Alcon Inc. (ALC) Q3 2026 Earnings Call Transcript

Operator: Greetings. Welcome to the Alcon Third Quarter 26 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to Daniel Cravens, VP and Global Head, Investor Relations. Thank you. You may begin.

Daniel Cravens: Welcome to Alcon's third quarter 26 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 J. Endicott, our Chief Executive Officer and Timothy Stonesipher, 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 materially 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 available on their website at sec.gov. We will also 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--growth rates--are expressed in constant currency. In a moment, David will begin with highlights from the third quarter. After his remarks, Timothy will walk through our financial performance in the quarter and outlook for the remainder of the year. David will then return with closing comments before we open the line for Q&A. With that, I will turn the call over to our CEO, David J. Endicott.

David J. Endicott: Thanks, Dan, and good morning, everyone. In the third quarter, we grew sales 5%, bringing year to date growth to 6%. We remain on track to deliver on our full year guidance of approximately 6% sales growth and double digit core EPS growth despite some specific areas of competitive pressure. As I reflect on the quarter, we saw good momentum across several parts of the portfolio. In Surgical, equipment and consumables remained strong, particularly in the U.S., demand for Unity and Valeda continue to be robust, while implantables continue to grow in our international markets, but that growth was offset by competitive pressures in the U.S. In Vision Care, contact lenses and ocular health both delivered solid growth driven by share gains in contact lenses, TRYPTYR and SYSTANE. Timothy will take you through the detailed financials. Let me focus on what is driving the business and why we remain confident about the opportunities ahead. Underpinning our conviction that we can continue to grow faster than the market is a steady cadence of innovation supported by clinical evidence that differentiates our products. At this fall's major congresses, we shared new data demonstrating the benefits of our latest technologies for surgeons, eye care professionals, and patients. ESCRS, we presented new data reinforcing the unsurpassed near vision performance of PanOptix PRO. The surgical efficiency of UNITY VCS. And at the optometry and ophthalmology annual meetings in the U.S., we shared new data showing Systane PRO delivered symptom relief clinically comparable to the prescription product MYBO with the accessibility and convenience of an over the counter option. In addition, new research on TRYPTYR and Dry Eye showed clinically meaningful improvements in patients' ability to work and perform daily activities, more than 70% reporting satisfaction with digital device use and end-of-day comfort. We also highlighted Valeda, the first and only FDA approved treatment for early and intermediate dry AMD. Continue to build awareness among ophthalmologists and engage the broader eye care community to identify appropriate patients and broaden access to this important new treatment. Together, these data reinforce the differentiation of our newest products and support our efforts to translate that innovation into sustainable revenue growth. We are seeing that innovation translate into commercial momentum in equipment where UNITY VCS and CS along with the latest drove double digit growth. In the U.S., UNITY continues to gain significant traction at some of the nation's most prominent academic medical centers, with placements secured in 40% of US teaching hospitals in the past year alone. Importantly, when combined with our legacy platform, our equipment is now available in 98% of ophthalmology teaching programs, providing broad exposure to the next generation of surgeons. Turning to implantable, sales were down 2% with IOLs down 1% driven primarily by competitive launches in the U.S. premium IOL category and continued reimbursement challenges for dual procedures in glaucoma implants in the U.S., competitive trialing and sampling of IOLs remain significant and we expect that activity to continue through the early part of next year. At the same time, we are strengthening our competitive position with the next wave of innovation in our IOL portfolio, Vivity PRO. Vivity PRO received FDA approval in the U.S. in early November with CE Mark expected soon. This lens was uniquely designed to improve near and intermediate vision without sacrificing distance or contrast. Our clinical data package at launch will include direct comparisons to competitive lenses. We began the U.S. KOL release last week and look forward to the full launch in January with expansion into select European markets to follow during the first quarter. Additionally, TruePlus, our first entrance in the monofocal Plus segment, is now broadly available in the U.S. and rolling out across Europe. Looking forward, our experience in Europe gives confidence in how these competitive dynamics can evolve. Competitive launches there have now been in market for some time, and with PanOptix PRO as our response, we returned to growth and are regaining PC-IOL share. That provides an encouraging reference point as we prepare for the full U.S. and European launches of Vivity PRO in January. More broadly, we believe this next wave of innovation can strengthen our performance well beyond the near term. PanOptix PRO, Vivity PRO, and TruePlus are the beginning of a steady cadence of new IOL technologies that we believe will position us to drive sustainable above market growth. Turning to contact lenses. We continue to gain share in the U.S. across both dailies and reusable supported by the breadth of our water innovations portfolio. That performance is an important example of our ability to win through differentiated innovation, commercial execution. The underlying market continues to benefit from premiumization as consumers move towards daily disposables and specialty lenses. The Total and Precision families give us premium and high performance platforms while innovations such as Total 30 multifocal for astigmatism expand our reach into higher value specialty segments. We remain well positioned to drive continued share and value growth. Finally, in ocular health, execution remains strong across both our prescription and consumer dry eye franchises. TRYPTYR continues to build momentum reaching approximately 6% market share as of October. We have also recently initiated direct to consumer promotion to increase patient awareness and drive demand. We are making solid progress against our reimbursement objectives with now more than 2 thirds of commercial lives covered. And on the consumer side, Systane delivered another quarter of double digit growth led by our multidose preservative free formulations including SYSTANE PRO, we continue to gain share in a fast growing market. We are also continuing to broaden our consumer eye care portfolio. Just a few weeks ago, the FDA approved Brightly, our new redness reliever eye drop, Brightly works in just 1 minute and provides up to 12 hours of redness reduction lasting up to 50% longer than LUMIFY. We expect Brightly to be available at major retailers and online in the first quarter. Before turning to the market environment, let me highlight an important addition to our retinal portfolio. We recently acquired Neurotech Pharmaceuticals, adding ICELL-Dose, the first and only FDA approved treatment for macular telangiectasia Type 2 or MacTel, a rare and progressive retinal disease that can cause irreversible central vision loss. ICELL-Dose is an encapsulated cell therapy that is intended for surgical intravitreal implantation. Neurotech is strategically compelling because it sits at the intersection of cell therapy, pharmaceuticals, and surgery, and it plays directly to Alcon's leadership in surgical retina. There are approximately 25,000 diagnosed MacTel patients in the U.S. today with an additional 2,000 to 3000 newly diagnosed each year. The coverage is largely established. By combining Neurotech's differentiated technology and cell therapy capabilities with Alcon's commercial reach, and retina relationships, we believe we can broaden access and build an important new long term growth platform. We expect peak sales between $250 million to $400 million with the ultimate trajectory largely dependent on how quickly patients are identified and brought into treatment. We are excited to welcome the Neurotech team and believe the acquisition strengthens both our retina franchise and the diversification of Alcon's future growth. Turning briefly to our efforts with Aurion, we are pleased to report enrollment is complete in our pivotal phase 3 program. We remain on track for a 2027 FDA submission and a 2028 FDA approval decision. Before I close, let me share a few observations about the market environment. Let me start with contact lenses. Globally, the market remains healthy, growing in line with our assumptions at 4% to 5%. With roughly 3 points coming from price, and 2 points from mix. The U.S. remains the strongest market growing 5% to 6%. Growth outside The U.S. is more modest, particularly in Europe where online channels and private label brands continue to put pressure on pricing, although mix remains positive. Across markets, the important trend is continued premiumization. As consumers move toward daily disposables and specialty lenses. That shift supports positive mix and plays directly to the strength of our portfolio in these higher valued categories. In cataract, procedure growth remains in line with our assumptions and below historical levels. Reflecting capacity constraints in the U.S. and reimbursement and hospital economics internationally. At the same time, premiumization remains a meaningful source of value growth and we believe the strength breadth of our premium IOL portfolio positions us well to capitalize on this trend. U.S. advanced technology IOL penetration reached 21.9% up 160 basis points year over year while international penetration increased 60 basis points to approximately 16%. Across our other eye care markets, underlying trends remain healthy and in line with our expectations. We put all that together, we estimate that our aggregate markets grew 3% in the third quarter at the low end of our assumptions underlying our guidance. Looking ahead, our base case assumes these trends broadly continue into next year, and our focus remains on execution, innovation and premiumization across the business. The breadth of our portfolio and the impact of our innovation continue to differentiate us enabling us to grow faster than the market. So in closing, we remain on track to deliver on our full year guidance. While our underlying markets are at the low end of our original guidance assumptions, it is our responsibility to deliver through that environment. We are doing that by executing our launches, translating innovation into broader adoption, and driving premiumization and entering attractive new white spaces. We have a diversified portfolio that continues to get stronger, including the addition of Neurotech, in retinal disease. This gives us multiple avenues to outgrow our markets and drive durable earnings growth and long term shareholder value. With that, I will turn it over to Timothy, who walk you through the financial details of the quarter.

Timothy C. Stonesifer: Thanks, David. Beginning with the top line, our third quarter sales were $2.7 billion, up 5% versus prior year up 6% on a year to date basis. While the cadence of growth was slightly different than we anticipated due to specific areas of competitive pressure, we remain on track with the midpoint of the original guidance provided in February. and expect to grow approximately 6% for the year. In our Surgical franchise grew 4% year-over-year to $1.5 billion. Implantable sales were $422 million in the quarter, down 2% versus the prior year. Within this, IOLs were down 1% due primarily to the competitive launches particularly in the U.S. As David mentioned, PanOptix continued to perform well and the family was up 9% year-over-year growing nicely in all regions. This growth was driven by strong customer demand, and continued commercial execution. In consumables, third quarter sales of $789 million were up 6%. This growth was driven by procedural volumes, price increases and Valeda. In equipment, sales were $269 million in the quarter and up 11%. This growth was driven by continued momentum from our Unity platform and the strength of our Valeda launch. This is despite now lapping the UNITY VCS launch in the prior year. Turning to Vision Care, third quarter sales were $1.2 billion and up 6%. Contact lens sales increased 5% to $737 million. This performance reflects continued premium trade up share gains and price increases partially offset by declines in legacy products. In Ocular Health, third quarter sales were $500 million, up 8% versus prior year. Systane grew double digits supported by share gains and strength across our preservative free portfolio, with SYSTANE PRO revenue doubling year over year. This growth was partially offset by continued softness in contact lens care. Moving down the income statement, Third quarter core gross margin was 65.7%, up 280 basis points year over year. As we communicated last quarter, the increase was expected and largely driven by tariff refunds along with continued manufacturing efficiencies. Core operating income was $591 million and was 21.8% of sales, up 150 basis points versus the prior year. This improvement was largely driven by the tariff refunds I mentioned and was partially offset by higher sales and marketing spend. Below the operating line, interest expense was $52 million during the quarter, broadly in line with the prior year. Turning to taxes. Our core effective tax rate was 17.8% in the third quarter, up from 16.9% in the prior year. Our year to date core effective tax rate was 19.4%, which is broadly in line with our guidance. Finally, core diluted earnings per share were $0.91 in the quarter, up 15% versus prior year. Turning to cash, we generated more than $1.3 billion of free cash flow in the first 9 months, which enabled the return of $748 million to shareholders through dividends and share repurchases over the same period. Within the quarter, we returned $210 million to shareholders through our share repurchase program and have now completed more than 1-third of our $1.5 billion repurchase authorization. Moving to our outlook for 2026. Based on recent market trends, we now assume that aggregate eye care markets grow 3% for the year and exchange rates as of the end of October hold through year end. We also assume the tariffs currently applicable to Alcon's business remain in effect through year end including U. S. Import tariff rates of approximately 10% to 12.5%. Based on these assumptions and our performance through the first 9 months, our guidance for 2026 is as follows: We expect sales growth of approximately 6% consistent with the midpoint of our original guidance issued in February. On profitability, we are narrowing our expected core operating margin expansion to a range of 100 to 150 basis points, while also narrowing our range on core diluted EPS growth to 12% to 14%. Moving to 2027, we will be issuing formal guidance in February, but I wanted to provide some color on the headwinds and tailwinds we see heading into next year. Starting with the underlying market, our base case assumption is that the current market trends that David referenced persists through next year. On the top line, starting with Surgical, although we expect equipment to grow next year, it will be the primary headwind as we lap the 2026 Unity rollout. However, the launches of UNITY M and UNITY DX along with continued expansion of our Valeda installed base will help alleviate some of that pressure. In implantables, we expect to return to growth given the launches of Vivity Pro and TruePlus, as well as the continued momentum from PanOptix PRO. In Vision Care, our recent and upcoming launches, including TRYPTYR and Brightly, will continue to contribute to growth, while the addition of Neurotech is expected to add approximately 75 to 100 basis points to the top line. Overall, we expect another year of above market sales growth in 2027. Moving down the income statement. Historically, we have been able to get approximately 100 to 150 basis points of operating leverage by growing revenue faster than our cost base. Next year, we would expect to drive roughly 150 to 200 basis points of leverage given the additional efficiency measures we implemented in 2026. However, we will face some headwinds in 2027. First, our 2026 results included $60 million in tariff refunds, and a $15 million milestone payment both of which are non recurring. In addition, we expect pressures from incremental inflation related to memory and resins as well as some near term pressure from the Neurotech acquisition. Despite these headwinds, we continue to expect margin improvement in 2027 and we will give you more color in February when we finalize our budget. Before we wrap up, I want to highlight an upcoming new accounting standard. IFRS 18 becomes effective in January and will introduce changes to the presentation and classification of certain items in our financial statements. Including some of our key metrics. We will provide more information on the impact of the new standard when we report in February including select historical financial information reflecting the new presentation to support comparability and modeling. In conclusion, we are performing in line with the expectations we set at the beginning of the year. Our year to date sales are up 6%, core diluted EPS is up double digits, and we again demonstrated that free cash flow potential of this business while executing on our commitment to meaningful capital returns. These results reflect the durability of our business, our clear market leadership and the efforts of our associates around the world. With that, I will turn it back to David.

David J. Endicott: Thanks, Timothy. As we approach the end of the year, I remain confident about the trajectory of the business. Our innovation pipeline continues to strengthen, We are executing with discipline and we are continuing to modernize our go to market approach. We are on track to complete a restructuring to improve operational efficiency. We have strengthened our portfolio with the addition of Neurotech, we have already returned approximately $750 million to shareholders. None of this would be possible without the hard work of our more than 25,000 associates around the world who help people see brilliantly every day. With that, operator, please open the line for questions.

Operator: Thank you. We will now be conducting a question and answer session. We ask that you please limit yourself to 1 question and 1 follow-up. Our first question is from Anthony Petrone with Mizuho Group. Please proceed with your question.

Anthony Petrone: Thanks and good morning everybody. Maybe David, 1 on equipment. Then I will go to Brightly. When we think about the rate of Unity VCS installs, it looks like it is tracking to On schedule, roughly 3000 units a year. But I think when you initially put that trajectory out, there was a little bit of step up in 2027 for installs. So should we be thinking that there is another bolus that can come in 2027 versus 2026 in just in terms of the number of installations? And then just on Brightly, I know the launch is 1Q, but should we be expecting any kind of big stocking orders in Q4 ahead of that large retail launch in Q1? Thanks.

David J. Endicott: Thanks, Anthony. On the equipment piece, I think you should think about it as relatively similar to this year in terms of unit placements. I think maybe this year was a big year for VCS and CS got out the gate, I think, probably full speed, maybe second quarter. So I think we have got a little bit more step up in CS as opposed to VCS. So remember that the CS market is much bigger. So, again, I think there will be a bit of a mix shift to CS next year as we sell probably a good bit more of that versus VCS. But largely, I would say the units are similar, I would say. I think the. On the Brightly launch, we have got retail orders. I do not think we are going to ship that until next year. And so I would not count on anything in the fourth quarter. But we are excited about that product. It is a kind of new market area for us, and we have been looking for white spaces like this. So again, this product lasts longer than the market leader. And we are excited about the potential of that with the consumer.

Anthony Petrone: Thanks, David.

Operator: Our next question is from Brett Fishbin with KeyBanc Capital Markets Inc. Please proceed with your question.

Brett Fishbin: Hey, guys. Thank you so much for taking the questions. I just wanted to ask 1 first just to clarify some of the margin commentary for 2027. I think you mentioned potentially driving 150 to 200 basis points of leverage. And then walk through a couple of considerations. I wanted to just understand if the 150 to 200 basis points is net of some of those expected headwinds if you are talking about like 150 to 200 basis points, of underlying improvement before some of those headwinds. Yes.

Timothy C. Stonesifer: I think about that as more of a gross number. Before the adjustment. So if you look at historically, we have always said a 100 to a 150 basis points of improvement. We think it will be higher next year given the efficiency program that we implemented. So if you start with a 100 to 50 to 200 basis points. I then start subtracting the pressures that we are gonna see from the 1 offs that we saw in 2026 that do not recur. We do anticipate seeing a little bit more inflationary pressure and then a little bit of pressure--near-term pressure--from for the Neurotech acquisition.

Brett Fishbin: Alright. Super, super helpful. And then just on implantables, it seemed like growth took a little bit of a step back this quarter. It sounded like it was more specific to The U. S. I was hoping you could just expand maybe on what you saw incremental from 1H levels that caused a little bit of further erosion? And then just level of confidence in your remarks that you expect a return to growth next year with some of the new product launches?

David J. Endicott: Yes. I think you are right. I mean, actually, the step forward was international. So Europe, I think, gained share in the quarter. But there was an extraordinary amount of activity, competitive activity in the third quarter, and there will be more in the fourth quarter, I think. So we are going to see some continued competitive activity that, you know, surgeons want to try new products. And, you know, good companies bring products out. They are gonna try them. And so I think we felt like that was certainly part of the challenge, but it was not way off of where we have been. It was a little bit off of where we have been in the prior quarters. So think we are just kind of working our way through to the next launch. And I think as I said in my remarks, you know, Vivity Pro is a really exciting product for, I think, what we have-- And we have got it approved now. So I think we have got it in the hands of a number of KOLs right now. We will get a--and we have got very good data comparing it to the competitor who is most active right now. So I think we feel like we are in a good place with better near vision, better intermediate than the competition and with very similar contrast and distance. So that data, I think, makes us confident that when we get it out full speed next year, we will see this thing continue. I would also point out that TruePlus is just kind of getting its feet around the world and that is our new entry into the monofocal plus space. And PanOptix PRO is still getting going, you know, internationally. So I think, you know, if you look around the world at where our portfolio is, and frankly, we have got a number of products after that which are on their way. We feel very confident over the next several years that we are going to be in a solid position for implantables.

Operator: Our next question is from Julian O'Dwyer with Bank of America. Please proceed with your question.

Analyst: Hi, thank you very much. So I have 1 question and 1 housekeeping follow-up. The question I just want to clarify your comment about Unity, where you expect the same--like same--volume next year, the shift to CS, which I believe the ASP is lower. I just want to make sure that you expect the revenue in absolute terms, that equipment will grow next year given the mix shift. And the follow-up, maybe I can ask it right now. Could you just help us to disaggregate the growth contribution from Valeda in the quarter? I mean, how much did Valeda contribute to the 11% growth in equipment and the 6% growth in consumables? Thank you very much.

David J. Endicott: Yes. Julian, we do not break up the individual products into categories, but I would just say that the category growth in equipment we were pleased with. You may have misheard me or I may have mis-said it. I think 1 way to think about unity is that the mix will shift to CS in aggregate. The value growth will be greater than it was in the prior year principally because the CS market is much bigger than the retina. So the retina market, I do not know, is maybe 1.5 million procedures, 2 million procedures, cataract market's 5 million or 6 million in the U.S. and around the world it is much bigger. So I think we have a much bigger market to address with CS and I suspect we will do quite well with CS.

Operator: Our next question is from Larry Biegelsen with Wells Fargo. Please proceed with your question.

Larry Biegelsen: Good morning. Thanks for taking the question. I had 1 on 2027 and 1 on Neurotech. So, Timothy, maybe if we could, what is the net impact of what you said on revenue? How will growth in 2027 compare to 2026? Are you pointing to basically, we will call it, 5% organic growth plus 75 to 100 basis points for Neurotech and margins. You talked about a lot of headwinds. So should we be thinking about. But you also said some margin improvement. So should we be thinking about 50 basis points of improvement? And I have 1 follow-up.

Timothy C. Stonesifer: Yeah. I am not gonna give I am not gonna give guidance here today, Larry, but you are thinking about it correctly. Listen. We think the markets are gonna hang in there at about 3%. As David said in the prepared remarks, we do not anticipate we are not expecting any uplift from that. As we have always said, we think we can grow faster than the market. We feel very good about the innovation pipeline and the launches that we have coming up and that are in place now. So we would expect to grow faster than that market. And then to your point, you know, I would add 75 to a 100 basis points on that for neurotech. As far as the margin expansion, you know, those are the pressure points I think we have hit those. We do expect margin expansion next year. And we will give you more color on that. Young know, we are gonna continue to get some margin expansion out of our marketing and sales area. As we have done historically. But you are not gonna see a net number of 100 to a 150 basis points like we have talked about before. And we will give you more color in February.

Larry Biegelsen: Very helpful. On neurotech, I mean, ICELL-Dose seems like a sleeper. Based on our checks. So what are 2026 sales? And the 75 to a 100 basis points for 2027? It sounds like clear if that was Vision Care or Total Alcon. But even if it is Total Outcome, I think if I am doing the math right, it is $50 million which seems small. And just lastly, how are you thinking about the ramp to those peak sales of $275 million to $400 million? Mean, even the mid point there implies only about 750 patients or 1500 eyes per year. Thanks.

David J. Endicott: Yes. Larry, you are doing the math the same way we are. Let me just tell you the dynamic. Trying to manage. What we are trying to manage is, this is a new--we have been involved in this for now a few months and trying to understand exactly the pace at which patients can be found and brought into treatment is really the key variable here. And until we get a really clean view of what that looks like, we feel comfortable with the $250 million to $400 million range. I do understand the math you are doing, and I do understand that could be the case. I think what we are gonna find is that these patients. Young know, there is there is a certain number of centers that are prepared to do this surgery. These are infrequently found patients, and the pace at which we find them, get them to treatment, get them through the reimbursement system, will be the defining factor. Now, you know, you could be right and we could be wrong on this 1. I think we are going to be careful around this as we go forward.

Timothy C. Stonesifer: I would just say, Larry, on 2027, that I would apply that 75 to 100 basis points on the total Alcon revenue.

Larry Biegelsen: Alright. Thank you.

Operator: Our next question is from Veronika Dubajova with Citi. Please proceed with your question.

Veronika Dubajova: Hi guys. Good afternoon. Good morning. Thanks for taking my questions. I have 2 please. The first 1 is, I just want to come back on the moving pieces for margin Timothy and I guess, this year, you stepped up DTC by about $40 million spending some of the proceeds from the tariff refunds. Just curious if this is something you intend to continue into next year, or should we put that into the tailwind column as we think about the margin piece for 2027? And then my second question is on contact lenses. And, David, your thoughts on kind of the health of the market and your ability to outgrow it. Obviously, the gap between you and the market has narrowed pretty substantially this year. I know you have had some headwinds in terms of disc discontinuing of some older product lines, but it would be good to understand, sort of, 1, how you are thinking about market growth contact lenses for next year and, 2, your ability to outperform that, from a share gain perspective. Thanks so much, guys.

Timothy C. Stonesifer: Hey, Veronika. Thanks for the question. Listen. it is really hard to say if the $40 million of additional spend is recurring given that our total SG&A base is $3.5 billion. So I think the. But I get your point. I think the way to think about it is take the 150 to 200 basis points that we talked about, back out the pressures that I just mentioned. Most of that is be in the gross margin line if you think about the refunds and the milestone payments and the inflation. However, we are still expecting to get margin expansion next year and most of that will come from, as I said, M&S and a little bit from G&A. So we will continue to expect to get leverage out of the M&S line.

David J. Endicott: And, Veronika, you know, the global contact lens market was probably 4% to 5%. It was healthy in The US, probably 5% to 6% with maybe 3% price and 2% mix. But international contact market was softer, as a function of online channels and the private label business. It was probably in that 1% to 2% range. So you know, we grew a share point on the quarter--or roughly a share point. We continue to outperform the market in that space. And I think we are feeling pretty good about it right now, principally because we rotated back towards dailies and specialty lenses. And the reason for that, obviously, is those are the fastest growing segments of the market. We had a good run in a reusable market. We took some share back there. Those are very profitable businesses for us. And now I think we see the market as growing principally in this premiumization process of moving people up. that is been the case for a while, but it continues on very successfully, I think, in The US. and the international business was grown principally by mix. So get less price there, but more mix. And we are trying to play that particular trend right now.

Operator: Our next question is from Brian Zimmerman with U. S. Bancorp BTIG. Please proceed with your question.

Ryan Zimmerman: Good morning and thanks for taking the questions. Timothy, if we look at 2027, I appreciate all the color. But as I think about kind of the continued double digit core EPS growth, I am just curious, what is coming from, say, operating leverage versus revenue growth versus share count reduction? And again, knowing that you did not give double digit core EPS growth as a guide, but assuming that is the case.

Timothy C. Stonesifer: Yeah. Again, you know, as you know, the revenue growth really drives the operating leverage. So assuming that we can grow faster than the market, we would expect to get the margin expansion that I talked to a little bit earlier and that will drop down to EPS growth. I would not from a year over year basis, you know, from a share count and buyback, I would not expect anything significantly different than what we did this year. But, again, we will evaluate that. We do when we look at our capital allocation strategy, and it just really depends on what M&A is out there, how much cash we have. But we will put the cash to work.

Ryan Zimmerman: Okay. And then on implantables, down 2% this quarter, flat year to date. On a constant currency basis. David, can you help us maybe size the market share loss in your view? Is it concentrated in a specific product area, you know, whether that is EDOF or monofocals versus maybe what is happening in the market? Thank you.

David J. Endicott: Yeah. Sure. I mean, look. The total foldables for us globally was actually flat in volume. It was AT-IOLs, and it was really the U.S. So if you look at the international markets, we gained share in the in Europe. In the U.S., we lost some share in the PC-IOL market. And the monofocal business, again, we actually gained a small a small amount. So you know, our general view is volumes are pretty healthy still. Because we are, you know, we basically were flat this quarter in volume. But you cannot give up the AT-IOL share because it is obviously more valuable. So this premiumization play that I think exists in that market, we need to, you know, get on the front foot with. So again, I feel very good about what is going on in Europe with PanOptix Pro, what is moving around the world with Pro. We are hoping to see that very same thing happen with Vivity Pro as we come back in on top of these competitive launches.

Ryan Zimmerman: Thank you.

Operator: Our next question is from Jeffrey Johnson with Baird. Please proceed with your question.

Jeffrey Johnson: Thank you. Good morning, everyone. So Tim, I guess 1 clarifying question, a lot of focus on 2027 for all the right reasons. But the approximate 6% for this year in the updated guidance that approximate could be doing a decent amount of heavy lifting, I guess. Trying to back into what you expect for Q4. If I go right to 6%, I would be, kind of, pushing about a 100 basis points improvement versus Q3. Are you implying in the updated guidance a little bit of improvement in growth versus Q3? Or should we be thinking Q3 is kind of the run rate at least for now? And then 1 follow-up. Thanks.

Timothy C. Stonesifer: Yeah. Listen. The reason we went with approximate is because we do not see 5 in play, and we do not see 7 in play. So we thought approximately 6 was kind of how we are looking at it right now. As far as. Young know, again, I am not going to guide Q4 revenue, but your thinking is the right thinking. And just keep in mind, there will be some neurotech in there. So that is why you might see a little bit more of a jump up. But we would expect to see some improvement in Q4.

Jeffrey Johnson: Alright. Fair enough. And then, David, you know, you have said a couple different things on VCS/CS. I just wanna clarify what you said. I know you do not guide product line. But, again, you know, I guess the question is you do expect, it sounds like, VCS CS combined unit growth next year offset by negative mix, but then I think you used the word value. I just wanna make sure you are expecting VCS/CS combined Unity platform revenue growth next year. And then on top of that, a little bit of M and DX and Valeda contribution so that equipment growth does have a positive sign on it next year. Thank you.

David J. Endicott: Yes, it does in both. So growth in total units will be higher than it was this year. Because the CS mix will help it. Growth in total dollars will be up next year, but it will be a little bit less than the unit growth because, obviously, we are getting a lower ASP on average if you mix to CS versus VCS. Hopefully, that helps.

Jeffrey Johnson: Thank you.

Operator: Our next question is from Chris Pasquale with Barclays. Please proceed with your question.

Analyst: Thanks. 1 on Neurotech. Just how soon after diagnosis do patients need to start therapy in order to see a benefit? I am just wondering how much penetration into that prevalence pool, the peak sales estimate assumes versus just achieving some broad use in the annual incidence rate?

David J. Endicott: This is a very slow moving disorder and it takes years to lose as much central vision as you ultimately will. However, as soon as you are diagnosed, historically, there has not been a therapy to treat this. So I am not sure I know the answer precisely to your question other than I think we have a pool of patients who have been diagnosed. We kind of know who they are. We need to get them to a surgeon who is willing to do this and then have them through the system work through the reimbursement part of this and then also get them to a center that will do the surgery. So The logistics of this, I think, are the piece that we are still working our way through. I think we have a sense that there are plenty of patients that we can find. I think it is a matter of then how do we get them to the right surgeon who knows how to do this is trained to do it in a center that will do it, a center that--and again, this is. This is not like cataract surgery where they are doing, you know, 1000 a year. This is 1 or 2 or 3, and so it is a novel procedure to many surgical centers.

Analyst: that is helpful. And then you talked about premiumization. In both contacts and IOLs. In some other corners of med tech, we have heard some rumblings recently about increased economic sensitivity due to cost of living pressures. It certainly does not sound like you are seeing that yet, but as you think about 2027, how confident are you that price and mix can continue to be such contributors to your market growth?

David J. Endicott: Well, when I think about I do not know that price is going to be a big piece of it. I do think mix will be, and I think we would look at that and we would say, you know, we have we have run sensitivities and tried to correlate, you know, consumer confidence with you know, revenue growth in both contact lenses and HIOLs, for example. Or even OTC products. Young just do not see that big of a correlation. Young know, the over long periods of time, there is almost none. Know, in short windows, there may be a little bit, but I think there is you know, principally, you know, something to ignore there on the consumer side. I think you could see that even in the first. In this current quarter where we had, you know, very significant AT-IOL growth. In penetration, you know, up almost 2 points in the Americas, up half a point, 50 basis points in international. So globally, you know, very significant penetration. Same thing with h. With kind of contact lenses. Saw you know, continued movement of the highest value lenses. Young know, the dailies think we are growing, you know, high-single digits. As opposed to the rest of the market, which was growing roughly in the 5% range. So I think that is. We are pretty comfortable with the premiumization. I would be a little more cautious on price and how that plays out.

Operator: Our next question is from Graham Doyle with UBS. Please proceed with your question.

Graham Doyle: Good morning. Thanks guys. Just 1 quick clarification and then 1 on the midterm guide. and Larry, I know it is come up a few times, but just to double check, we had a some incoming from investors here. David, your comments on UNITY, you expect UNITY, VCS, and CS to sell more volume next year than this year just to clarify that? And then a question on the midterm guide. So on the 6% to 8% constant currency, you obviously were not in the range last year. you would be at the bottom end this year. How do we think about the relevance of this guide going forward into next year given where market growth is? Just be useful to know that so when we kind of go back to our models so we can think about Thank you.

David J. Endicott: Yes. I obviously was not particularly clear on this VCS/CS thing. We are going to grow in total units, and we are gonna grow in total dollars. But the mix, you know, will be more to the CS side. Is that relatively clear?

Graham Doyle: Super clear. Thank you.

David J. Endicott: Okay. Brett. Then look on the long term guide, obviously, during this stretch market growth has been more modest. And you know, given last year's performance and where we are this year, you know, and what we think going forward, you know, we still think we are in the in the in the range of our guide, but, obviously, we are at the low end of it. So I think know, it is hard to come off of a 4 and, you know, on a 5 year guide and then get yourself back into 6% to 8%. So it is our belief that we continue to, you know, be at the low end of that guide, but, you know, that is our job right now is to maximize, you know, new IOL launches to extend our presence to get into higher growth categories and try and find the ways that we can grow our business beyond the market growth that is, you know, obviously not where we would like it to be right now. So that is partly why we are entering new categories. Right? Young know, we got Valeda out. We have got Brightly out there, and Seltos. Those are all new white space areas for us. And then you have got, you know, all the new IOLs coming, which I think help us I think you have got know, continued movement in equipment that drives this bit. So, you know, take it in aggregate. We probably have 10, 12 new products all of which are adding some degree of growth, many of which were concentrating now on the fastest segments of what we are doing importantly, getting into white space. So what we need to do is perform with those, execute well against those, and try and grow our way, you know, regardless of what the markets do. that is that is really where we are focused. My sense is we can get into and stay in the range, but it will likely be the bottom of the range.

Operator: Our next question is from Steven Lichtman with William Blair. Please proceed with your question.

Steven Lichtman: David, just going back on contact lenses on the price contribution. The 3% currently, you mentioned not sustainable. Level do you think is sustainable And should we be factoring in? And how does that differ U. S. Versus what you are seeing OUS?

David J. Endicott: Yeah. I Mean, The US is more sustainable in price and the international is less. And the fundamentals are pretty basic. Right? I mean, it is. The online market is squeezing the chains. The chains are then resisting price and, you know, online has always resisted price. Young know, you are gonna get a little bit there, but you are just not gonna get what we used to get. And in The US, it is still predominantly an independent OD market. So, you know, you can still pass on price The customer passes, you know, you know, our optometrist community passes that price along. And the chains are relatively receptive in The US, you know, still because they are they are. Know, it is probably 60% independents and percent, you know, change in online. it is exactly the opposite internationally. So, you know, I think what you should expect is that price you know, is not as strong, but I think you will get some. And I and I. Again, I will have to see how the consumer fares over the next couple of months. Young know, we have already taken a price increase you know, in this business. So, you know, we will watch that for next year and see what happens.

Steven Lichtman: that is helpful. And then, Timothy, on the efficiency programs, are the incremental savings you mentioned coming on the manufacturing side or in OpEx And how much of the now $130 million in savings are you gonna be capturing in 2026? Thanks.

Timothy C. Stonesifer: Yeah. I would say that it is a combination of areas. it is--we continue to drive productivity in our manufacturing operations and footprint to your point. I would say that is a good chunk of it. We have also made some structural changes in R&D due to the discontinuation of the, PowerVision project that we talked about last quarter. And then, you know, just looking across the business, you know, all the teams are additional opportunities. So we feel very good about the, about the program. And as we said, when we first came out, we called it about a $100 million run-rate savings, and now we think it is gonna be about $130 million of run-rate savings. As far as the additional $30 million and how much of that hits this year, I would say a small piece will--I would say I would think a majority of that will hit next year. Brett.

Steven Lichtman: Thanks, Timothy.

Operator: Our next question is from Izzy Kirby with Redburn. Proceed with your question.

Issie Kirby: Hi, guys. Thanks for taking my questions. I wanted to ask about the Neurotech acquisition and your commercial strategy here. Will you be leveraging your existing sales force? Any expansion needed? And then also when Orion eventually comes to market, just thinking about what commercial investments you might need to make there. And then I have a follow-up.

David J. Endicott: Yeah, Izzy, on Neurotech, they are pretty well situated. They are a year into that launch. And we will we will probably complement they are doing with some more resource. But I think mostly what we are gonna try and do is coordinate. And, you know, obviously, we have a fairly substantial retina sales force already. That I think can help guide and introduce and coordinate with them to try and help relationships and, you know, some of the connections with the ASCs that they wanna work with. But I think that--think of that as just kind of you know, free help if you will because it is not any incremental cost. I do think we will add a little bit of resource to their business overall just because it looks like a good opportunity for us. And then on the Orion launch, I would say, you know, most of what we are gonna do there commercially has not yet been developed. So we are still 18 months away from, you know, an approval at least. And so I think if we are kind of in that back half of 2028, see that as an approval timing. I would think we will need to be putting things together really next year. Those will all be incremental cost, but I would say they are planned in right now as we think about next year. We will guide on that as we get into beginning of February.

Issie Kirby: Great. Thank you. And then on AT-IOLs, is the way you are going to market or certainly marketing changing at all given how much more competitive it is, particularly in The U.S.? You mentioned you will include sort of direct clinical comparisons with Vivity PRO. Just how are you thinking about your go to market with advanced IOLs in a more competitive space? Thanks.

David J. Endicott: Yeah, it is a really good question. The short answer is yes. We are doing 2 or 3 things, actually. 1 of the things we are doing is we are speeding up the amount. You will see that over the last 18 months, we have sped up the innovation pace So we have--we have got PanOptix Pro out. We have got TruePlus out. We have got Vivity PRO out, all really within the last 24 months or so. We have got another 2 lenses behind that we will appropriately launch, you know, based on the timing. that we see the market will be receptive to. I think in addition to that, I think what we have done is we have done some direct to patient work that is mostly online work, but I think it is it is a different go to market strategy than we have had in the past, which is to try and, you know, articulate to patients what the differences are in these lenses. And what their preferences might be and how those could be satisfied. And I think further to that point, we have also spent a good bit of time thinking about with new products what are we comparing to so that we have not just, my lens is better than your lens, you know, good data that says, you know, here. here's the difference in near vision actually in a direct comparison. Here's the difference in intermediate vision actually here's the difference if there is 1--and there is not in many cases on distance and contrast because we are quite concerned about the misinformation I think that is going on at least in some of the initial launches.

Operator: Our next question is from David Saxon with Needham and Company. Please proceed with your question.

David Saxon: Great. Good morning, David and Timothy. Thanks for taking my questions. So first, maybe I will do Tryptyr, and then I will have a follow-up. So I think last quarter Tryptyr was kind of in the high teens in dollar terms. So did that get into the 20s this quarter? How are you feeling about driving volumes next year? And also, how should we think about kind of gross to net dynamics over the next, call it, 12 months?

David J. Endicott: Yes. Look, TRYPTYR is going well. I mean, you know, our volumes are kind of on pace to what we would hoped for. I think we saw something like 11,000 unique prescribers last month. We have got 2 thirds of the commercial lives covered at this point and our share I think we have gained up just short, I think, of about 6% this month or last month. And so I feel like we are doing exactly what we need to do. We have got more work to do on reimbursement. We need to pick up another Medicare plan at least and I do think there is still some commercial work we can do. But what we are most excited about is getting the DTC going. We needed to kind of get over a certain threshold with commercial to make that viable. We initiated that last month. And I think what you are seeing is a real positive response to the product itself. From the physicians that are prescribing it. And that is been and I think our most important idea has been, you know, look. What are you seeing with the patients? And they are seeing very quick response, which is what we had hoped for. And a very, you know, kind of meaningful, you know, tolerance, which is really a big deal too. Because I think patients will really want, as a result, kind of comfort. And I think the data that we showed at the optometry and ophthalmology meetings on TRYPTYR, I think, gives us real comfort that we had hoped to see with Tryptyr is exactly what they are saying. And we were hearing that from the docs, it is really great to see it in both the doc feedback and then also the data that we have created.

David Saxon: Okay. Great. Thanks for that. And then I wanted to follow-up on your comments around the next round of IOL launches. I mean you have PanOptix PRO and Vivity PRO out there. Vivity PRO is coming out. But you just discontinued PowerVision last quarter. So how do we think about kind of that next leg of IOL launches as it relates to kind of what you have out there in the market? Or getting out and what is already out there from a competitive perspective? And then also just kind of general level of confidence in The U. S. Penetration 30% to 40% range that you have talked about historically? Thanks so much.

David J. Endicott: Yeah. Okay. So on. So on the lenses and themselves, look, I feel very confident that we probably have the world's most successful optical design engineers, you know, and I do believe that what you see in PanOptix and then PanOptix PRO and Vivity and then Vivity PRO. And we have follow ons for both of those products that you know, advance those designs even further So again, we are traveling towards lower optical disturbances you know, with the trifocals and the diffractive lenses, and then we are we are traveling closer and closer to better near better intermediate with our with the EDOF lenses. And I think we are gonna be in front of most people on this. And, you know, that they will catch up eventually, but I think we are certainly gonna lead the way as we go forward on those designs and those lenses. there is. Young know, we obviously, you know, entered last quarter an agreement with the RX Sight folks. We think they have got a great idea in adjustability. We have got some great ideas around what we could do to create presbyopic resolution. And together, I think we could come up with something that is really exciting. So that is our next kind of phase after that. And then, you know, we have got a lot of irons in the fire around the world on other kinds of designs and ideas. And I would just be a little hesitant to comment on those yet. They are generally pretty early in their work, but we are excited about that stuff. On ATIOL penetration, you know, I do think that the know, the confidence we have on the long term is built on kind of an annual survey we do around, you know, what the consumer willingness to pay is. and it has generally hovered kind of in 35% to 40% of patients you know, given the right information are willing to compensate for the ATIOL and the PCIOL in particular. What I think is important is that you do see these kind of run ups when you see new products. So, you know, this most recent run up, I would attribute largely to the amount of competitive promotion going on in The US. But the international 1, again, that is pretty steady right now. And I think you see kind of the steady march that has historically been kind of 50 basis points a year, has accelerated most recently closer to 100. I expect it will probably settle back at some point, but it is going to be a kind of steady march towards, I think, the low 30s, ultimately peaking somewhere in the mid-30s.

Operator: Our next question is from Tom Steffen with Stifel. Please proceed with your question.

Thomas Stephan: Great. Hey, guys. Good morning. Thanks for taking the First 1 on 2027. I guess the way I am kind of reading it, you sound pretty confident in maybe 4% to 5% organic growth next year on revenues. But this year is tracking, you know, maybe only a bit above that on the organically. Next year, you lap Unity, so that will be a pretty meaningful headwind. So I guess my question is what gets you next year to maybe 4% to 5% as we think about other segments in the business outside of equipment that we need to accelerate from 2026 to 2027? I think you called out implantables, but what else accelerates organically from a growth rate standpoint next year versus this year? And then I have a follow-up.

David J. Endicott: Well, let me start by saying, look, you know, our during the stretch where the market growth is more modest, you know, our desire right now is to is to focus on executing more effectively in things like the IOL launches. So if you think about what we are trying to do, we are trying to maximize our IOL launches, particularly Vivity Pro, TruePlus, and then also PanOptix Pro around the world. And get into this high premiumization idea where the segment of the market we are participating in is growing considerably faster than the average total market aggregated. that is what we are doing with that. that is what we are doing with daily disposables, that is why we are concentrating on artificial tears and OTC. that is why we are dry eye and Rx. Those are categories that are all growing faster by a lot than the market. So if we rotate our promotion that direction and we enter new categories like Valeda, with dry AMD, like Voyager, you know, glaucoma. Like Brightly with a whitener, like ICELL-Dose. Those are all new white spaces for us. So What I am trying to direct you towards is that if we shift our mix towards the faster part of the market that is growing the fastest, we avail ourselves of a faster growing TAM than when we aggregate ourselves into some of the slower growing markets which again, look like monofocal cataract, some of the other kinds of businesses that we are in, you know, reusable lenses, etcetera. So that is the principal way in which we are gonna get there. But I will also just point to Brightly, is a new product. UNITY M, UNITY DX, and Celto. We have got a couple of other, you know, contact lenses. We have got a new contact lens coming. And we have got Unity. and Vivity PRO all coming. Those are all new products for us next year. That add to Year 1 revenue.

Thomas Stephan: Got it. that is great. And then quickly on my follow-up. Just for equipment, nice to see again strong year over year growth, but a little surprising seeing res down sequentially in the third quarter. I know there is seasonality, but the Unity launch still early days, especially CS, not really getting going until the second quarter, and it sounds like Valeda is continuing to ramp. So David, kind of talk about what happened in the quarter with equipment what you saw from kind of an end market standpoint as it rates relates to possibly higher interest rates and what does that kind of portend for Q4 and sort of the near term?

David J. Endicott: Yeah. Well, first thing is just remember the comp last year was 27% growth or something like that. I might have that partially correct, but it is in the high 20s. And I think what you are really seeing right now is more of a steady, you know, you are. We are moving into a steady state of reasonable growth. it is gonna be somewhere, you know, in the high-single digits, you know, to the low-double digits, you know, as we kind of move forward depending on what we are launching when. So I think the, you know, the exciting part of where we are with CS and VCS is know, we, you know, we are kinda working our way through a backlog of really, you know, kind of older equipment that needs to be replaced. Now the replacement cycle, you know, people. Young know, some markets let's say Japan in particular, has been a little slower than we had hoped for. But other markets like the U.S. have been particularly good. So I think, you know, we have seen kind of on balance what we would have expected given you know, all of the equipment that we are launching. And again, feel pretty good about the leads we have got, the visibility to our funnel is solid. We are looking at the fourth quarter, I think we feel pretty good about that. So, again, I see next year as principally continuation of what we had always said, which is the first year will be very strong. Second year will be a little--will be similarly strong, and then it will settle into a cadence that is year on year roughly representing the amount of equipment you know, that retires which again would be about, you know, a 10th to, you know, 12th of the of the total installed base. that is kind of the way we see it.

Thomas Stephan: it is really helpful. Thanks, David.

Operator: We have reached the end of the question and answer session. I would like to turn the floor back over to Daniel Cravens for closing comments.

Daniel Cravens: Thanks, Max, and thanks again for joining us today. If anybody has any follow-up questions, certainly reach out to the IR team for investors or corp comm team for media. I know there are a couple of analysts that did not get questions in, but we will be sure to address those in the follow-up calls. Again, thanks again for your time, and look forward to connecting with you.

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