Bausch + Lomb Corporation (BLCO) Earnings

Management highlights

- **Overall Strategic Execution & Financial Trajectory**: The company has delivered four consecutive quarters of progress against its 3-year growth plan outlined at November 2025 Investor Day. Q2 2026 total company revenue hit $1.394 billion, with 8% constant currency growth accelerating from 6% in Q1 2026. Adjusted EBITDA grew 28% year-over-year to $246 million, with adjusted EBITDA margin expanding 260 bps year-over-year to 17.6% (up from 16.1% in Q1). Adjusted operating cash flow reached $161 million, more than tripling from $45 million in Q1; year-to-date cash conversion is ~46% in line with expectations. Net leverage has fallen by a full turn from November 2025 Investor Day to 4.7x as of Q2 end. SG&A as a percentage of revenue continues to decline, reflecting permanent structural cost changes from 2025. R&D investment grew 19% year-over-year to $114 million in Q2, so margin expansion is not coming at the cost of long-term innovation. - **Surgical Segment Strategic Transformation**: The segment's accelerated growth confirms the success of the 3-pillar premium-led strategy. 1) Premium IOL portfolio expansion: The current portfolio is anchored by Envista, Aspire, Envy, and the LUX family, with complementary LUX Boost and LUX Lift scheduled to launch in 2028 to sustain mix shift. 2) Equipment innovation: Products like Helios strengthen long-term customer relationships and drive downstream growth for consumables and implantables. 3) Supply chain optimization: Bringing more premium production in-house and streamlining manufacturing networks reduces costs and complexity, structurally improving margins. The U.S. field force rebuild completed prior to 2026 is now delivering expected results, with the segment expected to remain a key core growth driver. - **Pharmaceuticals & Consumer Highlights**: The Mibo and Zydra dry eye portfolio delivered 27% combined first half 2026 revenue growth, with Mibo on track to become the leading branded dry eye treatment, capturing share across the treatment paradigm alongside established Zydra. In consumer eye health, recent launch Blink TripleCare Preservative Free is already a category expander, with 66% of volume coming from new franchise users, helping the full Blink franchise grow 12% in Q2. Preservation Erids 3 continues to gain shelf and digital distribution, blunting competitive pressure from private label alternatives. All consumer lines show strong underlying brand health, with consumption trends strengthening exiting Q2 and continuing into July 2026. - **Pipeline Progress**: The company filed its FDA submission for the Elios implant-free MIGS glaucoma laser in Q2 2026. Phase 2 readouts for a dual-action dry eye candidate and an ocular surface pain candidate are expected in H2 2026. Invista Beyond premium IOL is on track for FDA submission by end of 2026 and launch in 2027. The diversified pipeline is organized by category (dry eye, surgical, consumer health, contact lenses, retinal disease, AI/computational biology) and structured to reduce reliance on any single asset, aligned to structural long-term demand shifts (aging global population, rising childhood myopia, increasing screen time, growing dry eye/retinal disease prevalence). The AI-powered Orphea digital health platform for eye care providers has already received strong early market feedback.

Guidance

- Full-year 2026 revenue guidance is raised by $20 million to a range of $5.440 billion to $5.540 billion, representing 5.8% to 7.7% constant currency growth, 50 bps above the prior guidance range. The upward revision reflects stronger underlying business performance, partially offset by a $5 million reduction in expected foreign exchange tailwinds. - Full-year 2026 adjusted EBITDA guidance is raised by $15 million to a range of $1.025 billion to $1.075 billion. At the midpoint, this represents a 19.1% adjusted EBITDA margin and ~18% year-over-year adjusted EBITDA growth, with adjusted EBITDA expected to grow at nearly three times the rate of revenue, reflecting strong operating leverage. - Full-year 2026 estimated foreign exchange revenue tailwind is revised to $45 million, down from $50 million previously. Adjusted gross margin is still expected to be ~62%, and R&D investment is projected to remain between 7.5% and 8% of revenue. Interest expense, adjusted tax rate, and CapEx guidance remain unchanged at ~$365 million, ~19%, and ~$285 million, respectively. - Management expects the same 7% growth rate achieved in H1 2026 to continue in H2 2026, with EBITDA margin expected to accelerate to ~21% in H2 to hit the full-year midpoint of 19.1% margin. Phasing of full-year results is on track to be in line with historical norms, with H1 expected to deliver 25% to 26% of full-year guidance, slightly ahead of typical patterns. - Management remains confident in hitting or exceeding the original 3-year plan targets set at November 2025 Investor Day, and is currently tracking ahead of the 2028 target of 50%+ EBITDA to cash flow conversion.

Segment performance

1. **VisionCare**: Total Q2 2026 revenue = $784 million, up 4% year-over-year, accounting for 56.2% of total company revenue. The consumer sub-segment grew 3%: consumer dry eye portfolio revenue was $123 million (up 5%), driven by Blink (up 12%) and Arcelac (up 3%); Lumify revenue was $63 million (up 2%); eye vitamin lines (iVitamins, PreservVision, Ocuvite) revenue was $104 million (up 1%). Contact lens revenue grew 5%: daily Sci-High grew 16%, BioTrue One Day grew 13%, Ultra grew 9%. Geographically, U.S. contact lens grew 5%, international grew 6% (Europe +11%, Latin America +7%, Canada +11%, Asia-Pacific +3%). 2. **Surgical**: Total Q2 2026 revenue = $256 million, up 16% year-over-year (up 17% versus pre-recall Q2 2024 baseline), accounting for 18.4% of total company revenue. Implantables grew 64% year-over-year, with premium IOLs as the top contributor growing 175% year-over-year; premium IOLs now represent 13% of total surgical revenue, up from 6% in 2023. Consumables grew 4% year-over-year, and equipment revenue grew 2% year-over-year. 3. **Pharmaceuticals**: Total Q2 2026 revenue = $354 million, up 14% year-over-year, accounting for 25.4% of total company revenue. U.S. pharma grew 17%, driven by dry eye franchise growth of 23%: Mibo revenue was $91 million (up 44% year-over-year, with average weekly transactions up 29%), Zydra revenue was $87 million (up 6% year-over-year). International pharma grew 8% year-over-year.

Risks & headwinds

- U.S. consumer discretionary demand can fluctuate with gasoline prices, which leads to occasional increased promotion sensitivity and trade-down to smaller pack sizes, though management notes the business is resilient to these short-term pressures. - Ongoing labor strikes in Spain are expected to continue through the end of 2026, creating modest pressure on European surgical segment performance. - Pharmaceutical and medical device development carries inherent risk, as not all pipeline candidates are expected to reach commercial launch, even after early positive results. - Pricing and competitive pressure from private label alternatives in consumer eye vitamins creates headwinds for the PreservVision line, though expanding distribution of the new PreservVision Erids 3 is expected to offset most of this pressure. - The premium IOL market has grown increasingly competitive with new competitor product launches, though management notes its portfolio is well-positioned to maintain share.

Analyst Q&A

• Q: How has progress against the 3-year plan gone since November 2025 Investor Day, and are any areas stronger or weaker than expected? /

  A: Management reports that every quarter since Investor Day has delivered on original commitments, with Q2 2026 showing 8% constant currency revenue growth, 28% EBITDA growth, double cash flow year-over-year, and a full turn of leverage reduction. All improvements from the plan are structural and permanent, with margin expansion achieved while continuing to increase R&D investment for long-term growth. Management confirms the business is stronger than expected, and is on track to meet or exceed all original 3-year targets.

• Q: Now that the surgical recall is over a year in the past, what is the outlook for premium IOL growth and how high can the premium mix get in the next 1-2 years? /

  A: Q2 2026 results confirm full recovery from the recall; surgical revenue is up 17% and implantable revenue up 37% versus pre-recall Q2 2024, proving recovery is more than just easy comparisons. The rebuilt U.S. field force is now fully operational, winning back customers one by one after surgeons switched to competitors during the recall, and surgeons no longer reference the recall, focusing instead on strong clinical outcomes from Bausch & Lomb's premium portfolio. Momentum is sustainable, with a clear cadence of new product launches through 2028 to keep expanding premium mix.

• Q: How do new competitor product launches Pure C (premium IOL) and Trip Tier (dry eye) impact Bausch & Lomb's competitive position? /

  A: Pure C is a solid premium IOL that draws most of its volume from Alcon's existing customer base, and Bausch & Lomb's Envy trifocal IOL is best-in-class, with the company well-positioned for future competition with the upcoming Invista Beyond launch. In dry eye, Trip Tier targets the small segment of increased tear production, while the majority of the dry eye market focuses on inflammation and tear evaporation, where Bausch & Lomb's Mibo and Zydra are the undisputed leaders with the most momentum, largest share of voice, and strongest product profiles.

• Q: What gives management confidence in continued strong cash flow in H2 2026, and how is it tracking against long-term targets? /

  A: The business has inherent seasonality, with H2 always stronger than H1, creating natural momentum for continued cash generation. Management has made permanent working capital improvements, cutting 12 days of working capital year-over-year, with these gains sustained rather than being one-time. As of Q2 2026, the company is tracking ahead of the 2028 target of 50%+ EBITDA to cash flow conversion, which gives high confidence for both 2026 and long-term results.

• Q: How is the Elios MIGS glaucoma laser positioned in the already competitive MIGS market? /

  A: Elios is highly differentiated as an implant-free laser procedure that can be performed during existing cataract surgery, adding just five minutes of operating time for the 20% of cataract patients who also have glaucoma, making it efficient for clinics and convenient for patients. It is easy for cataract surgeons to adopt even if they have never performed MIGS before, preserves healthy trabecular meshwork for potential future procedures, and clinical trials show over 80% of patients become drop-free after treatment, addressing a major compliance issue in glaucoma management. It also aligns with the growing industry focus on interventional glaucoma during cataract surgery, complementing Bausch & Lomb's existing dry eye portfolio.