Alcon Inc.

Greetings and welcome to the Alcon fourth quarter and full year 2022 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Dan Cravens, Vice President and Global Head, Investor Relations for Alcon. Thank you. You may begin.

Welcome to Alcon's fourth quarter and full year 2022 earnings conference call. Yesterday, we issued a press release, interim financial report, an annual report, as well as posted a supplemental slide presentation on our website to enhance today's call. You can find all these documents in the investor relations section of our website at investor.alcon.com. Joining me on today's call from Geneva are David Endicott, our Chief Executive Officer, and Tim Stonecipher, our Chief Financial Officer. Our press release, presentation, and discussion will include forward-looking statements. We expressly disclaim any obligation to update forward-looking statements as a result of new information or future developments, except as required by law. Our actual results may vary materially from those expressed or implied in our forward-looking statements. Accordingly, you should not place undue reliance on any forward-looking statements. Important factors that could cause our Actual results to differ from those in our forward-looking statements are included in Alcon's Form 20F and our earnings press release and interim financial report on file with the Securities Exchange Commission and available on the SEC's website at sec.gov. Non-IFRS financial measures used by the company may be calculated differently from and therefore may not be comparable to similarly titled measures used in other companies. These non-IFRS 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 and our public filings. For discussion purposes only, our comments on growth are expressed in constant currency. In a moment, David will begin by recapping highlights from 2022 and recent months, including market dynamics, innovation, highlights, key product launches, and acquisitions. After his remarks, Tim will discuss our performance and outlook for 2023. Then David will wrap up with closing remarks, and we will open the call for Q&A. With that, I will now turn the call over to our CEO, David Endicott.

Thanks, Dan. Welcome to Alcon's fourth quarter and full year 2022 earnings call. 2022 was a great year for Alcon. We ended the year with sales of 8.7 billion and double-digit sales growth of 11%. These results were driven by new product launches, solid demand from resilient markets, and strong commercial execution. Core operating margin for the year was 18.2%, and core diluted earnings per share were $2.24, which was up 23% year-over-year on a constant currency basis. Additionally, we achieved a core operating margin of 20% when adjusted for foreign exchange. Based on these results, it's clear that the Alcon team is delivering and our fundamentals are strong. As I reflect on 2022, I'm extremely proud of what we've accomplished, especially given the challenging geopolitical, macroeconomic, and supply chain headwinds we faced. In Surgical, we grew the business double digits, driven by industry-leading technology, solid execution, and continuing international recovery. Our portfolio of PCI wells, Panoptix and Vividi, had another quarter of strong share growth. We exited the year with a global PCI well share position in the mid-50s. During the year, we launched our portfolio of IOLs on the Clarion platform in the United States. This highly differentiated material delivers among the lowest levels of glistening and surface haze and has a proprietary edge curvature designed to help reduce glare. Our new Clarion material has been well received by doctors around the world and is helping us to gain share. We're also expanding our footprint with double-digit sales growth in the equipment category for the year. This growth was particularly strong in international markets, where we continue to see solid uptake for our FACO machines, including our industry-leading Centurion device, as well as Legion, which is designed and priced for developing markets. We expect the demand for the equipment will return to more normalized growth rates this year. While we continue to grow our footprint in ophthalmic operating rooms worldwide, we've also significantly expanded our presence in the clinic with the Argos Biometer. Doctors are responding favorably to Argos, thanks in part to higher capture rates, easier prediction of accurate lens power, and data integration into the operating room, all of which helps drive clinic efficiencies and improve patient outcomes. Tying this all together is our digital offering, Smart Cataract, which we beta tested in 2022. Smart Cataracts received terrific feedback from surgeons and will continue to develop this platform in 2023. Smart Cataract is the first application in Alcon's comprehensive cloud-based platform that is uniquely designed for surgical ophthalmic practices. Smart Cataract links data systems and diagnostic devices in the clinic with equipment in the OR. Data shows that Smart Cataract delivers significant time savings during the cataract evaluation, planning, operating room, and post-operative workflows. Put it simply, Smart Cataract is helping surgeons deliver better outcomes more efficiently. Also in 2022, we expanded our presence in surgical glaucoma with the acquisition of Ivantis, which brought the Hydrus MicroStent into our portfolio of implantables. Hydrus has longstanding clinical and efficacy data. Its five-year horizon data demonstrated meaningful and statistically significant clinical benefits over the full five years, including sustained reduction in medication use, and decreased need for secondary glaucoma surgery. Now turning to vision care, our team delivered high single-digit growth across both our contact lens and ocular health franchises. In contact lenses, our full-year growth of 9% was driven by our portfolio of innovative lenses, which continue to receive favorable market feedback as well as select price increases. We continue to fill out our portfolio and launch new contact lenses in high-growth segments of the market or areas where we have opportunities to gain share. In 2022, we launched Total30 into the reusable market. This is the first major innovation of the $4.2 billion reusable lens category in many years. Total30 is the only water gradient lens available for reusable wearers, and since launching Total30, we are seeing share growth in this category. Total30 is available in the US and Europe, and we will continue to roll it out to more international markets in 2023. Just recently, we announced the launch of Total 30 for astigmatism, which competes in the $1.3 billion reusable TORIC category. This is the first reusable water gradient lens for astigmatic wearers. Since more patients with astigmatism wear reusable contact lenses, the availability of a TORIC T30 provides us an opportunity to gain share and bring exceptional comfort to these patients. This lens will be broadly available in the US and Europe earlier this year. and we'll roll out the lens internationally throughout 2023. We also launched DALYS Total One for astigmatism in early 2022, and customer reception has been very favorable. DALYS Total One TORIC joins the sphere and multifocal modalities for the premium DALYS lens market. DALYS Total One TORIC is also the first and only daily TORIC lens to feature our proprietary water gradient technology that delivers exceptional comfort. Now, all of our TORIC lenses feature a proprietary balanced design, which creates clear and stable vision. Our TORIC portfolio represents a significant opportunity as our estimates show that TORIC is among the fastest growing segments of the contact lens market. Now, turning to ocular health, where we also saw high single-digit growth in 2022, despite the supply chain challenges we faced. Starting with dry eye, our sustained family, including sustained hydration, ultra, and complete, continues to perform well, with double-digit sales growth in 2022. There are over 30 million people in the U.S. alone that suffer from dry eye, and Sustane is the best-selling brand of artificial tears and is clinically proven to soothe dry and irritated eyes quickly. Now, with multi-dose preservative-free formulations, we have a full suite of convenient and affordable options for patients. Late in the year, we acquired Aerie Pharmaceuticals. With this acquisition, we expanded our glaucoma portfolio with two additional products, Ropressa and Roclatan, which were complimentary to Stembrinza. Roccatan and Stembrinza offer four different mechanisms of action, allowing for maximal medical therapy in just two bottles. Additionally, the area acquisition expands our R&D pipeline and builds upon our pharma development expertise. Our strong 2022 ocular health performance was offset by significant supply chain challenges, particularly in contact lens care. Our team continues to address these challenges which are likely to persist through at least the first half of 2023. Now let me provide an update on our end markets. In surgical, global cataract procedures were up mid-single digits in the fourth quarter versus prior year. This growth varies by region. In the United States, where surgical centers continue to experience staffing challenges, procedural volume was up low single digits. Outside the U.S., procedures were up mid to high single digits as markets continue to improve. Encouragingly, we saw sequential improvements in ATI oil penetration in the U.S. in the fourth quarter. We continue to focus on driving penetration by educating doctors, clinical staff, and patients about the benefits of advanced technology lenses. In contact lenses, the retail market growth in the quarter was mid-single digits, with low single-digit growth in the U.S. and high single-digit growth internationally. While mid-single-digit growth is in line with historical rates, it's important to note that this growth predominantly reflects price increases and wearer trade-ups. Additionally, the market growth varies by modality, with the daily Cy-High category continuing to grow significantly due to higher pricing and patient trade-up. Torex also continued to grow nicely, primarily driven by the daily Torex category. Finally, the reusable category was flat. Now, with that, let me pass it to Tim. We'll take you through our financial results and comment on our outlook for 2023.