Alcon Inc.

Greetings. Welcome to Alcon's second quarter 2023 earnings call. At this time, all participants are in the 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. Please note this conference is being recorded. I will now turn the conference over to Dan Cravens, Vice President of Investor Relations. Thank you. You may begin.

Welcome to Alcon's second quarter 2023 earnings conference call. Yesterday, we issued a press release and interim financial report and 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 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 Materially from those in our forelooking 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 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, 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 the year. then David will wrap up and we will open the call for Q&A. With that, I will now turn the call over to our CEO, David Endicott.

Thanks, Dan. Welcome to Alcon's second quarter 2023 earnings call. I'm pleased to report that we had another strong quarter with double-digit sales growth of 12%, core operating margin of 19.9%, and core diluted earnings of 69 cents per share. These outstanding results were driven by our competitive product portfolio, favorable market conditions, strong commercial execution, and select price increases. We also saw strong performance in Asian markets, particularly in China. In surgical, our diverse portfolio and incremental innovation continue to deliver strong growth in a healthy market. In implantables, similar to last quarter, we saw the tail end of the Korea PCIOL reimbursement change, which increased out-of-pocket expenses for many Korean patients. If we exclude this impact, total implantable sales were up 5%. We have now fully lapped the reimbursement change and expect more normalized comparisons going forward. During the quarter, we introduced Vividi to select international markets, including Japan and Canada. Feedback from surgeons has been extremely positive, and we're excited to bring our patented non-diffractive technology into these important markets. As a reminder, Vividi is the first of its kind presbyopia-correcting IOL that provides patients with monofocal quality distance but excellent intermediate and functional near vision. all with low levels of visual disturbances. With Vividia Panoptix, we continue to lead the ATIOL category in the U.S. and international. Importantly, we remain encouraged by the resilience of global ATIOL penetration, which was up 80 basis points versus prior year and up 60 basis points sequentially. This growth was primarily driven by strength in international markets. As anticipated, we're starting to see more entrants in the U.S. IOL market, which will naturally have some impact on us given our significant share position. However, in China, where our IOL business is under-indexed, we're preparing to launch Vividi later this year, which we believe will help accelerate our share in this important market as it returns to significant growth. In the monofocal space, our Clarion material is helping us defend our market-leading position. Clarion is the latest material advancement in our 20-plus year history of continuous innovation in IOLs. As the name suggests, Clarion provides exceptional clarity, allowing surgeons to deliver long-lasting refractive outcomes and Clarion is glistening-free biomaterial that has amongst the lowest level of haze and subsurface nanoglistings compared to leading competitive IOLs. Additionally, the Clarion monofocal is available with the autonomy preloaded IOL delivery system. Autonomy is designed with advancements intended to benefit both surgeons and patients. Its automated delivery mechanism and ergonomic design allow precise and simplified single-handed control of IOL placement. Now turning to equipment, we are continuing to place Centurion and Legion devices in international markets as we work through the upgrade cycle of Legacy, Infinity, and other machines. Centurion with ActiveSentry is designed with advanced technology to help enhance surgeon confidence with lower intraocular pressure and enhanced chamber stability. Importantly, ActiveSentry helps maintain stability in the eye by adjusting for fluctuations in intraocular pressure. Our success in equipment also drives growth for consumables in three important ways. First, our growing share of the active equipment installed base naturally drives higher consumables demand. Second, as surge in productivity increase, so does consumption of consumables. And third, as we install higher value machines, there's a natural ASP uplift that drives consumables value. So all these factors, along with select price increases, have contributed nicely to our consumables growth. Now closely linked with equipment, is our world-class service offering, which we believe is one of the core strengths. Service is a critical component of our portfolio and is often a key factor for healthcare professionals when selecting technology for their practices. Our ability to offer market-leading technology supported by best-in-class services allows customers to fully realize the potential of Alcon's products, helping them deliver the best outcomes for their patients. Additionally, we're continuing to roll out Smart Cataract to new practices. Smart Cataract is the first of our digital health solutions that empowers surgical practices to work more efficiently while delivering optimal outcomes for patients. We specifically designed Smart Cataract with ophthalmology in mind. It seamlessly connects data systems, diagnostic devices, and surgical equipment from the clinic to the operating room. Later this year, we're rolling out a series of artificial intelligence-based features that enable Smart Cataract to automatically evaluate patient data and take into account surgeon preference, preferred formulas, and lens types to efficiently guide the surgical planning process. This enables surgeons to make optimized recommendations that we believe will help lead to better patient outcomes. Real-world data has indicated substantial time savings and efficiencies for cataract surgery planned with Smart Cataract, We're excited to bring this technology to more practices. Now I'll turn to VisionCare, where I continue to be pleased with our strong performance in contact lenses and ocular health. In contact lenses, our strategy of investing behind fast-growing market segments or where we have significant share opportunities working out well. As a result, we're outpacing market growth in every category where we have launched new products. I'll start with reusable lenses, where our latest products are total 30 and total 30 for astigmatism. Since launching Total30 TOREC earlier this year, we've seen an acceleration in the adoption of the Total30 family, which is now available in the U.S. and Europe. Later this year, we'll launch this innovative lens in Japan. Additionally, we'll further expand the Total30 family in the U.S. and Europe with the launch of our multifocal modality. The reusable water gradient design of Total30 is made possible by the introduction of our proprietary Celigent technology. Steligent mimics the ocular surface to help resist bacteria and lipid deposits. This is what enables Total 30 to provide a premium wearer experience similar to Daly's Total 1, but on a monthly platform. Now, turning to daily lenses, where we saw another quarter of double-digit growth, in particular, I continue to be impressed by the Florence R Toric lenses, including Precision 1 and Daly's Total 1 Toric. The Daly's Toric segment is the fastest-growing segment of the market, as it's estimated that approximately one-third of contact lens wearers have astigmatism, but only 10% wear toric lenses. And together, Precision 1 and Daly's Total 1 toric address the mainstream and premium market segments. A recent clinical study evaluated the performance of Daly's Total 1 sphere with wearers who have previously dropped out of contact lenses due to issues of comfort or dryness. This study found that approximately 90% of participants were likely to continue to wear Daly's Total 1 on a daily basis. This is important because preventing wearer dropout by improving the wearer experience represents an important patient feature as well as a sizable opportunity to contact lens value capture for our customers. Now, turning to ocular health, we continue to see strong retail, consumer, and physician interest in our portfolio of eye drops. I'll start with sustained, our family of artificial tears. A recent study examined the quality of life of high digital device users who are treated with sustained complete preservative-free. This study found a 40% reduction in dryness symptoms in treated patients. And now with these options available in the United States, we're bringing the benefits of preservative-free formulations to even more consumers at a more accessible price point. Moving to Pataday, our family of ocular allergy drops, encouragingly, we're seeing more consumers appropriately select ocular allergy drops to correctly treat their allergy symptoms as a result of our direct-to-consumer educational efforts in the U.S. And in our pharmaceutical eye drops, we're continuing to build momentum behind Roclatan and Repressa with ophthalmologists and optometrists. We're seeing positive uptake of these first-in-class therapies with low teens total prescription volume growth in the second quarter. Finally, I'm pleased to report that we're making solid progress towards resolving the supply chain challenges in contact lens care. Recall that these pressures started in the second quarter of last year, so we're wrapping around on an easier comparison. and we expect the situation to continue to recover throughout the back half of the year. Now let me provide an update on our end markets. In surgical, global cataract procedures were up mid-high single digits in the second quarter versus prior year. As I mentioned earlier, global ATI well penetration was up 80 basis points versus prior year and 60 basis points versus prior quarter. Notably, we're starting to see surgeon productivity improve, which when combined with the patient backlog should be an important driver of procedural growth. We continue to monitor penetration trends closely and are leveraging programs that digitally and conveniently educate patients about their lens options early in their cataract journey. Moving to contact lenses, retail market value was up mid to high single digits. Similar to last quarter, we saw steady wearer trade-up and meaningful contribution from price. Before I pass it to Tim, I want to briefly comment on our market outlook for the remainder of the year. On our May earnings call, we indicated that we were planning for a potential slowdown in market growth in the back half of the year. Throughout the first half of the year, global ATI oil penetration was solid, and contact lens trade-ups and price capture were both robust. Given these results, we've updated our outlook for the remainder of the year and currently assume that markets grow at or above historical trends. Now, with that, I'll turn it over to Tim, who will take you through our financial results and provide more color on our updated outlook.