Alcon Inc. (ALC) Earnings Call Transcript

Greetings. Welcome to the Alcon Third Quarter 2026 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Dan Cravens, VP and Global Head of Investor Relations. Thank you, Dan. You may begin.

Welcome to Alcon's Third 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 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 and available on their website at sec.gov. We'll 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, Tim 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'll turn the call over to our CEO, David 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 remain strong, particularly in the U.S., where demand for UNITY and Valeda continue to be robust, while Implantables continued to grow in our international markets, but that growth was offset by competitive pressures in the U.S. And in Vision Care, contact lenses and ocular health, both delivered solid growth, driven by share gains in contact lenses, Tryptyr and Systane. Now Tim will take you through the detailed financials. So let me focus on what's 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. At ESCRS, we presented new data reinforcing the unsurpassed near vision performance of PanOptix Pro and 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 MIEBO, 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 with 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. We 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're seeing that innovation translate into commercial momentum in equipment where UNITY VCS and CS, along with the [indiscernible] 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 U.S. 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 Implantables. Sales were down 2% and 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. And 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 entrant 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 us confidence in how these competitive dynamics can evolve. Competitive launches there have now been in the 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 and 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 TOTAL30 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've also recently initiated direct-to-consumer promotion to increase patient awareness and drive demand. We're making solid progress against our reimbursement objectives with now more than 2/3 of commercial lives covered. On the consumer side, Systane delivered another quarter of double-digit growth led by our multi-dose preservative-free formulations including Systane Pro as we continue to gain share in a fast-growing market. We're also continuing to broaden our consumer eye care portfolio. Just a few weeks ago, the FDA approved Brytly, our new redness reliever eye drop. Brytly works in just 1 minute and provides up to 12 hours of redness reduction lasting up to 50% longer than LUMIFY. We expect Brytly 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 retina portfolio. We recently acquired Neurotech Pharmaceuticals, adding ENCELTO, the first and only FDA-approved treatment for Macular Telangiectasia Type 2 or MacTel. This is a rare and progressive retinal disease that can cause irreversible central vision loss. ENCELTO 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 3,000 newly diagnosed each year, and 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're 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're pleased to report enrollment is complete in our pivotal Phase III program, and 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 approximately 4% to 5% with roughly 3 points coming from price and 2 points from mix. The U.S. remains the strongest market growing approximately 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. Cross 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-value 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 international. At the same time, premiumization remains a meaningful source of value growth, and we believe the strength and 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%. And across our other eye care markets, underlying trends remain healthy and in line with our expectations. So when we put all that together, we estimate that our aggregate markets grew approximately 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's our responsibility to deliver through that environment. And we're 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'll turn it over to Tim, who will walk you through the financial details of the quarter.

Thanks, David. Beginning with the top line, our third quarter sales were $2.7 billion, up 5% versus prior year and 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, sales were up 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 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 despite [indiscernible] now lapping the UNITY VCS launch in the prior year. Turning to Vision Care. Third quarter sales were $1.2 billion and up 6%. 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 a 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 1/3 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 grew 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 persist 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 the 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. And in Vision Care, our recent and upcoming launches, including Tryptyr and Brytly, 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've been able to get approximately 100 to 150 basis points of operating leverage by growing revenue faster than our cost base. Next year, we'd 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 nonrecurring. In addition, we expect pressure 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'll 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'll provide more information on the impact of the new standard when we reported 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 the 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'll turn it back to David.

Thanks, Tim. As we approach the end of the year, I remain confident about the trajectory of the business. Our innovation pipeline continues to strengthen. We're executing with discipline, and we're continuing to modernize our go-to-market approach. We're on track to complete a restructuring to improve operational efficiency. We strengthened our portfolio with the addition of Neurotech and we have already returned approximately $750 million to shareholders. And 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 Instructions] Our first question is from Anthony Petrone with Mizuho.

Maybe, David, one on equipment and -- and then just on Brytly, I know the launch is 1Q, but should we be expecting any kind of big stocking orders in 4Q ahead of that large retail launch in 1Q?

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've 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'll 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 Brytly launch, we have got retail orders. I don't think we're 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 kind of a new market area for us, and we've been looking for white spaces like this. So again, this product lasts longer than the market leader, and we're excited about the potential of that with the consumer.

Our next question is from Brett Fishbin with KeyBanc Capital Markets Inc.

I just wanted to ask one first on -- 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 or if you're talking about like 150 to 200 basis points of underlying improvement before some of those headwinds?

Yes. I think about that as more of a gross number before the adjustment. So if you think -- if you look at historically, we've always said 100 to 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 150 to 200 basis points, I then start subtracting the pressures that we're going to see from the one-offs that we saw in 2026 that don't recur. We do anticipate seeing a little bit more inflationary pressure and then a little bit of pressure -- near-term pressure for the Neurotech acquisition.

All right. 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, do you expect a return to growth next year with some of the new product launches?

Yes, I think you're 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'll be more in the fourth quarter, I think. So we're going to see some continued competitive activity that surgeons want to try new products and good companies bring products out. They're going to try them. And so I think we felt like that was certainly part of the challenge. But it wasn't way off of where we've been. It was a little bit off of where we've been in the prior quarters. So I think we're just kind of working our way through to the next launches. And I think as I said in my remarks, Vivity Pro is a really exciting product for us. I think what we've -- and we've got it approved now. So I think we've got it in the hands of a number of KOLs right now. We'll get -- and we've got very good data comparing it to the competitor who is most active right now. So I think we feel like we're 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'll see this thing continue. I would also point out that TRUEplus is just kind of getting its feet around the world, and that's our new entry into the Monofocal Plus space. and PanOptix Pro is still getting going internationally. So I think if you look around the world at where our portfolio is, and frankly, we've got a number of products after that which are on their way. We feel very confident over the next several years that we're going to be in a solid position for implantables.

Our next question is from Julien Ouaddour with Bank of America.

I have one question and one I was keeping a follow-up. So the question I just want to clarify your comment about UNITY, where you expect the same volume next year, but 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 in equipment to 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 fixed line growth in consumables?

Yes, Julien, we don't break up the individual products in the categories, but I would just say that the category growth in equipment we were pleased with. I may -- you may have misheard me or I may have mis-said it. I think the 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 market. So the retina market, I don't know, is maybe 1.5 million procedures, 2 million procedures, the cataract market is 5 million or 6 million in the U.S. and around the world, it's much bigger. So I think we have a much bigger market to address with CS, and I suspect we'll do quite well with CS.

Our next question is from Larry Biegelsen with Wells Fargo.

I had one on '27 and one on Neurotech. So Tim, maybe if we could -- what's the net impact of what you said on revenue? How will growth in '27 compared to '26? Are you pointing to basically, you 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 one follow-up.

Yes. I'm not going to give guidance here today, Larry. But you're thinking about it correctly. Listen, we think the markets are going to hang in there at about 3%, as David said in the prepared remarks. We don't anticipate -- we're not expecting any uplift from that. As we've 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'd expect to grow faster than that market. And then to your point, I would add 75 to 100 basis points on that for Neurotech. As far as the margin expansion, those are the pressure points. I think we hit those. We do expect margin expansion next year and we'll give you more color on that. We're going to continue to get some margin expansion out of our marketing and sales area as we've done historically. But you're not going to see a net number of 100 to 150 basis points that we've talked about before. And we'll give you more color in February.

Very helpful. On Neurotech, I mean, ENCELTO, it seems like a sleeper based on our checks. So what our 2026 sales and the 75 to 100 basis points for '27, it sounds like -- it wasn't clear if that was Vision Care or total Alcon? But even if it's total Alcon, I think if I'm doing the math right, it's $50 million, which seems small. And just lastly, how are you thinking about the ramp to those peak sales of $275 to $400? I mean, even the midpoint there implies only about 750 patients or 1,500 eyes per year?

Yes, Larry, you're doing the math the same way we are. Let me just tell you the dynamic we're trying to manage. What we're trying to manage is this is a new -- we've 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 kind of key variable here. And until we get a really clean view of what that looks like, we feel comfortable with the $250 to $400 range. I do -- I understand the math you're doing, and I do understand that, that could be the case. I think what we're going to find is that these patients -- there's 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 could be right and we could be wrong on this one, but I think we're going to be careful around this as we go forward.

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

Our next question is from Veronika Dubajova with Citi.

I have 2, please. The first was -- I just want to come back on the moving pieces for margin, Tim. And I guess this year, you stepped up DTC by about $40 million sort of 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 on 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've had some headwinds in terms of discontinuation of some older product lines. But it'd be good to understand sort of, one, how you're thinking about market growth contact lenses for next year; and two, your ability to outperform that from a share gain perspective?

Veronika, thanks for the question. Listen, it's 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 -- 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 going to be in the gross margin line. If you think about the refunds and the milestone payments and the inflation However, we're 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.

Veronika, the global contact lens market was probably 4% to 5%. It was healthy in the U.S., 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 kind of 1% to 2% range. So 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're feeling pretty good about it right now, principally because we kind of 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's been the case for a while, but it continues on very successfully, I think, in the U.S. And again, the international business was grown principally by mix. So you get less price there, but more mix, and we're trying to play that particular trend right now.

Our next question is from Ryan Zimmerman with U.S. Bancorp. BTIG.

Tim, if we look at '27, I appreciate all the color, but as I think about kind of the continued double-digit core EPS growth, I'm just curious what's coming from, say, operating leverage versus revenue growth versus share count reduction? And again, knowing that you didn't give double-digit core EPS growth as a guide, but assuming that, that's the case.

Yes. Again, 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 wouldn't -- from a year-over-year basis from a share count and buyback, I wouldn't expect anything significantly different than what we did this year. But again, we'll evaluate that as 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.

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? And is it concentrated in a specific product area, whether that's EDOF or monofocal versus maybe what's happening in the market?

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

Our next question is from Jeff Johnson with Baird.

So Tim, I guess one 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 4Q. If I go right to 6%, I'd be kind of pushing about 100 basis points improvement versus 3Q. Are you implying in the updated guidance a little bit of improvement in growth versus 3Q? Or should we be thinking 3Q is kind of the run rate at least for now? And then one follow-up.

Yes. Listen, the reason we went with approximate is because we don't see 5% in play and we don't see 7% in play. So we thought approximately 6% was kind of how we're looking at it right now. As far as -- again, I'm 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's why you might see a little bit more of a jump up, but we would expect to see some improvement in Q4.

All right. Fair enough. And then, David, you talked -- you've said a couple of different things on VCS, CS. I just want to clarify what you've said. I know you don't guide product line. But again, 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 want to make sure you are expecting VCS, CS combined UNITY platform revenue growth next year and then on top of that, a little bit of MDX and Valeda contribution so that equipment growth does have a positive sign on it next year.