Alcon Inc.

Greetings and welcome to the Alcon third quarter 2025 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. 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 Stonecipher, 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 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 20F, 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 for 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 vitro retinal and cataract procedures. Surgeons are responding positively to the introduction of 4D FACO technology. Unlike traditional systems, the 4D FACO tip moves in a unique multi-directional 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 competence 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 it reflects our longstanding commitment to customer-backed innovation with the surgical community. We're also gearing up for the launch of Unity CS, the standalone 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 Clarion 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 continued to outpace the market. Our toric modalities, in particular, delivered double-digit growth in the quarter and are expanding access for astigmatic patients. This is 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 SUSTAIN 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 SUSTAIN 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 Triptyr, which we launched in August. Unlike traditional prescription dry eye drops, Triptyr is the first and only prescription drop that stimulates natural tear production as early as day one. 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 Triptyr 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've 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 three topics. First, there was new data on Vividi ATI wells showing strong patient satisfaction in complex cases like early AMD and mild corneal irregularities. These findings reinforce Vimity'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 SmilePro revealed that WaveLight's ray tracing technology significantly outperforms Smile in visual outcomes. Using a three-dimensional digital twin of the eye, WaveLight Plus achieved 20, 12.5 vision or better in 98% of the cases versus 82% with SmilePro. 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 ATI well 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 Star Surgical. We continue to view the transaction as attractive and believe that Alcon is best suited to maximize the value of their implantable columnar 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 Star 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. We're proud of what we've accomplished together. I'm 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 surge in 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 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 Daily's AquaComfort Plus, where we've limited our promotional activity. In Ocula Health, third quarter sales of $462 million were up 6%. Growth was led by eye drops for dry eye and glaucoma, including Sustain, Roquitane, and initial sales of trip tier, which we launched in August. There was also some pressure resulting from the divestment of certain eye drops to OccuMention 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 expense was a net benefit of $3 million. The average core tax rate in the first nine 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 79 cents per share in the quarter, down 2 cents versus last year. Turning to cash, we generated $1.2 billion of pre-cash flow in the first nine 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 nine months of the year. comprised of $384 million in share repurchases and $166 million in dividend payments. Regarding tariffs, we incurred $57 million of tariff-related charges in the first nine 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 iCare 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 remains on track at $10.3 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 Orion. Our core operating margin outlook remains 19.5% to 20.5%, and non-operating expense is unchanged at $185 to $205 million. 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 TripTier, Panoptix Pro, and Precision 7, among others. These innovations should enable Alcon to grow faster than the market, and at the same time will 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 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 Orion 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 discipline 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 Pentoptics Pro, and the early promise of TripTier 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 at R&D so that Alcott 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.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. Please limit yourself to one question and one follow-up question. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. And our first question will come from Anthony Petrone with Mizuho Group.

Thanks and 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, you know, 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. You know, 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? Thanks.

Yeah, thanks, Anthony. Just a little bit on the cycle. You know, I don't have a lot different 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, you know, 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, you know, obviously it was 3% in the cataract procedural market. So, you know, significant move up relative to front half of the year. But, again, I think we're careful right now about what, you know, one data point doesn't make a trend. And so let us get into, you know, the beginning of the year next year, give you a better number when we look at guide. We'll have a good sense of the full fourth quarter. And I think, you know, if we're seeing what I think we said, which I've said before is kind of regression of the mean, you know, the historical level 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.

Thank you.

Our next question comes from Ryan Zimmerman with VTIG.

Good morning, or good afternoon, I guess, in Switzerland, but thank you for taking our question. David, on the Star transaction, you know, you guys put out, I think, pretty poignant 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 know, 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 Star, you know, Star's technology unique? attractive other than, you know, they've been in the market, they've had success for some time?

Well, let me say that I, you know, 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, you know, is interested in detail around this transaction, have a look at what we posted online. I think, you know, we like their product. We like their team a lot. I think it would be a good complementary business to us. I said in my notes, I think it fits nicely with our laser business. Same customer, same, you know, we have bigger geographies. We can take care of this, I think, more efficiently. But there, you know, there are a limited number of approval, a 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 Star is obvious, which is, you know, as kind of a standalone single-product company, they're just going to have a difficult and very unlikely path to profitable growth. So, you know, 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 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, you know, the Belkin product and some of the drops, but kind of where you, you know, what your outlook is on surgical glaucoma, I think, would be appreciated. Thank you.

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, 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 hour 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 Valeta 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, you know, 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, especially in interventional glaucoma, which we continue to believe is the way of the future.

Thank you.

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

Hi. Thank you for taking my questions. This is Kavya and to Graham. Just a couple, please. First is, so you look set 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 the 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? Thank you.

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 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. You know, 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's 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.

Thank you.

And we'll go next to Tom Steffen with Stiefel.

Great. Hey, guys. Thanks for taking the questions. 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 You know, 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 you know, and for 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, you know, our book is very strong.

Got it.

That's great.

And then, Tim, maybe for you, appreciate the comments on kind of the inputs to margins next year between tariffs, Orion, 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 BIPs. 2H25 by our math is tracking towards closer to 50 to 75 BIPs, 4Q closer to 100 BIPs. 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 to in that 150 bps plus. Thanks.

Yeah, listen, I think there's no doubt that this year has been challenging. You know, 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 Orion investment. We had seven launches this year, so we've obviously put more, you know, marketing and sales in our product launches to make sure that those are successful. So, you know, given all of that, that's what you're seeing this year in the margin pressure. I still believe if you normalize it and you look at historical improvements, you know, 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, you know, 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 Orion. But net-net, we'd expect to continue to get nice margin expansion next year. Got it.

Thanks.

And our next question comes from Matt Mixick with Barclays.

Hey, thanks so much for taking our questions. The 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, you know, on the gross margin line, any directionally, the effect of that, do 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 lines? And then just one quick follow-up on IOLs.

Yeah, 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 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 or $100 million range. And then there are going to be some other things that you're going to see in the gross margin, right? You're going to see a mixed 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 – and 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, you know, 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 two fronts to continue, you know, through, you know, launching, you know, a doctorate in optics pro and additional data on Vividi? or other factors that can kind of help you move the needle on or kind of stabilize share and maybe move the needle on volumes. Thanks.

Yeah, Matt, let me give you some context I think that may help. I mean, look, I think, you know, as I've said in the past, the next couple of years are going to be very difficult competitively. I think there's just, you know, 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, you know, we've lived also through some slower market, which I think is, you know, 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 ATI well penetration was up 130 basis points this year, or sorry, this particular quarter. And it's been up, you know, 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. But that actually benefits us quite a lot in markets where we have the majority of the ATI wells. So in the U.S., where we still have the vast majority of the ATI wells, 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 I think we're seeing – I think we see it in Japan right now. I mean, our reception has been so strong in the U.S., you know, 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 – you know, we're excited about what the next series of products does. And, you know, even in that vein, you know, we just got Vividi onto the Clarion 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 onto planables next year, but – But I do think that somewhere between the products that we have and are launching, the HCI well penetration and some improvement in the markets, it's going to be tough because there's going to be a lot of competition. But I think we'll weather through it. I think we, you know, have a solid performance this quarter. I'd like to see us somewhere right around market growth, you know, going forward.

Thanks so much.

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

Oh, great. Thanks for taking my questions, David and Tim. So maybe I'll start on the contact lens market. So I think, you know, the U.S. kind of drove that 4% growth. So, you know, 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 mixed benefit you could see going forward relative to what you've seen historically.

Yeah, really good questions, David. Thank you. A couple of comments on the global market. Look, globally, it's still 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, 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, you know, super strong either. So I think it was below kind of historical averages. So, I mean, I think some of that is just, you know, 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, you know, we should see, you know, I expect to see kind of normal market growth going forward. But, The U.S., you know, I think in particular has, you know, this 6% growth that we saw in the U.S. was a nice effort, but you 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 back. some of the share movement that we have back just a little bit as we go forward. On DHCP, the mix is certainly benefiting us 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 DHCP – sorry, into DT1. But the overall share in the U.S. in dailies is challenged by competition significantly and price competition in particular.

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

Yeah, look, Triptir is going really well. As I said in the notes, you know, the eye care community is very excited, and we're pleased with the amount of trial and uptake across the potential prescribing base. You know, perhaps most encouraging is that patients are playing back the unique efficacy of this mechanism. It's not a supplement to the lipid layer. It's not an anti-inflammatory, which, you know, again, it's going right at the kind of basic mechanism to create tiers, and that is the very core of the disorder. So, I mean, we're very excited about what's happening there. I think you've 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've got a platform that has been used by several companies in iCare. If you go back and you look at some of those launches, You'll find in 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 off easier, the prescription adjudication easier, and it actually delivers it to home patients. 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.

Okay. That's super helpful. Thank you.

And moving next to Veronica Dubiova with Citigroup.

Hi, David. Hi, Tim. Thanks so much for taking my questions. I will keep it to two, please. One, just want to get your flavor. I've seen lots of questions around unity and whether that's tracking in line with expectations, but there's a number of other products thriving growth this quarter. So just would love to get your high-level thoughts and, one, how you feel about the trip to your uptake relative to what you were looking at and hoping for this early on and, two, I think, David, you've touched upon pro, but maybe just a similar question. And if I can relate it to that, I might have missed it, but what your PCIO 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, you know, technically, mathematically, the guidance implies 5% to 9% organic sales growth for the fourth quarter. So 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. Thank you, guys.

Veronica, let me try and break your two questions into the four that you asked. Just kidding. Very nice. Look, the trip tier growth I just commented on, it's better than expectations for us out 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, you know, have a little bite to it. But, you know, what's exciting to hear is that this thing really works. And when you talk about efficacy that works, you know, all eye drops have a little bit of that bite to them. So, you know, we're excited about that balance that we're hearing back from the patients and the doctors that says, you know, this is really working and, you know, we like what we see. You know, there's more to come. We're early, so I should be a little, you know, careful about that and circumspect on it. But, you know, 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, you know, 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, it could 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, you know, 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, you know, 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, you know, the stability of the share quarter to quarter is, We had – you know, it's very hard to read this because remember that there was a – you know, 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, you know, from some slowdown in some of the other competitors. So – but generally speaking, you know, our share is very good. It's well above – we have the vast – well, we have a significant majority of the PCI well market and the majority of the, the whole of the HNI world 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, um, in, you know, just normal monofocal business. So when you look at the kind of unit volumes for us right now, we look solid all over the planables business. Um, PCIOL is still going to be just for balance, you know, a very significant competitive fight all over the world. We just, we just like our chances better, uh, today and we're doing well. Um, Q4 exit rate, I'm going to leave that to Tim.

Yeah, Veronica, thanks for the question. Yeah, 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, you know, 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, you know, 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.

Brilliant. Thanks, guys. And our next question comes from Larry Beagleson with Wells Fargo.

Thanks for taking the question. 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 VACO and vitrectomy placement based on, you know, the color you provided at Baird, which I think showed an incremental, you know, 1,200 placements in 2026. you know, can you confirm that that's about the FACO and vitrectomy is about half of equipment sales and how is the rest of equipment sales trending, you know, in 25 and 26? Just so the, you know, 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, you know, 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've 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 that particularly in a number of markets that people really want both machines because 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're just getting started with the Leda. I think, you know, 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 most of the world kind of glaucoma specialty world kind of technically onto 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 Salesforce 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. Did you hit refractive? Oh, I did. Oh, Wavelight Plus. Yeah, 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, you know, when you talk about, you know, the percentage that we can get to 2012 and a half 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 cool and on the front edge of what we're trying to do in cataract refractive.

That's helpful. Just one follow-up on contact lenses, David. Is there any consumer element here? You know, if we look at kind of the year-over-year change in growth, I know at Baird you talked about, you know, just less price. But, you know, there's been a pretty big change in the last year or two in the contact lens market growth. In Japan, you just talked about, you know, 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? Thank you.

You know, I'd have to think about that a little more than I have, but I think there is always some, you know, 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 is, you know, 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 four for a couple of quarters, you know, 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. You know, we had a lot of inflation through COVID. Almost everybody took, you know, 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, you know, trade-up. We've looked at it, you know, in the 2009 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.

All right.

Thank you.

Moving on to Jeff Johnson with Baird.

Thank you. Good morning, guys. Good afternoon. One maybe follow-up question on Unity. I know you've gotten a lot of questions on it so far, David. But, you know, again, referring back to the chart that you put up at our conference, you did talk about some volumes there. We kind of beat that to death today. What kind of price premium are you recognizing on BCS and do you expect to recognize on CS relative to Constellation and Centurion? 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's list price, I think, is $185,000. You know, we've given some discounting, but not much. And I think you can do the math off of the base two 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, you know, how big the customer is and what they're buying and what the commitments are and how long the contracts are. So, you know, 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, you know, pretty much as we've described in the past. probably a 10% to 20% premium on the procedure.

All right. That's helpful. Thank you. And then just over on Flipgear, 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 the 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? Thanks.

Well, look, first on the profitability of DTC, I mean, we won't begin to run DTC on trip tier until we have sufficient reimbursement for patients that it makes good sense. You know, I don't know, and I haven't really looked at the product level, you know, 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, you know, maybe it happens, maybe it doesn't. It really just depends on the pace of reimbursement. You know, through the third party we're using, you know, 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's more of just exiting that relationship and taking it up in a normal way once we get through the kind of heavy lifting that they do to get the reimbursement, the prior off, you know, all the work that they do to kind of get this available and then ship it to the patient's home. So all that, you know, is a service that is very useful in the early days but helpful not forever.

Understood. Thank you.

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

John, are you there?

Terry, we can move on to the next.

Okay. Jack Reynolds with RBC. Please go ahead.

Hi there. Thanks for taking the questions. I had a couple, please. The first is on the PCI world penetration. Could you talk about the penetration in the US versus Europe, and I guess versus APAC, if you've got that data as well? And how are you seeing pricing develop in Europe? And then kind of coming back to cataracts kind of more generally, because I was 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?

Yeah, well, let me start with PCI well 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'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 PCI wells. 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. Oh, pricing element in Europe. You know, the pricing element in Europe is obviously, you know, 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 is held pretty stable. And, you know, I think as we introduce new products, we are able to get a little price. So if you think about Pro on Panoptix, you know, we're obviously bringing it in at a slight premium to Panoptix, which gives us some flexibility around, you know, the core pricing model that we have. So, you know, I think stable but generally declining over time will be the answer.

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

You know, I mean, look, I mean, there's a thousand ideas on cataract volume and what it is. Look, here's what we're certain of. There's 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. 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'll 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. 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 groups. 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 two years, and I've been wrong, so I'll just give you the bucket of it and let you pick.

Okay, that's great. Thank you. I mean, can I just squeeze on about 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 a higher pull through of consumables kind of are you seeing that kind of that efficiency gain uh being being utilized by surgeons i i don't have that data um so i'm not i'm not sure um i'm i wouldn't expect it to be higher per se um because in the beginning especially you know the first what has it been six months nine months um you know we're getting these guys trained and moving if anything it's probably a little bit slower um 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, you know, in the long run, but I wouldn't worry too much about it in the near term.

Cool. Okay, lovely. Thanks very much.

And we'll go next to David Adlington with J.P. Morgan.

Hey, guys. Thanks for the questions. Firstly, just on Panoptix Pro, 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 wanted to check if there'd been any stocking in either Panoptix Pro or in Ocular Health. Thanks.

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

Yeah, exactly.

Yeah, no, not to my knowledge. You know, I think 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, you know, 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, you know, we're still only maybe, what are we, six months into this thing. So we'll see whether that pans out or not, so to speak.

Thanks.

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 Alan Trang or myself for investor questions or our corporate communications team for any media questions. Thanks again.

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