Bausch + Lomb Corporation 2026 Q3 Earnings Call

Good morning, everyone, and welcome to our third quarter 2026 financial results conference call. Participating on today's call are Chairman of the Board and Interim Chief Executive Officer, Mr. Tom Appio, and Chief Financial Officer, Mr. Sam Eldessouky. In addition to this live webcast, a copy of today's live presentation and a replay of this conference call will be available on our website under the investor relations section. Before we begin, I would like to remind you that our presentation today contains forward-looking information. We would ask that you take a moment to read the forward-looking legend at the beginning of our presentation, as it contains important information. This presentation contains non-GAAP financial measures and ratios. For more information about these measures and ratios, please refer to slide 1 of the presentation. Non-GAAP reconciliations can be found in the appendix to the presentation posted on our website.

The financial guidance in this presentation is effective as of today only. It is our policy to generally not update guidance until the following quarter, unless required by law, and not to update or affirm guidance other than through broadly disseminated public disclosure. With that, it's my pleasure to turn the call over to Tom.

Thank you, George, and thanks to everyone for joining us today. Before we begin, I want to say how honored and energized I am to serve as interim CEO of Bausch + Lomb. Having spent a good part of my career with the company, I have developed a deep understanding of our business, our markets, our products, and most importantly, the exceptional global team who drive our success. That experience gives me confidence in the strength of our organization, the trust our customers and patients place in us, and our ability to execute against our priorities. I am excited to lead Bausch + Lomb through its next phase of growth and value creation. Today's presentation will follow a familiar format. I will start with a few thoughts on my history with the company and my priorities as interim CEO, then share some perspective on our third quarter performance.

Sam will review the quarter in greater detail before we turn to the performance of our businesses and the opportunities ahead. I have spent enough time at Bausch + Lomb to understand both what makes this company successful and where we can improve. I have seen the strength of our portfolio, the resilience of our business model, and the power of our customer relationships. I have also seen opportunities to operate more effectively and unlock additional value. As interim CEO, my priorities are straightforward. First, we are focused on identifying opportunities to improve profitability and operate more effectively across the organization. Vision 2027 established a clear path for improving the financial profile of this business, and we will continue to build on the progress we have already made. I believe there is still room to enhance how we execute, allocate resources, and drive returns from the investments we have made.

Second, we remain committed to meeting or exceeding the targets we laid out in our three-year plan. The progress we have demonstrated this year reinforces our confidence in the strategy, and we will continue to balance growth, margin expansion, and cash generation as we work towards those objectives. Third, we will continue advancing our pipeline and investing in innovation, from dry eye solutions and surgical technologies to the next generation of contact lenses. Our future growth depends on bringing meaningful innovation to patients and eye care professionals. This commitment remains unchanged. Taken together, the goal is simple: build a stronger, more profitable company while continuing to invest in the innovations that will strengthen our competitive position and improve outcomes for the customers and patients we serve. This quarter represents another milestone for the company.

It marks the fourth consecutive quarter we have delivered against the commitments we outlined at Investor Day, demonstrating our ability to drive growth, expand margins, and strengthen the financial profile of the business. In the third quarter, we grew constant currency revenue by 8%, increased adjusted EBITDA by 34%, and expanded adjusted EBITDA margin to 23.6%. That is a result of disciplined execution, strong commercial performance, and the actions we have taken over the last several years to strengthen the business. What gives me confidence is not just the quarter itself, but the consistency of the performance we have delivered over the past year. We are building momentum across the business and the trajectory is encouraging. One of the things I find most encouraging about the quarter is the breadth of the performance. We are seeing growth across all three of our business segments.

Pharmaceuticals grew 11%, surgical grew 9%, and vision care grew 6% on a constant currency basis. Just as importantly, that growth is being driven by strong performances across multiple franchises rather than any single product or market. MIEBO continued its strong trajectory. LUMIFY delivered another quarter of impressive growth, and our contact lens portfolio remained a key contributor to growth, led by INFUSE and ULTRA. In surgical, we are also seeing continued momentum from premium IOLs. Reported growth in the quarter approached 70%, with our premium offerings continuing to gain traction. We believe there is significant runway ahead, both in terms of adoption and what these products can contribute to the business over time. Earlier, I mentioned that we have now delivered four consecutive quarters against the commitments we outlined at Investor Day.

This slide helps explain why we are confident in our ability to meet or exceed the targets we have established. Over the last four quarters, we have consistently achieved strong revenue growth while expanding profitability at an even faster rate. That is exactly the type of operating leverage we said we expected to generate as the business scaled and our strategic initiatives gain traction. Importantly, this is not the result of a single quarter or a single action. It is driven by the breadth of our portfolio and the work we have done to scale the business more efficiently. The progress we have made over the past year gives me confidence in the path we are on. It also reinforces my belief that there are additional opportunities to improve execution, enhance profitability, and create even more value over time. With that, I will hand the call over to Sam.

Sam? Thank you, Tom, and good morning, everyone.

Before we begin, please note that all of my comments today will be focused on growth expressed on a constant currency basis, unless specifically indicated otherwise. In addition, all references to adjusted EBITDA will exclude acquired in-process R&D. Today marks our fourth quarterly report since our 2025 Investor Day, and the results provide clear evidence of the momentum we have built across the business. Revenue grew 8% in the quarter, while adjusted EBITDA increased 34% on a reported basis, bringing our adjusted EBITDA margin to 23.6%. That combination of growth and margin expansion translated into strong cash generation with $233 million of operating cash flow and $178 million of free cash flow in the third quarter. As a result, we reduced net leverage to 4.1 times. This is the progression we laid out at Investor Day.

Grow revenue, expand margins, convert the performance into cash, and reduce leverage. One year in, we are delivering on our Investor Day targets, and our results give us even greater confidence in the path ahead. Turning now to our financial results on Slide 8. Total company revenue for Q3 was $1.375 billion, up 8%, with broad-based growth across all three segments. Foreign exchange was a headwind to revenue of approximately $6 million in the third quarter. Now let's turn to detailed results across the segments. Vision care third quarter revenue of $774 million increased by 6%, with growth in both consumer and contact lenses. The consumer business grew 6% in the quarter. LUMIFY generated $66 million of revenue, up 38%. The consumer dry eye portfolio delivered $115 million of revenue in the third quarter, up 3%. Eye vitamins, PreserVision, Ocuvite, delivered $95 million of revenue in the quarter.

We saw continued strength in consumer demand, with the positive trends exiting Q2 carrying through the third quarter and consumption growing at 6% in Q3. Contact lens delivered another strong quarter with revenue up 6%. Daily SiHy continued to lead the way, growing at 25%, while ULTRA was up 17%. Both the U.S. and international markets contribute to the strong performance. The U.S. was up 9% and international was up 4%. Moving now to the surgical segment. Third quarter revenue was $234 million, up 9% versus the prior year. Implantables grew 40%, with premium IOLs up 75%. This is another clear indication of the progress we are making in transitioning the portfolio to higher margin premium categories. In the third quarter, equipment was down 11%, which reflects our continued focus on strategic system placements to position us for future pull-through sales.

Consumables, the largest part of the surgical portfolio, were up 5% in the third quarter. Pharma delivered another strong quarter with revenue of $367 million and growth of 11%. U.S. Pharma grew 14%, led by continued momentum in dry eye. The dry eye pharma portfolio was up 22% with both MIEBO and Xiidra contributing to the performance. MIEBO remained a standout performer, with revenue increasing 42% to $119 million. Xiidra generated $89 million of revenue, up 2%. International pharma added to the performance with growth of 3% in the quarter. Now let me walk through some of the key non-GAAP line items on slide 9. Adjusted gross margin in the third quarter was 64.7%, up 300 basis points year-over-year. This includes a one-time tariff refund of approximately $14 million. Excluding this benefit, adjusted gross margin was a strong 63.6%.