Bausch + Lomb Corp. Q3 FY2026 earnings call

Strategic Priorities as Interim CEO:

• Focus on identifying opportunities to improve profitability and operate more effectively across the organization.
• Commitment to meeting or exceeding targets from the 'Vision 27' three-year plan, balancing growth, margin expansion, and cash generation.
• Advancing the R&D pipeline and investing in innovation for dry eye solutions, surgical technologies, and next-generation contact lenses.

Operational Performance:

• Delivered four consecutive quarters against Investor Day commitments, demonstrating consistent execution.
• Total company revenue grew 8% on a constant currency basis to $1.375 billion.
• Adjusted EBITDA increased 34% to $325 million, expanding the margin to 23.6%.
• Strong cash generation with $233 million in operating cash flow and $178 million in free cash flow.
• Net leverage reduced significantly from 5.7 times year-over-year to 4.1 times.

Product Highlights:

• Mibo continued strong trajectory with 42% growth, serving as a cornerstone of the dry eye portfolio.
• Lumify maintained impressive growth (+38%) eight years post-launch, indicating brand durability.
• Premium IOLs showed significant traction with reported growth approaching 70%, driving higher margins.
• Contact lens portfolio benefited from strong performance in DailySight Hi (+25%) and Ultra (+17%).

VisionCare: Revenue was $774 million, up 6% on a constant currency basis. This segment contributed approximately 56.3% of total company revenue. Key drivers included the Consumer business (up 6%, led by Lumify at $66 million, up 38%) and Contact Lenses (up 6%, with DailySight Hi up 25% and Ultra up 17%).

Surgical: Revenue was $234 million, up 9% on a constant currency basis, contributing approximately 17.0% of total company revenue. Growth was driven by Implantables (up 40%, with premium IOLs up 75%) and Consumables (up 5%), while Equipment declined 11% due to strategic placement strategies rather than revenue recognition.

Pharmaceuticals: Revenue was $367 million, up 11% on a constant currency basis, contributing approximately 26.7% of total company revenue. U.S. Pharma grew 14%, led by the Dry Eye portfolio (up 22%). Mibo was a standout performer, growing 42% to $119 million, while Zydra grew 2% to $89 million.

• Full-Year 2026 Revenue Guidance Raised: Increased by $10 million to a range of $5.450–$5.550 billion, reflecting underlying business strength partially offset by lower currency tailwinds.
• Full-Year 2026 Constant Currency Growth: Now expected to be approximately 6.1%–8.0%, an increase of 30 basis points from previous guidance.
• Full-Year 2026 Adjusted EBITDA Guidance Raised: Increased by $65 million to a range of $1.090–$1.140 billion.
• Implied Adjusted EBITDA Margin: Approximately 20.3% at the midpoint, representing about 130 basis points above the original Investor Day target.
• Currency Impact: Estimated at a $40 million headwind, down from the previously estimated $45 million.
• Gross Margin: Expected to be in the range of 62.5%–63.0%, up from approximately 62%.
• Tax Rate: Expected to be approximately 18%, slightly below the prior outlook of 19%.
• Capital Allocation: Interest expense remains ~$365 million; CapEx remains ~$285 million. R&D investment expected to remain 7.5%–8.0% of revenue.

• Foreign Exchange Headwinds: While moderated, currency fluctuations continue to impact revenue, estimated at a $40 million headwind for the full year.
• Regulatory and Pipeline Execution: Success depends on advancing R&D projects through clinical trials and regulatory approvals (e.g., FDA interactions), which carries inherent risk of delay or rejection.
• Competitive Pressure: The company faces competition in key categories such as contact lenses and dry eye treatments, requiring continuous innovation and market share defense.
• Operational Execution Risks: Achieving margin expansion targets relies heavily on the successful execution of productivity initiatives, supply chain optimization, and SG&A efficiency improvements.
• Leadership Transition: The recent change to interim leadership introduces short-term uncertainty, though management asserts confidence in the team's ability to execute.

Q: Analyst asked why a leadership change was deemed necessary given strong recent performance. / A: Tom Appio stated the transition was mutually agreed upon as the company enters its next growth phase. He emphasized his deep understanding of the business since 2010 and prioritized operational excellence, R&D pipeline advancement, and resource allocation to drive future value.