the technologies of the eye that apply to the eye and the markets and how they're going to develop. And if we deploy capital quickly and efficiently at that, we can be competitive and more competitive than folks around us. So we spend a lot of time thinking about how do we develop and retain expertise in this area, how do we develop products that work on the big problems in eye care.

And obviously, then we commercialize globally, we create data. And obviously, we do that to reinvest into the eye care. We are the largest investor in developing eye care right now. We spend about $1 billion a year developing programs and products that help people see brilliantly. I'll start with surgery business today. Our surgical business has had a very solid market. It continues to be a good market for us. We expect it to continue for a long period of time.

As people age, as cataracts continue to be kind of underserved around the world, the population has come forward and the surgeons continue to expand outside the U.S. And then, of course, a little bit in the U.S. was a strange year last year, but I think we expect a revision to the mean. This market typically has grown over the long period of time, plus or minus a couple of points on 4%, 5%. So very solid market. Through the years, we have spent a lot of time building out our portfolio of products that treat cataract surgery in particular. You can see a number of products, both in the IOL space and then recently in the phacoemulsification and vitreoretinal space. But we have products that address almost all of the needs in eye care.

So we have a new retina product. We have a new glaucoma product. We work in refractive surgery. We've got a lot of different things that have gone on. And we are coming through a period of innovation productivity that is particularly unique. So we are certainly prepared as we go into this next couple of years to launch probably 10 to 15 new products that will get full exposure to the markets around the world. So we're going to talk a little bit about the IOLs and our Unity platform today in this business, and I think that will be of interest to most everybody. And as we kind of reflect on where we are going, we've said for a number of years that we are trying to develop and we are in the process of rolling out now an ecosystem of equipment that does some really important things around efficiency.

First and foremost, our Unity platform, our diagnostic, which we will really pilot late this year and then launch next year is a Unity singular platform that creates efficiency in the office, but moves all of the data required for cataract surgery into a cloud planner. That Cloud planner moves that data into a new microscope that, again, we'll have late this year, early next that will give you visualization of the eye in unique ways and unique guidance around the procedural plan. That's combined with our Unity VCS/CS phacoemulsification vitreoretinal machine to create the most efficient cataract surgery in the world.

And I think when you do that, it will also attached to our inventory planner, which is in theater, which will, in real time, give us information on what's been consumed and replenish that stock for the OR, ultimately, with the patient coming back to the diagnostic and getting a post-op refraction, a post-op look at where -- how the surgery has performed. And then that recalculates in the cloud, the formulas for the surgeon as they move forward, which will improve outcomes and obviously contribute a great deal to patient satisfaction. So the Unity VCS/CS program has been a real success for us. We obviously started this last year with retina, which is the most complicated of the businesses. And VCS is the most complicated piece of equipment in ophthalmology.

And I do think that we've had a terrific year with retina folks where -- we've got a new entry system. We've got a new 4-spot laser. We've got a 30,000 speed cutter. We've got a new fluidic system. So there was a lot of energy put to the retina folks who do the most complicated, the most durable surgeries in ophthalmology. And I do think that when you see the results of this, what you find is that we are getting what we had thought about, which is we were trying to get very significant efficiency gains in retina and cataract. We're getting both of those right now. So if you were doing 5 surgeries a day in retina, maybe 5 vitrectomies, you can do 6. And when you do that, the economics of that are profound for both the surgeon and the surgical center. So the purchasing value of the unit is quite high.

We see that same thing in cataract surgery, but to a lesser degree because cataract surgery is already so to improve. But on a percentage basis, very high on an actual time basis, maybe if you're doing 20 cataracts, you could probably do 21. So that's the kind of speed and economics and efficiencies that market is desiring and we're pretty excited about what we saw in our first year of launch. I show you a quick video here that gives you some sense of how the phaco machine works in a cataract.

[Presentation]

So the value of that, obviously, is time in the eye and obviously, then a number of surgeries in a day. And so I think what we're really excited -- by the way, that was -- that is comparing to our existing Centurion machine, which is the very -- has a very significant share in the U.S. It's the market leader by far. And so we've stepped out meaningfully from the current best-in-class thinking around phaco. So really excited about this program, and we'll continue to move that.

I'll switch to Pro. PanOptix has been a great product for us. It did really well, and we began launching an upgraded version of this with greater light utilization in the middle part of the year, probably late Q2 really when we got it going. So we're getting better contrast. We're getting less light scatter. And when you look at these IOLs that are diffractive IOLs that are multifocal IOLs, the #1 concern of surgeons is, does it create scatter? Does it create halos and glare. We've decreased that with almost 92% light utilization, which leaves very little light for scattering. So significant upgrade from our PanOptix products has done very, very well. We're very excited about what we saw in the U.S. throughout the rest of the second half of the year.

So looking forward, we will move this product internationally, EU, Japan, Korea, all coming in '26, and we'll continue to build out the portfolio around the world. So excited with that. Secondly, on the IOL front, TruPlus, we are launching this year a next-generation monofocal + and monofocal toric +. So what you're expecting to see here, I think, is a new improved intermediate vision. So one of the things that we've tried to do is improve our monofocal, our base lens by adding a little bit more of that intermediate reading vision, which has been terrific for us. We also have really important edge dynamics. And I think what you're seeing here is a lens that doesn't compromise distance to get intermediate, and I think that will be an advantage over the existing multifocal + product.

Importantly, we'll have that in the toric version as well at launch. So we'll look for that in the second quarter, and we're excited about what we see there in terms of our opportunities. I'm going to move to Vision Care quickly and just give you the same story more or less with the market first. Very solid markets, typically 4% to 6% around the world. It's a very stable market. Last year, probably not as much price as we've typically done. We took a lot of price through the post-COVID period. Almost all of our competitors did as well. And I think as you kind of look forward to this year, you should see kind of -- again, on both markets, we expect kind of a revision to the mean, and we're very satisfied with the kind of stability of that market in general.

The product flow for us has been the kind of key for it. We started early on in trying to fill out the lines with geometries and other elements of the product. But in Vision Care, we've expanded, obviously, with our pharmaceutical business, our eye drops business and most recently with the acquisition of Aurion, our biopharma business with Vyznova. The going forward part of this is really exciting for us. Tryptyr, we just got out about the middle part of this year. So still early days, but very, very good response from the ophthalmic community. Our contact lens business is doing really well. We'll launch a multifocal toric coming up soon. I'll talk about that in a minute. We've got a new formulation of OPTI-FREE. We've got new Systane products, and we've got a new whitener coming. So we've got a lot of stuff that's, again, OTC, pharma, contact lenses, all the things that we think are nice white spaces, nice high-growth markets.

Total 30, we are going to launch a multifocal toric. Again, a complicated lens design, but one that I think has a really unique positioning for a 30-day lens wearer who has toricity and is aging a bit and is going to have a little bit more dry eye typically, you're going to get a better end-of-day comfort with this lens than other lenses. It's designed to have a value point that I think is appropriate for people in this particular category. So I think we're excited about getting that out. We'll put that out in the first quarter of this year.

Systane, we're gaining a lot of share on the preservative-free market segment. Some of you may remember, we've talked about the global market. The European market, in particular, is dominantly preservative-free. The U.S. market is moving that way. In the U.S. market, we've had and enjoyed a really nice run of change to the preservative-free where we've been quite successful. So you see that market growing 20%, and we're growing a lot faster than that, obviously, in both of the unit dose and the multi-dose. So I think we're excited about what's going on there. You should see and continue to see expected growth in that area.

Ocular health, we're expanding into a new category. Obviously, there's a whitener category out there that's cosmetic at some level. That's an interesting market, nicely growing. It's easy for us to get into. So we have something, I think, that will give a real advantage to the market, which is something that lasts longer, will last around 12 hours, works very quickly in 60 seconds or less. And obviously, a lot of patients are interested in this, and you can see that this market growing nicely through the years. We'll launch this next year about this time. So we'll talk a little bit more about that. We've submitted that product to FDA in end of last year.

Lastly, Tryptyr, off to a really good start. We're excited about what's going on with the number of folks who have jumped on to prescribing this. The refill rate very high. Our commercial lives covered are already strong. This is going to be a journey with all pharmaceuticals. The reimbursement cycle is long. So we'll look to see kind of full reimbursement, I would say, middle of next year. But for this year, we continue to work on both reimbursement and distribution, and we're seeing really nice take-up on this particular. Nice big market in the U.S. And again, I think we have a product that has a very unique mechanism.

I'm going to give you a little bit of a look at that as we see it now.

[Presentation]

So importantly, not a lipid layer supplement, not an aqueous supplement, but something that is agonistic driving the natural process of tear production. That's a very unique mechanism. We're very excited about it. And I think it's a one-of-a-kind idea that will have a big impact on this particular product. So market is well received right now. A couple of key takeaways. We've got -- again, I think Alcon enjoys durable, resilient markets. We really believe that long-term eye care is a very solid, stable place to continue to grow. And I think the underlying demand for eye care continues kind of running hot for us. So driving above-market top line growth is the thesis. I think we kind of start with this notion that we can grow markets in that 4% range.

We can grow a little faster than that if we invest properly and bring new product flow in. And I think we can kind of feel good about our ability to accelerate innovation around this space. So we've invested a lot of time and energy. You're seeing the beginning of a really long stretch of productivity for us. And I think last year, we basically introduced about 10 products that will have full year effect this year. There's a few more that will come this year. So we'll have kind of by next year, a double-digit number of products that are contributing to growth. And I think we're expanding our margins as a consequence of that.

So although we are investing, particularly in this year to generate -- get behind our product launches, our operating leverage has consistently been kind of that 150 basis points of operating leverage underneath all of that. So we continue to expect that. And free cash flow, we continue to generate somewhere, as we said at Capital Markets Day, somewhere around $2 billion, a little short of that every year that we can use to do any number of things. So I think we're excited about where we are.

And with that, I'll turn it over to questions. So thank you.

Great. Thanks, David. Maybe just to kick off here, you sort of touched on it a little bit in the presentation, but maybe you could just expand a little bit in terms of the surgical business, what you're seeing in terms of market conditions. And obviously, last year, we saw a bit of a slowdown in the middle of the year, particularly in the U.S. What do you think drove that? And how the outlook would be, would you be expecting some normalization, but what's going to drive that?

Well, look, I mean, I think in the front half of the year, there was a very unusual year in the U.S. in particular. I don't think we've ever seen a flat quarter. It was -- second quarter was flat, which is pretty unusual. Our sense of it is, is that the productivity gains following COVID were very substantial. People filled up the OR. They filled up their days. Typically, busy surgeons will do two OR days. There is a realignment happening in terms of the amount of surgery per surgeon that has to happen. It's going to happen only because they begin to realign and put more time into the OR, and they are doing that now. But it took them a while, I think, to kind of adjust scheduling so that they were utilizing more OR time. What we typically do is they'll do a Monday or Wednesday, they'll do post-ops, Tuesday, Thursday, they'll do a clinic day on Friday.

What they're really doing now is they're beginning to use more paraprofessionals, more optometry, more PAs to do their general practice work and the surgeons are doing more surgical work. And that's what's going to have to continue to happen. So I think we're seeing that adjustment, and I think we'll continue to see it. But there's a significant amount of cataracts that have kind of increased that are kind of waiting on the sidelines to be done. So we know that the demand for cataract surgery is there. It is a matter of now of surgeon productivity. And the other thing I think that helps a little bit is, obviously, part of our orientation to the cataract surgery business is to try and increase efficiency. So if you are doing 20 surgeries a day today, you could probably do 21 tomorrow if you get one of our new units.

And taking on to Unity. I mean how is the rollout of Unity gone versus your expectations? You talked about sort of managing the rollout very deliberately. Why are you doing that and...

Well, we're doing it because it's a process of switching somebody from Unity. They're very comfortable with in an ocular surgery that is very sensitive, particularly in the retina where you're peeling 5-micron, 10-micron fibers off the back of the eye or you're messing around in areas that are very sensitive and very complicated. Any little glitch in a surgery like that by any of the equipment can cause real significant challenges. We've got a new entry system, which is new and different for them.

We've got a new cutter, which is faster and they need to understand how to use it. We have new settings on the machine. We have a new 4-spot laser. Almost everything going into vitrectomy right now is new. And so for them, it's a little bit like when you get in a new Ferrari or whatever you got, this is a car that you can drive really, really well, but you need to learn how to drive it. And for us to get the most out of this. And we also knew that if we got the retina guys, they're the hardest and they are also the ones that have the most to gain on this. So the value to the retina specialist of this machine is very high because I think they -- the facility fees about $3,000 a procedure. The surgeon fee is very significant. And so for the facilities doing this, if you want to get one of these sold, what you want to explain to them is how many surgeries can you do in a day schedule.

And therefore -- and if you get the retina guys on site, I think you can -- you're going to be able to demonstrate to the facility why the economics of this makes sense. And we're obviously charging a premium. We're trying to make sure that we position this as a premium answer that generates real efficiency and is worth it. So that's where -- that's why we started it the way did. But the year has been terrific, honestly. The revenue for us was real close to our plan. And I think we're excited about this year as well. We got the cataract stand-alone unit out in the fourth quarter, as we said we would. So kind of everything on plan.

And so you have a backlog of installations to do coming into this year?

Yes, we do. Yes. We've got a big funnel and a lot of people wanting the product, and we'll move that at an appropriate pace where we can install it and make sure we ensure success. One of the things you got to remember is we've got -- we have really, really great machines right now. I mean everybody loves our machines today. This is a lot better, but you have to learn how to drive it. It is a process of making sure you know what to do with it to get the most out of it.

I know another conference sort of September time last year, you put up a chart just showing directionally the sort of numbers of installations and some people are quite excited about the potential for growth in your equipment business this year. Do you still stand by that?

Yes. Yes, there's about 10,000 -- there's about 30,000 installed base units. They turn over at about a 10-year cycle. So we've kind of -- if you just average that, put a little more upfront, put a little less in the back years, you get kind of roughly how we think about it. That's not going to be perfect. But then you got to get the mix right, get the ASP right, decide which is [ VCS ], how much of the retina machines versus how much of the -- so there's a little more math to it than I think people put into that particular diagram. But what we were trying to convince people of, I think, is that this is a big market, it's a big opportunity. And I think directionally, most people have got it right.

Okay. Perfect. And then obviously, on the Unity machines, there's a consumable as well that you'll be selling. Should we be thinking about that as a volume and price opportunity, mix opportunity?

Mostly a price opportunity, not -- I mean the consumables, it will move with the number of procedures. So you'll see that kind of -- it kind of depends on any particular facility, how they decided to purchase it, whether they've -- we'll position pricing, however, they want to, whether it's capital budget or whether it's the operating budget, and we can work that out with them.

Perfect. And then one of the questions I'm asking this week is just in terms of the uncertainty around the ACA subsidies might impact -- how that might impact the market, possibly drive some pull forward into Q4. Is that anything you've seen at all?

We don't see it. We haven't seen it. We haven't seen really -- there was a big concern, I think, recently about reimbursement to physician and facility. Physician fee did get cut down on cataract, but the facility fee went up 3%. So I think the facilities are healthy. They've got healthy budgets. And there's a lot of them, a very, very significant number of ophthalmic surgery centers are owned by ophthalmologists. So the economics here are accumulating to the surgeon often.

Perfect. And then again, you touched on it in the presentation, PanOptix Pro has been an important launch to you because you were losing a little bit of share, particularly to J&J with their new launches. It sounds like that rollout has been going in line with expectations. Just how you see the wider competitive environment from here?

Look, I mean, going forward, it's going to be a continued competitive environment in IOLs. There's a lot of IOLs out there. There's a lot of new players coming. Many of them smaller players, but good products, nothing wrong with any of them. I think you're never going to find a better lens than the lenses that we produce. But there is a market for price out there. There will be some price competition that comes. And Pro has been a really exciting development for us. I think probably did better than we expected it to do. We're looking forward to getting it out in Japan and getting it out in some of the other markets in Europe as soon as we can. We've actually had to delay some of those launches because the uptake in the U.S. was very strong.

And just on that, I think this time last year, we were talking about the relative pricing of PanOptix versus competition, particularly J&J and then PanOptix Pro. How does the pricing end up panning out versus expectations?

Yes, pretty much as we had expected. So I mean, similar, slight premium, but not a lot. I mean I think the pricing is going to continue to be a challenge in the market, and we see that. So we'll -- what we're trying to do is maintain pricing. We've always been the most expensive product, so to speak. But I do think that people, when they look and see what they're getting really, you're going to find that the value here is not having to deal with that one or two patients who really come back with halo and glare that is unpleasant is a problem.

You're going to spend three or four -- we talk about all the time. How many days do you want to spend seeing that same patient. Ultimately, maybe you got to take that lens out. It's not a huge number for competitors, but it's real, and it's different than our lens. And so it is a matter of whether you're willing to put up with that or not. And it's not -- that's the reason you pay more for ours.

Okay. And did you do anything on pricing on historic PanOptix, original PanOptix?

Not really. No. I mean we've kept most of those lenses pretty close to where they've been.

Perfect. And then switching across to Vision Care. Tryptyr obviously has been a big focus for last year. You talked about evolving reimbursement and full reimbursement by the middle of next year. Happy with how the uptake is going versus expectations and how we should be thinking about growth there this year?

Yes. No, Tryptyr has been very, very well received. I think it just -- it has a very unique mechanism that I think appeals to people because we've been treating dry eye for years and years with either end order problem solves like anti-inflammatories or cyclosporin or some other kind of product that's dealing with principally the inflammation. They take a long time to work. They are modestly effective or you're using supplements or artificial tears on the other end. And it just hasn't been anything that really attacked the basic problem, which is you're not making enough natural tear. And this is this is an agonist for production of tears in the eye. And that is a very unique idea. I think that really appeals to ophthalmologists, optometrists all over the world.

As we kind of work that through, I think the reception and the breadth of use on this early on has been very impressive to us. So we're excited about what we see there.

And payers are willing to buy into that mechanism as well?

We'll see. I think so. I mean we've got several already early. We'll see the Medicare players come on this year, hopefully, but there's a lot of work to be done there. So we'll see.

And then just switching across to contact lenses. You've got a bunch of new launches. You've been outgrowing the market. The market itself has actually been really robust, probably more robust than some of us were expecting. Why do you think it's been so robust given it's like more sort of consumer end of the market?

Well, I mean, contact lenses, people kind of -- people don't -- we've watched this one for a lot, and we did a lot of work on the '09 recession kind of -- and just to look and see what happens. What really happens when money gets tight, especially consumers get a little bit more sketchy is they stop trading up, but they don't stop wearing their lenses. And so if you're a lens wearer, you're a lens wearer, and that's a habit. It's a normal part of your routine and people really don't quit doing that. What changes usually is that you see a little bit of people who are using a monthly lens and they were thinking about a daily lens, they just put that off. And that's about 2% of the market growth generally is the trade up.

Pricing has been the other piece that's been kind of slowed a little bit. And generally speaking, during those stretches, people -- companies didn't take price in '09, '10 because it was obvious it was sensitive. So you see a little bit of a downturn, but you never see a real -- you don't see a regression in any way. You still see people coming into contacts. You still see people wearing them at appropriate level. And again, we see a real robustness in that market. And if you look at these -- all of our markets broadly, again, I recognize and freely suggest that last year was a weird year. But if you really look at this thing over the long haul, it's -- we've had those years in the past. It's just almost -- there hasn't been a circumstance where it hasn't reverted to the mean. And so again, we're very confident about our long-term view on this.

One of your competitors here yesterday, and they were putting out that they think market growth in contact lenses last year was more towards the lower end of the 4% to 6% historically, but point towards a slightly better year in '26. Is that something you'd...

We'll see. I mean, again, I think we would expect it to be, as we say, it's always going to be in that kind of 4% to 6% range for us. Whether it's 4% or 6%, I don't know. But I think it's likely -- it's not likely to be outside that range.

Perfect. Perfect. And then you obviously got a number of new product launches coming through across the business, maybe also a question for Tim as well. How should we think about how much you need to invest in that and the dynamics around the margin over the next 2, 3 years?

Yes. As David said in his remarks, if you look at just the total business, we would naturally get historically 150 to 200 basis points of margin expansion. Next year, as we talked about on the Q3 call, there's probably going to be about 40 basis points of pressure driven by the Aurion investment as we continue to invest behind that. And then we still have tariff pressure. So I think we called out $50 million to $75 million -- $50 million to $100 million of tariff pressure.

So there is some incremental investments behind the new product launches. It's certainly not as significant as it was in 2025, and that's kind of baked into that, call it, 150 to 200 basis points.

Perfect.

And in terms of offsetting that tariff pressure, is there anything that you're looking to do? It's slightly unusual. It's tariffs on U.S. production into China, I think, mostly. Is there anything you can do to offset that either through pricing or shifting production?

Yes. I mean we do a variety of things. We're looking at our manufacturing footprint and where we can move things to locations that make more sense and help ease some of that pressure. That takes time and that takes money. So we're being very thoughtful about it.

We're doing right now, what I would call sort of no regret moves. So if you look at our long-term goals that we laid out at Capital Markets Day, there were some moves in there that were on the back end of the plan. We're moving some of that forward. We are looking at price. We're getting -- we're not getting a lot of pricing traction or we did not get a lot of pricing traction for tariffs in particular in 2025. And then we're looking at our supplier agreements and trying to work through those. So there's a variety of actions that we're taking that are trying to offset some of that pressure.

Okay. And David, you mentioned in the presentation again that the free cash flow kind of coming through about a couple of billion a year. Obviously, you tried to deploy some of that capital towards the STAAR acquisition. That didn't pan out as probably you hoped. Maybe you could just -- I think that proposed acquisition surprised people given the fact you've got so much stuff coming through from your own portfolio, why kind of complicate with the STAAR acquisition?

Well, the acquisition wasn't complicated at one level. I mean, at some level, you kind of say it's a big number it is. It's also a big product. But it was a single product company. And so for us, it would have been a very straightforward integration, and we'd have picked it up, put it in the bag, and we've got a refractive sales force. We would have merged the two of them. It would have been pretty easy to do.

So we didn't see that as -- and that's typically been -- if you look at what we've acquired really over the last five years, almost always single product companies who have a good idea, they're struggling to scale. And we have a global footprint, which is our advantage in many ways. And so I think with STAAR in particular, the challenge for STAAR is they don't have the resources or the scalability as a stand-alone single product company to do what they need to do. Obviously, a couple of their shareholders had a higher price in mind than we did. And obviously, we've been very disciplined about how we think about pricing.

Perfect. And so going forward for that capital allocation here in terms of additional M&A, is that something we should continue to expect?

We'll continue to look at M&A as part of our overall strategy. We're always looking for the best ideas in eye care, but we're very disciplined about it as well. So I think I wouldn't forecast M&A per se. I think what we would be looking at is we see nearly everything going on in eye care. We try and do that. And for the things that we think make a lot of sense. And we started with this idea of how is it that we create comparative advantage? Why are we going to win in this space. And it is that we have a very disciplined approach to the way in which we think about our own investments internally and our external investments, and they are built on the knowledge of people who know those markets better than other people and know the technical risk associated with these assets as well.

So we do a really good technical risk assessment. We do a really good market risk assessment, and then we put those together. If we deploy capital more quickly at it, we're going to be very effective. And I think we've been, I think, demonstrated a lot of discipline around several things that have not gone our way, but reasonably, we've moved on and gotten other things.

And I would say it's probably fair to say that our philosophy around capital allocation hasn't changed. So organic investment will continue to be our primary focus. And if you look at all the products that David just presented earlier, most of that's organic. We realize we can't develop everything. That's where the M&A comes into play, and then we have returning cash to shareholders.

Perfect. And then maybe a final philosophical question as well. I mean in terms of the market ended up being, like you said, it was a funny year last year. Has that colored how you're thinking about giving guidance for '26 in terms of maybe being a bit more conservative capturing?

Not really. No. I mean, look, we go to the mid -- we try and bracket what the number is generally. And last year, we were wrong on the market. And it was -- but I don't think anybody was right on the market. So I think it was just an unusual year. I think we'll continue to try and pick a midpoint of a range and give that guidance the best we can given the assumptions that we have. We always lay out the assumptions, so you can see those in the guidance. And you'll have to agree or disagree with those ideas as opposed to the guidance per se.

Are there any questions from the floor?

Regarding the presbyopia, we see a lot of developments [indiscernible] what is your take on this?

Well, the question was regarding presbyopia in the pharmaceutical space there. There's a couple of companies three, four, I think, that have made efforts in that area. We've looked at all of them. It isn't currently of interest to us. The idea is of interest. I think the mechanisms, I think we're careful about. I think mydriatics, in particular, come with decreased light perception, decreased -- and an increased headache. And I think the side effects against the effectiveness is the question mark. If they can -- if somebody can get that mix correct, it may be a valuable product. Obviously, the last couple haven't worked out that way. And so we've been -- I think, again, this probably demonstrates some of the discipline. We looked at all of those. We had option on one of them, and we didn't do anything with them.

And then maybe just one final one for me. Last year, one of the issues you pulled out was private equity coming around and actually buying quite a lot of clinics. Is that a trend you expect to continue? Or are we beginning to see some...

It seems like it's slowed. I mean I think with all respect to the private equity groups, I think they found that it's quite difficult to get the economics, and there hasn't been a lot of exits coming out of those deals. So I always joke that ophthalmologists are not terrific employees. They just aren't. They're surgeons by nature and they're hard to control, I think. And I think they found that -- again, this is the second -- this is not the first time that people have tried to bring ophthalmology and optometry together and try and create efficiencies in the back office, try to create some economic value by scaling or negotiating with suppliers and negotiating with payers.

There was a big run at that in the late '90s. It didn't work then. I'm skeptical still that they're going to find a lot of value in this. But there was a stretch where they purchased a lot and probably 20% of the volume in cataracts in the U.S., for example, is somewhere in that neighborhood is under the control of private equity groups.

Those groups unfortunately, have bought the most productive practices and the guys who sold those practices were generally in their 60s and decided that, that was enough. And the young guys that are taking their place are on salary. So they don't have the same incentives to work Thursday night until 8:00, getting that 23rd cataract done. It's just not the way they're thinking. That was a big issue for us for a stretch. I think that did contribute to some of the decline in productivity in practices.

The demand for cataract surgery is still way out there. In fact, I was in Boston. We were in Boston with some of our folks, and they were talking about the list getting longer, not shorter. So there's plenty of cataracts to be done. It is a matter of OR time, discipline about surgeons wanting to do that surgery and then finding enough room in their schedule to do that. And I think that happens because they're beginning to take on more in-practice folks. There's a segmentation of real surgeons doing a lot more surgery and other ophthalmologists taking on or other optometrists taking on the primary care...

And presumably the productivity gains that you offer with Unity is an attraction for them to...

Well, that's obviously our intent, right? And so if you look through almost everything we're doing right now is about productivity. It's about economics in the practice. And we see what everybody sees. The health care system is expensive. There are inefficiencies in it. We are trying to find the ways in which we can contribute to making that more efficient, more cost effective and more -- and better outcomes. And that's what Valeda is about. That's what Voyager is about. That's what VCS is about. That's what almost all of the stuff that we're producing right now is about efficiency and trying to make an economic argument that says this is better for the patient. It's a better outcome, but it's also better economics for the doc, for the patient, for the payer.

Perfect. Great. We'll wrap it up there. Thanks very much guys.

Good to see you.

Thanks.

Greetings, and welcome to the Alcon Third Quarter 2025 Earnings Call.

[Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Dan Cravens. Please go ahead, sir.

Welcome to Alcon's Third Quarter 2025 Earnings Conference Call.

Yesterday, we issued a press release, interim financial report and presentation. You can find all these documents on our website at investor.alcon.com.

Joining me on today's call are David Endicott, our Chief Executive Officer; and Tim Stonesifer, our Chief Financial Officer.

Our press release, presentation and discussion will include forward-looking statements, including statements about our future outlook. We undertake no obligation to update forward-looking statements as a result of new information for future developments, except as required by law. 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 materially from those in our forward-looking statements are included in our Form 20-F, earnings press release and interim financial report, which are all on file with the Securities and Exchange Commission and available on their website at sec.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. These non-IFRS financial measures should be considered along with but not as alternatives to the operating performance measures as prescribed per IFRS. Please see a reconciliation between our non-IFRS measures with directly comparable measures presented in accordance with IFRS in our press release. For discussion purposes, our comments on growth are expressed in constant currency.

In a moment, David will begin by recapping highlights from the third quarter. After his remarks, Tim will discuss our performance and outlook for the remainder of the year. Then David will wrap up, and we will open the call for Q&A.

With that, I'd now like to turn the call over to our CEO, David Endicott.

Good afternoon, everyone, and thank you for joining us. We entered 2025 knowing that it would be a year of building toward the second half, and the third quarter reflects that progress. While there's still work ahead, we're encouraged by the momentum we're seeing in equipment and ocular health.

I'll begin with surgical equipment, where we're seeing clear signs of strength with Unity VCS. As expected, the launch is delivering on its promise of greater efficiency and workflow optimization in vitreoretinal and cataract procedures. Surgeons are responding positively to the introduction of 4D Phaco technology. Unlike traditional systems, the 4D Phaco tip moves in a unique multidirectional pattern that enables more efficient lens removal while delivering significantly less energy into the eye. This motion combined with real-time fluidics is designed to enhance chamber stability. The result is greater control and confidence for surgeons and greater efficiency for the hospital or ASC.

Importantly, as we articulated in the past, we're being deliberate in pacing installations so that surgeons can observe these significant gains in efficiency. We're investing heavily in training, clinical support and workflow integration so that each site can fully realize the benefits of Unity. This approach is helping us build durable momentum and strong customer advocacy and reflects our long-standing commitment to customer-backed innovation with the surgical community. We're also gearing up for the launch of Unity CS, the stand-alone cataract version, which will be widely available in the coming months. Together, Unity VCS and CS represent a step change in Surgical performance, and we're excited about the momentum heading into next year.

Turning to implantables. PanOptix Pro is proving to be a meaningful differentiator. It builds on the success of Clareon PanOptix, but now with 94% light utilization and half the light scattered compared to its predecessor. These enhancements reflect a significant advancement in optical design by providing more uninterrupted light distribution and greater image contrast. Importantly, the launch of PanOptix Pro is beginning to stabilize market share dynamics in the U.S. Trifocal IOL category.

Now turning to contact lenses. I was pleased with our results this quarter as we continue to outpace the market. Our toric modalities, in particular, delivered double-digit growth in the quarter and are expanding access for astigmatic patients. It's important because studies show that more than 40% of patients are astigmatic, yet less than half are fitted with toric lenses, representing significant growth opportunity. These lenses feature our proprietary 8 and 4 design, which helps reduce eyelid interaction and allows these lenses to settle quickly. And for wearers, this means clear, stable vision and exceptional comfort. This enhances the patient experience as well as supports practice growth and retention for eye care professionals by expanding access to more astigmatic patients.

Now moving to ocular health. I'm very pleased with the continued strength of the Systane family of artificial tears, which delivered high single-digit growth in the quarter. We continue to see encouraging momentum in the adoption of our multi-dose preservative-free formulations led by Systane Pro, which we launched in January. These formulations are helping us meet the growing demand for preservative-free artificial tears.

We're also encouraged by the early performance of Tryptyr, which we launched in August. Unlike traditional prescription dry eye drops, Tryptyr is the first and only prescription drop that stimulates natural tear production as early as day 1. This mechanism of action directly and rapidly addresses the core problem in dry eye disease rather than supplementing for evaporation or treating the resulting inflammation. This makes Tryptyr a meaningful advancement for both prescribers and patients. While it's still early, the breadth of initial uptake has been very encouraging, prescribable trialing is high, and we're seeing adoption from both ophthalmologists and optometrists.

To support access and streamline the patient experience, we partnered with an easy-to-use digital pharmacy platform to simplify fulfillment. This collaboration is helping patients start the therapy quickly and conveniently, which is especially important in the early stages of launch.

Now more broadly, our commitment to innovation and clinical excellence was on display at the recent ESCRS and AAO conferences. We supported over 40 studies reinforcing the value of our technologies across cataract and refractive care. I'll take a few moments now to highlight 3 topics.

First, there was new data on Vivity AT-IOLs showing strong patient satisfaction in complex cases like early AMD and mild corneal irregularities. These findings reinforce Vivity's differentiated value proposition in the premium IOL segment. Second, there were time and motion studies that demonstrated statistically significant efficiency gains with Unity VCS compared to the legacy systems. With cataract volumes rising and incidence of retinal disease increasing, demand for ophthalmic care is outpacing the supply of eye care professionals. These results demonstrate that Unity helps address this imbalance by enabling more efficient procedures and supporting higher patient throughput.

Finally, a head-to-head study comparing WaveLight Plus and SMILE Pro revealed that WaveLight's ray tracing technology significantly outperformed SMILE in visual outcomes. Using a 3-dimensional digital twin of the eye, WaveLight Plus achieved 20/12.5 vision or better in 98% of the cases versus 82% with SMILE Pro. It also delivered superior precision, astigmatism correction and contrast sensitivity. These results underscore the potential of personalized LASIK to set a new benchmark for refractive surgery and reinforces Alcon's leadership in ophthalmic innovation.

Moving now to market dynamics. Global cataract procedure volumes grew approximately 3% in the quarter, which is an improvement, but remains below historical averages. Additionally, global AT-IOL penetration was up 130 basis points. In Vision Care, we estimate that the global contact lens market grew approximately 4% in the quarter with a strong U.S. market partially offset by weaker growth internationally.

And before I pass it to Tim, I'll briefly comment on our proposed acquisition of STAAR Surgical. We continue to view the transaction as attractive and believe that Alcon is best suited to maximize the value of their implantable polymer lens. And we believe that the ICL is complementary to our refractive laser business. So we like this deal, but it isn't essential to our long-term growth plan. Last week, we published a presentation expressing our perspective on the upcoming shareholder vote. We believe our offer represents an attractive premium across multiple measures and creates value for both Alcon and STAAR shareholders.

So to wrap up, despite a soft first half, we're encouraged by recent signs of improving market conditions and the robust performance of our recently launched products. Our innovation pipeline is strong, our execution is focused, and our teams are energized. I want to thank our associates around the world. Your dedication and passion continue to drive Alcon forward. I'm proud of what we've accomplished together and excited for what's ahead.

With that, I'll turn it over to Tim, who will walk you through the financials.

Thanks, David. Our third quarter sales of $2.6 billion were up 5% versus prior year. In our Surgical franchise, revenue was up 5% year-over-year to $1.4 billion. Implantable sales were $432 million in the quarter, up 2% versus the prior year period. As David mentioned, we've been very pleased by the surgeon response to the U.S. launch of PanOptix Pro, which is beginning to stabilize share dynamics in an increasingly competitive market. In consumables, third quarter sales of $745 million were up 5%. This growth reflects improving global cataract procedure volumes as well as price increases. As David mentioned, while procedure volumes in the U.S. improved during the quarter, they were still not back to historical rates. In equipment, as we expected, we saw a significant acceleration in the third quarter with sales of $243 million and growth of 13%, driven by the launch of Unity VCS.

Turning to Vision Care. Third quarter sales of $1.2 billion were up 5%. Contact lens sales were up 5% to $707 million in the quarter, primarily driven by product innovation and price increases. This growth was partially offset by declines in legacy products, including DAILIES AquaComfort Plus, where we've limited our promotional activity. In ocular health, third quarter sales of $462 million were up 6%. Growth was led by eye drops for dry eye and glaucoma, including Systane, Rocklatan and initial sales of Tryptyr, which we launched in August. There was also some pressure resulting from the divestment of certain eye drops to Ocumension in China, which we will lap in the fourth quarter.

Now moving down the income statement. Third quarter core gross margin was 62.9%, down 50 basis points year-over-year, mainly driven by incremental tariffs. Core operating margin was 20.2%, down 60 basis points, driven by lower gross margin, sales and marketing investments behind new product launches and increased R&D investment. Third quarter interest expense was $51 million, broadly in line with last year. Other financial income and expense was a net benefit of $3 million. The average core tax rate in the first 9 months of the year was 17.4%, down from 18.5% in the prior year due to higher discrete tax benefits in the current year. Core diluted earnings were $0.79 per share in the quarter, down $0.02 versus last year.

Turning to cash. We generated $1.2 billion of free cash flow in the first 9 months of the year compared to $1.3 billion in 2024, primarily due to increased capital expenditures. Our robust cash generation has enabled us to return $550 million to shareholders in the first 9 months of the year, comprised of $384 million in share repurchase and $166 million in dividend payments. Regarding tariffs, we incurred $57 million of tariff-related charges in the first 9 months of the year. Of this amount, $38 million was recognized in cost of sales, and $19 million was recorded on the balance sheet for product not yet sold.

As we enter the fourth quarter, we expect to see a step-up in tariff-related charges and cost of sales. Given tariffs are capitalized into inventory and only recognized in cost of sales when the inventory is sold, this creates a timing lag between when the tariff is paid and when it affects profitability. Due to our inventory cycles, we will start to see the full financial impact in Q4. We continue to expect a full year impact of approximately $100 million to cost of sales, and we expect to offset this primarily through foreign exchange as well as operational actions.

Now moving to our outlook. Our outlook assumes that aggregate eye care markets grow low single digits for the remainder of the year. Exchange rates as of the end of October hold through year-end and the current tariff structure remains in place. Based on these assumptions and our year-to-date performance, we are reaffirming our full year guidance across all metrics. Sales remained on track at $10.3 billion to $10.4 billion with constant currency growth of 4% to 5%, and we continue to expect acceleration in the fourth quarter driven by new product launches.

R&D is expected to finish toward the high end of our 8% to 10% of sales range, which also reflects the impact of recent acquisitions, including Aurion. Our core operating margin outlook remains 19.5% to 20.5%, and nonoperating expense is unchanged at $185 million to $205. We maintain our core average tax rate guidance at approximately 18% and our core diluted EPS range of $3.05 to $3.15, reflecting flat to 2% constant currency growth.

Looking to 2026, while we won't formally guide until February, I'd like to share some color around expected headwinds and tailwinds. On tailwinds, we expect continued acceleration from new product launches, including Unity VCS and CS as well as Tryptyr, PanOptix Pro and Precision7 among others. These innovations should enable Alcon to grow faster than the market. And at the same time, we'll maintain disciplined cost management so that sales growth outpaces SG&A, driving margin expansion through operating leverage.

On headwinds, although we've operationalized some mitigating actions, we expect a net incremental impact from tariffs of roughly $50 million to $100 million in 2026 versus 2025, which reflects an evolving sales mix as well as our inventory cycles. And with regards to investment, in 2026, we'll see the full year impact of Aurion and initiate the Phase III clinical trial early in the year. Combined, these are expected to pressure core operating margin by an incremental 40 basis points. Beyond that, we remain focused on disciplined execution and are confident in our ability to deliver sustainable growth and long-term value for shareholders.

Finally, I'd like to extend my heartfelt thanks to associates across the organization for their dedication and hard work. And with that, I'll turn it back to David.

Thanks, Tim. To wrap up, I'm encouraged by the progress we saw across the business in the third quarter. The successful launch and growing adoption of Unity VCS, the strong reception for PanOptix Pro and the early promise of Tryptyr, all underscore the strength of our innovation engine. As we discussed at our Capital Markets Day, we remain intently focused on the long term. The markets we serve are resilient, underpinned by powerful demographic and technological trends. We're investing behind operational excellence and R&D so that Alcon continues to lead our industry. And our long-term vision is anchored in a steady flow of new products, a commitment to innovation and a deep understanding of our customers. With our global reach, dedicated teams and rich pipeline, I'm confident that Alcon is well positioned to accelerate growth, expand patient access and deliver sustainable value to our shareholders.

And with that, let's open our line for Q&A.

[Operator Instructions] And our first question will come from Anthony Petrone with Mizuho Group.

Congratulations here on the quarter. One on Unity and one on just the underlying U.S. market. So on Unity, it looks like the cycle is sort of getting started here. The company has commented in the past that 10% of the base, that 30,000 base is sort of how to think about this cycle, but it could be more front-end loaded. So maybe just a little bit on the shape of what that S curve will look like into 2026. And then the underlying surgical market in the U.S., it's still below normal levels. What were the trends in October when you think about underlying cataract volumes, for instance? And what is the early view on how this is going to shape up into 2026?

Yes. Thanks, Anthony. Just a little bit on the cycle. I don't have a lot different anything to say really here than what we've said at either the Bernstein conference or the times we've talked about this. We have a 30% or so -- or sorry, a 30,000 unit base that you stretch out over 10 years and you kind of come up with an average, and it's obviously a little more delayed in the back end and a little faster in the front end. But again, we'll see that kind of take shape as we go. We'll give you a good sense of where we are. I think we put out on our website not too long ago, an estimate of the shape of several of those first couple of years. So I would refer back to that because that really hasn't changed and we're kind of right on track with what we expected this year. So we feel fine about it. And I would think about it kind of off of what we've given already.

On the U.S. cataract market, the quarter in the third quarter, at least was improved, obviously, in the U.S. a fair bit. It was improved overall a fair bit, too, globally. So I guess it was 1% growth or so. It was flat in the U.S. last quarter. Total this year, obviously, was 3% in the cataract procedural market. So significant move up relative to front half of the year. But again, I think we're careful right now about what one data point doesn't make a trend.

And so let us get into the beginning of the year next year, give you a better number when we look and guide. We'll have a good sense of the full fourth quarter. And I think look, if we're seeing what I think we said, which I've said before is kind of regression of the mean, the historical levels should be somewhere around 4%, U.S. something around 3%. So we'll see. But I guess that's been our historical view and remains what we believe long term is the trend.

Our next question comes from Ryan Zimmerman with BTIG.

David, on the STAAR transaction, you guys put out, I think, pretty pointed comments about your views about it. I guess what I would ask is if it were to fall through, even after this new go-shop period, you highlighted a number of alternative ICL offerings in the market, either coming or in the market. Why wouldn't one of those fit your needs? And I guess, what, in your view, makes STAAR's technology attractive other than they've been in the market, they've had success for some time.

Well, let me say that I don't have a lot to add to my prepared remarks because obviously, it's a sensitive period, and I'd encourage anybody really who is interested in detail around this transaction to have a look at what we posted online. I think we like their product. We like their team a lot. I think it would be a good complementary business to us. As I said in my notes, I think it fits nicely with our laser business. Same customer, same -- we have bigger geographies. We can take care of this, I think, more efficiently.

But there are a limited number of proven ICLs. This is a proven one. It's been in the market a while. I think it has very -- the material is unique. It's a columnar material. And I think directionally, a lot of people who've used these products and used other people's products, I think, look at it and say, okay, this is well known. And with elective procedures, you want well known. So what you don't want is to be experimenting with new things. Now that doesn't mean somebody can't come up with a great product. It just means it's going to take some time to establish it.

The challenge for STAAR is obvious, which is as kind of a stand-alone single product company, they're just going to have a difficult and very unlikely path to profitable growth. So ultimately, their shareholders will make a choice between a return to the unaffected share price and a long journey with activists in control of that company, or they can take a certain and generous premium from us. But either way, we're going to be in a good place. So we'll figure that out when we get there. But I think directionally, we're -- we hope that this gets done. But as I said in the notes, if it doesn't, we've got a great plan.

Okay. Very helpful. And then the second one for me. I could be wrong, correct me if I'm wrong, but I think you folded your Hydrus sales force into the broader cataract sales force or something to that effect. Maybe just talk to us about kind of where you stand in surgical glaucoma today and kind of what happens from here? I mean you've moved earlier in the treatment cycle with the BELKIN product and some of the drops, but kind of where you -- what your outlook is on surgical glaucoma, I think, would be appreciated.

No. Look, we're bullish on this. I mean -- and I'm going to reframe what you said a little bit, not because it could be understood that way, but it isn't that -- that's not the circumstance. We have actually expanded the number of people that are going to be selling Hydrus. So we have our in-theater group is selling both IOLs and Hydrus now. And remember, that's -- we had a certain number of Hydrus folks, but they didn't do any IOLs, and we had a whole bunch of IOL folks who didn't do any Hydrus, which didn't make any sense to us since they're talking to the same person in the same OR at the same time.

So what we've really done is we've said, let's consolidate that group, make it bigger. And then what we're doing with the Voyager and Valeda product is we're creating a new expanded group to add reps into the clinic to go after glaucoma specialists in the clinic where they're treating SLT and in the retina space where they're treating AMD. So we've actually expanded in these areas. And again, I've said this before, which is we have some really nice white spaces here. We've got glaucoma, we've got retina, we've got refractive. We are moving towards those spaces, not away from them. So I would be -- I wouldn't misinterpret our intention here. We are going to get bigger in both spaces, both -- especially in interventional glaucoma, which we continue to believe is the way of the future.

And we'll go next to Graham Doyle with UBS.

This is Kavya, on for Graham. Just a couple, please. First is, do you expect to exit the year at a 7% plus top line growth? Why isn't that a good starting point when we're thinking about next year? And then second question is just on equipment again. So at a recent conference, you outlined targets for next year implying 50% volume growth. Is that a sensible starting point for next year for the half of equipment that is driven by Unity?

Look, I think we're not going to comment too much on next year until next year. And I think the reason we give a range, of course, is because these are assumptions we're making about the trajectory and the market, and we'll see. So I think the obvious opportunity here is to be at the high end of that. If it doesn't happen, it won't be a surprise to us. We're looking to just try and do as much as we can right now and think about the long term.

So we've been very careful about Unity VCS, in particular, because it really, at this point, is so far in front of every other piece of equipment that's in its class. We just don't have to rush because the worst-case scenario is somebody is going to buy one of our other pieces of equipment. So I think what you're going to see next year in equipment is a robust year. I think it will accelerate from this year for sure. But I wouldn't want to venture a percentage guess until we really get through this year and get into a place where we're really guiding with some certainty around the assumptions. So let me do that for you in February.

And we'll go next to Tom Stephan with Stifel.

Great. First one, just on Unity. I know it's early, but can you talk a bit about, I guess, how placements are trending relative to initial expectations? And then maybe how the order book is building compared to those expectations as well?

Sure, Tom. I mean, it's kind of as expected. I think we gave some expectations recently at a conference. I think we're on those. Our order book, we don't comment on directionally. It's been very healthy. We could ship a lot more if we chose to. We are being clear about our intention to train these very carefully and make sure people realize the benefits of them. I mean the basic idea here is we're trying to get more efficiency in the OR. And to do that, you have to work with both the surgeon and the staff.

And what you have to really do is begin to think about, well, if I did 20 cataracts in a day, could I do 21 and how would I do that? It has to do a lot more with the turn of the room, the priming of the machine, the transfer of settings, so everything moves smoothly, the priming of the handpiece. There's a great deal of detail in this. But what we're getting and what we demonstrated at the data we showed at the Academy is we're getting more surgeries in a day, and that's a beautiful thing for the surgeons and for the patients who need the surgery. So I think we're patient on this. I can tell you that we're right on track with what we expected, and our order book is very strong.

Got it. That's great. And then, Tim, maybe for you. I appreciate the comments on kind of the inputs to margins next year between tariffs, Aurion, et cetera. But -- can you touch a bit on sort of how we should be thinking about underlying op margin expansion next year? I think in the past, you've talked about 150 bps. 2H '25 by our math is tracking towards closer to 50 to 75 bps, 4Q closer to 100 bps. Just curious if there's any refined thinking on sort of what models should be contemplating on underlying op margin expansion going into next year? Or what gives you the confidence in that 150 bps plus?

Yes. Listen, I think there's no doubt that this year has been challenging. It's been an unusual year for us, right? If you look at the revenue growth of 4% to 5%, that's been below what we have typically delivered in prior years. We've got the tariff pressures, which is a new pressure point. We've got the Aurion investment. We had 7 launches this year. So we've obviously put more marketing and sales and our product launches to make sure that those are successful.

So given all of that, that's what you're seeing this year and the margin pressure. I still believe if you normalize it and you look at historical improvements, we're kind of in the 150, 200 basis point margin improvement. I believe we can continue to do that. And if you assume that, then we do have incremental pressure, as I said in my prepared remarks, on tariffs. We do have some incremental pressure on a full year of Aurion. So -- but net-net, we'd expect to continue to get nice margin expansion next year.

Our next question comes from Matt Miksic with Barclays.

A question on tariffs. You mentioned the capitalized tariff expense moving through the P&L. I know you're not giving a ton of color on '26, but on the gross margin line, any directionally the effect of that, should we expect kind of a flatter gross margin offset by some of the other operating changes you're making? Or does the FX kind of offset that in the gross profit line? And then just one quick follow-up on IOLs?

Yes. Listen, we'll give you more color on '26 when we get to the February call. But when you think about gross margin, again, we're going to have an incremental $50 million to $100 million of pressure that's going to show up in your gross margin line for next year. And that's basically driven by that we've got a full year impact of the margins. We're not going to have the FX benefit that we had this year, but we do have a lot of operational actions that are going to help mitigate some of that pressure. So I sort of think about it in that $50 million to $100 million range. And then there are going to be some other things that you're going to see in the gross margin, Ryan. You're going to see a mix impact, you're going to see some other things. So we'll give you more color in '26 when we get there.

Okay. And then just there are some -- competition has been one of the challenges, maybe volume growth has been another. It seems like things are kind of improving here a little bit. Competition, as you know, is expected to kind of heat up a little more next year. So given that this year was a tough year, is next year kind of an easier year? Or do you expect this kind of battle on those 2 fronts to continue through launch of PanOptix Pro and additional data on Vivity, or other factors that could kind of help you move the needle on or kind of stabilize share and maybe move the needle on volumes?

Yes. Matt, let me give you some context, I think, that may help. I mean, look, I think, as I've said in the past, the next couple of years are going to be very difficult competitively. I think there's just -- it's just not going to be a big growth driver for us because there's just a lot of entrants, as you correctly point out. Now that said, let me make a couple of really positive remarks. I think we've lived also through some slower market, which I think is not a sustainable idea for a long period of time because there's just too many cataracts out there.

The second one is that the AT-IOL penetration was up 130 basis points this year -- or sorry, this particular quarter. And it's been up consistently in some really important markets, the U.S. and others. And that's partly due to the competitive selling that's going on out there. More docs are trying it, more people. But that actually benefits us quite a lot in markets, where we have the majority of the AT-IOLs. So in the U.S., where we still have the vast majority of the AT-IOLs that's really what helps us is the penetration moving up. You stabilize share and penetration moves up, we look pretty good. So think about that dynamic a little bit as an offset to what is going to be price pressure and share pressure in most markets.

Last point I'll make is we are in the process still of launching PanOptix Pro around the world. We haven't had any really competitive time in Europe and in Japan and a few other places where we're just getting Pro going. We won't get PanOptix Pro until next year in Europe. So we're seeing -- I think we see it in Japan right now. I mean our reception has been so strong in the U.S. We've had to kind of delay a few launches just to make sure that we got the right amount of inventory to go in with.

So we're excited about what the next series of products does. And even in that vein, we just got Vivity onto the Clareon material in Europe. And that's having a nice impact, I think. So we've got that. We've got a few other products. We'll talk more about product flow and implantables next year. But I do think that somewhere between the products that we are -- we have and are launching the AT-IOL penetration and some improvement in the market, it's going to be tough because there's going to be a lot of competition, but I think we'll weather through it. And I think we have a solid performance this quarter. I'd like to see us somewhere right around market growth going forward.

And David Saxon with Needham & Company has our next question.

David and Tim, maybe, I'll start on the contact lens market. So I think the U.S. kind of drove that 4% growth. So would you consider the U.S. market kind of in that normal 4% to 6% range? And then what's driving that international weakness? And then relative to the DACP comments, I mean, I'm guessing kind of you're in the later innings of converting that base. So maybe talk about how you think about the mix benefit you could see going forward relative to what you've seen historically?

Yes. Really good questions, David. Thank you. A couple of comments on the global market. Look, it's -- globally, it's still at the normal -- in the normal range, just at the low end of 4%, right? We've always said it's kind of mid-single digits. And the U.S. was considerably better than that and the international market considerably lower than that. But I think really what's happening internationally is Japan is really struggling and has for a while. I think it was negative. It might have been flat. I can't remember quite right off the top of my head. But that's a big market. And Europe, to be fair, Europe wasn't super strong either. So I think it was below kind of historical averages.

So I mean, I think some of that is just a little bit of product, I would just say, lack of new product flow in those markets. We're just getting some things in those markets right now that we're excited about. So I think we should see -- I expect to see kind of normal market growth going forward. But the U.S., I think, in particular, has -- the 6% growth that we saw in the U.S. was a nice effort, but you see -- still see some of that being given back in a significant amount of price rebating to consumers.

So my sense of where we're going is that the branded products that do really well are going to build the international market. The branded products in the U.S. that have been around for a stretch will continue to do well. But I think you've got some newer ones in there that are fighting on price that may hold some of the share movement that we have back just a little bit as we go forward.

On DACP, the mix is certainly benefiting us on a on a gross margin basis, it doesn't really help us a ton on a share level, but it does help us at the margin level. So we're trading that into P1. We're trading it into DACP -- or sorry, the DT1, but the overall share in the U.S. in DAILIES is challenged by competition significantly and price competition, in particular.

Okay. And then maybe just on Tryptyr. I mean, per IQVIA, it seems like the TRxs are kind of ramping more gradually than what we saw with another launch a couple of years ago from a competitor. So maybe just talk about that launch, how it compares to kind of your internal expectations and how we think about -- how we should think about that ramp heading into next year?

Yes. Look, Tryptyr is going really well. As I said in the notes, the eye care community is very excited, and we're pleased with the amount of trial and uptake across the potential prescribing base. Perhaps most encouraging is that patients are playing back the unique efficacy of this mechanism. It's not a supplement to lipid layer. It's not an anti-inflammatory, which, again, it's going right at the kind of basic mechanism to create tears, and that is the very core of the disorder. So I mean, we're very excited about what's happening there. I think you got to be careful with the audited data because the audited data source does not capture the third party that we're using to manage the initial uptake of the product.

So we're -- we've got a platform that has been used by several companies in eye care. If you go back and you look at some of those launches, you'll find a number of companies that do this work. But there's a digital prescribing platform that helps patients get access to new prescription products, which makes the sample easier, the prior auth easier, the prescription adjudication easier, and it actually delivers it to home to their homes. So it's a pretty cool deal. And a number of folks have used it. So it's very commonly understood by the ophthalmology community, and they're taken to it quite rapidly. None of those prescriptions, and that's the majority of what's going on is captured in that audited data you're using. So just be a little cautious about what's in there right now.

And moving next to Veronika Dubajova with Citi Group.

I will keep it to 2, please. One, just want to get your flavor, obviously, lots of questions around Unity and whether that's tracking in line with expectations, but there is a number of other products driving growth this quarter. So just would love to get your high-level thoughts on, one, how you feel about the Tryptyr uptake relative to what you were looking at and hoping for this early on? And I think, David, you've touched upon Pro, but maybe just a similar question. And if I can relate to that, I might have missed it, but what your PC-IOL market share in the U.S. was in the third quarter and how that moved sequentially?

And then one for Tim. I guess if I look at the full year guide, the exit range for the fourth quarter is still pretty wide. I think technically, mathematically, the guidance implies 5% to 9% organic sales growth for the fourth quarter. Tim, I'm just curious if you have a point there where you feel more comfortable given everything that you see at this point in time.

Veronika, let me try and break your 2 questions into the 4 that you asked. Just kidding.

Fair enough.

Look, the Tryptyr growth I just commented on, it's been -- it's better than expectations for us out of the gate. I think we've got a lot of trial, and I think we're just kind of excited about the patient response right now because we knew the product was going to have a little bite to it. But what's exciting to hear is that this thing really works. And when you talk about efficacy that works, all eye drops have a little bit of that bite to them. So we're excited about that balance that we're hearing back from the patients and the doctors that says, this is really working, and we like what we see. There's more to come. We're early, so I should be a little careful about that and circumspect on it. But I think in terms of uptake and breadth of prescribing and all the things that we look at metric-wise, doing very well.

On Pro, I would just say PanOptix Pro has done really well, better than we expected in many ways because we -- at some level, we had a certain amount of consignments we thought would take over. We kind of ran out of them, I think, somewhere along in the third quarter and couldn't ship some to the Japan market, which we were trying to get on a little bit sooner. I think we're just getting them out now. So I think we've been excited about the people who -- once they've tried it, they really like it, and they're describing back to us exactly what we had hoped for, which is, look, less light scatter and less -- and more light usage. So a little bit of kind of clarity at distance seems to be the common language we're hearing.

So the qualitative is good. The stability of the share quarter-to-quarter, we had -- it's very hard to read this because remember that there was a recall by one of our competitors in the second quarter. It bounced back in the third. You've got a little bit of noise in there from some slowdown in some of the other competitors. So -- but generally speaking, our share is very good. It's well above -- we have the vast -- well, we have a significant majority of the PC-IOL market and the majority of the whole of the AT-IOL market.

I'll just add one other thing, which is we grew share all over the world in toric, and we grew share all over the world in just normal monofocal business. So when you look at the kind of unit volumes for us right now, we look solid all over the implantables business. PC-IOL is still going to be just balance a very significant competitive fight all over the world. We just like our chances better today, and we're doing well.

Q4 exit rate, I'm going to leave that to Tim.

Yes. Veronika, thanks for the question. Yes, it is a wider range than we typically have. I would say the thing that's a little different this year is the challenge we've had in calling the markets as well as the new product launches and how those are going to do. So I would say our base case is sort of at that midpoint. If markets are a little bit softer and launches don't go as well as we anticipate, then that would be at the lower end. If the markets come back roaring back and the launches continue to do really, really well, that's how you get to the higher end. But the base case is really more towards the midpoint.

And our next question comes from Larry Biegelsen with Wells Fargo.

Maybe Tim or David, can you help us with a framework for your equipment growth because there's a lot of components there. So we can make an assumption on the phaco and vitrectomy placements based on the color you provided at Baird, which I think showed an incremental 1,200 placements in 2026. So can you confirm that those -- that's about the phaco and vitrectomy is about half of equipment sales? And how is the rest of equipment sales trending in '25 and '26? Just so our estimates aren't complete guesses. And I had one follow-up.

Well, look, on the mix, the mix is moving around right now. I would say the mix is -- we really haven't tried to sell much cataract right now. So I'm not sure I can give you a lot of direction on it right now, Larry. We've sold mostly VCS units this year. We sold a few CS lately. But we sold for a period of time, we had an orientation that there was going to be a much higher demand for CS than VCS. We are finding out, particularly in a number of markets that people really want both machines because they're -- it creates an efficiency that I think is unique. I don't have a really good number for you to give you right there. The remainder of the equipment, I would just say, is really pretty positive. I mean we've got -- we're just getting started with Valeda. I think I'm encouraged about that. That's all going to be new for next year.

The Voyager thing is really, I think we've just kind of gotten the most of the world kind of glaucoma specialty, world kind of technically on to this notion that you should start with SLT. That was job one that we did this year. I think you're going to see a real uptake of Voyager as we move into next year. We've had a pretty good run of it this year. But I think as we convert a new sales force to do both of those next year, you should see Valeda and Voyager do well and contribute quite a little bit.

And then I think lastly, I would say that the -- our biometer still does well, our microscope does well. We've got some new stuff coming that we'll talk about in January. So I'd probably say we're going to have a good year next year in equipment.

You hit refractive?

I did -- WaveLight Plus. Yes, good point. And WaveLight Plus, I think what was most exciting about WaveLight Plus this year has been the ability to kind of refresh the market on how important LASIK is and importantly, how much we can improve it. So when you talk about the percentage that we can get to 20/12.5 or better is really unique. And obviously, we're targeting one of our competitors that has a competitive procedure. But frankly, you just can't do better than the installed base of LASIK machines we've got once you get our new WaveLight Plus product in. So that's done pretty well and a little bit better than expectations this year. Again, relatively small part of our business, but really cooling on the front edge of what we're trying to do in cataract and refractive.

That's helpful. Just one follow-up on contact lenses, David. Is there any consumer element here? If we look at kind of the year-over-year change in growth, I know at Baird, you talked about just less price, but there's been a pretty big change in the last year or 2 in the contact lens market growth. In Japan, you just talked about a lack of new product flow. But is there a consumer element here where consumers are stretching lenses, buying less bulk? Anything else you can add?

I mean I'd have to think about that a little more than I have, but I think there is always some -- we've always known that there was some consumer effect in here. Whether or not it's really affecting this market, I mean, the data would be -- it just depends on what data you're looking at. I mean I think if you think about the moving annual total on the contact lens market as of third quarter was 5%, so right in the center of what we would call the normal range, mid-single digits. It's been 4% for a couple of quarters. That is easily explainable by the lack of price that went into the market this year relative to prior years. And we were catching up.

We had a lot of inflation through COVID. Almost everybody took a significant amount of price in '23 and '24. And I think '25, people just, I think, are taking a little bit of a breather, give the consumer some room. But typically, as we've kind of regressed it, you don't see a lot of change in consumption or trade up. We looked at it in the '09 recession. We've looked at it before and tried to correlate it with consumers. It's not highly correlated, let me say it that way, but I wouldn't say it's not correlated.

Moving on to Jeff Johnson with Baird.

One maybe follow-up question on Unity. I know you've gotten a lot of questions on it so far, David. But again, referring back to the chart that you put up at our conference, you did talk about some volumes there. We've kind of beat that to death today. What kind of price premium are you recognizing on VCS and do you expect to recognize on CS relative to CONSTELLATION and CENTURION in the past? At one point, we had heard it was going to be 20% to 30%. Then we heard maybe it was coming in a little lower than that. Just how should we model maybe or think about the price premium on the newer technology?

Well, look, I mean, VCS' list price, I think, is $185,000. We've given some discounting, but not much. And I think you can do the math off of the base 2 products. There is a premium to the box itself and there's a premium to the packs as we go through it. It does depend on how big the customer is and what they're buying and what the commitments are and how long the contracts are. So it's a little tricky. But early on, I would just say that the ASP on the product is exactly or better than where we expected. So we don't see any challenge with pricing right now. So I would be thinking about it as pretty much as we've described in the past, probably a 10% to 20% premium on the procedure.

All right. That's helpful. And then just over on Tryptyr, can that product be profitable next year? Or will DTC spending maybe push profitability on that product into 2027? And when it's being sold today through BlinkRx, when you get it on to fully reimbursed commercial plans, do you start recognizing more revenue? And maybe that's an ignorant question, and it's something I should know, but the pricing on BlinkRx is pretty aggressive right now, and that's a good thing. But when you go to a fully reimbursed on the P&L, will you start recognizing even more than revenue per patient or per box of vials?

Well, look, first on the profitability in DTC, I mean, we won't begin to run DTC on Tryptyr until we have sufficient reimbursement for patients that it makes good sense. So I don't know -- and I haven't really looked at the product level P&L. But what I'd say is that we don't really expect to be fully reimbursed at kind of peak until '27. So I would be thinking modestly about DTC for next year, and I would -- maybe it happens, maybe it doesn't, really just depends on the pace of reimbursement.

Through the third party we're using, which you've correctly identified, I would say just we do pay them for their service, and we will recognize more revenue once it comes into our hands, but that is -- that's just -- that's more of just exiting that relationship and taking up in a normal way once we get through the kind of heavy lifting that they do to get the reimbursement, the prior auth, all the work that they do to kind of get this available and then ship it to the patient's home. So all that is a service that is very useful in the early days, but helpful, not forever.

And we'll go next to Young Li with Jefferies.

Young, are you there? Gary, we can move on to the next...

Okay. Jack Reynolds with RBC.

I had a couple, please. The first is on PC-IOL penetration. Could you talk about the penetration in the U.S. versus Europe and I guess, versus APAC, if you've got that data as well? And are you kind of -- how are you seeing pricing develop in Europe? And then kind of coming back to cataracts, kind of more generally, because I actually dropped off the call when the Q&A started. So I think I missed a bit of your first answer. But could you just reflect kind of on what you think drove the weakness earlier in the year? Kind of do you have any better visibility on what the cause of that was? And then therefore, kind of what's driving the kind of the more positive Q3 kind of beyond kind of the mean reversion aspect? Is there anything kind of fundamental driving that? And then what are you seeing so far in Q4?

Yes. I -- let me start with PC-IOL penetration. The U.S., I think, was 120 or 130 basis points up. APAC, I don't remember, and EU, we generally don't break those down. But I think what I would say is that Japan, EU, very strong. APAC generally very strong, better than the U.S., I'm sure. And what you see, I think, in the offset is China wrapping around on a large volume influx from our VBP win last year. So on a quarter-on-quarter basis, they were down quite a lot in penetration, but I wouldn't overread that. That was -- that's really just holding back. So what you're seeing, I think, is a good bit of competition and promotion driving the market to use more PC-IOLs. And that's a good thing for everybody. And so we're excited about that.

On the pricing -- what was the pricing question?

Pricing in Europe.

Pricing element in Europe. The pricing element in Europe is obviously probably the lowest in the world or near it. So I think we watch that very carefully because it probably portends pricing around the world, but only once you get all of the players in as you do in Europe. So my sense is that it's probably bottomed out, but it's hard to know. What I think is good news is that pricing around the world has held pretty stable. And I think our -- as we introduce new products, we are able to get a little price. So if you think about Pro on PanOptix, we're obviously bringing it in at a slight premium to PanOptix, which gives us some flexibility around the core pricing model that we have. So I think stable but generally declining over time will be the answer.

And then just on the cataract volume piece, kind of any color you could share there?

I mean, look, I mean, there's 1,000 ideas on cataract volume and what it is. Look, here's what we're certain of. There are some certainties that we can say. One is there's way more cataracts today than there was last year. And there are fewer surgeons in the world, at least in the United States and in Europe than there were last year by a little bit. So there is a productivity challenge that has generally improved every year, and there was a pause in productivity. Now why was there a pause in productivity? I don't know. The short version is it could have been staff. It could have been consumers didn't want to go in. I don't think so. It could be a general younger docs taking over for older docs who sold their practices. That's definitely part of it, could be private equity dynamics that have taken over practices in the U.S.

We've kind of collected a lot of those ideas, thrown them into a bucket and said, look, this is going to revert to the mean generally because there's too many cataracts to deny that kind of service, we will figure out a way. It will be more days in surgery by the surgeons and probably people picking up their in-office work as a consequence. That could be a collaboration with other professionals, other kinds of eye care professionals. And -- but there's going to have to be a pickup in productivity. I think that's naturally driven by the folks who own these practices and naturally driven by the private equity group. So I think it comes back to the mean, and I would -- one day, we'll know the secret answer to that one, but I've been trying at it for about 2 years, and I've been wrong. So I'll just give you the bucket of it and let you pick.

Okay. That's great. And then can I just squeeze on one last one. On Unity, so I'm not going to ask about placements, but I was wondering, in the accounts where you have made a placement, are you seeing kind of higher pull-through of consumables? Kind of are you seeing that kind of that efficiency gain being utilized by surgeons?

I don't have that data. So I'm not sure. I wouldn't expect it to be higher per se because in the beginning, especially in the first -- what has it been 6 months, 9 months, we're getting these guys trained and moving. If anything, it's probably a little bit slower. But I think what you get to when you get up to speed is a faster throughput for the facility. So I think we're in a good place in the long run, but I wouldn't worry too much about it in the near term.

And we'll go next to David Adlington with JPMorgan.

Firstly, just on PanOptix Pro, I just wondered what sort of price premium you're actually achieving, if that's in line with your expectations and whether you'd actually changed your PanOptix pricing at all? And then secondly, just on -- just wanted to check if there have been any stocking in either PanOptix Pro or in Ocular Health?

When you say stocking, you talking about the third quarter?

Yes, exactly.

Yes. No, not to my knowledge. I think the -- on the price premium, there's a slight price premium. I think I don't really know the answer to that one. There's a -- we've gone out, I think, with a belief that we can do that. Obviously, the customers will speak and we'll find out. We're kind of -- we're still only maybe what are we 6 months into this thing. So we'll see whether that pans out or not, so to speak.

And this now concludes our question-and-answer session. I would like to turn the floor back over to Dan Cravens for closing comments.

All right. Well, thank you, everybody, again, for joining us today. If you have any follow-up questions, feel free to reach out to Allen Trang or myself for investor questions or our corporate communications team for any media questions. Thanks again.

And ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.

Greetings, and welcome to the Alcon Second Quarter 2025 Earnings Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded.

It's now my pleasure to turn the call over to Dan Cravens, Vice President, Global Head of Investor Relations. Please go ahead, sir.

Good morning. Welcome to Alcon's Second Quarter 2025 Earnings Conference Call. Yesterday, we issued a press release, interim financial report and presentation. You can find all these documents on our website at investor.alcon.com.

Joining me on today's call are David Endicott, our Chief Executive Officer; and Tim Stonesifer, our Chief Financial Officer. Our press release, presentation and discussion will include forward-looking statements, including statements about our future outlook. We undertake no obligation to update forward-looking statements and as a result of new information or future developments, except as required by law.

Our actual results may differ materially from those expressed or implied in our forward-looking statements and as such, you should not place undue reliance on any forward-looking statements. Important factors that could cause our actual results to differ materially from those in our forward-looking statements are included in our Form 20-F, earnings press release and interim financial report, which are all on file with the Securities Exchange Commission and available on their website at sec.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. These non-IFRS financial measures should be considered along with but not as alternatives to the operating performance measures as prescribed or IFRS. Please see a reconciliation between our non-IFRS measures with directly comparable measures presented in accordance with IFRS in our press release.

For discussion purposes, our comments on growth are expressed in constant currency. In a moment, David will begin by recapping highlights from the second quarter. After his remarks, Tim will discuss our performance and outlook for the remainder of 2025. Then David will wrap up and we'll open the call for Q&A.

So with that, I'd like to turn the call over to our CEO, David Endicott.

Good morning, everyone, and thank you all for joining us today. We are entering an exciting phase at Alcon. Several major product launches are now underway and beginning to gain traction. Our innovation and commercial teams continue to deliver, reinforcing our leadership in eye care and deepening our connection with patients and providers worldwide.

While markets in the first half of the year were softer than anticipated, primarily in Surgical, Vision Care remains solid. And although our second quarter results fell short of our expectations, we remain confident in the long-term durability of our end markets, the resilience of our customers and our plan to accelerate growth.

Looking ahead, we've never been better positioned for sustained growth. Our teams are executing with focus and agility. And as we discussed at our Capital Markets Day, our robust pipeline and strategic expansion gives us confidence in our growth trajectory into 2026 and beyond.

I'll start my remarks today by discussing some of our recent business development and licensing transactions. At Alcon, our BD&L strategy is focused on acquiring transformative technologies in attractive white spaces that address unmet needs in eye care.

In glaucoma, we recently integrated the Voyager Direct selective laser trabeculoplasty device into our portfolio. This first noncontact laser therapy offers a streamlined patient-friendly alternative to traditional SLT and positions us to accelerate global adoption of laser-first treatments.

In refractive surgery, our agreement to acquire STAAR, will strengthen our offering with implantable collamer lenses, broadening our solution for high myopes. And in retina, we recently announced the acquisition of LumiThera and its Valeda Light Delivery System for early and intermediate dry age-related macular degeneration.

Now I'll take a few moments to discuss these last 2 transactions in a little more detail, starting with STAAR Surgical. As announced, we've entered into a definitive merger agreement to acquire STAAR and its market-leading EVO family of ICLs for vision correction. The boards of both companies have unanimously approved the transaction, which is valued at $1.5 billion. Upon closing, we expect the merger to be accretive to earnings in year 2.

ICLs represent one of the few sizable market segments in surgical vision correction in which Alcon does not currently have a presence. And STAAR is the leader in this space, but remains underrepresented in several global markets. By combining forces, we can leverage Alcon's broader commercial infrastructure to accelerate adoption of the EVO ICL platform.

Furthermore, the EVO family expands our ability to address significant refractive errors because it can be used to treat high myopes. EVO complements Alcon's laser vision correction platforms which are typically used for patients requiring correction of 6 diopters or less. Importantly, this transaction brings Alcon a proven technology upon which to build, and longer term, our internal product development teams will collaborate with STAAR's experts to explore combining our advanced IOL optical designs with their collamer platform with the goal of developing a presbyopia correcting ICL.

We expect this transaction to close in 6 to 12 months, subject to customary closing conditions, including regulatory approvals and STAAR's approval of shareholders. Until then, Alcon and STAAR will operate as independent companies.

While EVO generates significant revenue in China, we remain confident in the long-term opportunity that, that market presents. We recognize that there have been recent macroeconomic headwinds in China, but this transaction is about the future. Long term, we expect China to be the largest single eye care market in the world. And as the global leader in eye care, we expect to have a sizable presence there.

Lastly, EVO's differentiated clinical profile positions us well to drive penetration and treat the myopia epidemic that's unfolding around the world.

I'll now shift to our announced acquisition of LumiThera and the Valeda Light Delivery System. We believe this product is a pivotal shift in the treatment of dry age-related macular degeneration or AMD.

Dry AMD is a progressive eye disease that leads to irreversible vision loss. It affects nearly 200 million people globally and that number is expected to rise to over 280 million by 2040. Additionally, there are currently no widely adopted treatments for the early to intermediate stages of dry AMD, which is where the majority of patients sit today.

The Valeda system is the first FDA authorized medical device that uses a combination of light known as photobiomodulation to stimulate the retina's natural ability to heal and regenerate. It's a noninvasive in-office therapy that has been shown in clinical trials to improve visual function and slow the progression of AMD. Most importantly, it's safe, scalable and offers a completely new therapeutic option in an area with major unmet need.

The pivotal LIGHTSITE III trial showed statistically significant improvements in best corrected visual acuity over a 2-year period. And based on those results, the product received FDA de novo authorization in 2024, a key milestone that clears the path for U.S. market adoption.

We also plan to pursue CMS reimbursement. And recent developments are favorable in terms of gaining coverage. If we're able to secure reimbursement and expand penetration, we estimate the peak recurring revenue could range between $100 million to $150 million by 2030.

As we continue to strengthen our portfolio through strategic acquisitions, we're equally focused on driving organic growth through our own innovation and execution. Our recent product launches reflect Alcon's commitment to delivering differentiated high-performance technologies that meet the evolving needs of doctors and patients.

I want to start with equipment where we're encouraged by the initial demand for Unity VCS, our next-generation combined vitreoretinal cataract system. This device is the result of years of collaboration with surgeons worldwide. It's a fully integrated platform that unifies both anterior and posterior segment capabilities into a single intelligent console aimed at improving surgical workflow and efficiency.

I'm pleased to report that the innovations like 4D Phaco and the Hypervit 30K cutter are resonating well with both cataract and retina specialists. Unity has received regulatory approval in key markets, including the U.S., EU, Japan and Australia, and we began shipping in May. And while it's still early in their launch, our order book is strong. We're being deliberate with our installations. We're providing the best possible support to surgeons and clinicians as they adopt the latest advancements in Phacovit technology.

Now turning to implantables. We're very pleased with the early market response to our latest innovation, PanOptix Pro. Building on the success of the original PanOptix, our latest advancement represents an important improvement in optical performance and patient outcomes.

PanOptix Pro delivers 94% light utilization, which is the highest among trifocal IOLs. It also reduces light scatter by 50% compared to its predecessor. This translates to sharper, clearer vision across all distances with enhanced contrast and reduced visual disturbances and surgeon feedback has been highly encouraging, and we're seeing solid adoption trends in early launch markets. Importantly, PanOptix Pro is helping stabilize share in the U.S. premium IOL segment with a modest sequential improvement shown in the second quarter. This is a great example of how Alcon continues to leverage our innovation engine, global scale and surgeon input to drive differentiated value-driven growth.

Now shifting to Vision Care. We continue to see solid performance in our contact lens portfolio fueled by innovation. During the quarter, we continued to advance Precision7 sphere and toric lenses in the U.S. These lenses represent a significant step forward in our water innovations portfolio, designed to deliver all-day comfort and convenience for patients who prefer a weekly replacement schedule.

Precision7 is built on a novel silicone hydrogel material and features our proprietary active flow system. This unique technology embeds a water-loving moisturizing agent directly into the lens matrix and continuously replenishes that agent over 7 days. We're seeing strong feedback from practitioners who appreciate the simplicity of the weekly schedule and the performance of the lens, especially for patients who may not be well suited for a daily disposable contact.

Turning to ocular health. The headline in the second quarter was the FDA approval and subsequent launch of Tryptyr, our new prescription eye drop for the treatment of the signs and symptoms of dry eye disease. While most other dry eye treatments simply mask symptoms or supplement the tear film, Tryptyr addresses the root cause of dry eye. It's a first-in-class agonist neuromodulator that stimulates the eye's natural ability to produce tears. It's fast acting and effective with clinical trials showing meaningful improvement as early as day 1.

Tryptyr addresses a major unmet need. Despite over 35 million people in the U.S. suffering from dry eye, fewer than 10% are treated with a prescription product. We believe Tryptyr has the potential to expand the category, not just compete within it. Now based on our strong clinical data and market dynamics, we estimate peak sales potentially of approximately $250 million to $400 million. And while reimbursement time lines vary, we expect full reimbursement in about 18 months.

We officially launched Tryptyr in the U.S. in late July. While it's early days, we are encouraged by the initial feedback from physicians and patients. I look forward to sharing more details about the performance of this innovative therapy in the future.

And finally, I'll briefly discuss market dynamics for the second quarter. In cataract, we saw a soft quarter for procedural growth with a modest improvement in the U.S. In total, we estimate that global cataract volumes grew approximately low single digits in the quarter and the first half of the year. For context, this compares to a historical average of approximately 4%. Additionally, global AT-IOL penetration was up approximately 120 basis points year-over-year, equally balanced between the U.S. and international markets. In contact lenses, we estimate that the retail market grew mid-single digits.

With that, I'll pass it to Tim who will take you through the financial results and discuss our outlook for the remainder of the year.

Thanks, David. Our second quarter sales of $2.6 billion were up 3% versus prior year. This growth was largely in line with our first quarter and doesn't reflect the full contribution from our recent product launches.

In our surgical franchise, revenue was up 1% year-over-year to $1.5 billion. Implantable sales were $456 million in the quarter, down 2% versus the prior year. This result reflects soft market conditions David just mentioned as well as competitive pressures.

In consumables, second quarter sales of $777 million were up 4%. Growth was led by vitreoretinal and cataract consumables as well as price increases. This growth also reflects the soft market conditions we've been discussing.

In equipment, sales of $222 million were down slightly as declines in legacy surgical equipment were partially offset by sales of the recently launched Unity VCS and Voyager DSLT systems.

Turning to Vision Care. Second quarter sales of $1.1 billion were up 5%. Contact lens sales were up 7% to $692 million in the quarter, primarily driven by product innovation as well as price increases.

In ocular health, second quarter sales of $430 million were up 2% year-over-year. Growth was led by our portfolio of eye drops, partially offset by declines in contact lens care. There was also some pressure resulting from the divestment of certain eye drops to OcuMension in China, which we expect to continue through the third quarter.

Now moving down the income statement. Second quarter core gross margin was 62.2%, broadly in line with the prior year. Core operating margin was 19.1%, down 100 basis points, primarily due to increased investment in R&D.

Second quarter interest expense was $51 million, broadly in line with last year. Other financial income and expense was a net benefit of $4 million.

The average core tax rate in the first half of the year was 17.7%, down from 21.2% in the prior year due to discrete tax benefits in the current year compared to discrete tax expenses in the prior year. Core diluted earnings were $0.76 per share in the quarter, broadly in line with last year on a constant currency basis.

Turning to cash. We generated $681 million of free cash flow in the first half of the year compared to $667 million in 2024. Our robust cash generation enabled us to return $287 million to shareholders during the quarter, comprised of $121 million in share repurchases and $166 million in dividend payments.

Regarding tariffs, we incurred $27 million of tariff-related charges during the second quarter. Of this amount, $12 million was recognized in cost of sales and $15 million was recorded on the balance sheet for product not yet sold. Based on tariff rates as of August 11, we now expect a full year impact of approximately $100 million to cost of sales.

This represents an incremental headwind of approximately $20 million versus the tariff structure in May. Nevertheless, we continue to expect to fully offset the impact through a combination of foreign exchange and operational actions.

Now moving to our outlook for the remainder of the year. Our current guidance assumes that the aggregate global eye care market grows low single digits versus a historical average of mid-single digits. Exchange rates as of the end of July hold through year-end, and that the tariff structure I just described holds for the remainder of the year.

Starting with sales, we are updating our full year revenue guidance to $10.3 billion to $10.4 billion, which reflects a soft surgical market and recent moves in the U.S. dollar versus our basket of currencies. Additionally, given the soft surgical market, we are updating our sales growth rate guidance to between 4% and 5% in constant currency.

In terms of phasing, we continue to expect sales growth to accelerate in the second half of the year, predominantly in the fourth quarter. We expect full year R&D coming in at the top half of our 8% to 10% of sales range.

Turning to profitability. We now expect full year core operating margin to be between 19.5% and 20.5%, which reflects the updated sales outlook. Moving down the income statement. We continue to expect nonoperating income and expense to be between $185 million and $205 million.

Turning to tax. We now expect our full year core average tax rate to be approximately 18%. Based on all these factors, we are maintaining our core diluted earnings guidance range of between $3.05 to $3.15 per share. This range corresponds to a year-over-year change of between 0% and 2% in constant currency. We believe this updated guidance is prudent and reflects the current market conditions.

We also remain confident and committed to the long-term goals we outlined at Capital Markets Day in March. Despite near-term softness, we believe favorable market mega trends will persist and enable healthy long-term market growth. And from an operational perspective, we will continue to invest behind innovation, we have a solid plan to grow sales faster than the market and we will continue to be disciplined around costs. And as we've said in the past, these activities will drive strong operating leverage and generate significant free cash flow.

With that, I want to thank our associates for another quarter of hard work and dedication, and I'll now turn it back to David.

Thanks, Tim. To wrap up, we remain focused on executing with discipline, investing behind innovation and supporting our customers and their patients. Most importantly, we've laid the groundwork for an exciting second half driven by numerous new product entries. These products are the result of years of collaboration with our customers and are a testament to our deep market knowledge and commitment to helping the world see brilliantly.

Lastly, we're excited to expand our presence in white spaces like refractive surgery, glaucoma and retina through acquisitions. Products like EVO, Voyager and Valeda are each strategic moves in growing markets with unique technologies. Combining these products with Alcon's global reach and operational excellence, we're poised to accelerate growth, expand patient access and deliver long-term value to our shareholders.

Finally, I'd like to thank our talented teams across the globe for their dedication and passion.

With that, I'll open the line for Q&A.

[Operator Instructions] Our first question today is coming from Jeff Johnson from Baird.

All right. So I guess 2 questions for me. One, David, I want to understand, I think one of the encouraging points you brought up in the prepared remarks was that your share in PC-IOL was stable in the U.S. and maybe even ticked up sequentially a bit. Could you flesh that out a little bit more and maybe talk about your AT-IOL share outside the U.S.? You seem to drop some commentary in your slide deck from the first quarter about strength in AT-IOLs outside the U.S. that was not included in your slide deck here in the second quarter.

Yes, Jeff, good question. Let me separate the two. The first one was, obviously, the second quarter for us was sequentially better by about 4 share points. It was -- I think, obviously, PanOptix Pro has been well received for all the reasons I mentioned in the remarks, and I'm pleased with the way it's performing right now. There was obviously also a competitive outage during that period too. So you need to be thoughtful about what to attribute that to.

But I would say that generally speaking, we've done a really nice job getting the kind of the surgeons, what they really want, which is less visual disturbance and more light to create contrast. So that's what the design element was. We took the time to kind of choose that element. It plays back really well for us right now. So we're optimistic about, I think, how that plays out with the U.S. market.

There was pressure in the international markets. And I think you see some new products coming from competitors, particularly in Europe, where we did have some share loss, probably a little more than expected. And I do think that you're going to continue to see the IOL space pressured globally until you kind of see a stabilization of the number of new products entering. And so I think for a number of years now, we've been saying, look, we were -- we had a great run for on our own in the U.S. for a while, but the world is complicated. There's lots of products out there. So we were never going to stay forever at an 80% share in the U.S.

I think what we see now is a nice stabilization process coming forward, solid performance with new products. And we're starting to get a good sense for what competition is doing. So I think you're seeing the beginning of a stabilization process, but I still think that you're going to see some international pressure coming forward.

All right. Fair enough. And Tim, maybe just one quick question for you. I know you're not providing 2026 guidance in. I'm sure you won't even fully address this question. But you guys have done, I think, $2.5 billion, maybe a little bit more than that in deals here in the last 6 to 12 months, you've got 5 to 6 new products, sizable new products here that you're launching and trying to build some new markets in dry eye and DSLT, those kind of areas. Obviously, you're going to be working to mitigate the tariff pressures.

Just how do we think conceptually about how all that comes together through dis-synergies, synergies, maybe some dilution from some of those deals, things like that? Just can next year be a good earnings growth year? Just how to think -- again, not putting us on a number for next year, but just how to conceptually set up our models for 2026?

Yes. Great question. Again, I'm a little hesitant to talk too much about 2026. But I would say this, we feel great about the deals that we've done. We feel like they add long-term strategic value. Keep in mind, the biggest deal obviously being STAAR. That doesn't close for 6 to 12 months. So that's probably going to have limited impact on next year, but it depends on when we close the deal.

But with regards to the overall philosophy around synergies, obviously, we're a global company. We have a large footprint. We have -- when you think about it from a functional perspective, we have the resources and shared services in place to support a lot of those activities. So we'll give you more color when we get to the guidance in 2026.

Next question is coming from Jack Reynolds-Clark from RBC Capital Markets.

So my first is just on the market weakness that you discussed and was a driver of the downgrade. What's driven that weakness? And what's the outlook for that? What gives you confidence it's going to return? And kind of what kind of time frames are you looking for that? That's the first one.

Yes. Thanks for the question. Look, I mean, the world is aging, cataract prevalence is growing and treatment access is increasing. So underneath all of this, there is no shortage of cataracts. So I think the simplest way to think about it is there aren't fewer cataracts today or tomorrow, there's going to be only an increasing number. And if you look at our procedural volumes, that's what gives us confidence around the treatment in the end.

Now the reason we've been a little bit careful on this one is because, frankly, the historical surgical procedure volume has been about 4%, but it does have an oscillation around it. Over the last, let's call it, 10, 15 years, if you look back, there's a plus or minus a couple of points on that. So if you look at our MAT right now, it's probably 2% on the 12 months, but it was closer to 1% last quarter. So that's a relatively normal oscillation but on the low end of what the natural historical average should be.

So again, I'm going to lean on the math, and I'm going to tell you that there's no reason to believe from a fundamentals perspective, there's any fewer cataracts, and this is probably much more of a return to the norm or a version of the mean that will happen. We've had a number of really good years that were above 4% globally. And I think what you're seeing right now is just kind of a normalization that's happening. So look, we're going to give it a couple of quarters. We've obviously been careful about the next 2, and then we'll give you some more guidance for next year as we see what happens in the next third and fourth quarter.

Okay. Fair enough. Then my second question is on Unity. So you mentioned there's been some kind of pretty good kind of uptake since the launch at the end of May. Could you just give a bit more color on your order book here? Kind of how much line of sight do you have on placements through the remainder of the year? And kind of what placement has been like so far in July and August? Kind of just any color there would be great.

Yes, sure. Look, we sold our first VCS, I think, late May. So again, be careful about your timings on these. We've had probably 10 weeks or so. And in that 10 weeks, we've accumulated over 1,000 kind of qualified or quoted or contracted leads. So our funnel is very solid at this point. I think you need to remember though, this launch is going to be deliberate, and it will be a ramp because we're starting principally with the combined console and the most complicated surgeries, this is principally with the retina specialists because Constellation is almost 17 years old.

And to succeed here, we've got to train the staff. We've got to train the surgeon, we've got to ensure the settings transfers occur properly. And so we're moving -- look, we're moving deliberately and efficiently, but we're creating the experience that these surgeons expect and these are the toughest surgeons in the world. So we're very comfortable with where we are. What we're trying to do is make sure that we handle this in carefully.

And as we launched this thing like late this year, we get CS, the ramp will continue to build. And of course, this is a long game for us. Our replacement cycle is 10 years. We've got 30,000 consoles out there. And we are super confident that what we're seeing right now is an efficiency in this machine that we expect to make it a very, very significant part of what happens in the next decade.

Your next question is coming from Veronika Dubajova from Citi. Our next question today is coming from Anthony Petrone from Mizuho Group.

Maybe one on IOLs and one on the STAAR transaction. IOLs, maybe just a little bit on -- we've seen this now for a few quarters reverted to a low single-digit growth rate, talking about an end market business on one hand, but also various different competitive responses here, whether it be now of U.S. or U.S. So what is the timing where you could think IOLs in general stabilize? And what does that look like once we get to a stabilization phase? And I'll have a follow-up on STAAR.

Yes, I don't know. I'd have to be thoughtful about that one, and I'm not sure I'm able to kind of forecast what everybody is bringing right now. I think the people that we know a lot about who we've seen around the world, I think most of those products get into the market over the next 18 months. And I do think it -- almost every product takes about a year to kind of try it, see it stabilize and then kind of respond.

And so I think there's always trial in these categories because it's easy to try these products, and almost everybody wants to, if you -- so I think I guess the things from a visibility level that we have today, I would say it's kind of in that next 18, 24 months, it's going to be busy in this category.

On the other hand, we're also going to be busy in this category. So I would tell you, we've got a couple of things coming with -- certainly with Pro around the world, and we've got a few other things that we'll talk more about later. But I think everybody is going to be busy in this category, and I do think that it will be competitive. So I'd give you kind of a nonanswer there, I suppose, because I'm not 100% sure who's got what and what's coming next. And I do think that, that's going to be busy.

Fair enough. Just quickly on STAAR, you had a 12-month review period at the high end. Why is that extended? And Dave, you mentioned the collamer material, presbyopia potentially. But is there a potential to leverage collamer for an intraocular lens?

Yes. I think conceptually, there is. I don't know that we would necessarily see that as a priority. Whereas I think if you were doing a piggyback lens for a presbyope that's not ready for cataract surgery, let's call that a 45- to 60-year-old, that's a pretty interesting space. And so I think STAAR has worked on PC ICL before, and I think has got some good ideas. That material works really well as a secondary lens. And I think we've got a series of optical designs, I think, that we might be able to incorporate. So again, that's a long-term project. I wouldn't get too interested in it per se, but it is a great idea, and I think gives us a long-term view that we can add some things into that portfolio.

On the duration of this, I think this is largely around international regulatory review. In particular, China has a competitive review that we'll need to go through. We've not been through it before. So again, it's a little bit of a guessing game for us as to how long it takes. But the advice we're getting is it could take that long, hopefully not, but we'll see.

Your next question is coming from Veronika Dubajova from Citi.

Let's see if you guys can hear me okay.

Yes, we got you.

Sorry about that. I'm not sure what happened earlier, I'll keep it to 2 please. The first one is just circling back on Unity, I guess, I think, David, in the past, you've talked about this idea kind of 3,000 installations in a year. Can you maybe just give us a little bit of flavor of when you think we can get there? And I guess, maybe contextualize the 1,000 leads versus this idea of 3,000 placements. How should we think about it? And from where you guys sit, do you feel Unity is tracking ahead, behind? Or kind of how do we think about that? So that's my first question. Then I'll have a follow-up. Maybe we can get this one out of the way first.

Yes. No, we're pretty much what we'd expect to be. I mean I think we've been out there about 10 weeks, I think, something like that. We've got all we can handle right now. And I think as we work our way through that and place the units and train the units, again, we'll continue to move. We get faster as we go forward. And again, that's a big part of the ramp of this. The reason I say ramp as you -- these aren't iPhones that we're selling where they turn them on themselves and they fire up. We spent about a week or more in the office, in the OR and that's new for us, and it's new for them. And so what we're trying to do is make sure that everybody has a brilliant experience. And to the extent that we get that done, we move on. To the extent we don't, we stay. And I think that's the thing we're learning about and we're getting through it.

So I think our -- as I said last time, the gating factor for this will be our installation capacity. And I think we're working on that right now. I don't believe that, that's going to keep us from doing 3,000 at steady state of the year. We may do a little bit more than that early on, a little bit less than that in the back piece of it. But I think we still believe that over the next decade, we're going to see this whole console install base turn because we'll -- obviously, we're going to end of life a lot of these things at some point and we'll push along the way.

So in the near term, we're in pretty good place, probably as expected in terms of demand. And there's not a lot to report here. I think the big thing is people misunderstood a little bit about when we had CS coming out and what the difference between the VCS is and the CS because CS really opens the cataract market to anybody who wants a cataract machine that's at a price point that's considerably lower than the VCS. And the VCS is really for retina specialists to replace Constellation. So that's a very much more complicated world than our cataract business at the core of it. So lots of opportunity here and lots of excitement on the ground.

Okay. That's really helpful. And then just maybe a follow-up. Do you think you can hit the 3,000 next year. And then, Tim, I don't know if you want to add any color on what you'd expect equipment to do in the back half of the year since it's been so hard for us to model from the outside and maybe that would be helpful.

Yes. Look, I'm not going to get into the numbers exactly for next year. I think the way we've tried to guide everybody has been, look, we've got 30,000 units on the ground between Constellation and Centurion. Over the next 10 years, we'll replace that fleet. It's generally -- if you think about it as an even number across that, it should be a little faster in the front because people are excited about the thing. It will be a little slower because -- in the back because people will be waiting for the next one as they have in these last year or so. What you really see in the first and second quarter and late last year was a slowdown in equipment because people are waiting for this. So now it's just a matter of us getting the work done, and I think that's underway.

Yes. I would just say, Veronika, to give you some color on the new product launches. I mean, with the revenue guide of 4% to 5%, that obviously would imply if you take the midpoint, that would imply, call it, 6% in the back half of the year. New product launches are going to be a significant driver of that. A big piece of that will be coming in the fourth quarter. And if you look at the new product launches, again, we've got 6 or 7 launches coming out this year. Unity VCS is a big piece of that.

The next question is coming from Richard Felton from Goldman Sachs.

The first one is on Systane. I'm interested to know how that's performing in the quarter. Some of the industry data that we get, it looks like the brand and the overall category slowed a little bit. So I'd be interested to hear if that's what you're seeing and why you think that is? That's the first one.

Yes. Systane and Systane Pro were pretty good. I mean I think it was kind of mid-single digits, high single-digit growth, somewhere in that zone. I think what you saw in the quarter, I think, and we saw it, too, was a real pop up in the category broadly because there's a significant amount of advertising by some competitors. And that's, I think, good for the category. So it certainly helped us and obviously helped them as well. So we saw a little bit of a tick down in share, but actually, the market size grew for us, so perfectly reasonable for us.

I think what our category challenge in that area really more about the OcuMension wraparound and some gel stuff that we had some supply issues around. So I would tell you that underlying this is pretty healthy growth in Systane all around world.

Great. And then the second one is on STAAR. I was interested to know how important the China piece is to the business case for that acquisition. And as you sort of think through the growth outlook in China, we are also interested to hear your views on sort of local competitions in the ICL space in that market.

Well, look, I mean, I think we expect local competition. We know who they are. We participate in that market in a very significant way. It's our second largest market or second or third, depending on where the yen and the Chinese yuan is. I think the idea for us has been always how do we expand the refractive options for patients? And Lasik for us is a good business, and we've got a big chunk of business around the world that is the Lasik business.

But in China, actually Smile has done very well. And if you look at our WaveLight Plus data right now, we've got 100% of patients came out of our WaveLight Plus at 2020 or better. And like 80% plus came out 2016. So nobody else can do that. And so we're looking to get critical mass in markets like China, where the demand for refractive surgery is very high. But that's the same in Korea. It's the same in Japan. It's the same as the rest of Southeast Asia. It's the rest in -- really in Europe and the U.S.

So although I would say China matters a lot, it's not the long term. I mean long term for us, we'll be there. We're going to be -- it's going to be a huge market for us, and we'll be there with both above 6 diopters for EVO and Lasik for below 6 after. But with that -- those 2 products together give us an offering now that I think is very competitive with what everybody else is going to bring.

And I think also allows us to move into other markets around the world with greater critical mass and greater effectiveness. So we see this myopia epidemic as a real opportunity and to help patients. This product is a really terrific product. And I think it just needs a little bit more push into new markets and I think we give STAAR a bit of that critical mass. So that's what we're excited about.

Your next question today is coming from Chris Pasquale from Nephron Research.

One on STAAR and then I had a follow-up on tariffs. So how are you thinking about the sustainable revenue growth rate for the EVO ICL platform once all the noise in China calms down?

Yes, we think it's solid in China and it's solid everywhere else. I mean the penetration of EVO so low relative to the high myopes that it's just really -- I think it's a matter of dock training, business model. I don't -- I think competition is real, and I think it's going to -- I think on its own, I think it would have been a difficult road for STAAR in China in particular. I think with our critical mass, with our folks on the ground and frankly, as we look at the total offer we can bring to bear for some of these customers, I think we give a real opportunity to that brand. So I think that's -- for us, we see this as a very positive contribution accretive to our normal growth rate.

Great. And then the increased tariff headwind you're forecasting makes you a bit of an outlier. Most companies this quarter have been talking about less exposure than they had a few months ago. Is that specifically related to Switzerland and some of the recent developments there. And then can you talk about what you're doing in terms of mitigation? Is the ability to offset this really the weak dollar? Or are you guys actually making substantive changes to your supply chain and distribution channel?

Yes, I would say for us, I can't talk to other companies, but if you think about the EU as an example, coming in at 15%, I think what we had at the May time frame, folks were talking about the 10% kind of range. So I would say that's one of the key drivers of it. But the mitigation factors that we have in place, a vast majority right now is dollar and is the currency. But we are continuing to look at things like moving manufacturing footprint where it makes sense, kind of, I'll call it, the non-regret type of things because again, this is a very volatile environment. It takes a lot of thought, money and effort to move manufacturing. So we're really looking for a stable policy before we start making some larger moves like that.

Our next question today is coming from Ryan Zimmerman from BTIG.

I want to talk about maybe some of the long-term targets that have been out there for some time since the Capital Markets Day in the context of some of these new market growth rates. And you laid out a 5% growth rate kind of in line with market, and there's another 200 basis points of innovation, I think, gets you about 7%. With the new market assumptions this year, does that step down over the long term to maybe 3% and 5% on that 200 basis points. Does the long-term targets hold in your view? I'm curious if you could kind of give us your thoughts on that.

Yes. I don't think we feel any differently about the long term. Obviously, we've called the market off 3 times now. So I mean we missed the surgical market. That's just a fact. But that is not unusual in the context of 15 years. So what we -- if you really look at the market, it's basically a 4% growth market in the surgical procedural growth area. And we don't see any reason why that should change. But I will tell you, there is a plus/minus of 2% around it. So for it to be 2% right now is not where we thought it would be, but it's also within the range of normality.

So our general view right now is to do nothing other than say, "Look, there's no fewer cataracts today than they were yesterday. There's not -- we're graduating more surgeons around the world, particularly outside the U.S. than we have." I mean, U.S. productivity needs to pick up a little bit. But I think at the end of the day, there's no reason to believe that anything other than increased productivity is going to be the answer.

That's partly why VCS is so important because we see that it really does have the opportunity. If you were doing 19 cataracts in a day, you could probably do 20 now. I mean those are the kinds of efficiencies that private equity is looking for, the practices they're looking for that helps the procedural growth. But directionally, we don't expect anything other than normal markets in this -- and very similar to what's going on for the last 10, 15 years.

And I would also just remind you that that's -- we're talking often right now about the surgical procedure market, which is really cataract procedures. And there's a lot more to our business in here than just that element. So remember, our contact lens business, for example, that market growth is typically mid-single digits, but on the high end of mid-single. We've typically seen that 5% to 7%.

So -- and we don't see any real change in that. You look at our OTC market, again, the eye drops business has generally been kind of 4% to 5% grower. So we've got a lot of markets that are all pretty healthy. And that's why even today, we're basically growing with market. We'd like to be growing a little faster than that, but the markets are slow. So that's where we are.

Yes. I think also to David's point that I alluded to -- go ahead.

Go ahead, Tim.

Yes. Again, if you look at the megatrends that underpin when you look at the entire company, the population continues to age. The middle class continues to grow. Half the world is going to be myopic by 2050, and then the technologies continue to increase access, improve outcomes. So those -- we don't see those trends really changing. And again, when you're looking at the long-term goals, you're talking about sort of a 5-year time frame or so.

Yes. And sorry, if I was being a little myopic I guess, on Surgical. So maybe just on the other kind of long-term target, which is, Tim, the impression I got out at the Capital Markets Day was that you felt that margins, specifically your operating margins we're reaching a point where cash will kind of flow through the P&L back to shareholders. You've done a lot of M&A now. But with the step back in op margins, does kind of how you think about cash flow and the ramp in margins change at all? Because arguably, the margin trajectory over the coming years is a little bit more elongated. And I asked that also around -- with the perspective of, well, you've just done all these deals and should we not expect maybe as much robust M&A activity given some of these changing factors?

Yes, I'd say a couple of things. When you look at the margin profile, so if you look at this year, you take the midpoint, that would imply or that would be a step back from where we were last year. But when you break that down, this year, we're still going to get roughly 150 or so basis points of operating leverage. The challenge has been, what's offsetting that is we've got tariff pressure when you look at the op margin line and you've got the Aurion pressure.

So as you think about going forward into '26 and beyond, we should continue to get that same type of operating leverage 150, 200 basis points, what we've gotten historically. And you won't have the Aurion pressure. You still have a little bit of tariff pressure because some of that's hung up on the balance sheet.

So the fact that the business can continue to generate significant operating leverage, we feel really good about. And when you do that, you obviously generate nice free cash flow. So we feel good about the free cash flow. Our capital allocation philosophy hasn't changed. And again, the balance sheet is very, very healthy. So we've got a lot of capacity, and that gives us a lot of financial flexibility.

The other thing, Ryan, I'd just add for what it's worth is you got to think about these acquisitions as really product acquisitions. I recognize their companies, but they're almost all one product companies, right? So there's a tremendous amount of value in that. So if you think about Aurion, that's a single product company despite the fact that it's got a lot of R&D in front of it.

LumiThera was Valeda, LENSAR is a FLACS machine, STAAR is EVO and Belkin was the Voyager. So what we're getting is leverage off of our infrastructure, our sales force, our manufacturing, most -- all of this stuff has great leverage capability. So we actually benefit a great deal from it, and we can move those products faster than anybody else can. So that's obviously the idea here.

Our next question is coming from David Saxon from Needham & Company.

Great maybe one on Tryptyr, and then I'll have a pipeline related question. So just on Tryptyr, can you talk about the launch strategy since you rolled it out in late July? What's the level of investments baked into guidance? And how should we think about the revenue ramp to peak sales relative to the -- to getting to full coverage, I think you said at 18 months or so?

Yes. I mean I'd be careful about the revenue ramp in particular, because I think it's just going to depend on how the reimbursement process works. But let me talk to the launch strategy because I think it's really interesting, and we're excited about it. I mean, this is one of our first core entries back into pharmaceuticals where we've spent a lot of time over the years. We obviously have a good bit of pharmaceutical in the business. But this is a new product, and we have -- this is probably the first new launch we've done in a while.

And I will tell you that we've done a really nice job at the beginning of really working on professional education for the last year. Where it's appropriate, we've been talking to payers to make sure that they were. We understood their process, that we understood how we could get involved with reimbursement process. I think we understand it pretty well. We've been -- we've hired a new sales force. That sales force is working both on Tryptyr plus our Systane Pro. So it's really a dry eye focused group. It's calling on a combination of optometry and ophthalmology but all the highest using folks who we have good -- pretty good data on. So we've got pretty good targeting there.

We have a comprehensive advertising and promotion program that I won't bore you with exactly, but I'll just say that going forward, we've got things like first fill free, which is a program that is instead of sampling the product through the office, we're getting -- making it very easy for patients to get to the pharmacy with a prescription and get that filled without having to worry exactly about that reimbursement the first time around. That gets us going down the path little bit faster.

We've got a number of other clever ideas, I think, that are doing a nice job of helping us build this market. And I think we do see this as a blue ocean. I think what we really believe is there are a whole lot of patients in the office. And if you look at the visit data for ophthalmologists in particular, one of the most common, if not the most common presenting patient is a dry eye patient. And often, that's a frustrated patient that the ophthalmologists want something new and different for.

And I think this product is being received well, but it's early. We'll see, and we're all of about 3, 4, 5 weeks into this thing. So we're excited about it. We think it will take, obviously, 18 months to get, as I said, to get our full reimbursement in there, but directionally very happy with that we're off to the races.

Okay. That's great. And then I wanted to get an update on the Power Vision trial. What have you seen in the study following the new protocol as you talked about at the Capital Markets Day? And then I guess, what's the timing of when that could wrap up? And when could we see data for that expanded trial?

Yes, you're welcome. The timing on that is end of the year. So we'll have some data -- I don't know if we'll get it out in the fourth quarter -- or the third quarter call or whether we'll have it for the February call. But somewhere in that zone, we'll have -- we'll work through the data itself.

Next question is coming from Larry Biegelsen from Wells Fargo.

Tim, 2 for you. The implied second half guidance declined from -- by our math, over 9% to about 5% to 7%. How much of the reduction in the implied second half guidance is due to slower market growth and other factors such as the slower ramp of new products? And I have one follow-up for you.

Yes. I think a majority of it is really the market. Again, the ramps and the launches, we feel pretty good about. There was some share loss in there, to be fair. So if you had to split it out, maybe, call it, 2/3 market, maybe some share in there?

That's helpful. Tim, I wanted -- you got a couple of questions today on 2026, partly because we see The Street at 16% EPS growth, which is above your Capital Markets Day goal of 12% to 15%. I heard your comments earlier about 150 to 200 basis points leverage underlying. Is there any way you could at least tell us kind of the aggregate dilution from the deals next year, incremental tariff impact and anything else we should contemplate when we kind of calibrate our models for next year?

Yes. I really can't get too much into the deals, Larry, in '26 because again, it really depends on when we close them, how we close them and all of that. I can't give you a little help on tariffs again. Tariffs sort of hit to call it in the April time frame, a lot of that -- or some of that is going to get hung up on the balance sheet. So as we roll into 2026, we'll have a full year impact. I would guess maybe 50 basis points of pressure on the tariff piece depending, that's assuming that we don't offset it. So it depends on whether we offset it or not. But if you're looking at just gross tariff impact that's rolling off, that's probably a good number to start with.

Next question today is coming from Graham Doyle from UBS.

Just one on the kind of a follow-up to Larry's question on the sort of midterm guidance there, which effectively is, I know you don't want to comment on 2026, but I think even you gave this guidance only a few months ago, and is being reiterated today. I think it's not unreasonable to ask the question, which is you're not going to do 12% to 15% EPS growth this year. It is a CAGR over not that long period. Is it reasonable to think that you do 12% to 15% growth next year?

Yes. Again, I'm not going to get into 2026. We're sitting here in August, and we're in a dynamic environment right now. Happy to give you plenty of color to throw all that out in February when we give the guide. But again, I'll just reiterate the guidance that we gave at Capital Markets Day, so that 12% to 15%, that's a CAGR over our long-term goals, and we feel pretty good about that. We feel good that we're going to continue to invest in the business. The markets, again, the mega trends haven't changed, so we would assume that the markets come back. We're going to continue to drive operating margin improvement. And when you do that, that generates nice EPS. It generates good free cash flow. And from a long-term goal perspective, we feel pretty good about it.

Maybe I'll add this color, Graham, just for what it's worth. I mean the surgical market moving annual total was about 2%, all right? So that's the audited data, that should revert north of that. I would think that's what we're -- that's a belief that we have over the long haul. That should be somewhere around 4% over the long haul. The Vision Care market, moving annual right now is about 6%. It's typically been 5% to 7%, so you can pick a number in there.

And if those markets hold like that, which is what they should do, and then you lay in VCS, CS, PanOptix Pro, Tryptyr, Voyager, Precision7, Systane Pro, Aurion, Valeda, LENSAR, STAAR. And we got lots of stuff going on that we think adds to our base core business. And so look, when you get all through this, we got a tough moment here, but this has always been a backloaded year. We've been saying that from the beginning of the year, and next year looks really good to us.

Next question is coming from Issie Kirby from Redburn.

I wanted to ask on the contact lens market dynamics that you're seeing. There were some concerns last quarter about a bit of a weaker demand environment within contact lenses. You put up a pretty decent number. So I was just wondering what you're seeing there? And then how is Precision7 doing versus your expectations? Are you seeing any, I guess, positive cannibalization of some of your monthly wearers there? And I have a follow-up.

Yes. On P7, yes, look, it's doing very well. It's doing what we expected. And obviously, it is cannibalizing some of our product, but it also is taking share. So we expected it to work against the 2-week market. It seems to be doing that. So we're pleased with that outcome. And I think as we expected, it's a high-margin brand for us. So we like the mix shift to P7 to the extent that we get it from our old monthly lenses or from some of our lower-cost daily lenses. It's priced in a place which will help us on a margin basis. So I think even if we're trading some of our own product into this, I think we're still doing pretty well with it. And then we are taking share with that particular brand in the reusable category.

I would say on the other piece of this, the demand in the second quarter was a little bit more muted. It was on the low end of mid-single digits, but it's still mid-single digits. And as I just said a minute ago, this contact lens MAT, the 12-month number is about 6%. So I think what you're really seeing right now is a slightly lower amount of price into the market this year. We certainly took a little bit less than we took last year, and that's probably the only effect here.

What we saw with the consumer was consistent mix up. The price was still pretty solid. And we -- and frankly, the wearers are about flat, but they're usually flat. So I think we're in a pretty good place with contact lens health.

Great. And then just a follow-up on Unity and how revenue is being recognized with this product. Should we think about Unity as really a capital placement? To what extent are you guys leasing or perhaps bundling with your broader portfolio? Just trying to get a sense of how these placements really hit the equipment line or if there's anything elsewhere within Surgical that we need to consider?

Yes. Generally speaking, this is a capital purchase. I mean, I would just -- I would assume that. I mean, some of our customers are going to lease, but they'll use external leasing agencies to do that. For us, it will be largely capital. We don't do any more leasing, I don't think. And there isn't any real volume discounting at this point. So we're early in the cycle. We've got a lot of demand, I think, from the market. So I think our ASPs are holding nicely kind of through this first 10 weeks or so even though it's a bit early.

Our final question today is coming from Susannah Ludwig from Bernstein.

Could you guys just go into a bit more granular detail on the lower growth in the consumables business as this is one of the weakest quarters since the pandemic. You've been talking about for a couple of quarters, a softer market, but sort of sequentially, which regions were worse? And should we expect this more subdued growth to continuing consumables through the rest of H2? And then I guess is there any difference in the price contribution in consumables in Q2 versus Q1?

Yes, the last one, there's no real difference. I mean what you see -- I mean our consumables market and our consumables number is a pretty good proxy for what's going on in the market because our shares are meaningful in that area. And what you did see is, I think, correctly identified as a slower market, and that happened both in the U.S. and the international markets.

So I would say that around the world, it was a slow quarter for procedures. And I believe that to be kind of temporary. But again, we've called a little bit softer back half of the year, a little more consistent with the front half. And so I would expect similar numbers kind of going forward.

We reached the end of our question-and-answer session. I'd like to turn the floor back over to Dan for any further closing comments.

All right. Thanks, everybody. Thanks again for joining us. If you have any follow-up questions for investors, certainly reach out to Allen Treng or myself or for media, reach out to our corporate communications team. Appreciate your time. Thanks.

Appreciate the interest.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.