Greetings, and welcome to Alcon's First Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Dan Cravens, Vice President of Investor Relations. Thank you, sir. You may begin.

Welcome to Alcon's first quarter 2024 earnings conference call. Today, 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 Stonesifer, 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 differ materially from those expressed or implied in our forward-looking statements. Accordingly, you should not place any 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 20-F form and our earnings press release and interim financial report on file with the Securities and Exchange Commission and available on the SEC's website at sec.gov. Non-IFRS financial measures used by the company may be calculated differently and therefore 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 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 first quarter. After his remarks, Tim will discuss our performance and outlook for 2024. 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.

Thanks, Dan, and thank you all for joining today's call. I'm pleased to report another quarter of strong performance across our business. We grew sales by 7% to $2.4 billion. We grew core diluted earnings by 21% to $0.78 per share, and we expanded core operating margin to 22%. These results reflect the strength of our broad portfolio products. I'm particularly pleased with the performance of the Contact Lens business, where we saw another quarter of record sales. It's clear that our business is delivering solid growth supported by leading positions in durable end markets. Now, starting with surgical, in the coming months, we expect to receive FDA approval for our UNITY VCS phaco machine. As I've said before, UNITY VCS is a best-in-class phaco and vitreoretinal console that was designed to create near-physiological conditions during surgery, which is expected to improve performance and efficiency without compromising safety. We're encouraged by the feedback we've received from clinical utilization in initial cases performed by surgeons around the world. UNITY will be a meaningful improvement in cataract and vitreoretinal surgery. Today there are more than 28,000 of our Centurion and Constellation devices in the market that we expect to upgrade to the UNITY platform over the next decade. Toward the end of 2024, we'll start user preference evaluations with surgeons in the U.S. and select international markets ahead of a broader commercial launch in 2025. Additionally, following the launch of VCS, we will offer a cataract-only system called UNITY CS, which will be available starting in 2026. Importantly, UNITY brings with it new and innovative consumables that drive incremental benefits for the surgeon. The launch of these instruments will help us secure the next decade of our consumables business, which is a large, recurring, and profitable revenue stream. Now I'll move to implantables, where we continue to outpace market growth, and I'm particularly pleased by our performance in international markets. I'll start with PanOptix. PanOptix is the most implanted trifocal in the world, thanks in part to a patented design that optimizes the intermediate focal point at 60 centimeters, which is the most common middle vision sight distance. Additionally, data presented at the recent ASCRS conference shows that PanOptix delivers high patient satisfaction partly due to the low incidence of visual disturbances. This is a critical factor as surgeons and patients consider any advanced technology lens. Building on this success, we recently received pre-market approval from the FDA on two separate innovations that improve PanOptix performance. Preference studies will begin in the second half of 2024 with the goal of bringing a next-generation PanOptix to market within the next 12 to 18 months. Now I'll turn to Vivity, which recently surpassed more than 1 million implants, making it the most implanted extended depth of focus lens globally. Vivity's success is underpinned by our patented, non-defractive technology that stretches and shifts light without splitting it. The optic delivers excellent distance and intermediate vision, as well as functional near vision. It's designed to simplify presbyopia correction, prioritizing patient satisfaction while minimizing surgeon and clinic chair time. The lens's performance has been confirmed by large-scale real-world data that includes patients with common comorbidities such as post-refractive eyes. We're excited to further expand on the success of both of these lenses around the world. In China, our team is working hard in preparation for the Volume Based Procurement Award. We expect a gradual ramp-up of activity starting in the second half of the year as the award will be implemented province-by-province. Next, I'll briefly discuss our digital innovations in the surgical space. Recently, the first-ever study to evaluate the impact of our Smart Cataract Planner on patient outcomes demonstrated refractive target accuracy and excellent distance visual acuity. Now with this study and our earlier time-in-motion study, we have data showing that Smart Cataract drives meaningful efficiencies for surgeons and their staff. Importantly, as this program grows, so do its capabilities, including leveraging AI-driven algorithms to improve outcomes for surgeons and patients. Now I'll move to contact lenses, where I continue to be extremely pleased with our performance. As we've talked about previously, we've made significant investments in this business over the past several years to drive commercial innovation, expand our manufacturing capacity, and add profitable growth. The foundation of our success is our proprietary manufacturing technology. This innovation gives us the agility to produce a variety of products including different materials, chemistries, and geometries on the same lines. This has enabled rapid innovation, demonstrated by the six new contact lens platforms we've launched since 2020, including the Precision 1 family, the Total 30 family, and DAILIES Total1 for Astigmatism. Importantly, our innovations are always developed with the patient and eye care practitioner in mind. One example of our surface chemistry innovation is our water gradient technology. With this technology, the water content at the outer surface of the lens reaches almost 100%, which is nearly the same as the surface of the cornea. Additionally, it enables excellent oxygen transmissibility to deliver exceptional comfort even after a full day of wear. We feature this technology on the DAILIES Total1 and Total 30 contact lens families. Another area we're innovating is in specialty lenses. In particular, we've brought three new toric lenses to market over the past four years. This is important because of the significant unmet need. Our estimates show that toric is the fastest-growing segment of the contact lens market. This presents a large opportunity since a low number of astigmatic patients are currently wearing toric contact lenses. These lenses leverage our proven precision balance technology. This proprietary design features anchor points that deliver exceptional stability for the patient and a smooth fitting process for the physician. So based on our recent results, it's clear that our investments in innovation and in manufacturing have paid off and are driving market share and significant growth. Now finally, I'll turn to Ocular Health. I'll start with the over-the-counter portfolio, which includes the Sustained family of artificial tears, which grew double-digits in the first quarter. With Sustained, we're continuing to win with our multi-dose preservative-free innovation, which is driving market expansion as we launch around the world. We've launched in more than 40 countries, and in low-penetration markets like the U.S., we're seeing the preservative-free category continue to expand. In our pharmaceutical business, I continue to be pleased by the total prescription growth of Rocklatan and Rhopressa. In particular, Rocklatan TRx grew approximately 9% year-over-year while the broader glaucoma market was flat. At the recent ASCRS conference, Phase 4 data presentations further supported the intraocular pressure-lowering efficacy of Rocklatan, while maintaining the convenience of a once daily dosing. In the coming months, we will continue to focus on expanding market access for these important medications. Lastly, on our dry eye pharmaceutical candidate, AR-15512, we are in the process of preparing the new drug application for submission to the FDA, which we expect to submit in the coming months. Next, I'll briefly talk about market dynamics for the first quarter. In Cataract, we estimate the global procedures were up approximately 2%, slightly softer than historical levels. Additionally, global ATI well penetration was up approximately 130 basis points year-over-year, mainly driven by international markets. In contact lenses, we estimate the retail market was up approximately 7%, driven by pricing and continued steady wearer trade-up. Now before I turn it over to Tim, I want to briefly comment on our planned acquisition of Belkin Vision and its innovative technology, the Belkin Vision Eagle. With this potential acquisition, Alcon will further our commitment to the glaucoma space and pioneer the expansion of interventional glaucoma globally with the Eagle device. We expect the transaction to close during the third quarter, and we look forward to welcoming the Belkin Associates to the Alcon family. With that, I'll turn it over to Tim, who will take you through our financial results and provide more color on our outlook.

Thanks, David. We're pleased to report first quarter sales of $2.4 billion, up 7% versus prior year. This growth is primarily driven by strength in our innovative contact lens portfolio and in ocular health. Our first quarter U.S. dollar sales growth included approximately 200 basis points of pressure from foreign currency. In our surgical franchise, revenue was up 6% year-over-year to $1.3 billion and implantables sales were $433 million in the quarter, up 6% year-over-year, mainly driven by our advanced technology intraocular lenses, including Vivity, PanOptix, and our monofocal torics in international markets. In consumables, our first quarter sales were up 7% to $686 million. In the quarter, we saw strong demand for vitrectomy and cataract consumables, particularly in international markets. We also saw some contribution from price. In equipment, sales of $219 million were up 2% year-over-year. This is consistent with our expectations that we discussed on our last earnings call as we lost strong performance in 2023 and are in the late stages of the international upgrade cycle. We continue to expect equipment sales growth to be largely flat for the remainder of the year until we begin to roll out the new UNITY platform. Turning to Vision Care, first quarter sales of $1.1 billion were up 10%. Contact lens sales were up 11% to $671 million in the quarter. As David mentioned, our innovation, including toric and multifocal modalities, continues to win in the market. Additionally, we saw a strong contribution from price in the quarter. In Ocular Health, first quarter sales of $435 million were up 8% year-over-year. This was driven by our portfolio of eyedrops, including the sustained family of artificial tears, which saw another quarter of double-digit growth. I want to briefly discuss how pleased I am with the improvement in Vision Care profitability. As David mentioned, we have made significant investments in this franchise. These investments, coupled with strong commercial execution, have enabled us to grow the franchise's segment contribution margin from a low point of 16.6% in 2022 to 23.8% in the first quarter of 2024. The robust sales growth we've delivered over the past several years is driving significant operating leverage. While we expect to see normal seasonality throughout the year, we look forward to continued year-over-year improvement in Vision Care profitability. Now moving down the income statement. First quarter core gross margin was 63.4%, broadly in line with last year. This is better than we anticipated, mainly due to the timing of customs duties refunds, which positively impacted gross margin by approximately 50 basis points. For the full year, we continue to expect gross margins to be broadly in line with 2023. Core operating margin was 22%, up 260 basis points year-over-year, driven by operating leverage from higher sales and the timing of certain discretionary spend, including R&D and SG&A expense. First quarter interest expense was $45 million, broadly in line with last year. Other financial income and expense was a net benefit of $12 million, compared to a net expense of $8 million in the first quarter of last year. This improvement was primarily driven by higher interest income and lower foreign currency losses. The first quarter average core tax rate was 23.2%, compared to 18.4% last year. The first quarter was impacted by a net expense from discrete items. For the full year, we continue to expect the core effective tax rate to be approximately 20%. Core diluted earnings were at $0.78 per share in the quarter, up 21% from last year. Now, before I touch on our outlook for 2024, I'll discuss a few cash flow and other related items. Free cash flow for the quarter was an inflow of $229 million, compared to an outflow of $19 million in 2023. This improvement was driven by higher cash from operations. For the full year, we continue to expect a meaningful step up in free cash flow versus 2023. Before I move to our outlook, I'm pleased to report that at our annual general meeting last week, shareholders approved the dividend of CHF0.24 per share in line with our payout policy of approximately 10% of the previous year's coordinate income. I want to thank our shareholders for their continued support. Now moving to 2024 guidance. Our current outlook assumes that markets will grow in line with historical averages of mid-single-digits and exchange rates as of the end of April hold through year-end. As such, we're maintaining our full-year top-line guidance of $9.9 billion to $10.1 billion. Additionally, we are increasing our constant currency sales growth guidance of 7% to 9%. However, given the recent strengthening of the U.S. dollar, we now expect an incremental $100 million of top-line foreign exchange pressures versus our outlook in February. If April rates persist, we will likely trend toward the lower end of our guidance range. Moving to operating expenses, we continue to expect full-year core R&D expense to be toward the high end of the range of 7% to 9% of sales. Turning to profitability, despite continued currency headwinds, we are maintaining our full-year core operating margin outlook of 20.5% to 21.5%. Despite approximately 60 basis points of pressure from foreign exchange, we are currently trending toward the midpoint of the range. Moving down the income statement, we now expect interest and other financial expenses to be between $180 million and $200 million. As I mentioned earlier, we continue to expect our full-year core effective tax rate to be approximately 20%. In terms of phasing, we expect the core tax rate to be slightly higher than 20% in the first half of the year and slightly lower than the second half. Based on all these factors, we're maintaining our core diluted earnings guidance range of $3 to $3.10 per share, which now corresponds to 15% to 18% constant currency growth over 2023. Despite the foreign exchange headwind I mentioned previously, we are absorbing an incremental $0.08 of FX pressure versus our guidance in February, and are currently trending towards the midpoint of our guidance range. In terms of phasing, we expect most of the incremental FX pressure in the second and third quarters. Finally, I want to thank the entire Alcon team for a great start to 2024. With that, I'll turn it back to David.

Thanks, Tim. To conclude my remarks, I want to thank the team once again for a strong start to the year. These results reflect the hard work and commercial expertise of our team, our broad and balanced portfolio products, and the durability of our end markets. As we look to the remainder of the year, we continue to be excited about our strong in-market performance and our robust pipeline of products. We've got a number of growth drivers and a position at Alcon nicely to expand sales faster than our markets, deliver operating leverage, and long-term shareholder value. With that, let's open the line for Q&A.

Thank you. At this time, we will be conducting a question-and-answer session. Our first question comes from Graham Doyle with UBS. Please proceed with your question.

Good morning, guys. Thanks for taking my questions. It was very helpful to get some color on the UNITY launch and also on the progress with PanOptix 2.0. Would you be able to give us a bit more color as to your expectations around PowerVision, so the accommodating lens, and how you're thinking about timelines in terms of sharing data on that? And then also just a refresher of where we are on dry eye and when we might submit that? And then lastly, could you give us a little bit of color on the contact lens pricing versus volume and where you might think that goes through the rest of the year? Thank you very much.

Yes, thank you, Graham. Regarding UNITY and PanOptix, we are looking forward to UNITY being approved in the next couple of months, possibly sooner. We submitted it late last year, and it typically takes about six months to receive feedback from the FDA, so we feel confident about where we are. We will be cautious with the launch since it's a crucial part of our strategy, and we plan to pilot it with select individuals before fully launching it next year. So anticipate revenue from that next year. PanOptix Pro is similar; we have two approved concepts and want to enhance the product. We’ll closely evaluate feedback from surgeons to identify the most important aspects to bring to market. We are conducting preference testing over the next six to twelve months, with expectations for next year. For PowerVision, we expect to have some data by late this year as we are in the first-in-human trial. The data should be available to us in the fall, and we will either present it at a meeting or during these calls as soon as we have a complete dataset. The submission for AR-15512 is pending and we are aiming for a summer submission, which would mean a PDUFA in about a year. So look for that in the middle of next year. There are several innovation projects lined up in the near term that will support us in 2025. Regarding pricing and volume, the contact lens prices rebounded, being about half to a third compared to the volume. Overall, we experienced positive price movement and strong volume growth. We were among the few that gained market share in the quarter, leading to an increase in our unit volume.

Awesome. That's really helpful. Thanks a lot, guys.

Our next question comes from Veronica Dubajova with Citi. Please proceed with your question.

Hey, guys. Good morning, good afternoon. Thank you for taking my questions. It's going to be everyone's favorite topic. I just wanted to circle back on U.S. ATI wells and maybe kind of push you, David, a little bit on what you are seeing in terms of penetration and why do you think we are still stagnating at the levels that we've been at now for six, seven quarters? What is it going to take for things to get better? And then maybe just a thought on the competitive environment. Obviously, we continue to feel lots of questions on some of the new products that are coming in. What are you seeing out there and hearing from folks would be very helpful? And then my just quick second question is on the guidance upgrade to constant currency revenue growth, if you can tease out for us whether surgical or contact lenses or ocular health are the biggest driver of that, if you can give us some specificity around that? Thanks, guys.

Yes, Veronica, let me address your question about implantables. You raised several points, so I'll do my best to clarify. Implantables had a very strong quarter for us internationally, particularly in ATI wells. We see significant opportunities ahead, especially with the upcoming China VBP, which is crucial for us. Europe also performed well, as we gained share in PCI wells globally, and we're continuing to introduce Vivity in various markets. Internationally, I think we're seeing strong performance. In the U.S., the market was a bit soft, showing about 2% overall, with possibly 1% specifically in the U.S. However, I believe what you're really inquiring about is the competitive landscape. There are new products entering the market from companies like J&J and B&L, but we were prepared for this. We feel confident about our market share, having gained share in monofocal and PCIOLs; we're maintaining over 80%. The competition in torics is also present, and we expect to see more of that. Regarding your second question about new products, there isn't much new on the horizon beyond a couple of things potentially coming next year. I'll let our competitors provide details on that. Regarding constant currency revenue growth, this year, contact lenses are a major driver, and we're pleased with the share movements, especially in toric lenses. Looking ahead, as I've mentioned before, our extensive portfolio across different regions and businesses offers us stability. If markets grow in the mid-single digits and we outperform that, that's part of our strategy moving forward. Currently, international markets are performing very well, which is beneficial compared to the U.S., and Contact Lens and Vision Care are also doing exceptionally well. I expect these trends to continue.

Yeah, and as far as the foreign exchange, Veronica, it's pretty much evenly distributed across the categories.

Excellent. Thanks, guys.

Our next question comes from Ryan Zimmerman with BTIG. Please proceed with your question.

Good morning. Thanks for taking the question. I want to ask two, the first on Belkin Vision and the second on price. So the first one on Belkin, you know, they sell the direct SLT device for the office setting. David, I'd love to get your thoughts on kind of where you see the SLT fitting in terms of your glaucoma treatment portfolio, but also in the context of treatments in glaucoma, is this what you want to do with the device? Is there more to using the Eagle device beyond DSLT when you think about kind of its benefits for glaucoma patients?

Yes, Ryan, that's a great question. We are seeing an emerging consensus among glaucoma leaders that starting patients with selective laser trabeculoplasty (SLT), particularly the dual selective laser trabeculoplasty (DSLT), is the best approach. We believe DSLT is more convenient and easier to use. This advancement could change how surgeons adopt SLT, which is currently challenging due to the need for a gonioscope and the complexity of accessing the angle with traditional lasers. DSLT simplifies this process and could enhance treatment. Importantly, research, such as the light study conducted a few years ago, suggests that we should prioritize laser trabeculoplasty for treating glaucoma patients sooner rather than later. Overall, we think this aligns with our approach to managing glaucoma, which includes eye drops, laser therapy, and stent interventions. We see significant opportunities in the glaucoma category.

Got it. And just a quick one on that. Do you have to do any more clinical studies? I mean, I've looked at the studies for Belkin pretty on par with SLT. Do you feel like you need to do any more clinical studies for that? And then I'll just add to the second question up front, but you know you've got some price on consumables as well. You called out the pricing on contact lenses. I'm curious what the pricing benefit was in consumables and how to think about the benefit of consumable pricing next year conceivably when UNITY is available. I imagine that's going to be a nice growth driver in the consumable segment. Thanks for taking the questions, guys.

Of course, yes. On the clinical studies around Belkin, we don't really anticipate anything for approvable status. I mean, it's approved at this point in the United States and also in Europe. So we're satisfied with that process. We will probably, I'm sure, want to do more work around this to support the intervention earlier and the success of that intervention with patients and frankly the ease and ease of use for the surgeon. So directionally, I think we're excited about Belkin, and I would just say that we look forward to getting that into the field probably late this year, early next. When you get to the consumables business, there was a little bit of price increase in consumables, but again, I wouldn't think of that as the major driver. What's been driving consumables for us has been the footprint growth that we've had on the equipment side over the last couple of years. I think you'll note that if we go back, we've had a really good run with Constellation and with Centurion, and our share of PHACO PAKs has gone up, even despite the last two launches against us. So directionally, we're picking up a little bit of volume, and then we pick up a little bit of price as we mix to kind of the more modern equipment. And think of that as, like, the handpieces and the devices that we use to open and close the eye, and so blades, knives, everything else that goes with it. Generally speaking, the folks on the ground are always trying to improve the speed and the safety of the procedure. So usually, it's the mix that's driving the price piece of it. And on consumables for next year, look, I mean, I think we haven't priced the consumables or the UNITY unit yet. We are thinking hard about it. There's a lot of work going on to figure out what's the optimized value here. A lot of what we're trying to figure out in the near term is how much efficiency can we generate for the surgeon? How much faster can you be with this? How much safer can you be with this? And if we can really improve our efficiency in the OR, then again, that helps the economics of the surgeon in the facility, and obviously, we'd choose to want to share in that, so we're working through the math on that right now.

Our next question comes from Richard Felton with Goldman Sachs. Please proceed with your question.

Thank you very much for taking the questions. Two from me, please, both on margin. So Tim, I think you said on your Q4 call that you expect H1 margins to be down by 100 basis points year-on-year? Obviously, Q1 is coming in a lot stronger than that. My question is heading into Q2, is that 100 bps guide still relevant? And should we expect a much softer Q2 from a margin perspective, or has the underlying momentum been a little bit better than you had previously expected? And then also a follow-up, also margin, you referenced the timing of discretionary spend as a driver for margin year-on-year. Are you able to quantify the impact of that, please? And also say what parts of your business that impacted? Thank you.

Yes, so starting with the 100 basis points that we referred to in the last call, that was related to gross margin. So if you look at gross margin year-over-year, it was flat. We have about 50 basis points in there that was really the timing of the duties that we called out. So I would step that margin rate down by about 50 basis points. And as you think about the progression throughout the rest of the year, Q2 sequentially will probably be down a little bit more as we have more inventory flowing through that higher-cost inventory that we spoke about. And then it'll start ramping up in Q3 and Q4. But again, total year-over-year should be relatively flat. And as far as the discretionary, I mean, I would call out these 50 basis points on the duties. So that's obviously in the gross margin section of the P&L. And then I would look at R&D, I mean, R&D was a little bit light in Q1. We came in at about 8% of revenue as we talked about on the original guide. We're guiding 7% and 9%. We think we'll be at the high-end of that. So I would expect a little bit more R&D flowing through the P&L in quarters Q2 through Q4.

Great. Thanks very much.

Our next question comes from Larry Biegelsen with Wells Fargo. Please proceed with your question.

Good morning. Thanks for taking the question. So David, UNITY is a big opportunity for you. How far behind is the phaco-only clearance in the U.S.? I heard it's a 2026 launch, but just the clearance, how far behind is it? And we estimate the UNITY platform can contribute to above-average growth in equipment and surgical as soon as 2025. Would you agree, and what are the margin implications? And I had one follow-up.

The margin on equipment tends to be lower, so it's at the lower end of our sales range. Consider it a slight downside to our gross margin. However, the revenue growth will significantly contribute to profit growth, and we will focus on EPS growth moving forward. We anticipate this market to be fairly stable over the long term, following a roughly 10-year cycle, with the initial years seeing more aggressive growth as consumers seek out new products. Those who purchased a Constellation or Centurion recently will continue to use them for several more years. Regarding the CS approval, we approximate a potential revenue contribution in 2026. We don’t believe we are significantly behind with CS; possibly just a six-month to one-year delay. The combined machine offers a substantial advantage internationally, as most international markets share operating rooms, which we believe will be appealing. Our new emulsification method is promising in terms of speed and simplicity, and our fluidics are nearing physiological IOP targets. Overall, the joint machine is expected to deliver significant efficiency gains for the market, which excites us. Concerning growth in 2025, we noted at Capital Markets Day that equipment market growth could improve. Historically, this market has seen lower growth rates, but we predict mid-single-digit growth moving forward, where we expect to align closely with overall market trends. Additionally, we had a strong quarter with our biometer and microscopes, highlighting a positive impact from our equipment offerings.

That's super helpful. And Tim, it's unclear to me, did you raise the constant currency revenue guidance or not? Because I heard you say the numbers are higher at the midpoint, but you pointed to the low end of the new range and what's assumed for implantables in that? Should we be thinking about low-single-digit growth for the rest of the year? Thank you.

Yes, so we raised constant currency and on the absolute dollars, obviously you have to triangulate the currency rates with the absolute dollars. If rates stay where they are in April, we're trending more towards the lower end of that. But given the midpoint of everything else, we're at the midpoint of the EPS guide. I'm sorry, what was your second question?

Yes, so I understand when you were pointing to the low-end, Tim, you were talking about the dollar sales; you weren't talking about the low-end of that 7% to 9%.

Correct, correct.

Okay, thanks. Implantables, just kind of, should we be thinking about low-single-digit growth for the rest of the year? Thank you.

Yes, I would think about whatever the market sits at, again, I suspect it's kind of in the mid-single-digits or to the low end of that. Usually, a normal global market is going to run 4% or 5%. So I would think about it right around there, plus or minus, a little bit in the U.S. And I think directionally, international should grow a little bit faster than that.

Our next question comes from Jack Reynolds-Clark with RBC Capital Markets. Please proceed with your question.

Are you seeing any impact there in your relatively small China business? And do you have any kind of update about what you're hearing about that ahead of VBP rollout? Thank you.

Hey, Jack, no. We had a good quarter in China. I mean, it grew, kind of, low-teens, I think mainly based on consumables and refractive equipment for us. But our business was pretty stable because it's principally in the private markets or has been historically. And so I think directionally, we didn't see much. I think there is some activity in China as people are exiting the VBP. And again, I think there'd be some noise in the system if that's what you're referring to, as people kind of load up some of the distributors for their last sale, trying to push that along. So again, that did not affect us in any way.

Our next question comes from David Saxon with Needham & co. Please proceed with your question.

I wanted to ask about Sustained, another really strong quarter here. So can you talk about the durability of growth for Sustained? How much runway do you have with either product iterations or geographic expansion to drive growth in that product line?

Yes, it's a really good question, David, and sometimes an underappreciated element of our business. That brand is well over $0.50 for us, and I think people may not understand just how good that is. Directionally for us, the Sustained brand has benefited from the preservative-free form and format. Internationally, preservative-free products have been around for a long time, and the U.S. market has not had them. What we had anticipated was that we would cannibalize some of our own business. It just doesn't look like that's happening. So in the Sustained brand we have a value brand, we have a middle brand, and then we have our top-end, which is the Preservative-Free Complete, so Sustained Complete Preservative Free. And we're selling all three of those quite well. So I think we've got the retail piece of this correct. The consumer is sensitive in some days. Some people want the less expensive version. Some people want the preservative-free product, and it is, quite frankly, the best one. So we're excited about what's going on there. We have launched preservative-free in most markets. I think, as I think I said, nearly 40 markets around the world. There are still a few that are in the early phases of that, but the U.S. has still got plenty of runway. I would say if you were to try and model it, I'd model it against where the penetration of preservative-free products is in Europe and where it is in the United States, and then just compare those numbers. It'll show you that we have a pretty good runway. The real question is only how much of our own brands will we cannibalize along the way, but directionally, as I said, we were mid-teens growth on a pretty big number.

Okay. Super hopeful. Thanks for that, David. Just a follow-up on that. Maybe could you remind us where penetration is for the preservative-free in the U.S. and Europe? And then my follow-up is probably for Tim, so when AR-512 does get approved and launched, how are you thinking about marketing and promotional spend that will be required to drive that launch? How much of a drag would or could those launch investments have on margins? Thanks so much.

Yes, on the penetration for the multi-dose preservative-free, I think the preservative-free brands in Europe are about half the market. I'm going to get this mostly right, so again, you may want to check the data, but in the U.S., it's about 25%. So, probably half of the penetration that is currently in Europe. Oh, at 512, yes, just on the investment there, we really haven't decided that yet. So, give us a little longer to work through that. I think what we're trying to figure out is we're learning a lot about access right now. And until we really get that nailed down, I think we're going to be careful about what we say. So give me another quarter to work on that and we'll get back to you.

Okay, thank you.

Our next question comes from Michael Sarcone with Jefferies. Please proceed with your question.

Can you talk more about the China VBP opportunity specifically? Can you help us understand what you may have baked in for contribution in terms of the 2024 guide? And then how you see that potentially ramping in 2025?

Yes, let me try and give you some directional help without necessarily telling you what we put in the numbers here. I think the thing to remember about the China VBP is there's a committed volume to competitors, there's a committed volume to us, and then there's an up-for-grabs bid, and it's kind of a third, a third, a third, roughly speaking. And so remember too that this is a province-by-province thing, so it's going to ramp up through the back half of this year, and then obviously, we'll have a full-year effect for next year, that's much more, I think, a natural number. So again, I will see how fast this moves. And again, what we're excited about, truthfully, is that Vivity hasn't been in the China market until recently. And that putting it onto the VBP, I think, along with PanOptix, gives the Chinese market the two best products in the world, and they really haven't had that before. So I think they've been using a lot of older products that are bifocal. Bifocal is one of the largest segments, but again, some of that market is going to be committed to the competitors, who've had those in place for a while. So again, I think there's a lot of things moving. This is our first run at this as well, and so we'll have to learn a little bit from it with you, but we'll try to keep you up to speed on what's going on as we do.

Got it. That's really helpful. And then just the second one, again, sticking with China. You've got the public market now with VBP. Do you expect that being in the public markets with VBP could help your private business in any way?

Well, probably not. I think directionally what we've experienced when we weren't in the public market was that the private business was very aware of the public market and partly because even though we call it private, a lot of these private hospitals, the largest group in particular, take a lot of public patients and is under a public DRG for those patients. So they are very aware of what the pricing in the VBP is and whether you're participating or not. So there's a bit of equilibrium that gets struck here that what you're doing in the public environment is largely similar to what you're doing in the private environment, although there are obviously exceptions to that. But I think in the main, I would say it doesn't really help us in a private business. We're fairly competitive there already, and again, we intend to continue.

Our next question comes from Brett Fishbin with KeyBanc Capital Markets. Please proceed with your question.

Hey guys, thank you so much for taking the questions. Just had one on contact lenses. So pretty impressed by the 11% constant currency growth this quarter on a pretty tough comp. You called out a couple of the new products in toric and multifocals. Just curious if you could call out which of those launches you're seeing the most success with right now? And then maybe just as a follow-up, a little bit of a more general update on how you're viewing the competitive environment in contact lenses? And if there's any differences in how you're thinking about market growth in that sub-segment relative to your comments for the whole company of like relatively in-line market growth? Thank you very much.

We are pleased with the performance of our contact lenses this quarter. Globally, we gained market share, particularly in the toric segment, which has been very successful for us. The Precision 1 toric has been especially notable, and after a long wait, the DT1 toric has also performed well, showcasing the strength of our brand. Both products have contributed positively to our results. Additionally, Total 30, which may not seem exciting at first due to its reusable nature, offers exceptional comfort on the 30th day, making it popular with customers. The toric and multifocal versions of this brand are also doing well. Overall, our progress is widespread, but the Precision 1 brand stands out due to its rapid growth and significant market presence. In terms of competition, the landscape is quite competitive, with strong players each employing different strategies. We feel confident in our positioning, ensuring that our products meet consumer needs within the marketplace. The Precision 1 lens is easy to handle and comes at a lower price point compared to DT1, making it ideal for kids, teenagers, and young adults who may not be able to afford the more expensive options. For older patients dealing with dry eyes, our Total 1 lens is an excellent choice due to its comfort, despite being pricier. Regarding the toric market growth, it was around 11% for all lenses, with daily disposables growing at 27% in silicone hydrogel. The overall daily lens market grew by 17%, and we’ve been successful in capturing share in the fastest-growing segments. Our strategy focuses on entering under-indexed areas and growing within the most dynamic parts of the market.

Our next question comes from Issie Kirby with Redburn Atlantic. Please proceed with your question.

Can you just talk a little bit about the sustainability of that vision margin, both throughout the rest of the year, and then as we look forward sort of towards the midterm plan as well, given just the strength this quarter? And then secondly, within that vision margin, it would be really helpful if you could give us some color both, I guess, in terms of the margin level, but also the direction between contact lenses and ocular health as well, given from what I understand there's quite a big differential between the margin profiles of those two businesses? Thank you.

Yes, so as far as the sustainability, to your point, we had a very nice quarter that we were pleased with. We were at 450 basis points in constant currency. So that would be 400 basis points in USD. There is some phasing in there. Again, the duties would heavily impact the Vision Care margins. Some of that R&D would be in the Vision Care margins as well. So there are some headwinds or tailwinds in that I should say. If you look at the total year, we feel very comfortable that we will increase margins year-over-year as we did last year. So we have a lot of momentum in that business. As we said on the prepared remarks, a lot of the investments we've made are starting to come through in the P&L, which is nice to see. As far as the margin level of contact lenses versus ocular health, I would say ocular health for the most part is above company average, and contact lenses is a little bit below, depending on whether it is dailies or reusables.

Yes, we likely have a bit of a mixed benefit, but I wouldn't read too much into that. Some products, like eyedrops and reusables, have performed well for us, and both tend to have higher margins than daily disposables. However, daily disposables remain the core of our contact lens and Vision Care business.

Our next question comes from Tom Stephan with Stifel. Please proceed with your question.

Just curious on contact lenses, if continued low-double-digit growth may be the right bar to think about for 2024? I guess notably as comps ease a little bit in the rest of the year. And then my follow-up is just on Precision 7. Can you update us on what the latest is with timing there? Thanks.

Yes, look, I mean, I think the best I could do with the forward look is what we always say, and I don't mean to be vague, but I would think about the market. The market grew 7% in the first quarter, so we were pleased with the 11%, and we are growing faster than the market in a fair bit. So I do think that you should start with what do you think market growth is going to be? And we would say on the high end of mid-single digits. And then I think directionally after that, we continue to gain share. If you believe that, then we'll grow faster than that. And the benefit of that is, of course, that as I said earlier, a good bit of the mix right now is coming from higher-valued products. So think about the toric being more valuable than the sphere. Think about the reusables being more valuable to us profitably than the dailies. But P7 will also benefit us because of course it's a reusable lens at the one-week frame. And the timing on that, we've been slow to bring it out. We've made it; it’s ready to go. It's approved. We've been holding it, I think, to a large degree to allow the sales force to continue with the very busy schedule they have promoting the products we've got. So we're making such good progress right now on so many fronts that we’d like to kind of hold this one off. I think we're probably going to do something with it later this year and then probably think about it as a full launch next year.

We have reached the end of our question-and-answer session. I would now like to turn the floor back over to Dan Cravens for closing comments.

Great. Thanks again for joining us today. If you have any follow-up questions, certainly reach out to the Investor Relations department for investors or corporate communications for media. Thanks.

Appreciate the interest.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.