Bausch + Lomb Corporation Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Overview: Bausch + Lomb had strong third quarter performance with 6% constant currency revenue growth. Pharmaceuticals was a standout due to Miebo's $84 million revenue. The company highlighted its pipeline of innovative products across categories.
• Segment Growth: Vision Care saw growth in consumer and contact lenses. Surgical showed steady performance with enVista's return to market. Pharma was driven by Miebo and Xiidra.
• Investments: Adjusted R&D spend for Q3 was $95 million, a 13% increase year-over-year. Adjusted EBITDA was $243 million, up 7% year-over-year.
• Pipeline: Future products include new formulations in consumer, next-generation lifitegrast in pharma, a bioactive contact lens, and premium surgical products, with a focus on disruptive innovation.

Segment Performance

• Vision Care: Third quarter revenue was $736 million, up 6% year-over-year. Consumer business grew 6%, with key brands like Blink showing 37% revenue growth, Artelac at 24%, Daily SiHy offerings at 22%, and eye vitamins at 12%. Contact lens revenue grew 6% on a constant currency basis, with U.S. up 9% and international up 4%.
• Surgical: Third quarter revenue was $215 million, up 1% year-over-year. Excluding the enVista recall, revenue growth was 7%. Implantables were up 2% sequentially, consumables were flat on a constant currency basis but up 4% reported, and equipment was up 4%.
• Pharma: Revenue was $330 million, up 7% year-over-year. U.S. branded Rx was up 13% in the quarter. Miebo generated $84 million in revenue, with 33% sequential growth and 71% year-over-year increase. Xiidra delivered $87 million in revenue, in line with expectations. International pharma was up 12% in the quarter, and U.S. generics saw sequential growth of 2% in Q3.

Guidance

• Maintained full-year revenue guidance at $5.05 billion to $5.15 billion, representing 5%-7% constant currency growth.
• Updated adjusted EBITDA guidance to $870 million to $910 million (raise in the lower end due to business strength).
• Expected adjusted gross margin to be approximately 61.5%, R&D investments to be ~7.5% of revenue, interest expense ~$375 million, and CapEx ~$295 million.

Risks

• Tariffs: Fluid tariff policy, particularly reciprocal tariffs from China, with impact mitigated but situation remaining uncertain due to ongoing trade negotiations.
• Market Fluctuations: Contact lens market softness in some regions, including Southeast Asia and China, and fluid trade dynamics affecting tariff impacts.

Question and Answer

Q: Patrick Wood from Morgan Stanley asks about the financial excellence pillar.

A: Brent Saunders and Osama Eldessouky discuss financial excellence as sharpening execution, controlling operating expenses, and disciplined resource allocation to drive growth and efficiency.

Q: Joanne Wuensch from Citibank inquires about contact lens market growth.

A: Brent Saunders states the contact lens market is growing in the mid-single digits, Bausch + Lomb is growing faster than the market due to new product innovations and execution, and comments on the Cooper situation being between Cooper and its shareholders.

Q: Young Li from Jefferies asks about Miebo dry eye and combo drugs.

A: Brent Saunders discusses Miebo's strong performance despite competitive launch, noting market expansion and the potential of combination therapy in dry eye treatment.

Q: David Roman from Goldman Sachs asks about surgical business and P&L leverage.

A: Brent Saunders and Osama Eldessouky talk about enVista's recovery, SG&A leverage sustainability, and the upcoming 3-year plan to detail growth and margin expansion strategies.

Q: Lilia-Celine Lozada from JPMorgan asks about tariffs and contact lens market outlook.

A: Brent Saunders comments on fluid tariff situation, potential trade deal impact, and contact lens market softness in some regions while emphasizing Bausch + Lomb's ability to manage and grow faster than the market.

Q: Pito Chickering from Deutsche Bank asks about gross profit margin and Q4 guidance.

A: Osama Eldessouky explains gross margin decline due to product mix and enVista recall, and Q4 guidance influenced by enVista ramp-up and seasonality.

Q: Matthew Miksic from Barclays asks about surgical market health and pharma coverage.

A: Brent Saunders states surgical market is steady, pharma coverage for Miebo and Xiidra is ~70%, and Xiidra investment cycle baseline established in 2025.

Q: Gary Nachman from Raymond James asks about dry eye market growth and U.S. generics.

A: Brent Saunders discusses dry eye market growth potential, ongoing investment balance, and U.S. generics as opportunistic with plant absorption and market disruption opportunities.

Q: Douglas Miehm from RBC Capital Markets asks about Miebo profitability timing and capital allocation.

A: Osama Eldessouky and Brent Saunders talk about Miebo profitability timing tied to investment returns, capital allocation focus on deleveraging, strengthening balance sheet, and shareholder value creation.