Greetings, and welcome to the Alcon Fourth Quarter and 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, VP of Investor Relations. Thank you. You may begin.

Welcome to Alcon's fourth quarter and full year 2024 earnings conference call. Yesterday, we issued a press release, interim financial report, annual report, and 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. Please note that 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, and as such, you should not place undue reliance on any forward-looking statements. Important factors that could cause our actual results to differ from those in our forward-looking statements are included in our Form 20-F, earnings press release and interim financial report, which are all on file with the Securities and 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 per IFRS. Please see a reconciliation between our non-IFRS measures with directly comparable measures presented in accordance with IFRS in 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 fourth quarter. After his remarks, Tim will discuss our performance and outlook for 2025. Then, David will wrap up, and we will open the call for Q&A. With that, I will now turn the call over to our CEO, David Endicott.

Thanks, Dan, and thanks everyone for joining us today. 2024 was another solid year for Alcon. We ended the year with sales of $9.8 billion and above market sales growth of 6%. We grew core diluted EPS by 16% to $3.05 and generated a record $1.6 billion of free cash flow. In 2024, we also continued to live out our purpose of helping people see brilliantly. Concretely, we helped improve the vision of more than 1 million patients in low- and middle-income countries. Additionally, we screened over 31,000 children for refractive error and provided spectacles where required. None of these accomplishments would have been possible without the focus of our more than 25,000 associates who worked tirelessly to make a difference for our customers, their patients and the communities we serve. Equally important, we laid the groundwork in preparation to launch one of the richest product pipelines in Alcon's history. Additionally, we realigned our leadership team and organizational structure to increase our focus on innovation, operational excellence and speed to market. We'll talk about all of this and more at our upcoming Capital Markets Day. However, I'd like to share a bit of a preview with you now. In Surgical, we will show you our upcoming equipment launches as well as our connected equipment ecosystem. We'll also provide an update on our IOL portfolio, including some insight on our accommodating programs. In Vision Care, we'll talk about our focus areas, including our innovation in specialty contact lenses. In ocular health, we'll discuss our strategy around accelerating growth with our over-the-counter assets such as SYSTANE, as well as our pharmaceutical pipeline. And finally, we'll provide more color on our long-term innovation as we attempt to tackle some of the most challenging problems in eye care. With all this coming in a month's time, today I'll highlight just a few of these innovations in my prepared remarks. Let's start with Surgical. We're particularly excited about UNITY VCS, our upcoming phacovit device. UNITY was designed with safety and efficiency in mind and this is the most efficient piece of phaco equipment Alcon has ever created. In cataract, this efficiency is enabled by phaco that is twice as fast as its predecessor while using 40% less energy. Additionally, in vitrectomy, UNITY VCS brings new innovation with vitreous cutting that is 1.5 times faster than constellation. In both cataract and vitrectomy, UNITY also enables efficiency through streamlined setup and teardown, which directly supports rapid OR turnarounds as well as intraoperative workflows. Importantly, this next-generation console comes with next-generation consumables. These include premium cassettes and less invasive instrumentation, which are designed to increase OR efficiency and improve the surgeon and patient experience. We received FDA clearance for UNITY VCS and the standalone cataract device CS in 2024. Additionally, we anticipate receiving CE Mark in the coming weeks. And we're in the final stages of our user experience testing ahead of a full commercial launch expected in May. Next, I'll discuss PanOptix Pro, our latest PCIOL innovation. I'm pleased to announce that we're moving forward with a lens design that significantly reduces light scatter. Surgeons remain foremost interested in improving patient outcomes, which includes reducing the incidence of visual disturbances. PanOptix Pro was designed with that outcome in mind and ingeniously uses more light with less scatter. I look forward to sharing more information on this product with you at CMD in March ahead of our commercial launch again in May. Now, I'll touch on the Voyager Direct Selective Laser Trabeculoplasty device, which is already available in certain EU markets and in the US. Since introducing the Voyager into the US, we've received very positive feedback from doctors and have seen strong initial demand. We are now focused on ramping up production of the device. Voyager offers a novel way of lowering intraocular pressure by delivering laser energy to stimulate fluid outflow. This device leverages proprietary eye-tracking technology for accurate automated treatment. Its streamlined workflow eliminates the need for a gonio lens or manual aiming, making it a patient- and physician-friendly solution, particularly when compared to manual SLT. SLT is already a well-regarded procedure by glaucoma specialists and has well-established reimbursement mechanisms in many markets. We're excited to bring the benefits of this procedure to even more patients. Now, moving on to contact lenses, I'm pleased to announce that our latest innovation, PRECISION7, is now widely available throughout the US. PRECISION7 targets the reusable lens category, which we estimate is worth approximately $3.8 billion and where Alcon is under-indexed. This market segment has been underserved by innovation for years. This lens has a groundbreaking one-week replacement modality, offering 16 hours of exceptional comfort and precise vision even on day seven. PRECISION7 delivers a breakthrough in comfort by utilizing our proprietary ACTIV-FLO system, which combines a moisturizing agent and a replenishing agent that continually releases moisture to the surface of the lens over a seven-day period. Early doctor and wearer feedback has been extremely positive. Wearers like the feel of the lens, and eye care professionals appreciate its ease of fit and intuitive compliance, particularly when compared to a two-week schedule. Now, I'll turn to ocular health, where we have several exciting developments. I'll start with SYSTANE, the world's leading over-the-counter artificial tear, which achieved its fourth year of double-digit growth, driven by our multi-dose preservative-free formulations. We're continuing to invest behind SYSTANE. We're bolstering the SYSTANE brand with the launch of SYSTANE Pro Preservative-Free, our latest and longest-lasting triple-action formula that hydrates, restores, and protects all types of dry eye. SYSTANE Pro is now available at retailers throughout the US, and we will continue to expand its availability throughout the year. This product incorporates nano-sized lipids and hyaluronate to reduce tear evaporation and provide prolonged hydration. Turning to prescription eye drops, I continue to be pleased by the performance of Rocklatan, one of our glaucoma medications. In the fourth quarter, TRx for this product grew mid-teens. Regarding AR-15512, we continue to expect that we are preparing for a US launch in the second half of the year pending FDA approval. Looking toward the launch, I'm increasingly encouraged by the strength of the US prescription dry eye market, which we estimate is worth approximately $1.4 billion. In particular, I'm pleased to see strong uptake of new branded Rx products, which we think is a positive indicator for the potential of 512. More importantly, 512 has some important differentiators from the currently marketed products, including onset of action. Finally, I'll briefly discuss market dynamics for the fourth quarter. In cataract, we estimate that global procedures grew approximately mid-single digits. Additionally, global ATIOL penetration was up approximately 180 basis points year-over-year. In both cases, the main driver of growth was international markets. In the US, we saw another quarter of slower market growth with dynamics similar to Q3. We believe this was driven in part by competitive trialing and sampling, which are not captured in our third-party data. In contact lenses, we estimate that the retail market was up mid-single digits. This growth was mainly driven by pricing and lens trade-up. And with that, I'll pass it to Tim, who'll take you through our financial results and discuss our outlook for the year.

Thanks, David. We're pleased to report fourth quarter sales of $2.5 billion, up 6% versus prior year. This growth was primarily driven by strength in our innovative contact lens portfolio and consumables. In our Surgical franchise, revenue was up 5% year-over-year to $1.4 billion. Implantable sales were $456 million in the quarter, up 2% year-over-year. International uptake of our advanced technology IOLs continues to drive growth. In the quarter, growth was partially offset by the slower market conditions in the US that David mentioned earlier, as well as competitive pressures. In consumables, our fourth quarter sales were up 7% to $738 million, driven by vitrect and cataract consumables, including price increases. In equipment, sales of $229 million were up 2% year-over-year, in line with our expectations. Turning to Vision Care, fourth quarter sales of $1.1 billion were up 7%. Contact lens sales were up 11% to $638 million in the quarter. This growth was driven by our innovative lenses, including toric and multifocal modalities which continue to win in the market. Additionally, we had another quarter with solid contribution from price which we expect to moderate going forward. In ocular health, fourth quarter sales of $416 million were up 2% year-over-year. We saw strong performance in our portfolio of eyedrops, including another quarter of solid growth from SYSTANE. This growth was partially offset by declines in contact lens care. We also saw approximately 1 point of pressure following this strategic transaction with OcuMension in China, which we expect to continue through the third quarter. Now, moving down the income statement. Fourth quarter core gross margin was 62.7%, up 70 basis points, reflecting favorable product mix and manufacturing efficiencies in Vision Care, partially offset by Surgical gross margin. Core operating margin was 20.1%, up 130 basis points year-over-year, driven by improved gross margin and improved operating leverage in SG&A from higher sales, partially offset by investment in R&D, particularly in Surgical. Fourth quarter interest expense was $48 million, broadly in-line with last year. Other financial income and expense was a net benefit of $9 million, also broadly in-line with last year. The fourth quarter average core tax rate was 20.6% compared to 13.8% in the prior-year period. For the full year, our average core tax rate was 19%. Core diluted earnings were $0.72 per share in the quarter, up 3% from last year. Turning to cash, on a year-to-date basis, free cash flow was a record $1.6 billion compared to $730 million in 2023. This improvement was mainly driven by higher cash from operations and a decrease in capital expenditures. Now, moving to the 2025 guidance. Our current outlook assumes that the aggregate global eye care market grows 4% to 5% and exchange rates as of the end of January hold through year-end. Starting with sales, we expect our full year revenue to be between $10.2 billion and $10.4 billion, which includes 2 points of foreign exchange headwind. On a constant currency basis, we expect our sales growth rate to be between 6% and 8%. In terms of phasing, given the timing of the new product launches, we continue to expect sales growth to accelerate in the second half of the year. Moving to operating expenses, as we continue to invest behind innovation, we've increased our targeted R&D investment range by 1 point and expect R&D expense to be at the midpoint of the range of 8% to 10% of sales. Turning to profitability, we expect our core operating margin to be between 21% and 22%. As I've mentioned before, this reflects our planned investments behind new product launches throughout the year. These investments will be mainly front-end loaded, and as such, we expect to see operating leverage accelerate in the second half of the year. Moving down the income statement, we expect non-operating income and expense to be between $200 million and $220 million. This measure is new to our guidance and includes interest expense, other financial income and expense, as well as the impact of certain equity investments. Turning to tax, we expect our full year core average tax rate to be approximately 20%. Based on all these factors, we expect our core diluted earnings guidance range to be between $3.15 to $3.25 per share, which corresponds to 8% to 11% constant currency growth over 2024. This guidance reflects approximately $0.15 of foreign exchange pressure, most of which we expect in the first half of the year. Before I wrap up, I'm pleased to announce that our Board of Directors has proposed an increase in our dividend to CHF0.28 per share. This is in-line with our payout policy of 10% of the previous year's core net income. Shareholders will vote on this proposal at our upcoming Annual General Meeting in May. Additionally, I'm pleased to report that our Board has also authorized a share repurchase program of up to $750 million to be completed over the next three years. This program is designed to offset future dilution from associate equity-based incentive plans. Our priority for capital allocation will continue to be investing for top-line growth, both internally and externally. And finally, I'd like to thank the entire Alcon team for another great year. Their passion and dedication to our purpose is what differentiates Alcon from other companies. And with that, I'll turn it back over to David.

So, to wrap up, I'm proud of the significant progress we made in 2024. Our strong financial performance, bolstered by our strategic investments and operational efficiency, underscores the bold action, thoughtful planning, and solid execution by our talented teams across the globe. Looking forward, 2025 will be a pivotal year for Alcon. We are launching a wave of new products across each franchise that will position us for durable long-term growth. We will continue to invest behind customer-driven innovation, drive operational excellence, and create value for our shareholders. Once again, thank you for your support. We look forward to giving another update at our Capital Markets Day in March. With that, let's open it up for Q&A.

Thank you. We will now be conducting a question-and-answer session. The first question is from David Saxon from Needham & Company. Please go ahead.

Great. Good morning, David and Tim. Thanks for taking my questions, and congrats on the quarter. I wanted to start on the US ATIOL business and getting some questions there on just some recent competitive launches. So, can you talk about specifically how that business did in the quarter? Did it grow year-on-year? And then, what do you see in terms of impact from competitive trialing and kind of what are your expectations for how that extends into 2025 as you launch PanOptix Pro?

Well, look, the US ATIOL market, I think, had some small growth in it, yes. I think directionally, though, there's a lot of noise in the data. And so, I think what people are finding is that there was a lot of competitive trialing. Some of that was sampled, so that affects some of the year-on-year change. If you look at our consumables business in the US, which is a pretty good indicator of procedural growth, we think it was a relatively normal quarter, maybe a little bit light, probably in the 2% to 3% range. So that said, I think, directionally we've been very comfortable with the progress we've been making against competition. I think our total share in foldables grew and our ATIOLs business grew. It's just that it grew principally outside the US, and in the US, we lost a little bit of share to competition, which is as we would have expected. So, I think we are in a very positive frame as we move into this PanOptix Pro launch. We feel good about where we are and kind of as expected as we had said.

Okay, great. Thanks for that. And then, maybe for Tim, just on the margin. So, I heard the comments around operating margins should accelerate in the back half. If I look at the first half, I mean, do you expect to see expansion? I know the first quarter, it's kind of a tougher comp, but can you see expansion starting in the second quarter, or should we think about that really just a second-half dynamic? Thanks so much.

Yeah. I think we'd probably start to see a little bit of expansion in the back half of the first half, if that makes sense. To your point, Q1, we had a very strong Q1 in 2024. I wouldn't anticipate that expanding given the investments that we're making, but we should see expansion throughout the course of the year.

The next question is from Jeff Johnson from Baird. Please go ahead.

Thank you. David, maybe I can push you just a little bit on your US ATIOL comments there. I think in the past you've given market shares on the PCIOL side. Is there anything you could update there? I mean, I think we've all assumed you're going to lose a little bit of share or maybe even a little more than a little bit of share here over the next few quarters until Pro launches. But any updates there on where you think that share potentially could trend down to over the next couple of quarters until Pro launches?

Well, I think what you're seeing right now is a relatively stable share globally with the Chinese market, for example, doing quite well. We had a very significant share growth there. And an offset in the US, obviously. So, we continue to see competition pricing in a way that makes it very attractive for people to try. So, I think as that settles down, I think we'll see a return to stability in the market globally. And I do think that the challenge in the financial piece is, of course, that the price in the US is higher than the price in China. So, even though we're growing units globally, we are not getting as much price out of that. So, that's really what I think most people are observing in the 2%. So, good quarter for us generally in this area, and I think as we launch Pro, people are going to be excited about what we can do with that.

All right. And then, maybe just on top of that or a similar follow-up, just that 2% implantables number, I guess maybe for you, Tim, should we expect that as maybe competitive trialing goes up in the US over the next quarter or two, does that 2% potentially soften a little bit from there before we see it reaccelerate in the back half, or do you think 2% is kind of the trough of growth in that segment? I know you don't guide by segment, but just generally speaking, how you think that segment could play out here over the next few quarters? Thanks.

Yeah. We are not really going to get into guiding by quarter or by segment. So, to David's point, we are very excited about PanOptix Pro, and I think as we launch that, you are going to see those results in the revenue growth line.

The next question is from Ryan Zimmerman from BTIG. Please go ahead.

Good morning. Thanks for taking the questions, David and Tim. I appreciate it. I'm going to avoid the ATIOL questions and talk a bit about price, if we could, in the quarter. And just a broader question for the industry, because I think price has been a meaningful driver on the top-line, but when you adjust for price dynamics, can you comment more from a volume perspective? How would you characterize the growth, particularly in the contact lens segment of the business where price has been a meaningful driver?

Yeah. Thanks, Ryan. And I think the quarter for us, I think directionally is pretty close to where the year was with about a third of our growth coming from price. So, it is meaningful and we have had pricing power for the last several years. So, I think if you cut it down into kind of segments, I would say the contact lens business has benefited a lot in the last year or so from price, but it always has. I mean, historically, you see about a third of the value coming from trade-up or mix, and a third of the value coming from price, and then a third coming from the unit growth. And so, typically, that's made a market of mid-single-digits. And so, we would just think that that continues going forward. I don't know that it will be nearly as substantial as it was last year or the year before. And I think if that's where you are going, I think we are not optimistic necessarily about big price increases. Given where we are right now, we think it's pretty well priced and priced appropriately for the consumer.

Okay. Very helpful. And then, Tim, in the presentation, I think you called out some higher inventory build as just a headwind to gross margins in the fourth quarter. Given the product cycle that you have this year, would that continue? I mean, can you elaborate just on kind of whether that may or may not prohibit gross margin expansion specifically in 2025 relative to maybe the core operating margin expectations that you're calling out in guidance?

I believe that gross margin for 2025 compared to 2024 may see a slight improvement. However, we will still experience some higher cost inventory impacting 2025. Additionally, as we introduce UNITY and increase equipment sales, it might put some pressure on gross margins. Overall, I would anticipate gross margins to remain relatively flat with a slight improvement.

The next question is from Larry Biegelsen from Wells Fargo. Please go ahead.

Good morning. Thank you for the question. Tim, I wanted to ask about the key assumptions in the 6% to 8% constant currency guidance. You mentioned the phasing and acceleration throughout the year. Similar to margins, do you expect the first half to fall within that range, or be on the low end or below it? The second half of the year was around 6%. Therefore, the midpoint of the guidance suggests an acceleration. Is this primarily driven by an increase in equipment? I have one follow-up.

I would consider the revenue performance in terms of the first half and second half of the year. In the Surgical segment, particularly with implantables, we've seen some market weakness in the US and increased competition, which became noticeable around May and June of 2024, making this a tougher comparison. In the contact lenses segment, we had some price increases in the first half of 2024 that won't happen again. Additionally, there was a structural change with OcuMension that was announced for the second half of 2024, meaning the revenue from last year won't be replicated this year. However, there's potential upside from the China VBP that was implemented in the second quarter of 2024, which could provide some benefit in the first half. Considering all these factors, I anticipate that revenue for the first half will be at the lower end of our guidance, while I expect it to rise to the higher end as we move through the year, especially with the launches David mentioned in his prepared remarks.

That's very helpful. I wanted to ask about UNITY, David. Can you discuss the feedback so far and how we should consider the growth trajectory in the equipment business throughout the year? We've experienced years where equipment sales exceeded 10%, even without a major launch, just two years ago it was above 10%. Should we anticipate equipment experiencing significant growth in that sector? Thank you.

It's certainly going to be an increase year-on-year. The exciting aspect of the equipment business is our success with biometry and microscopes. Adding Voyager to the mix should provide additional benefits. Moreover, we are experiencing a generational change in phaco and vitrectomy, so we believe the equipment business will be very strong this year. We plan to launch UNITY VCS around May, and we see that as more of a second-half initiative since it will take time to get it out and properly train the OR teams. We don't feel the need to be overly aggressive with this launch; our priority is to ensure that surgeons are trained effectively to maximize its value. If we do this correctly, we will see significant benefits such as performing more cataract surgeries and vitrectomy procedures each day, which will create value for the ASCs and surgeons, while also helping patients access therapy more quickly. We are particularly optimistic about the latter part of the year.

Thank you.

The next question is from Anthony Petrone from Mizuho Group. Please go ahead.

Thank you very much. Good morning, everyone. My first question is about China. Can you provide more details about the momentum in the IOL market that you're observing in China? What kind of share gains are you experiencing currently, and what are your projections for 2025? Any qualitative insights regarding China's VBP for 2025 would be greatly appreciated. Thank you.

Yeah, obviously, we expect China to do quite well this year. We had about a half a year of impact last year as that took off in the middle part of the year. We had not participated in the program in the past. So, there was some inventory that was built in the second quarter, but I think in the first quarter wraparound, for example, and then even in the second quarter, you're going to see some benefit from China on the volume. I do think that the share has been very significant relative to where we were. You remember that I've said in the past, we were in the high-single-digits. I think originally, we're significantly higher than that at this point. And that was really with only about six months of effort. So, I hesitate to give a share number because it's probably got a lot of noise in it. That data is not super great, but we're doing quite well. And I would just say that PanOptix, in particular, has just kind of gotten its feet under it. And Vivity, which is really the one that's taken off in China for us, has been a very positive momentum gainer for us. I would just remind people, though, that the China pricing is European pricing. And so, even though we're gaining units globally and our share is relatively stable globally, I think the value that you're seeing that comes through is a little bit less because the IOLs in the US are very different price than they are in Europe and the rest of the world. So, expect that we're going to do well in China, but also expect that that's largely a front half and then a stabilizing piece in the back half.

Perfect, thanks. And I just have a follow-up that I'd like to squeeze in. Could you maybe comment about the margin for Surgical this year, given you're growing nicely in China and you have also like some product launches in equipment? I mean, do we expect margin expansion in Surgical as well?

Yeah, we'll see a little bit of expansion. I think one of the things that you have to take, and I think Larry hit on this, is there will be a little pressure given the fact that the equipment sales will be increasing. So, we're excited about that launch. That will drive a lot of revenue growth in the back half. But that does put a little pressure on the margins, but we'll continue to get some operating leverage as well. So, we feel very good about the Surgical margins.

The next question is from Patrick Wood from Morgan Stanley. Please go ahead.

Beautiful, thanks. I'll keep it to one and a slightly esoteric one. But I'm curious, is there any interest on your end within the IOL market to go for the kind of drug delivery side using the haptics? Obviously, we've seen some on the private side going this pathway. And glaucoma management and a bunch of areas feels like it could add a lot of value to the franchise over time going that way. I'm just curious if that's something you guys have discussed internally or thought about partnerships there. Thanks.

Yes, Patrick, we are aware of those technologies and have looked into them. However, I would say we consider ourselves to be a fast follower in this area. We want to see how the market develops, especially regarding reimbursement stabilization in intraocular drug delivery and glaucoma. It will be interesting to observe how things stabilize over time. I would categorize this similarly to IOL delivery. We plan to monitor this for a while, but we are prepared to enter the market quickly if necessary. It’s an intriguing concept, but it has yet to fully unfold.

The next question is from David Adlington from JPMorgan. Please go ahead.

Hi, guys. Thanks for the question. More or less a high-level one. So, revenue guide this year at 6% to 8%, is the same as it was this time last year, but you've got a number of new products launching and the Chinese VBP. I just wondered how we should be thinking about the offsets on the downside. Is that entirely down to the softness in the IOL market, or are there other things we should be thinking about? Thanks.

The factors limiting our growth are primarily the legacy brands and, to some extent, the market dynamics. Overall, the global markets were fairly stable last year. The key difference was that the US had a weaker year in implantables, whereas international markets performed well. Consequently, while our unit volumes were solid, the variations in pricing between the international markets and the US significantly impacted value. We anticipate this trend will continue, with the US remaining somewhat softer due to increased competition expected this year, while we expect international markets to remain strong. Other factors to consider include the development of the contact lens market and trends in the equipment and capital purchasing markets, although we typically aren't significantly impacted by those. Overall, general market conditions will likely be the primary influence.

Perfect. And then, maybe one quick follow-up. As we get to this time next year when the exit rate in the second half and all those products start to ramp, are you expecting a faster growth rate in 2026 than 2025?

Well, when we get through 2025, we'll talk about 2026. The reason the range is a little wide, 6% to 8%, is because we're very interested in how these new products perform. We're optimistic about them and excited about each one. We're hopeful that the predictions will hold true, but we don't know that for sure. We'll see how these products ramp up, how the market responds to them, and we'll provide updates as we approach the end of next year.

The next question is from Brett Fishbin from Keybanc Capital Markets. Please go ahead.

Thank you for taking my questions. I'd like to follow up on the contact lens side. You mentioned the recent launch of PRECISION7 sphere and toric in your last calls. Can you share more about how optometrists have received this launch? Additionally, while you provided a total addressable market opportunity, could you elaborate on your expectations for the ramp-up of this product and its potential contributions over the next few years? Thank you.

It's an interesting topic. Brett, this product has been in our line-up for some time, and we held off on its launch because we had other priorities. We spent nearly a year testing it before introducing it to the market, and the response has been very positive. Just yesterday, I spoke with our team in the US and learned that over half of our sales are coming from the two-week and reusable market, which aligns with our expectations. This two-week replacement concept isn't always intuitive; patients can forget, and doctors have their concerns. Often, when contact lenses become gritty, people choose to replace them instead of opting for a healthier alternative. A more intuitive replacement schedule, whether it's every Monday or Sunday, tends to resonate better. Optometrists prioritize patient safety and eye health, so if we can provide a schedule that is shorter, affordable, and easy to remember, that appeals to them greatly. Given this feedback, I'm optimistic about the market's potential. It's significant, and I believe this product launch will positively impact the reusable segment.

All right. Thank you very much. Appreciate it.

The next question is from Harry Shrives from Citi. Please go ahead.

Hi, guys, thanks for taking the question. Just back on the US dynamics in the ATIOLs market, on the competitive sampling, so how long do you see this lasting? And is there anything you can do about the competitive sampling, or do we just have to wait for the launch of the new PanOptix product?

Well, Harry, this has been happening for a while now. We’ve known for some time that we wouldn’t be the sole players in the ATIOL space in the US with significant products. We anticipated this competitive landscape from Europe and other markets. For the past 18 months, we've expected to lose some market share in the US to quality products that people would want to try. That’s what we expect to see again this year. We have several products we plan to launch later this year. We believe that when consumers have the chance to try new things, especially if they're free or low-cost, they will be inclined to test them out. That makes sense. Once they decide what to purchase, the situation changes slightly. We think things will stabilize, but it will be a year filled with new competitors, and more are on the way. However, I am confident in our ability to compete with PanOptix Pro. No one else has the profile that we do with PanOptix. Furthermore, we’re positioned well because our product maximizes light usage and minimizes light scatter, providing a unique experience for patients compared to other offerings. We’re optimistic about this. The product launch is just a couple of months away, and we are currently building the product. We've made our decisions and have taken many surgeons’ feedback into account. Our teams are trained and ready, so we just need to finalize production and get it out there.

Great. Thank you. And on your margin guidance of sort of 21% to 22% next year, could you just break that down for us into sort of effects from gross margin and OpEx, please?

Yeah. We don't really break it down that way. But again, I think if you look at the margin expansion, the point I'd make is it will be more back-half loaded just given the investments that we're making on these new product launches. But we expect to continue to see nice margin improvement.

The next question is from Tom Stephan from Stifel. Please go ahead.

Great. Hey, guys, thanks for the questions. I'll start with Hydrus. David, can you remind us of the size of that business, maybe in 2024 and your outlook here in the US, just given the LCD noise that has surfaced of late? And then, where do we stand with OUS expansion of Hydrus as well? And then, I have a follow-up.

We generally don't discuss the size of our products. I can say it's a little under 100, but the product has performed quite well. The combined use of products has been favored by surgeons, and we aim to assist them in reversing that trend. We'll see if that materializes in the next couple of years, although I'm uncertain. Nevertheless, we believe that Hydrus has been shown to be the most effective treatment method. If you're opting for a MIG, this is the one that works particularly well, which is supported by data and long-term visual field results, as well as positive feedback from doctors. We believe it's the right choice. Additionally, we see promising opportunities outside the US in Japan, France, Spain, and China, with reimbursement being a key factor in these markets. We'll wait to see how that develops, but we are eager to build the brand internationally as well.

Got it. That's great. And then, just on contact lenses to pivot a bit. For 2025 kind of end market growth, David, I think you talked about maybe price potentially moderating a bit. But can you just discuss your view on the trade-up aspect of market growth? Sort of what do you think that looks like in '25 versus '24? Maybe just kind of that DAILIES versus reusables growth dynamic? Thanks.

It's really consistent. Looking back over the years, it has remained steady, and I don't expect that to change. People tend to prefer daily lenses, and the prices for DAILIES have become more accessible, offering various options for those interested in them. Our PRECISION1 is an excellent value within the DAILIES category. For those seeking the best comfort, DAILIES TOTAL1 is a bit pricier but an outstanding product. Both options attract reusable lens users because they’re more convenient to wear once a day and dispose of, plus they offer greater comfort, especially towards the end of the reusable wear period. You receive a better product if you can afford it, but we understand that not everyone can, which is why we provide reusable options. We’ve introduced P7 between the T30 and our DAILIES lenses. However, we don’t expect our focus on reusables to impact the transition to DAILIES significantly. We actually foresee continued growth in DAILIES while gaining market share in reusables. Therefore, I predict a steady shift towards DAILIES, with some price increases expected in 2025, though not as substantial as in 2024 or 2023.

Great color. Thanks, David.

The next question is from Issie Kirby from Redburn Atlantic. Please go ahead.

Hi, guys. Thanks for taking my question. I just wanted to touch upon dry eye and some of the investments that you're making there. I was wondering if you could talk about the prescriber base here for dry eye and the extent to which you're already calling on that existing prescriber base with your broader product portfolio and how you can potentially leverage your broader over-the-counter offering to win here?

Yeah, it's a really interesting question. We spent a lot of time as of late thinking about the deployment for AR-512, and I think there is a significant optometric audience here that we are intending to cover, and again, we will do that, but it is different than some of our other eye drops. So, for example, Rocklatan, much more of a traditional ophthalmology audience, some optometry, but not a lot. What you see with the high prescribers is there are some concentrated high prescribers in optometry that we will want to cover and we are expanding our sales force to do that. So, as I have said in the past, we were going to look at what's the optimum way to maximize the value here of our launch on 512, and we are adding a sales force to get coverage of not just ophthalmologists who are high prescribers, but also optometrists who will fit in that category as well. And that will give us room to continue to promote our glaucoma drops and some of our other eye drops that we have. And the leverage obviously comes from an ability to self-sustain preservative-free Pataday and a number of other OTC products. So, your point on OTC is well made. We do have a lot of opportunity to kind of leverage that and help build the demand coming from the surgeon side or the doc side of this, in addition to obviously continuing to build our consumer effort. So, good question and we are headed that way.

Great. Thanks for the color. And then, just as a follow-up on contact lenses and as it relates to CapEx, just wondering how you're feeling from a capacity standpoint at the moment and how we should think about contact lens margins over the next few years? Thanks.

CapEx for us remains in the mid-single-digit range, and we intend to maintain that level. I believe it's the right balance of recapitalization and expansion, and it aligns with what we've stated previously. Regarding capacity for contact lenses, I can say that our manufacturing team has performed exceptionally well. During our visit to the German facility, we observed significant improvements in output, surpassing original design speeds, which has lessened the need for new production lines. We are achieving great productivity, and the flexibility of our existing lines allows us to produce products like P7 without needing to establish a new line. T30, PRECISION7, and PRECISION1 all come from the same line. As we progress, we aim to develop more products on those same lines. Our manufacturing and R&D teams have successfully optimized capital utilization and can repurpose lines when necessary. Overall, they have the flexibility to accommodate various modalities, finishes, and surfaces, which has greatly enhanced our capital efficiency.

Great. Thanks so much.

The next question is from Kavya Deshpande from UBS. Please go ahead.

Hi. This is Kavya from UBS. Thanks for taking my question. I was just wondering about the BELKIN Vision product and how significant you think this technology can be and how we should think about the ramp-up here? Thank you.

It's an excellent question. The ramp-up is the challenging aspect. We estimate that it's likely to be in the range of 75 to 150 million. I mention such a wide range because there’s a growing consensus that SLT is the best starting point for almost every glaucoma patient. The difficulty arises because it's a complex procedure to perform without something like Voyager. We are addressing the need for a gonio lens and the challenge of accurately aiming during the procedure. Traditional SLT methods can be cumbersome and time-consuming, making it tough for both patients and doctors. However, most ophthalmologists, especially glaucoma specialists, consider SLT their preferred approach, even if they don’t perform it frequently. The advantage of Voyager is that it simplifies the process, making it more accessible for patients and easier for the surgeon and glaucomatologist who may have previously hesitated. We believe this will expedite the adoption process. The interest and market potential are significant, but the ramp-up is the key question, and we will have to observe how it unfolds. We currently have a dedicated glaucoma team working with Hydrus and focusing on this initiative. We are pursuing what we believe to be the most effective treatment approach for glaucoma patients, starting with SLT, followed by drops, considering MIGS, and ensuring patients retain their vision for as long as possible.

Thank you.

The next question is from Jack Reynolds-Clark from RBC Capital Markets. Please go ahead.

Thanks for taking my questions. I have another one regarding Voyager. I appreciate the focus on ramping in the US first. How soon do you anticipate expanding this opportunity to other regions, such as Europe? Additionally, how should we view the medium- to long-term value proposition in terms of capital compared to click fee?

Well, yeah, I mean, I think the idea, of course, would be long-term the click fee is the reusable element of this that we would see as the majority of the revenue. Once you buy one of these units, you should be able to use it quite some time. So, we expect to place as many as is appropriate, but I think the click fee will be the value over the long haul and frankly great margin for us relative to the capital. So, over the long haul, we think this becomes a profitable, very nice business for us. On the European ramp, I would just say that this will largely be a function of how fast we can build product. This was a company that we had been partnering with for some time out of Israel. We've been in the process of working with them to manage the difficult situation that exists over there and also move that manufacturing into one of our facilities and augment their efforts. So, as we get through that, we will bring more to Europe. But our primary objective right now is to launch in the US, and we'll send product as fast as we can into Europe. Europe has been approved for some time, has product available now. It just isn't going to be as aggressive a launch, I think, there as we'll see in the US, where we'll go first.

That's super clear. Thanks very much. And then, a very quick follow-up. So, my line dropped, so apologies if this question has already been asked. But just on international ATIOLs, can you give a bit of color on which geographies were the major drivers and which modalities there? Was that kind of basically a function of China or were there other things going on as well?

Well, we had a couple of very good markets. Southeast Asia and LATAM did really well, both of them. I think China was a standout by far, both by ATIOL penetration. It drove most of the global penetration gain, and also for us, it really held our unit share up in a very meaningful way. So, I would say, we like what's going on in China for us right now. It's pretty much as expected. I would say the US is also as expected and we are getting a little bit of a nice lift out of some, I would just call it, other markets. Latin America did pretty well. Japan has done pretty well recently, and we feel pretty good about all that.

That's great. Thanks very much.

The next question is from Chris Pasquale from Nephron Research LLC. Please go ahead.

Thanks. David, I wanted to follow-up on the comments about the contact lens market. If volume and trade-ups are steady and price moderates, that implies slower market growth. Our sense is that the incremental price tailwinds over the past few years has probably added about 2 points of market growth relative to pre-pandemic. So, is your expectation that the market decelerates by that magnitude in '25 versus '24?

No, our expectation is mid-single-digit growth, which aligns with the normal growth we anticipate. While there are various estimates circulating, we have consistently described the contact lens market as a 4% to 6% grower, which falls under mid-single digits. Therefore, we will see, but I believe that aligns with what it grew this year and what we expect for next year.

Okay. And I'm curious why now in terms of the price tailwind moderating, it's been strong over the last several years. It looks like this was another good quarter for both the market and your own business in 4Q. So, are you picking up signs of pushback from patients or softness in the consumer environment more broadly? Just what drives the thinking that '25 is different on that particular dynamic?

Well, I think what you're going to see right now is there's a great deal of competition, particularly in the US market. And when you look at what's happening with competitors, they are beginning to respond to the success that our new products have had, and they are responding with price, and they are responding with discounts. And so, when those discounts are available and there was significant amount of discounting that went on in the fourth quarter from some of our competitors, it makes it a little bit trickier to handle. So, I think we are not looking to raise price necessarily. We are looking to manage the consumer very carefully and we feel like that's the appropriate thing to do. I would also say that as we are coming off of '23 and '24, we were trying to catch up and a lot of people were to the inflation that had happened in our core cost of goods. And I think that was kind of a one-off, if you will, that most of us got through. The consumers largely accepted and I think we should be sensitive to the notion that we want continued trade-up and that's what we are getting. We think we have got it priced right.

Next question is from Anthony Petrone from Mizuho Group. Please go ahead.

Thanks. Sorry, just hopping between earnings calls. Apologies for that. So, one on when we look ahead to the UNITY launch, just wondering, Dave, when we think about the path to acquisition for these systems, whether it's an upgrade or outright purchase, will the company pursue bundled deals? In other words, if they purchase the capital, can you actually gain share in consumables and IOLs into those cycles? And then, really quickly on the US dry eye TAM, the latest numbers that you have there? And if you can, how 512 will be differentiated versus what's out there in the market? Thanks.

The idea we have with UNITY is that it significantly increases efficiency in the operating room. It will be interesting to see how the upgrades and new machines perform, as I believe there's real value in having a combined machine, especially for those with older equipment. Many will likely opt for the joint unit. The consumables add considerable value to this process, and I think that this standalone approach will influence decisions at the ambulatory surgical center based on perceived value. We aim to highlight that our unit and consumables allow for more surgeries weekly, quicker turnover in operating rooms, and a smaller footprint since there's just one unit instead of two. There is substantial value in selling these solutions directly, and I believe customers will prefer that. Regarding the dry eye market, we see it as a promising opportunity, especially with some recently launched products performing well with reimbursement. This is a positive indicator, as our product's ability to improve the corneal surface and enhance patient outcomes is quite exciting; few products can demonstrate such results. We are optimistic about the product's potential, but it may take some time. I want to be cautious since we are in a mid-year launch cycle, which will primarily reflect in revenue in 2026. Thus, I wouldn't want to overestimate its impact in 2025. However, we feel energized and are receiving positive feedback from payers and clinical trial sites regarding patient outcomes. We are excited about this product.

Thank you.

The next question is from Michael Sarcone from Jefferies. Please go ahead.

Hey, thanks for squeezing me in. Just one for me. Can you maybe talk about how you're thinking about potential tariff risk, and whether there is anything you call out on the risk side around supply chain?

Yeah, Michael, it's certainly a very pertinent question these days. And the dynamic is hard to read. So, I would just say that we are fortunate in many ways that we manufacture inside of the regions we deliver to mostly. That doesn't limit our supplier tariff risk. So, we do buy from markets all over the world supply for our products. We manufacture most of them in the markets. We manufacture most of the US in the US. We manufacture most of Europe in Europe. We manufacture a lot of Asia product for us in Singapore. But I would just say that, we'll have to play that one out and just see what happens. I do think we have identified those risks and created plans around if we needed to move things, we could. We probably will wait and see how long these things last, and obviously, everybody is exposed to the same kind of deal, but maybe we're in a little bit better position than most because of the nature of the location of our facilities. I would also just say though that the beauty of one of our businesses is the diversity of markets and the diversity of products that we make. And so, when you kind of cut through the broad strokes of our business, we've got countries all over the world that we can benefit from. So, if one country increases tariffs, we may be able to make it up somewhere else. The same thing with our product lines. We've got a little bit of implantable pressure in the US, but we are doing really well in China. So, it is a matter of geographic diversity and category diversity that really drives our steady growth going forward.

All right. Thank you.

There are no further questions at this time. I would like to turn the floor back over to Dan Cravens for closing comments.

Thanks, everybody, again, for joining us this morning. For any follow-up questions, certainly reach out to either Allen Trang or myself in Investor Relations. For media questions, feel free to reach out to our Corporate Communications team. Thanks, again, and have a great rest of your day.

Thanks, everyone.

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