Alcon : Press Release (opens in new window)

Alcon Reports Second Quarter 2021 Results

• Second quarter sales of $2.1 billion, up 75% or 69% constant currency
• Growth in all Surgical and Vision Care categories
• First half cash from operations of $542 million and free cash flow of $320 million
• Raises full year guidance: sales of $8.0 - $8.2 billion, core diluted EPS of $2.00 - $2.10

Ad Hoc Announcement Pursuant to Art. 53 LR

Geneva, August 17, 2021 - Alcon (SIX/NYSE:ALC), the global leader in eye care, reported its financial results for the three and six months ended June 30, 2021. For the second quarter of 2021, worldwide sales were $2.1 billion, an increase of 75% on a reported basis and 69% on a constant currency basis(2), as compared to the same quarter of the previous year. Second quarter 2021 diluted earnings per share were $0.31 and core diluted earnings per share were $0.56.

Second quarter and first half 2021 key figures

Three months ended June 30

2021 2020

Six months ended June 30

2021 2020

Net sales ($ millions)	2,094	1,198	4,004	3,020
Operating margin (%)	10.9%	(38.9)%	9.4%	(16.4)%
Core operating margin (%)(1)	18.2%	(6.6)%	18.1%	7.4%
Diluted earnings/(loss) per share ($)	0.31	(0.86)	0.48	(0.98)
Core diluted earnings/(loss) per share ($)(1)	0.56	(0.21)	1.05	0.24

"Our second quarter performance demonstrates the strength and resilience of our businesses, with our highest quarterly sales and earnings since our spin-off," said David Endicott, Alcon's Chief Executive Officer. "Strong commercial execution behind our new product launches resulted in all sales categories in Surgical and Vision Care posting growth over 2019, notwithstanding the continued impact of COVID-19."

Mr. Endicott continued, "The healthy recovery in the business underlies our confidence in driving top line growth with continued innovation and the growing demand for eye care. With the ongoing expansion of our manufacturing capacity, we remain focused on maintaining a steady stream of product flow as we expand our portfolio and respond to market demand."

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Second quarter and first half 2021 results

Worldwide sales for the second quarter were $2.1 billion, an increase of 75% on a reported basis and 69% on a constant currency basis, compared to the second quarter of 2020. All categories benefited from the improvements in the eye care market, led by the strong recovery in the US and varied paces of recovery in international markets from the COVID-19 pandemic.

The following table highlights net sales by segment for the second quarter and first half of 2021:

	Three months		Change %		Six months ended		Change %
	ended June 30			June 30
($ millions unless indicated otherwise)	2021	2020		$	cc(2)		2021	2020		$	cc(2)
Surgical
Implantables	387	176	120	113	731	486	50	46
Consumables	620	320	94	87	1,155	839	38	33
Equipment/other	199	106	88	83	397	261	52	49
Total Surgical	1,206	602	100	94	2,283	1,586	44	40
Vision Care
Contact lenses	535	329	63	57	1,044	831	26	22
Ocular health	353	267	32	28	677	603	12	10
Total Vision Care	888	596	49	44	1,721	1,434	20	17
Net sales to third parties	2,094	1,198	75	69	4,004	3,020	33	29

Surgical momentum continues

Surgical net sales of $1.2 billion, which include implantables, consumables and equipment/other, increased 100%, or 94% on a constant currency basis, compared to the second quarter of 2020, with strong increases across all three categories. Implantables growth was driven by market improvements as well as the continued adoption of advanced technology intraocular lenses, led by the launch of Vivity and continued strength of PanOptix. Consumables growth was driven primarily by the recovery in surgical procedures over the prior year, while the equipment/other category benefited from the healthy demand of refractive and cataract products. For the first half of 2021, Surgical net sales increased 44%, or 40% on a constant currency basis, compared to the first half of 2020.

Vision Care returns to growth; strong demand for Precision1, Systane and Pataday

Vision Care net sales of $0.9 billion, which include contact lenses and ocular health, increased 49%, or 44% on a constant currency basis, compared to the second quarter of 2020, also with double- digit increases across both categories. Contact lens growth reflected improvements in all product categories and continued momentum from the launch of Precision1 and Precision1 for Astigmatism. Growth in ocular health was led by Systane and Pataday, primarily due to the recent launch of Pataday Extra Strength. For the first half of 2021, Vision Care net sales increased 20%, or 17% on a constant currency basis, compared to the first half of 2020.

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Operating income

Second quarter 2021 operating income was $229 million, which includes charges of $128 million from the amortization of certain intangible assets. Excluding this and other adjustments, second quarter 2021 core operating income was $382 million. The prior year period saw a broad slowdown in non-urgent surgeries and lower demand due to the COVID-19 pandemic. Second quarter core operating margin of 18.2% increased versus the prior year, mainly driven by higher sales, gross margin and operating leverage, as sales growth outpaced increases in marketing and selling expenses and research and development. The prior year was impacted by unabsorbed manufacturing overhead costs and provisions for expected credit losses related to COVID-19 as well as higher inventory provisions. Foreign exchange had a positive 70 basis point impact on second quarter 2021 core operating margin.

Operating income for the first half of 2021 was $378 million, which includes charges of $253 million from the amortization of certain intangible assets and a $45 million impairment of an intangible asset. Excluding these and other adjustments, core operating income for the first half of 2021 was $726 million and first half core operating margin was 18.1% compared to 7.4% for the same period last year. Foreign exchange had a positive 50 basis point impact on first half 2021 core operating margin.

Diluted earnings per share (EPS)

Second quarter 2021 diluted earnings per share were $0.31 and core diluted earnings per share were $0.56. First half 2021 diluted earnings per share were $0.48 and core diluted earnings per share were $1.05.

Balance sheet and cash flow highlights

The Company ended the second quarter with a cash position of $1.4 billion. Current year cash flows benefited from higher sales, lower separation and transformation payments, partially offset by the payment of $355 million for the acquisition of US distribution rights for Simbrinza, higher capital expenditures and a $54 million dividend payment. Cash flows from operations for the first six months of 2021 totaled $542 million and free cash flow(3) amounted to $320 million, compared to cash flows from operations of $58 million and negative free cash flow of $110 million for the same period in the previous year. The increase in free cash flow was driven by higher cash flows from operations, partially offset by higher capital expenditures. Financial debts totaled $4.1 billion, in line with prior year-end. The Company ended the second quarter with a net debt(4) position of $2.8 billion. The Company continues to have $1 billion available in its existing revolving credit facility as of August 17, 2021.

Financial outlook

The Company raised its full year outlook as follows. This guidance assumes that global markets return to 2019 levels at the end of the year. It further assumes that the US market will continue to grow relative to 2019 in the second half of the year and that international markets will return to 2019 levels early next year.

	May 2021	August 2021
Net sales	$7.8 to $8.0 billion	$8.0 to $8.2 billion
Core operating margin(1)	approximately 17%	approximately 17.5%
Core diluted EPS(1)	$1.85 to $1.95	$2.00 to $2.10

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Webcast and Conference Call Instructions

The Company will host a conference call on August 18 at 2:00 p.m. Central European Summer Time / 8:00 a.m. Eastern Daylight Time to discuss its second quarter 2021 earnings results. The webcast can be accessed online through Alcon's Investor Relations website, investor.alcon.com. Listeners should log on approximately 10 minutes in advance. A replay will be available online within 24 hours after the event.

The Company's interim financial report and supplemental presentation materials can be found online through Alcon's Investor Relations website at the beginning of the conference, or by clicking on the link:

https://investor.alcon.com/news-and-events/events-and-presentations/event-details/2021/-Alcons-Second-Quarter-2021-Earnings-Conference-Call/default.aspx

Footnotes (pages 1-3)

1. Core results, such as core operating margin and core EPS, are non-IFRS measures. For additional information, including a reconciliation of such core results to the most directly comparable measures presented in accordance with IFRS, see the explanation of non-IFRS measures and reconciliation tables in the 'Non-IFRS measures as defined by the Company' and 'Financial tables' sections.
2. Constant currency (cc) is a non-IFRS measure. Growth in constant currency (cc) is calculated by translating the current year's foreign currency items into US dollars using average exchange rates from the historical comparative period and comparing them to the values from the historical comparative period in US dollars. An explanation of non-IFRS measures can be found in the 'Non-IFRS measures as defined by the Company' section.
3. Free cash flow is a non-IFRS measure. For additional information regarding free cash flow, see the explanation of non-IFRS measures and reconciliation tables in the 'Non-IFRS measures as defined by the Company' and 'Financial Tables' sections.
4. Net (debt)/liquidity is a non-IFRS measure. For additional information regarding net (debt)/liquidity, see the explanation of non-IFRS measures and reconciliation tables in the 'Non-IFRS measures as defined by the Company' and 'Financial tables' sections.

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Cautionary Note Regarding Forward-Looking Statements

This press release contains, and our officers and representatives may from time to time make, certain "forward-looking statements" within the meaning of the safe harbor provisions of the US Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as "anticipate," "intend," "commitment," "look forward," "maintain," "plan," "goal," "seek," "target," "assume," "believe," "project," "estimate," "expect," "strategy," "future," "likely," "may," "should," "will" and similar references to future periods. Examples of forward-looking statements include, among others, statements Alcon makes regarding its liquidity, revenue, gross margin, effective tax rate, foreign currency exchange movements, earnings per share, its plans and decisions relating to various capital expenditures, capital allocation priorities and other discretionary items, market growth assumptions, and generally, its expectations concerning its future performance and the effects of the COVID-19 pandemic on its businesses.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on Alcon's current beliefs, expectations and assumptions regarding the future of its business, future plans and strategies, and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties and risks that are difficult to predict such as: the effect of the COVID-19 pandemic as well as other viral or disease outbreaks and the availability and the public's acceptance of vaccines; the commercial success of its products and its ability to maintain and strengthen its position in its markets; the success of its research and development efforts, including its ability to innovate to compete effectively; its success in completing and integrating strategic acquisitions; its ability to successfully transition the manufacture, distribution and commercialization of Simbrinza from Novartis; its ability to leverage existing relationships with healthcare professionals to help drive patient adoption of Simbrinza; pricing pressure from changes in third party payor coverage and reimbursement methodologies; global and regional economic, financial, legal, tax, political, and social change; data breaches or other disruptions of its information technology systems; ongoing industry consolidation; its ability to properly educate and train healthcare providers on its products; changes in inventory levels or buying patterns of its customers; the impact of a disruption in its global supply chain or important facilities; ability to service its debt obligations; its ability to comply with the US Foreign Corrupt Practices Act of 1977 and other applicable anti- corruption laws, particularly given that it has entered into a three-year Deferred Prosecution Agreement with the US Department of Justice; uncertainty and impact relating to the potential phasing out of LIBOR and transition to alternative reference rates; the need for additional financing through the issuance of debt or equity; its reliance on outsourcing key business functions; its ability to protect its intellectual property; the impact of unauthorized importation of its products from countries with lower prices to countries with higher prices; uncertainties regarding the success of Alcon's separation and spin-off from Novartis and the subsequent transformation program, including the expected separation and transformation costs, as well as any potential savings, incurred or realized by Alcon; the effects of litigation, including product liability lawsuits and government investigations; its ability to comply with all laws to which it may be subject; effect of product recalls or voluntary market withdrawals; the implementation of its enterprise resource planning system; its ability to attract and retain qualified personnel; the accuracy of its accounting estimates and assumptions, including pension plan obligations and the carrying value of intangible assets; the ability to obtain regulatory clearance and approval of its products as well as compliance with any post-approval obligations, including quality control of its manufacturing; legislative and regulatory reform; the ability of Alcon Pharmaceuticals Ltd. to comply with its investment tax incentive agreement with the Swiss State Secretariat for Economic Affairs in Switzerland and the Canton of Fribourg, Switzerland; its ability to manage environmental, social and governance matters to the satisfaction of its many stakeholders, some of which may have competing interests; its ability to operate as a stand-alone company; whether the transitional services Novartis has agreed to provide Alcon are sufficient; the impact of the spin-off from

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