Bausch + Lomb Corporation (BLCO) Q3 2026 Earnings Call Transcript

Operator: Good morning, and welcome to Bausch and Lomb's Third Quarter 26 Earnings Call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key. Followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your touch tone phone. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to George Gadkowski, vice president of investor relations and business insights. Please go ahead.

George Gadkowski: Thank you. Good morning, everyone, and welcome to our third quarter 26 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. Osama A. Eldessouky. In addition to this live webcast, a copy of today's 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 is my pleasure to turn the call over to Tom.

Tom Appio: 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 and 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 that drives 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 and 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. Osama 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 and Lomb to 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, are focused on identifying opportunities to improve profitability and operate more effectively across the organization. Vision 27 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 on the investments we have made. Second, we remain committed to meeting or exceeding the targets we laid out in our 3-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. 1 of the things I find most encouraging about the quarter is the breadth of the performance. We are seeing growth across all 3 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 do for the business over time. Earlier, I mentioned that we have now delivered 4 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 4 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 would generate as the business scaled and our strategic initiatives gained traction. Importantly, this is not the result of a single quarter or a single 1. 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 Osama. Osama?

Osama A. Eldessouky: Thank you, Tom. 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 25 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 a strong cash generation. $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 4.1x. This is the progression we laid after the investor day. Grow revenue, expand margins, convert the performance into cash, and reduce leverage. 1 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 3 segments. Foreign exchange, was a headwind to revenue of approximately $6 million in the third quarter.

Operator: Now let's turn to detailed results across the segments.

Osama A. Eldessouky: 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 1-time tariff refund of approximately $14 million Excluding this benefit, adjusted gross margin was a strong 63.6%. We are executing on the gross margin plan. We outlined at Investor Day. Driven by favorable mix from higher margin brands, and the results of our productivity initiatives. This is a credit to the strong execution of our manufacturing and supply chain teams. In Q3, we invested $91 million in adjusted R&D as we continue to advance our pipeline. In the third quarter, adjusted SG&A margin continued to trend lower, building on the significant progress we made in 2025 and through the first 3 quarters in 26. Our lower fixed cost structure has driven 150 basis points of year to date improvement and positions us to continue expanding operating leverage through the remainder of 2026. Third quarter adjusted EBITDA was $325 million, up 34% year over year. On a reported basis and adjusted EBITDA margin was 23.6%, up 460 basis points year over year. In Q3, we generated $233 million of operating cash flow and $178 million of free cash flow. With CapEx moderating as expected to $55 million This was our strongest quarter of cash generation, since the IPO 2022. Our strong performance drove net leverage down from 5.7x a year ago to 4.1x at the end of the third quarter. With substantial progress already achieved, we are increasingly confident in our ability to achieve our 3.5x target. That we outlined on Investor Day. Net interest expense was $93 million for the quarter, Adjusted EPS, excluding acquired in-process R&D, was $0.34 in Q3. A substantial increase versus $0.18 in the prior year quarter. Now turning to our 2026 guidance on slide 12. Our momentum continued in Q3. Driven by strong execution and a healthy eye care market. And we are now raising guidance for the third time this year. With 1 quarter remaining, we are raising full year revenue guidance by $10 million to a range of $5.450 billion to $5.550 billion. This reflects a $15 million increase in the underlying business outlook partially offset by $5 million of lower currency tailwinds. The updated revenue guidance reflects full year constant currency growth of approximately 6.1% to 8.0% which is 30 basis points above our July guidance. We are also raising full year adjusted EBITDA guidance by $65 million to a range of $1.090 billion to $1.140 billion. At the midpoint, our guidance implies an adjusted EBITDA margin of approximately 20.3%, which is about 130 basis points above our full year 2026 outlook. Provided at Investor Day. In terms of the other key assumptions underlying our guidance, for the full year 2026, we now estimate a $40 million revenue tailwind from currency. Down from approximately $45 million previously. As exchange rates have moderated. We now expect adjusted gross margin to be in the range of 62.5% to 63% up from approximately 62% previously. R&D investment is expected to remain in the range of 7.5% to 8.0% of revenue. Below the line, our expectations for interest expense and CapEx remain unchanged. We continue to expect interest expense of approximately $365 million and full year CapEx of approximately $285 million. We now expect the adjusted tax rate to be approximately 18%, slightly below our previous outlook of 19.0%. Our strategy and disciplined execution continue to demonstrate significant and sustained margin expansion. As we close out the year, we remain focused on advancing toward our 3 year Investor Day targets. Slide 13 highlights the meaningful margin expansion progress we have made since Investor Day reflecting the strong execution and commitment of our team. Adjusted EBITDA margin was 17.5% in 2025, And at Investor Day, we set a 2026 target of approximately 19.0%. Our updated full year guidance now implies an adjusted EBITDA margin, of approximately 20.3%, about 280 basis points of expansion versus 2025. And importantly, 130 basis points above our Investor Day target. 1 year into our 3-year plan, the business is delivering results. With increasing momentum, and we are clearly tracking ahead. We are proud of our progress, and confident in the path ahead. None of these results would have been possible without the dedication and commitment of our colleagues across the organization. And I want to sincerely thank them for everything they do. And with that, I will turn the call back over to Tom.

Tom Appio: Thanks, Osama. Earlier, I talked about the breadth of our performance. Let's take a closer look at what is driving the growth across each of our businesses. Miebo and Xiidra continue to serve as the cornerstones of our dry eye portfolio. Miebo revenue grew 42% to $119 million in the quarter, while Xiidra grew 2% to $89 million further strengthening our position in 1 of the largest categories in eye health. What stands out to me is the franchise we have built. Miebo continues to expand its presence in the market. While Xiidra remains an important treatment for eye care professionals and patients. Together, they give us 2 differentiated brands with important roles in a large and growing category. We continue to see strong underlying consumption across our consumer business. U.S. consumption grew 6% in the third quarter, demonstrating continued momentum across our portfolio. LUMIFY, remains 1 of the standout brands in the business Reported revenue grew 35% in the quarter, adding to a remarkable track record of growth. What is particularly impressive is that we are more than 8 years since launch, yet Lumify continues to deliver consistent growth. That kind of durability is rare, and it speaks to the strength of the brand and the demand we continue to see from consumers. And with the next generation of Lumify expected to launch in the first half of 27, we believe there is more opportunity ahead. What stands out to me about our contact lens business is the strong performance of the total portfolio. Led by SiHy Daily and Monthly Lenses. Our daily SiHy portfolio grew 25% on a constant currency basis in the quarter, building on sustained growth across our contact lens offerings. That consistency speaks to the strength and durability of the business. At the same time, we are continuing to invest in the next generation of innovation, such as Project Halo, While we are still early in the development process, we believe this first of its kind bioactive lens material has the potential to further differentiate our portfolio and create a meaningful new growth opportunity over time. When I look at this business, I see a category that is performing well today and 1 that has the potential become even stronger in the years ahead. Earlier, I highlighted the strong growth we are seeing in premium IOLs The slide provides a closer look at what is driving that performance. Our premium offerings are gaining track and we are seeing a clear shift towards these technologies. This is an important part of the opportunity we see in surgical. Not only to grow the business, but to improve the mix and profitability of the portfolio over time. We believe there is significant runway ahead as we drive broader adoption and continue bringing differentiated technology to surgeons and their patients. 1 of the things that has impressed me since stepping into the role is the breadth of the pipeline we have built. Across each of our businesses, we are in encouraged by the opportunities ahead and their potential to support sustained growth over time. Building that pipeline took significant investment a lot of work across the organization. Our job now is to make sure we are advancing opportunities with the greatest potential to make a difference for eye care professionals and patients. While being thoughtful and disciplined about where we invest. We will continue to prioritize innovation because it is fundamental to the long term growth of the company. At the same time, we will be rigorous about how we allocate resources with a focus on the programs we believe can create the greatest value over time. Before we open it up for questions, let me come back to where I started. I am excited to be leading Bausch and Lomb at this point in the company's journey. We are performing well. We have clear opportunities to continue driving margin expansion and create additional value and we have an impressive pipeline that can support growth well into the future. I want to thank the global team for everything they have done, and I look forward to working alongside them to build on what we have accomplished and take the company even further. With that, we are happy to take your questions Operator, please open the line for Q&A.

Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Patrick Wood at UBS. Patrick, your line is live. Please go ahead.

Patrick Wood: Beautiful. Thank you so much for taking the questions, and everything this morning. From my perspective, taking a step back, I mean, the numbers, obviously, you guys crushed it. Margins, growth, pretty much across the piece. Clearly, the strategy has been working well. And I would love to hear more about that. But I guess, the obvious question on my side is, therefore, what was it that made you feel like a change was the right thing to do in terms of, you know, leadership and the board composition Just any color around the thought process around that, given things are clearly going very well. Thanks.

Tom Appio: Yes, Patrick. Hi, good morning. Thank you for the congratulations. I can take that question. I think that the way we need to look at it is, Brenton and the board mutually agreed on this leadership transition. As the company enters its next phase of growth. So I am not prepared to talk about anything that was that was more than that was in the press release and the 8-K filing. What I would say is the company, you saw the performance and the product portfolio, Clearly, 4 strong areas on the contact lens side, the consumer side, the surgical side and the pharma side. I have. Young know, I joined Bausch and Lomb back in 2010, so I have a really strong understanding of this business and the team. So as we move forward, the focus is going to be to drive operational excellence And in my prepared remarks, I talked about some of the things that we can work on to get better on as we move forward. What will be critical as we go forward is our R&D pipeline. I talked about that in my prepared remarks as well. And how we are allocating those resources and getting those very interesting projects through, to conclusion and get the data that we would need to file them. So overall, I am really excited about the future. And as we look forward, there is a lot of things that the team has been doing that we can continue to build on. Operator, next question?

Operator: Thanks a lot. Certainly. Thanks, Patrick. Yeah. Your next question is coming from Young Li from Jefferies. Young, your line is live. Please go ahead.

Young Li: Alright. Great. Thanks for taking the question. I guess maybe just to follow-up on that. First off, welcome back to Belco. Young know, you. Young have been there for a long time since 2010. Young know, definitely had a front road seat to all the changes in recent years. I guess wanted to hear a little bit more about this know, what you are gonna be doing differently. Young know, definitely sounded like there is more focus on profitability. But, you know, also, how will you be splitting time between BHC as well as Velco?

Tom Appio: Yeah. Thanks for the question. What I could say is this is given the fact that if you look at this company, let me go back years ago, was together. Splitting time, I do not think it is going to be an issue. So, of course, we will have to manage that accordingly. What I would say is, as we look at the future, okay, and going forward, you know, vision 2027, as Osama said in his prepared remarks, we are a third of the way through. So it is to drive VISION 2027 to meet or exceed those targets that were presented approximately a year ago. The second is to focus on the customers and the patients we serve. That is critical As we move forward, we will continue to work on that. I mentioned during the last question is on delivering the R&D pipeline. And the pipeline has been built over the last few years investments have been made. How we are going to allocate those resources into each of those projects and making sure that each of them has the resources and clearly can get to the endpoint because in some of what was discussed in VISION 2027, some of that is coming. And then, of course, that will drive future growth. At the end of the decade. I want to focus on continuing to drive the top line. The top line is critical. And then we talked about this already, improving the margins, and the operational efficiencies that need to be had there. As you know, in this space, especially with our portfolio of products, manufacturing, the changing of the regulations, getting, you know, know, continuing to have to invest behind all of those portfolios. So be able to invest behind our facilities and also at the same time driving efficiencies. I think that when we look at SG and A, there is opportunities to drive SG&A savings that will drive more to the bottom line. That will be helpful. So I will be spending some time there with all the teams, both, you know, on the selling and advertising side along with the G&A from the functional side, to see where we can gain further efficiencies to improve the bottom line. Clearly, I have always said, it is profitable growth, is critical. Young have to be able to have a leveraged P and L. Sam and I have talked about this many times. And then the last 2 things is focusing on the capital allocation. What that is, and the balance sheet. And I think that Osama can point to that as well. We have to reduce our debt. And therefore there is decisions to be made of where you apply capital and where you reduce debt. Then lastly, and A. So Still, if we look at the portfolio, there is probably again, this is only 2 weeks in. There could be gaps in the portfolio that we will need to take a look at. There could be things out there that we wanna bring in, but we also have to bring those in from an accretive basis, and that will be the focus as well. Do not know. Sam, you just wanna comment anything on, you know, the balance sheet or what we wanna do?

Osama A. Eldessouky: Yeah. I know. it is. Thank you, Tom. it is it is been a really important part us. And, Young, as you know, we. When we set our targets 3 year out targets, we set 3.5x, leverage for the P and L for the balance sheet. And it is been. Really been focused. And you see the evidence of the work when we announced that on Investor Day last year, we were saying roughly about 5.7x We have seen right now the improvement we are seeing today at 4.1x, which is really remarkable in that period of time, just a year, to be able to drop down to that level. there is more room for us to go. I think our focus still at the 3.5x, and I think we make that 3.5x very achievable as we plan forward. And that is gonna be a number 1 priority. But investing in the business is. Comes in second or after that from a capital allocation as well as Tom mentioned. And either investing organically or inorganically but the key is gonna be really how you can actually drive the right ROI behind those investments. In both ways and make sure that we keep driving the business on the top line growth.

Tom Appio: Okay. Operator, next question.

Operator: Your next question is coming from Laurence Biegelsen from Wells Fargo. Laurence, your line is live. Please go ahead.

Leigh: Hi. Good morning. it is Lei Huang calling in for Larry in Really strong quarter. My question is really on EBITDA and it is 2-part. I mean you beat in Q3 very strong, even excluding the tariff refund. Young have raised the guidance for 2026 on EBITDA. Talk about what were the key drivers of the Q3 beat and the raise And perhaps importantly, you set a target EBITDA margin target of 23%. In 2028, and that is up roughly 600 basis points or so from 25. A year in, you are nearly halfway there. So how do we think about the remaining past to 23%? And maybe there is potential to kinda exceed that target. Thank you.

Osama A. Eldessouky: Alright. Hey. Good morning. So it is a very good question, and it is many parts. So let me try to unpack it here as we go through. And if I miss any of the parts, just tap me on the short end. Let me know. So let me start with just focusing the quarter first. And I wanna just reflect on what we were able to achieve in the quarter because it is it is been remarkable, and it is been a journey. And the team have done a really fantastic work across the board. it is it really all starts from the top line. Right? We set a really ambitious and sort of goal for us, a high bar on the top line. And the commercial team has been doing a really good job delivering, and we saw that with the 8% constant currency growth. But then as you go work your way down the P and L, I gross margin has been just remarkable for us. And I called out the tariff. it is a onetime. It was about 14 million. Young see the impact roughly about a 100-basis-point or so. On the gross margin bet. When you look excluding the tariff, we are saying roughly about 63.6% gross margin. that is up from 61.7% last year. Great improvement Couple of parts here, I will say, on gross margin. The product mix played a really important role for us. The growth that we have seen around the strategy around execution around the growth around Miebo, you have seen the numbers on Miebo with 42% growth in the quarter. Young have seen the IOLs around the premium IOLs with the breeding great growth that we are seeing there with 70%-plus in the quarter. Young are seeing Lumify was hitting at 38% and Daily SiHy hitting at 25%. So all the key elements of the portfolio that drives high margin has been growing really in a nice trajectory, and that is really driving product mix. That being said, the supply and manufacturing team have been doing a really nice job with what we refer to as the execution of division 27, which is what we talked about at investor day where they network optimization work have launched, as well as the work around our sourcing and network optimization, as well as vertical integration. And you are still early days on those. And that the work because we still have 3 years to go as far as the execution of that work to go. But the early signs is really encouraging with the results that you are seeing in the gross margin. Now as you shift from the gross margin and you look at look at the OpEx, In 2025, we talked about resizing our fixed cost structure around the OpEx, especially around G and A. As well as taking, I will call it, the step from a launch phase to a growth mode or in our selling and AMP and the commercial spend around that part of it. And we have seen that really drive roughly about 150 basis point this year on the SG&A side. And that is really again, great progress. Those were the initial steps Tom talked about. there is gonna be that part of our focus, and we are continuing. That we are gonna continue to drive more efficiency out of that as we launch new initiatives to be able to still get to our 200-basis-point improvement for the next couple of years. But that you see that. So part of it is driving all into where we got us to the EBITDA numbers that we saw this quarter, which is really great work by the entire team and focused on execution. In terms of, the long term plan, which the way I would say is we are very pleased with the with the guidance. 20.3% EBITDA margin, that is a really good thing for us, 2026. It probably would be 1 of the things we will. We will look at as we give 2027 guidance. We will we will be able to be. that is probably would be the appropriate time for us to be able to talk more about the long term plan.

Tom Appio: Operator, next question.

Operator: Certainly. Your next question is coming from Joanne Wuensch from Citi. Joanne, your line is live. Please go ahead.

Anthony: Hey. Good morning. This is Anthony on for Joanne. Could you maybe characterize a bit more what you are seeing in the market in contact lenses in the U.S. and outside the U.S? And then maybe talk a little about competition. U.S. was up 9% OUS was a little bit slower at 4%. Just anything more on that would be helpful.

Tom Appio: Yes, Anthony, thank you for the question. I will take that and then maybe Osama can add anything onto it. When I look at the contact lens business, I always thought this was an underappreciated business by when you look at it, it is a strong, durable business. If you look at the growth that the contact lens franchise has had over the previous years, it is durable performer that continues to outgrow the market. I think when you look at the portfolio in contact lens, and I said this back, you know, many years ago, if you look at the base business, the FRP business, that is a nice base. And then building off of it, you have the daily SiHy portfolio. And I think our R And D Colleagues In Rochester did a wonderful job when they designed Ultra 1 Day and Infuse. And if you see that course, you look at the growth that portfolio has been driving. And if you look also at the you have the spherical, you have toric, you got the multifocal, you got the multifocal toric. So there is a lot of runway there to continue to grow as it rolls out. Across the globe. When you look at The US business, some of our competitors have challenges, but we do not see that for us. If you take a look at 9% growth, well above the market, in The U. S, And then from the international side, growing at 4%, but as we look at some of the portfolio, probably more of the legacy portfolio, that has an impact there from an international side. But overall, the contact lens business for us is performing really strong. And as I said, underappreciated in how the durableness of this business and the breadth of the portfolio that we have from a daily to the FRP lenses. I think that the other thing, and maybe Yehia can talk about this as well, is, you know, Project Halo. This is a very interesting project. I think it is gonna be a game changer from a contact lens perspective. And Osama can talk about this as well. And Yahia in terms of being able to run this on existing equipment, which is critical to continuing to drive margin expansion. So with that, let me just turn it over to Sam and Yahiya, maybe they could add to that.

Osama A. Eldessouky: Yeah. Thanks, Tom. And let me let me maybe just focus on the upper side and the lens side because I think Tom covered it really nice with sort of the broader view and big picture in terms of what we are seeing. The 1 thing I maybe take a step back and just remind you, like, we are seeing, for example, a daily SiHy growing at 25% this quarter. And that is coming off double digit growth in the last 2 quarters. And that is based on also a 28% growth last year. So you are seeing the momentum here around daily SiHy is just continuing. And I agree with Tom. it is. We are we are under indexed in that category, and we are. there is a lot of room for us to still continue to grow, and we are seeing that growth. And the team is doing a great job terms of the execution. And expanding the portfolio across the board. what is also important the FRP, which I do not wanna lose sight of it because I think we are seeing the. Not only the daily is growing, but you are seeing also FRP is growing. And we saw that growing roughly about 17% this quarter. Just keep in mind that it is coming off roughly about 10% growth last year as well. So, again, it is not a 1-quarter of momentum. You are seeing that momentum continues very nicely. Before I turn it to Yehia to talk about Halo, the 1 just aspect I will comment on project is the fact that we talked about the importance of the cost around the lenses as well as the capital needs around a build out of any type of new lenses and 1 of the opportunities that we have here with this new project is you do not need the build out capital intensity that is required because it is gonna be on existing lines. And that is a re plus for us, especially from a cash flow perspective. The second part is the starting point of the cost per unit is very attractive. And it puts us in a position that you are not starting with the higher cost and having to work your way down with the yield. You are starting at a lower cost point, which is really gives us a very good update from a margin perspective. On that product.

Yehia Hashad: Yeah. I do not know if you wanna add on anything else. Absolutely. I can give just a quick update on Project Halo, which we. The team have been making great progress on that project as well. Since we reported the results earlier in the year about the first external study the team actually have done several internal insertion studies in order to optimize the lens design. We are also conducting a lot of tear dynamics studies to find. This is a completely innovative new material So to understand exactly how they work in the eye and with the tear homeostasis, So this is work being in progress now. In addition to this, also, we are doing a lot of studies to the packaging solution because at the end of the day, we are targeting the end of day dryness that affects the majority of the contact lenses that can happen with it. So this is where the majority of the work being done now. And we are actually. Do not want to start the next expected study until we are very confident about the design. The tier dynamics, as well as well as the packaging solution. So great work being done, and the progress is on track to deliver it as planned before.

Tom Appio: So Anthony, that is just an overall view of the business. But I believe that this is a really nice growth driver for us going forward. And as I said, durable and really need to appreciate what we have. Operator, next question.

Operator: Certainly. Your next question is coming from Robbie Marcus from JPMorgan. Robbie, your line is live. Please go ahead.

Henry: Hey. This is Henry on for Robbie. Thank you for taking the questions, and Congratulations on the strong quarter. Maybe looking a bit at Surgical, we did see some softness there in the quarter relative to expectations. Looking like maybe mostly on the capital equipment side. Can you talk a bit about what you are seeing in the market there during the quarter? And then I just have a quick follow-up. Thank you.

Tom Appio: Yes. Henry, thanks for the question. Overall, when we look at the Surgical business, as we talked about in the prepared remarks and also Osama mentioned it as well, driving the premium IOL business. We think we have a really nice product here, you know, in the premium sector, that is very competitive overall in the quarter. You looked at just our consumable growth, which again, driving procedures through the providers. What I would say is on the equipment, you know, really, the when you look at the equipment, it is a strategy there of placing equipment versus recording revenue. So I think that is what has changed the dynamic there. As we really are focusing on the premium IOL business. And, of course, the consumables. Do not know. Sam, do you want to add anything more to that?

Osama A. Eldessouky: Not much, Tom. I think you said it well. I think when you think about for the last couple of quarters, we have been calling out the placements. Of the equipment, and it is it is really part of our own strategy in terms of how we position our equipment in the marketplace. And we are seeing the benefit of that and you. Already, and you start to see that we are a number of placements is high, But that is also. The important of that is it is also the expansion of that placement it also expands our installed base which drives more recurring revenue for us around the consumables. And you saw that really play in the quarter with 5% growth, and consumables is the largest part of our surgical business. And it is the highest margin part of our surgical business. So it is really driving down. Young see I know we did not file the 10-Q yet, but when you see the 10-Q later in the day when it gets filed, you will see, for example, the gross margin around surgical was up about 800 basis points Mhmm. In the quarter. So you are seeing that play out from a margin perspective, which is really the strategy, that we outlined.

Tom Appio: Yeah. I think, Henry, also, to add to that, you know, on the, you know, the premium IOLs, you look at the premium momentum that we have had in The US, now extending into Europe, and with Envista Envy launches. So the strategy delivering the top line growth and margin expansion there. Is the focus. And then in the quarter, it was solid growth in consumables, which is our largest business. So as we move forward, and as I spend some time, with the surgical team, it is only been 2 weeks since I have been in the role. I have spent some time with the surgical team. Have a really good understanding of the surgical business globally. And, you know, hopefully, really do a deep dive into what else we can do to further grow. Operator, next question.

Operator: Certainly. Your next question is coming from Pito Chickering from Deutsche Bank. Pito, your line is live. Please go ahead.

Kieran Ryan: Hi there. Yeah. You have got Kieran Ryan on for Pito. Thanks for taking our question. I wanted to ask about the pipeline. I guess, Tom, if there is anything you would wanna talk about there that you wanna highlight or are most excited about But more specifically, wanted to ask if you could provide any updates on, the dry eye, AMD program. I think you have some interesting stuff going on there with an earlier intervention oral. Thanks.

Tom Appio: Yeah, Kieran, thank you for the question. Clearly, innovation is critical. Investing behind innovation there is some very interesting projects that are in our R&D pipeline. I am going to spend some time this week with the R&D team, you know, going through each of these projects. But clearly, the breadth of a healthcare company is to have innovation and provide innovation in the relentless drive to create better health outcomes. And so when I look at what is in the pipeline, there is various things in each of the areas where we compete that I think are very interesting. And I think the team is working on some projects that, you know, can, of course, are part of VISION 27, but also can help us in the end of the decade and the beginning of the next decade. Of course, always need to have the data, and you need. you know, of course, you have to prove it. But, you know, that is, you know, that is the business that we are in. I will. I can. Hand it over to Yehia. He can talk more specifically, about some of the programs.

Yehia Hashad: Yeah. So first of all, you for the question on the pipeline. Let me start by the last part that you asked about specifically, and then I will give you also a quick update on least the critical projects that we have. So obviously, you are speaking about the tonabersat. That we issued a press release about meeting with the FDA in the dry AMD or the pre geographic atrophy. Atrophy or pre wet AMD stage. This is actually an orally administered once daily small molecule that inhibits pathological opening of the connexin 43 These are hemichannels existing and once it open pathologically, it release a lot of inflammatory mediators. Like primarily created by inflammasome. And what does this product does, it inhibits this type of inflammation. So it works really upstream. And this is a high unmet medical need area because there is no available treatment now for these earlier stages or pre atrophic stages of AMD. And being an orally administered is a great advantage. In fact, when we met with the FDA, they acknowledged a lot this approach. And they encourage us that we actually try. I think the whole discussion with the FDA went into the clinical program and how we progress on the clinical program. We are trying, several doses in the first study, and some of these doses were not tested before. So that is why they ask us for a PK safety study to start with, which we are planning to start at the beginning of next year. The meeting actually was actually very encouraging from the FDA side towards whether the unmet medical need or even the mechanism of action of this product to work with. The second thing I would like is just to give you a very quick. I think Halo, I already gave an update on it. Some of the critical projects we have, project Ilios is still on track. Under the FDA review currently. and we are still planning to get approval by the end of the year if there is no other issues issued by the FDA. Second, I would like also to mention that we are primarily, from a surgical perspective, we have a pre submission meeting for the EDOF. We already announced the results of our EDOF study earlier. And we have a meeting that is planned around mid December for presubmission on that side. On the vision care, we mentioned halo myopia. We are planning to start the myopia study in the U.S. in Q4. And then on the other pharma studies, you have mentioned also dry eye. We are actually in the phase of planning our Phase III studies with the dual products. That we also announced the results. And we are expecting very soon the results of the ocular surface pain post PRK or post photorefractive keratectomy. Refractive surgery. So these are the quick highlights of the pipeline. But, again, happy to receive any other questions.

Tom Appio: Okay. Thank you. Operator, next question.

Operator: Your next question is coming from Daniel Clark from Leerink. Daniel, your line is live. Please go ahead.

Daniel Clark: Great. Thank you, and congrats on the quarter. Wanted to ask about Mybo, very strong performance there. How should we think about that strength, whether from a volume side or if there are any changes in gross to net both in the quarter itself and in the fourth quarter and into next year? Thank you.

Osama A. Eldessouky: Yes. Yes. So when you think about Miebo, performance is really all coming in from the volume. You can see the TRxs and we saw the really impressive TRx growth We are averaging roughly about 37 thousand TRx. So it is really impressive in terms of the work and the execution the pharma team was able to do there. From a gross to net perspective, really, nothing has changed for 2026. We all started about, the gross-to-net structure about the mid seventies. For Miebo, and that continues to be the same part of our thinking as we think about Q4 as well and the full year for 2026.

Tom Appio: Okay. Next question.

Operator: Your next question is coming from Douglas Miehm from RBC Capital. Douglas, your line is live. Please go ahead.

Douglas Miehm: Yeah. Good morning. I think most questions have already been answered. But, Tom, you are in a very unique position here as CEO of both companies and with a deep knowledge of both those companies given your history. Is it the best thing for this company to remain public, or should Bausch and Lomb become part of the parent again at some point in the future?

Tom Appio: Hi, Douglas. Thanks for joining the call. I appreciate it. What I would say is this is, you know, my focus right now as interim CEO is to drive performance, and I laid that out before in previous question of what my focus is going to be. When we look at, you know, vision 27, you know, what needs to be done there, it is only. Young know, we are 1 year in. to a 3-year plan. And I am going to stay real focused on driving performance there, on the top line, through the gross margin line, through the expense line, invest in innovation, get those R&D projects through the pipeline, And clearly, we can do some M and A that can really help us to fill gaps and help patients. I think that overall, if when we execute on that, it is good for B and L shareholders. And that is all I can say as I in this job now for 2 weeks. And I really think that we have a great team around the world that can execute, on Vision 27. Excellent. Thank you. Okay, operator.

Operator: Thank you. We are now out of time, and this concludes our question and answer session, and our conference has now concluded. Thank you for attending today's presentation. You may now disconnect.