Alcon AG Q3 FY2024 earnings call

• Reported solid quarter with sales of $2.4 billion, 6% growth, core diluted earnings $0.81 per share (25% growth), core operating margin 20.6%, and record free cash flow of $1.3 billion in first nine months. • Launched Precision7 one-week replacement contact lens, with full U.S. availability starting January 2025. • Systane had fifth consecutive quarter of double-digit growth, with launch of Systane Pro preservative-free. • Strategic arrangement with OcuMension in China to maximize value of dry eye products. • Anticipated U.S. launch of 512 dry eye treatment with PDUFA date May 30, 2025. • Surgical implantables: International uptake of ACIOLs growing, migration of intraocular lenses to Clareon material, expansion of ACIOL offering with AutonoMe. • Surgical equipment: Unity VCS combined phaco and vitret platform expected to launch in second quarter 2025, Voyager DSLT device to launch in U.S. first quarter 2025. • Market dynamics: Global cataract procedures grew ~4%, contact lens retail market up ~5%.

Vision Care: Third quarter sales of $1.1 billion, up 7%. Contact lens sales were $664 million, up 8% driven by innovative lenses and price. Surgical: Revenue was $1.3 billion, up 5% year-over-year. Implantable sales were $422 million, up 5% mainly due to advanced intraocular lens technology in international markets, including a benefit in China from volume-based procurement, partially offset by slower U.S. market conditions. Consumables: Third quarter sales were up 6% to $701 million, driven by vitret consumables in international markets, cataract consumables, and price increases. Equipment: Sales of $215 million were up 1% year-over-year, in line with expectations, with equipment sales growth expected to be broadly flat until the commercial launch of Unity VCS. Ocular Health: Third quarter sales of $431 million were up 4% year-over-year, with strong performance in eye drop portfolio including double-digit growth for Systane, partially offset by declines in contact lens care in international markets.

• Updated full-year revenue guidance range to $9.8 billion to $9.9 billion, constant currency sales growth 6% to 7%. • Tightened core operating margin guidance to 20.5% to 21%, trending toward the low end due to inventory provision and investment in new products. • Interest and other financial expense expected between $155 million and $165 million. • Core diluted earnings guidance range tightened to $3.00 to $3.05 per share, corresponding to 15% to 17% constant currency growth over 2023, with ~$0.08 FX headwind absorbed.

• Potential impact of competitive sampling on U.S. surgical market performance. • Uncertainties regarding the timing and full revenue contribution of new product launches. • FX headwinds that could affect financial results.

Q: Greetings and welcome to the Alcon third quarter 2024 earnings conference call.

A: Operator's opening remarks.

Q: Graham Doyle from UBS asked about next year's growth and margin investment.

A: David Endicott and Tim Stonesifer discussed next year's growth expectations, new product cadence, and margin expectations.

Q: Jack Reynolds-Clark from RBC Capital Markets asked about consumables demand and Voyager rollout.

A: David Endicott spoke about consumables demand and Voyager's potential benefits and rollout plans.

Q: David Saxon from Needham asked about AR512 adverse events and PanOptix Pro.

A: David Endicott addressed AR512 adverse events and PanOptix Pro launch timeline.

Q: Larry Biegelsen from Wells Fargo asked about top line guidance reduction and Unity VCS feedback.

A: Tim Stonesifer and David Endicott discussed guidance reduction factors and Unity VCS feedback.

Q: Patrick Wood from Morgan Stanley asked about OUS ACIOL business and therapeutic assets.

A: David Endicott talked about OUS ACIOL business growth and therapeutic asset appetite.

Q: Ryan Zimmerman from BTIG asked about fourth quarter assumptions and Precision7.

A: David Endicott discussed fourth quarter assumptions and Precision7 market segmentation.

Q: Jeff Johnson from Baird asked about 4Q guidance and contact lens market.

A: Tim Stonesifer and David Endicott addressed 4Q guidance and contact lens market dynamics.

Q: Anthony Petrone from Mizuho Securities asked about IOL dynamics and new product contribution.

A: David Endicott spoke about IOL competitive dynamics and new product contribution expectations.

Q: Tom Stephan from Stifel asked about Unity consumables and tail on revenue.

A: David Endicott discussed Unity consumables share gain and revenue tail.

Q: Brett Fishbin from Keybanc Capital Markets asked about contact lens business trend and operating margins.

A: David Endicott and Tim Stonesifer talked about contact lens business trends and operating margin moving pieces.

Q: David Adlington from JP Morgan asked about China BDP and 512 payors.

A: David Endicott discussed China BDP progress and 512 payor discussions.

Q: Giang Nguyen from Citi asked about U.S. ACIOL penetration and contact lens business.

A: David Endicott addressed U.S. ACIOL penetration and contact lens business outlooks.

Q: Issie Kirby from Redburn Atlantic asked about Systane growth and surgical margins.

A: David Endicott and Tim Stonesifer spoke about Systane growth drivers and surgical margin dynamics.

Q: Sajid Aznar from HSBC asked about tax, cash flows, and value-based procurement.

A: Tim Stonesifer and David Endicott discussed tax, cash flows, and value-based procurement impacts.

Q: Falco Freidrichs from Deutsche Bank asked about U.S. market softness and IOL share confidence.

A: David Endicott addressed U.S. market softness and IOL share confidence.