Alcon Inc Q1 FY2026 Earnings Call

Greetings. Welcome to Alcon's First Quarter 2026 earnings call. Please note that this conference is being recorded. At this time, I'll turn the conference over to Dan Cravens, Vice President and Global Head of Investor Relations. Thank you. You may now begin.

Welcome to Alcon's First Quarter 2026 Earnings Conference Call. Yesterday, we issued our press release, interim financial report and earnings presentation. All of these documents are available on 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. Before we begin, please note that our press release, presentation and remarks today will include forward-looking statements, including statements regarding our future outlook. We undertake no obligation to update these statements as a result of new information or future events, except as required by law. Actual results may differ materially from those expressed or implied in these forward-looking statements. Please do not place undue reliance on them. Important factors that could cause actual results to differ are included in our Form 20-F, earnings press release and interim financial report, each of which is on file with the Securities and Exchange Commission and available on their website at sec.gov. We will discuss certain non-IFRS financial measures. These measures may be calculated differently from and may not be comparable to similar measures used by other companies. They should be considered in addition to and not as a substitute for IFRS-prescribed performance measures. Reconciliation between our non-IFRS measures and the most directly comparable IFRS measures can be found in our earnings press release. For discussion purposes, our comments on growth rates are expressed in constant currency. In a moment, David will begin with highlights from the first quarter. After his remarks, Tim will walk through our financial performance and outlook for the remainder of 2026. David will then return with closing comments before we open the line for Q&A. Before I turn the call over, I'd like to share that Alan Trang has accepted a new finance leadership role within Alcon, supporting our surgical business in Singapore. On a personal note, I want to thank Alan for his deep expertise, sound judgment and the partnership and friendship he has brought to our team and to our engagement with the investment community. He has made a meaningful impact on Alcon. And while we'll miss him in his current role, we're excited to see him take on this next chapter within the company, and we expect to announce Alan's replacement in the near future. With that, I'll turn the call over to our CEO, David Endicott.

Good afternoon, and thanks for joining us. Let me start by recognizing the incredible work of our talented teams around the world. Your ongoing dedication, innovation and commitment to our customers continue to move Alcon forward and make a meaningful difference in patients' lives. Now, the first quarter was an important step forward for our new products, demonstrating strong market acceptance and share gains. In a quarter marked by uneven market conditions, particularly in cataract, our teams stayed focused and delivered results that reflect the strength of our innovative portfolio. Our recent product launches contributed meaningfully to top-line growth in the first quarter, and we expect that contribution to continue to build as the year progresses. Importantly, we're seeing market share gains across key categories, particularly in U.S. AT-IOLs, surgical equipment and consumables, and contact lenses as well as dry eye. That momentum was clear at the ASCRS meeting last month. Across more than 60 presentations and peer-to-peer sessions, we saw strong surgeon engagement driven by impactful scientific data and hands-on demonstrations. Discussions focused on consistency, workflow integration and matching technology to patient and doctor needs. This real-time feedback reinforces our confidence in our ability to translate innovation into real-world clinical value. I'll now move to discussing recent innovation, starting with our Unity VCS device. As we discussed in the past, the Unity platform represents our most significant equipment upgrade opportunity in more than a decade, and the scientific community continues to recognize that. In addition to previous top innovation awards, I'm pleased to report that Unity VCS was named an Edison Award winner last week. This is one of the most recognized honors for market-ready innovation and reflects its meaningful impact on surgical technology. Launched in 2025, Unity VCS is engineered to enhance surgeon control, improve efficiency and streamline the surgical workflow. VCS has been introduced across most major markets worldwide and continues to build momentum and performed well in the quarter. In late last year, we expanded the platform with Unity CS, our stand-alone cataract system. It's designed to increase surgical throughput while maintaining precision and safety. Unity CS has also been very well received. Surgeons have noted its seamless workflow and next-generation energy delivery that help optimize case efficiency without compromising outcomes. With a substantial installed base of legacy machines and a compelling value proposition across both efficiency and clinical performance, Unity represents a significant technology upgrade. Beyond the replacement market, Unity is also showing strengthening share and actually expanding our installed base. As a result, our order pipeline remains robust, especially post ASCRS. We're continuing to work closely with customers to manage all our installations with the quality, service and support they expect from Alcon. Now, on implantables, our innovation is strengthening our competitive position and driving solid performance. In fact, in the U.S., we gained share in the IOL category in the first quarter. I'll start with PanOptix Pro, our latest trifocal IOL. Pro builds on the proven success of PanOptix, which is already the world's number one most implanted trifocal with over 4 million implants. Pro introduces new features that reduce light scatter and deliver greater quality of vision. In the U.S., this lens has helped to drive almost two share points of growth in the PC-IOL category. Internationally, we're just getting started. We recently launched in Australia, Japan, South Korea and now Europe. Feedback from these launches has been positive, and we're confident that PanOptix Pro will bolster our presbyopia-correcting IOL leadership globally. Building on PanOptix Pro momentum, we launched TruPlus, our new enhanced monofocal IOL. This lens extends the range of vision of a traditional monofocal, providing enhanced intermediate vision without compromising distance performance. TruPlus is designed for surgeons who want an enhanced monofocal option. It enables us to compete more effectively while defending our Clarion monofocal base. Importantly, TruPlus launches with a toric version from day one, and having a toric modality is a meaningful advantage for competing in the astigmatism-correcting segment and growing our AT-IOL share. Finally, we remain on track to launch an upgraded version of Vivity, our extended depth of focus lens, in early 2027. With more than 2 million implants, Vivity is already the world's most implanted EDOF lens and this enhancement is designed to improve near vision while preserving Vivity's low visual disturbance profile. Now I'll move to retina, where Valeda, our photobiomodulation device for intermediate dry AMD, continues to see encouraging early adoption. Valeda is the first and only therapy clinically shown to maintain vision improvement in dry AMD patients, with some patients achieving about a one-line gain in visual acuity. This technology uses three specific wavelengths of light to improve mitochondrial activity and retinal health, giving patients a noninvasive treatment option for dry AMD that they've never had before. Importantly, reimbursement is progressing with all but one Medicare administrative contractor covering Valeda, and we're actively engaging private payers and expanding physician education. Valeda complements Voyager by expanding our office-based procedures, enabling practices to operate more efficiently while offering patients convenient noninvasive options. Now I'll move to contact lenses, where we continue to gain traction with our innovative reusable portfolio. More than half of new wearers started reusables, which is a segment that supports strong patient retention and delivers highly attractive margins. Given our under-indexed share position, this category remains an important growth opportunity for us. Our reusable portfolio is anchored by Total30, the industry's first and only monthly lens with water ingredient technology, which delivers exceptional comfort for 30 days of wear. Last year, we expanded the Total30 family to cover all major modalities: sphere, toric and multifocal. And in February, we introduced Total30 multifocal for astigmatism, which is our first multifocal toric contact lens. This lens fills an important unmet need for presbyopic patients with astigmatism, a group that historically has had very few options. Initial feedback has been excellent with eye care professionals highlighting excellent vision at all distances and long-lasting comfort. Alongside Total30, Precision7 broadens our portfolio with a high-quality, accessible one-week replacement lens. Designed for patients for whom daily disposables are not an option, Precision7 delivers a comfortable experience at an attractive price point while introducing a replacement schedule that many optometrists view as more intuitive than traditional two-week lenses. Combined, these innovations drove share gains in the quarter, and we expect that to continue in this category. Now finally, in ocular health, we continue to strengthen our leadership in the expanding dry eye category through innovation in both our over-the-counter and pharmaceutical products. On the over-the-counter side, our Sustained family of artificial tears delivered another quarter of high single-digit growth. Most notably, last year, we launched SustainPro, our most advanced artificial tear. Its triple-action formula is designed to hydrate, restore and protect the ocular surface delivering long-lasting relief. Early performance has been strong, contributing to continued share gains in U.S. artificial tears and reinforcing our leadership as that category expands. In pharmaceuticals, Tryptyr continues to perform well. Doctors appreciate its rapid onset and novel mechanism of action. Importantly, Tryptyr is already capturing share with approximately four share points in just eight months into the launch. We've also made great progress with payers. In the first quarter, we expanded coverage to more than half of our commercial lives; our focus for the remainder of the year is on broadening the prescriber base and securing future Medicare Part D coverage, which will significantly expand patient access and make Tryptyr easier to prescribe. Tryptyr and SustainPro together represent significant innovation in dry eye, extending our reach across the full spectrum of dry eye sufferers and reinforcing Alcon's leadership in this category. Looking ahead, our innovation pipeline remains strong with upcoming launches, including a new entry into a high-whitening category as well as Unity M, our newest microscope, and Unity Dx, our whole-eye diagnostic device. These programs build on the momentum we're seeing across the portfolio and reflect our continued focus on advancing differentiated innovation. Together, they reinforce our confidence in the durability of our pipeline and our ability to drive sustained growth over time. Now I'd like to turn to operational improvements where we are making a number of things happen internally. As we scale innovation across the portfolio, artificial intelligence has become an important enabler at Alcon, helping us operate faster and make better decisions. We started applying AI selectively where it enhances productivity, quality and speed. In R&D, we've deployed solutions that we expect will increase speed to approval while working on AI-enabled modeling and simulation for accelerating design and development. In operations and quality, we are leveraging AI solutions to improve yield and perform automated inspections. And on the commercial side, AI-assisted analytics are enabling deeper customer insights and more personalized engagement. So while it's still early in our journey with AI, these advancements are fortifying our operational foundation at a pivotal moment and enabling us to leverage a more stable cost structure and seize emerging opportunities. Now before I close, I want to share a few observations on the market environment. In cataract surgery, consistent with prior quarters, we estimate that global procedure volumes grew low single digits. While this relative softness has persisted for several quarters, we continue to believe that market growth will return to historical levels as health care systems adapt to increasing demand. However, for 2026, our guidance continues to assume that current trends continue. On the other hand, we estimate that global AT-IOL penetration was up 130 basis points to approximately 17%. There was broad-based strength in most regions of the globe, which was pressured by weakness in China. If you exclude China, global penetration was up approximately 220 basis points. In contact lenses, we estimate the global market grew at the low end of mid-single digits, led by strength in the United States. In summary, while market conditions remain mixed, our strong portfolio of innovation is performing well and continues to deliver solid results. We're operating from a position of greater strength backed by a deeper innovation engine and a more resilient commercial model. This positions us to deliver durable, profitable growth and create meaningful long-term value for shareholders. With that, I'll turn it over to Tim, who will walk you through the financials.

Thanks, David. Our first quarter sales of $2.7 billion were up 6% versus prior year. In our Surgical franchise, revenue was up 6% year-over-year to $1.5 billion. Implantable sales were $438 million in the quarter, up 1% versus the prior year period. As David mentioned, PanOptix Pro growth continued to perform well. We saw solid growth in IOLs in the U.S., partially offset by ongoing competitive pressures internationally. We also saw some pressure in surgical glaucoma. In Consumables, first quarter sales of $769 million were up 4%, which reflects softer-than-historical market conditions as well as price increases. In Equipment, we saw another quarter of accelerating growth with sales of $253 million, up 23%, driven by strong momentum from Unity. Early adoption has been encouraging, and we're seeing Unity act as a meaningful catalyst for equipment growth. Turning to Vision Care, first quarter sales of $1.2 billion were up 6%. Contact lens sales were up 4% to $738 million. This growth was primarily driven by product innovation and price increases, partially offset by declines in legacy products where we've limited our promotional activity. In Ocular Health, first quarter sales of $487 million were up 10%, led by continued strength of our dry eye portfolio, including Tryptyr and SustainPro. Tryptyr continues to perform well with strong refill rates and broad prescriber enthusiasm. As access expands and awareness builds, we continue to expect Tryptyr to be a meaningful growth driver this year. And as David mentioned, our Sustained family of eyedrops also had another great quarter with high single-digit growth. Within that portfolio, our multi-dose preservative-free formulations contributed nicely, growing more than 20% year-over-year. Now moving down the income statement. First quarter core gross margin was 63%, down 40 basis points year-over-year. This is primarily due to 120 basis points of pressure from incremental tariffs. Core operating margin was 21.2%, which was flat year-over-year. Improved operating leverage from higher sales and manufacturing efficiencies were partially offset by the pressure from tariffs that I just mentioned as well as investment behind new product launches and R&D. First quarter interest expense was $52 million and other financial income and expense was a net benefit of $2 million. The average core tax rate in the first quarter was 19.7%, down from 21% in the prior year. And finally, core diluted earnings were $0.85 per share in the quarter. Turning to cash, we generated $279 million of free cash flow in the first quarter, which was flat when compared to the same period last year. Lastly, with respect to tariffs, we incurred $33 million of incremental tariff-related charges in the first quarter, which is recognized in cost of sales. Now moving to our outlook for the remainder of the year. Our outlook assumes that aggregate eye care markets grow 3% to 4% for the year at exchange rates as of the end of April hold through year-end, and regarding tariffs, we are now assuming an average tariff rate of approximately 10% on U.S. imports holds for the remainder of the year versus our previous assumption of 15%. We also assume retaliatory tariffs remain unchanged. This change results in an estimated $25 million reduction in tariff expense versus our February guidance, which we would expect to reinvest back into the business. Based on these assumptions and our performance through the first quarter, our guidance is as follows. We continue to expect constant currency sales growth of between 5% and 7%. Turning to margin, we continue to expect core operating margin expansion of between 70 and 170 basis points. We expect the majority of this expansion to occur in the second half of the year. As in prior years, SG&A is expected to peak in the second quarter due to normal seasonality with incremental spend this year in support of product launches. Accordingly, we expect second quarter core operating margin to be below the prior year period. And lastly, we now expect core diluted EPS growth of between 10% and 13%. Moving on, I'm happy to announce that our Board has approved a new $1.5 billion share repurchase program to be executed over the next three years. This authorization reflects the strength of our balance sheet and robust cash flow generation, and is fully aligned with our long-standing capital allocation priorities. We will continue to prioritize investments in top-line growth through R&D and disciplined bolt-on M&A. This program enables us to return incremental capital to shareholders in a measured and disciplined way without constraining our ability to fund growth or maintain a healthy deal pipeline. And before I wrap up, I'm also pleased to report that at our Annual General Meeting last week, our shareholders approved a dividend of $0.28 per share, which we expect to pay on or around May 7. I'd like to thank our shareholders for their continued support. And lastly, I'd also like to extend my thanks to our more than 25,000 associates across the organization for their dedication and hard work. And with that, I'll turn it back to David.

Thanks, Tim. To close, the first quarter underscored the strength of our business. Our steady cadence of innovation, balanced portfolio and strong execution are driving durable performance across the company. New product launches are gaining traction. Our pipeline continues to advance, and we're utilizing tools like AI to help us operate with greater speed, precision and scale. Taken together, these advantages position Alcon to navigate the environment with confidence and deliver steady profitable growth and long-term value for our shareholders. With that, operator, please open the line for questions.

And our first question today is from the line of Ryan Zimmerman with BTIG.

Maybe to start with the implantable category growth for a minute here, David. If you look at the growth over the last five quarters or so, compared with peers in the category, it's been a bit below the market rate. I'm wondering how much surgical glaucoma is dragging down your growth, given what you're seeing in PanOptix Pro and the Clarion launch. And if you could parse out what's China VBP versus glaucoma versus maybe more of your core AT-IOL adoption, I'd appreciate it.

Yes. Thanks, Ryan. Really good question. The one percent growth on the implantables broadly is made up of a number of things. One of the reasons we called out glaucoma implantables is because, as you know, the reimbursement changed this year. And we also had about a $3 million to $4 million supply issue on Hydrus late in the quarter. So our core growth there, when you back the Hydrus piece out, is about 3%. If you looked at it in the U.S., it was 6%. So we had a very good quarter in the U.S. And if you look at it without China, it gets higher because China had inventory changes coming in as we moved forward with VBP last year, so the comparison is a little bit challenging. So we've actually had a pretty good quarter in implantables around the world in various markets. I think as we go forward, PanOptix Pro really looks to be doing very well. In the U.S., in particular, we gained share in implantables; we gained in AT-IOL more than a share point. I think we were up AT-IOL around 2.2 points. So we've stabilized that market a bit. We feel like once we get Pro into Europe, which is launching this month, and considering the nice reception in Japan, we expect momentum to build as we launch in additional markets. And I think when you add TruPlus and then look forward to the upgraded Vivity late in the year, we won't have the same kind of prolonged exposure to competitive products. Most of the products you're seeing now have been in the market a long time. So we've got a number of new things coming that should offset that. Make no mistake, it's going to be competitive. I think we can grow at market rate here, but it's going to be competitive. The best thing that happened, honestly, was AT-IOL penetration was up 230 basis points in the U.S. So really nice movement around the world on AT-IOL penetration, and we seem to be doing pretty well right now in the U.S. We'll see how that takes shape as other products launch, but I generally think it's going to be a competitive fight and we're in a healthy position.

Understood. And maybe for Tim. Gross margins came in a bit better than I think the Street was looking for here. It sounds like some of that was price and you have a little bit less of a tariff impact. I'm just wondering with gross margins trending higher than maybe the Street was looking for, one, what are your expectations there? But why can't that flow through at a higher level to the operating margin line and subsequently EPS?

I think you got the pieces of the pie correct. We did still see tariff pressure. When you look year-over-year, the rate cuts we talked about will really hit in the back half of the year. But we're seeing some nice productivity improvements in our manufacturing plants. We are still getting price. I'd expect gross margins to continue to be in that neighborhood of 63% as we go through the course of the year.

Our next questions are from the line of Veronika Dubajova with Citi.

First one, how you think about the market momentum; lots of moving parts in Q1, especially on the surgical side, with weather and some strikes that some of your peers have called out. I'm just curious, I think you described the market growing at 3% in Q4. It sounds like maybe Q1 on the surgical side was a little bit softer. What's your degree of confidence that we're going to be within that 3% to 4% range that you guided for the year? And to what extent you're seeing momentum that has improved looking at March and April, if you can comment on that. And then my second question is on contact lenses. We've seen the gap between you and the market really narrow. Looking at the last couple of quarters, on a sell-in perspective, it seems you are tracking the market very closely. Can you talk about how you feel about the competitive dynamics there and your degree of confidence in your ability to outgrow that market as we look through the remainder of the year?

Thanks, Veronika. Let me start with the surgical market. Yes, there were strikes and weather and some of that had an effect. The way to think about our 3% to 4% market guidance is as an aggregate number: contact lenses, which generally grows 4% to 6%; the cataract market, which generally grows around 3%; and the pharmaceutical and OTC markets, which are growing a bit better than that. We are confident in the 3% to 4% range. In the quarter we were on the lower end, because the U.S. market in Surgical was soft. You can attribute some of that to weather and other disruptions, but at the core there is a lot of unmet demand for cataract procedures. Wait times have gone up. What's happening is a restructuring of service and workflow: surgeons are hiring optometrists, using office-based surgery, and finding more ASC time in other places. To capture the economics, it takes a little time. As they work through it, procedure throughput increases. So I don't expect a big change in the U.S. cataract market this year relative to our view at the beginning of the year. On contact lenses, we've done well with many products. We gained a share point in reusables, while our DAILIES business was a little flat; we were only one of two firms to gain share in DAILIES. We're gaining share in reusables in the U.S. and in DAILIES in international markets. The legacy business is drawing down, which makes comps easier later in the year. Overall, it's a mixed bag, but we expect mix shift to reusables and DAILIES as well as new products to allow us to outgrow the market over time.

Our next question comes from the line of Matt Miksic with Barclays.

So appreciate the color on the market and congrats on the progress on PanOptix Pro. I was just wondering if you could talk a little bit about the effect of some of the pull-through that you've seen from the Unity renewals in terms of either locking down or taking more share in monofocal IOL growth — and then I had one quick follow-up.

It's a good question, Matt, because we did actually see and I didn't mention it earlier, but we took a fair bit of share in monofocal globally in the quarter. Some of that has to do with our presence in the OR. When you're selling more into the OR, you can generally sell more of our other products. So that connection has been positive. The AT-IOL business is still the area we focus most on because internationally we've had challenges; we're stabilized and beginning to grow again in the U.S. market. The Unity CS launch helps because it's easier to install and requires less handholding, enabling us to expand placements beyond retina into cataract ORs. That gives us more opportunity to sell viscoelastic, BSS and other consumables. So Unity renewals and the CS product are beneficial to pull-through and share gains across implantables and consumables.

Our next questions come from the line of Jack Reynolds-Clark with RBC Capital Markets.

My first was just coming back to the surgical cataract market. With the waiting list long, could you talk through exactly what has to happen for this demand to translate into a higher market growth and when that's going to happen? Is it going to be 2027, 2028? What are the drivers there? And then on AT-IOL penetration, could you remind us what it was in Europe this quarter and how you see that progressing over the next couple of years? Do you expect to catch up with the U.S. or something like that?

On Europe AT-IOL penetration this quarter, it improved about 260 basis points, comparable to the U.S. increase. Directionally, most markets are beginning to catch up to the U.S., which sits in the low twenties for penetration. Historically, penetration has grown 50 to 100 basis points per year, and there's a lot of room to grow — the upper limit might be mid-30s to high 30s percentage-wise. Regarding translating demand into procedure volume, it's primarily about freeing up OR time to do more surgery. That requires practice adaptations: shifting procedures to office-based surgery or ambulatory surgical centers, hiring more optometrists to handle pre- and post-op care, and reorganizing workflows. That takes time. We're seeing movement toward office-based surgery and hiring patterns that free surgeons to increase surgical throughput. It's not an instantaneous change; it will occur over time as practices adapt and capacity is increased.

The next question is from the line of Susannah Ludwig with Bernstein.

First, on contact lenses, could you talk more about the drivers of growth and the contribution from volume, price and the mix shift to DAILIES? And a bit about your performance geographically in the U.S. versus Europe versus Japan. Second, on IOLs: you have noted heightened competitive pressure in international markets for several quarters. Could you talk about how this pressure has progressed sequentially and when you will start to lap some of that pressure?

Historically, the contact lens market grows mid-single digits; price contributes roughly 2% to 3% and mix 2% to 3%, with volume generally flat. Recently, pricing resistance internationally — particularly from chains and internet channels — has paused the ability to push price into those markets. That's contributing to some slower market growth, though we're still within the normal range, albeit at the low end. Going forward, consumer demand strengthening and new products, especially mix shifts to reusables and DAILIES, should allow us to outperform the market. Geographically, we're gaining DAILIES share in international markets and gaining reusables share in the U.S.; in the U.S. DAILIES were flattish. On IOLs, competitive pressure has been more pronounced outside the U.S., where there are more products in the market. We lacked new products internationally until early this year in Japan, so that contributed to share pressure. The introduction of PanOptix Pro, TruPlus and Vivity upgrades should help us counter competitive pressure over time. We believe new product introductions will help restore growth and share internationally.

Our next question is from the line of Graham Doyle with UBS.

In the context of the phasing through this year, you just printed a 6% against what we think is the easiest comp in the year at least optically. Therefore, I think there's disappointment in the share price that maybe we're looking at slowing growth or no improvement from here. Is that a reasonable way of thinking? Or is there scope for growth to improve as you go through the quarters? It'd be good to get that sense, please.

Let me clarify the comp. We had a number of one-off items that affected optics. The Middle East shipping disruption was worth about $11 million, roughly 50 basis points of growth, and the Hydrus supply issue was another roughly 10 basis points. On the reported 6.1% growth, without those impacts we would have been closer to 6.7% to 6.8%. We've run a level-loaded plan for a while, and the front half of this year has a lower amount of new product contribution. The back half has a much higher amount, so you should expect acceleration as the year progresses. By the time you get to the fourth quarter, many new products will have been in market for longer and should contribute more meaningfully. So yes, there's scope for growth to improve through the quarters as new product momentum builds.

Okay. So fair to say you'd hope to maintain this momentum and avoid the sort of Hydrus and Middle East shipping issues in the next few quarters effectively.

Yes. I think that's fair. The Hydrus issue was a resolvable outage that we have corrected. The Middle East situation we'll monitor, but it's not something we can prognosticate. We expect to avoid similar internal issues going forward.

The next question is from the line of David Saxon with Needham & Company.

I wanted to ask on Tryptyr, David or Tim, can you talk about the contribution to growth there? What kind of traction you're seeing in existing accounts and how you're positioning it for expanding the prescriber base as you move into the next wave?

We're very excited about what's going on with Tryptyr. You never know precisely how a product will perform until it's in market, but we have a pretty good feel now. Refill rates are over 70%, which is excellent. There was some concern about comfort, but patients find that initial discomfort is worth the rapid relief; they experience relief quickly, often day one, and that drives refill behavior. We're seeing broad prescribing across the full audience and good repeat prescriptions. The sales force has done a terrific job getting widespread trial and repeat use. The big factor for continued growth is reimbursement: we're about 55% of commercial lives covered now and expect that to grow through the rest of the year. We're focused on broadening the prescriber base and securing Medicare Part D coverage, which would be significant for patient access. On balance, Tryptyr is on plan and perhaps a bit better than expected.

Great. And then just on implantables, beyond PanOptix Pro and Vivity, would love to hear how you're thinking about TruPlus and how meaningful that could be to recapture some of the share you lost to competitive monofocal-plus launches in the last couple years?

TruPlus is a terrific product. It offers better intermediate vision than alternatives while maintaining monofocal distance performance. For surgeons charging patients for a monofocal-plus product, this should be an attractive choice: it improves intermediate vision without compromising distance. In the toric segment, we lost share to competitors — in the U.S. it was about a 10-point share loss to toric competitors. Internationally, the market impact was larger. I don't expect TruPlus to be a huge incremental driver by itself; rather, it will help sustain and upgrade our core monofocal business and protect against competitive intrusion. Think of it as an upgrade to our current monofocal toric offering with a modest price increase and a defensive advantage on the Clarion platform.

The next question is from the line of Steven Lichtman with William Blair.

Tim, with one quarter complete here, can you provide any more color on the operating margin guidance range and whether you see it trending toward the upper half or lower half for the year? It seems like FX will be less of a tailwind, but you have efficiencies kicking in. You said Q2 will be down year-over-year, so it puts more emphasis on the second half. Any further color within that range would be helpful. And one quick follow-up.

The 70 to 170 basis point improvement that we guided to is something we're comfortable with, and that guidance is in constant currency. Q2 will be light due to seasonal SG&A spending, including back-to-school and other investments related to product launches, which is normal. The first half will be lighter than the second half, and expansion will accelerate in Q3 and Q4. Overall, we feel very good about the 70 to 170 basis point improvement range.

And quickly on the accommodating tunable IOL, any further color on when we could see early data? I think you talked maybe Q2 or Q3?

Somewhere between now and the next call. We expect that data midyear and have most of it in-house. We anticipate sharing more as we finalize our review.

The next question is from the line of Young Li with Jefferies.

Start one more on the guidance. Q1 was the easiest comp of the year. It seems like Unity and Tryptyr are doing better than expected, but hitting the midpoint of the full year guidance implies a sizable ramp against tougher comps. Can you push on which segments get meaningfully better from here and which will be laggards?

Think about new product flow. We have a number of meaningful new products that came to market in the back half of last year and early this year. As you get into the back half of this year, many of those will have a larger full-year effect. Key drivers will be Unity, Tryptyr, PanOptix Pro and our OTC brands. The ocular health business is an important and sometimes underestimated contributor; it's roughly the same size as implantables and growing around 10%. Most of the core business will grow with the market, slightly better in some areas due to share gains, but the incremental acceleration comes from new product momentum in the second half.

And on implantables growth: there wasn't a competitive launch in Q1, but going forward there will be. You're expecting around 2% growth — how much competitive pressure is baked into that number? Is 2% still the right number for annual growth?

We haven't guided individual category rates publicly, but we are modeling the impact of competition. We're excited about the PanOptix Pro launch in Europe and believe it will drive positive momentum. TruePlus and the Vivity upgrade are also expected to help. I hope we do a bit better than expected with those products, but we do expect an aggressive competitive environment and are planning accordingly.

The next question is from the line of Richard Felton with Goldman Sachs.

Two for me, please. First, on China IOLs: any sense of how material that market is for you currently? And linked to that, any expectations for the upcoming round of China IOL VBP? Second, could we get an update on Orion, please. What's the feedback been like on the commercial launch in Japan, any incremental data or insights on efficacy versus transplants? And an update on the timeline for Phase III trials in the U.S.?

China represents roughly 5% of our overall business currently, so it's meaningful but not dominant. Historically we had a smaller IOL presence there, but we've seen growth and share pickup after the VBP changes last year. We'll watch the next VBP cycle in the middle of the year. On Orion, we have started Phase III and had our first dosing earlier this month. If the trial completes this year on schedule, we could potentially file next year. Orion is an exciting opportunity to help many patients avoid corneal transplant and represents a meaningful commercial opportunity if clinical and regulatory paths stay on track.

The next question is from the line of Lei Huang calling for Larry Biegelsen with Wells Fargo.

On Unity, you sound very excited about the launch and it seems to be doing well. Can you talk about how you think about equipment growth for the remainder of the year with Unity and related products? Any timing updates on when Unity M and other Unity variants are coming to market, U.S. versus OUS? Second, around M&A: Alcon has recently exited two deals for different reasons. Do you think the space has become tougher in terms of M&A given Alcon's size or the valuation environment? Anything you're thinking differently about M&A going forward?

On Unity, we expect continued growth. There are roughly 30,000 legacy units that cycle over about a 10-year period; placements will vary over time but we remain aligned with our prior expectations for uptake. Unity CS expands our addressable cataract market because it's easier to install and requires less support. Unity M is expected late this year as the first phase of a multi-phase launch; Unity Dx is slated for next year, though you'll start to see controlled rollouts later this year as we ensure integration with our microscope and other systems. On M&A, our approach hasn't changed: we primarily target tuck-ins and single-product companies in the $50 million to $500 million range, still the bulk of what we pursue. We can do larger deals, but there's no pressing need to do so and not many targets fit that profile. We remain disciplined and focused on bolt-on acquisitions that complement our portfolio.

Our last question comes from the line of Brett Fishbin with KeyBanc Capital Markets.

You took the tariff estimate down by $25 million within the guide and mentioned the plan would be to reinvest that within the business. Where do you see incremental need for greater investment activity rather than letting that drop to earnings?

A majority of that reinvestment will be in R&D. There are innovation programs we're excited about, and continuing to fund that pipeline supports our revenue thesis. So we will continue to back R&D when we can.

A follow-up on margins: you kept the 70 to 170 basis point core operating margin expansion guide, but since the last call there's been macro noise around energy prices and inflation. How is that contemplated in the guide and any general thoughts on Alcon's exposure to those items?

It's not a material exposure for us. The primary areas are transportation and resins. We've assumed a baseline oil price in our guide and baked that into our assumptions, but it's not a material amount at this stage.

At this time, I'll turn the floor to Dan Cravens for closing remarks.

Okay. Thanks, Rob, and thanks, everybody, for joining us. If you have any follow-up questions, please don't hesitate to call either Alan Trang or myself. Thanks again for your time. Appreciate it.

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