Q2 2021 Bausch Health Companies Inc Earnings Call
Our chairman and Chief Executive Officer, Mr. Joe Papa and Chief Financial Officer, Mr. Stan <unk>.
<unk> pharma CEO, Tom Feo, and CEO of filter Scott Hirsch and addition to this live webcast a copy of today's slide presentation and a replay of this conference call will be available on our website under the Investor Relations section before we begin we'd like to remind you that our presentation. Today contains forward looking information, we would ask and you take a moment so.
On the forward looking statement legend at the beginning of our presentation as it contains important information.
This presentation contains non-GAAP financial measures from more information about these measures. Please refer to slide 2 of the presentation and non-GAAP reconciliations can be found in the appendix to the presentation posted on our website finally financial guidance and this presentation is effective as of today only it is our policy to generally not update guidance until the following quarter and not to us.
Date or affirm guidance other than through broadly disseminated public disclosure with that is my pleasure to turn the call over to Joe.
Thank you art and thank you everyone for joining us today I will start by briefly covering the second quarter highlights before turning the call over spam and <unk>, our CFO to review the financial results in detail and discuss our 2021 guidance will then review the segment results and recovery finally, we'll provide an upper.
On the spinoff of Bausch and Lomb before opening the line for questions, but before I address these topics I would like to comment on this morning's announcement that we have decided to pursue and IPO of our sulfur medical business over the last few months, we completed a thorough review of the strategic alternatives for Solta and <unk>.
<unk> and audited the financial performance growth drivers and future revenue opportunities. We believe a solta IPO will help us accomplished 2 important objectives.
First we intend to use the proceeds of the proposed IPO to pay down debt, which will help effectuate, the previously announced spinoff of Bausch and lomb.
Second we believe and IPO of silica medical will help unlock the value of a high growth business that would compare very favorably to peer medical aesthetic companies in terms of valuations while maintaining future.
Optionality simply stated we believe that the actions we've announced will result, and the creation of 3 attractive focused company Bausch and Lomb, a pure play integrated eye Health company, Bausch and pharma, a global diversified pharmaceuticals business and Solta medical a leading global provider and the medical aesthetics.
Market moving now to slide 4 and while there are some pockets of variability due to new COVID-19 variance our overall recovery from the impact of the pandemic remains in progress over the second quarter.
And Q2.2021 total company revenue grew by 26% on a reported basis and by 23% organically driven by strong year over year recovery across the business units. This strong growth was offset by the impact of a recall of and international consumer product due to a quality issue at a third party.
Fire that I will discuss in more detail when we cover the global consumer business importantly, our business generated strong cash flows from operations of $395 million on a GAAP basis, and an adjusted cash from operations of $425 million and the second quarter, we continued to see strong performance, including <unk>.
Share gains and recovery from leading brands and in fact, <unk> achieved a record sales of $29 million and the second quarter and we expect it now to be a $100 million brand on an annualized basis.
We also delivered near term R&D catalyst during the quarter, including we completed the enrollment of the phase III trial for <unk> 3 we obtained FDA approval for and launched clear risk and we are submitting an NDA for XI peer with a <unk> date of October 32021.
Debt repayment remains a priority as we continue to focus on accelerating strategic alternatives to unlock shareholder value, we repaid $300 million of debt and the second quarter of 2021 using cash generated from operations year to date as of August 3rd we have reduced debt by $1.2.5 billion.
And which includes a $600 million and connection with the Moon divestiture, which we announced the closing of yesterday.
And today, we announced that we plan to redeem and additional $350 million of bonds, which when completed will bring our aggregate debt reduction for the year to $1.6 billion.
Finally, I want to mention that we have settled another legacy legal matter that relates back to 8.
2012 patent settlement agreement on <unk> as it will be disclosed in our 10-Q filing we have now reached agreement in principle to resolve the claims of the class and the non class plaintiffs to.
To summarize our second quarter results demonstrate that recovery remains in progress our business is generating strong cash flow from operations, which has enabled us to make great progress paying down our debt and we are taking action to accelerate strategic alternatives process and unlock shareholder value with that I'll turn it over to Sam to cover the financial result.
And more detail thank.
Thank you Joe we're pleased to report second quarter revenue of $2.1 billion and up 26% on reported basis, 23% organically moving into our second quarter 2021 and year to day performance, we're seeing a nice recovery and all of our businesses and more importantly, very nice sequential growth in 2020.1.
As you recall last year, COVID-19, and had a negative impact on all our business, where second quarter of 2020 being most impacted therefore, it's important to point out that this current quarter benefits from this comparison.
The markets stabilize and our teams continue to execute on our strategy, we're seeing a steady progress towards a recovery I want to spend a minute and addressing a recovery sooner and to last year, the recovery values by type of business and by country.
Despite the emergence of the Doctor brands and all.
COVID-19, and the U S and general life on E Commerce, it appears to be trending back towards normal.
Outside the U S. Certain countries continues to face COVID-19 challenges and other restrictions that are impacting the pace of market recovery.
And in order to give you a sense of all recovery I thought it might be helpful. During my comments today to provide you with some color on how our Q2.2020 1 performance compared to Q2, 2019, which we believe to be a good reference for our pre pandemic levels.
If you turn to slide 5 starting with the P&L segment second quarter revenue of $934 million was up 33% organically all our businesses within WNS segment contributed to the growth this quarter now turning to our global vision care business second quarter revenue of $260 million was up 50% organically.
It was up 103% and international update your percentage there.
And the U S demonstrates the overall steady recovery and the U S markets with growth coming from buy through 1 day and ultra brand coupled with the success of our recently launched GLA, sorry, higher lines, and fuse, which was a key contributor and the quarter.
International vision care organic growth and 38% reflects the recovery of the markets that we participate and mainly in Asia and parts of Europe by true 1 day ultra and the soft lines family were all key contributors to the growth and the second quarter for international vision care.
And while were.
With the growth of our international vision care business. This quarter. It's important to note that we're not all the way back to pre COVID-19 levels with some countries continuing to face COVID-19 challenges and are imposing new levels of restrictions and we do expect to gradually return to pre pandemic growth rates.
Moving on to our global surgical business second quarter revenue of 185, and then it was up 97% organically with the U S, 92% and international up a 100%.
The growth and our surgical business reflects a steady a market recovery.
The U S and and international circuit, and surgical growth were driven by strength in debt and tiered disposables with recovery in all regions led by Asia and Europe.
To provide you with a point of reference regarding a recovery there.
Current quarter performance was up 1% organically as compared to second quarter of 2019 performance.
Turning to our global consumer and second quarter revenue of $341 million was up 9% organically with the U S consumer business up 20% and international consumer business down 2% the growth and the U S. Consumer business was driven by growth and our eye vitamins occupies and present vision, coupled with the strong <unk> performance.
And I'm very pleased with the strong commercial execution and the U S consumer business for the current quarter and year to date. The U S consumer business demonstrated solid growth against a strong first half of 2020, which was favorably impacted by pantry loading.
International consumer was down 2% organically, mainly driven by the product recall and Europe, excluding the impact of the product recall the international consumer business growth was in line with the U S consumer business growth or.
Overall, the global consumer and business continued to perform well gaining market share with a healthy growth trajectory, excluding the impact of the product recall. The current core performance was roughly 6% organically as compared to second quarter 2019 performance.
Finally for P&L Davita Rx business second quarter revenue of 192 million and was up 27% organically versus second quarter of 2020. The current quarter benefited from a comparison to a soft quarter last year due to <unk> being postponed due to COVID-19, and the growth and the second quarter of 2021 was driven by higher volumes and our key per warrant.
Rand per Lanza advanced, Florida, Max SM and why is also.
We have been making steady progress and expanding access and med D coverage provides ulta and lower Max SM. Although this increases the level of rebates and the improved access will position book by Solta and lower Max SM to continue impressive <unk> growth trajectories.
And the current correlates also saw 31% Trs growth versus second quarter of 2020.
Finally, <unk> continues to be a drag on our U S. Auto Rx portfolio continued erosion from low of lower Max gel was a big factor versus the prior year quarter and versus Q2 of 2019, which was down 13%.
Now turning to Salix.
Second quarter revenue of $560 million was up 28% from Q2.2020 performance was mainly driven by the <unk> that was up 28% relative.
<unk> was up 23% and true Alliance was up 65% net 28% increase and as I touched on was all due to volume with a quarter of the volume increase as a result of increased and consumption and then the remainder of the increase was due to the non recurrence of the Q2.2020 at wholesale and retail and inventory dream that we experienced last year due to COVID-19.
Yes.
As of the end of Q2.2021, our inventory levels were in line with all our expectation and historical trends.
The fact that and see Rx trends are starting and moving the right direction as we discussed in prior quarters. COVID-19 has negatively impacted our access and the long term care setting, while we're pleased with the recovery trend and sequential growth for <unk> and prescriptions overall prescriptions within the long term care channel have not fully recovered to pre COVID-19 levels.
This lag we expect that long term care business will rebound.
The 6.5% increase and true alliance was mainly driven by volume if you recall about a year ago, we secured several meaningful managed care wins for true lent, which helped us drive Rx and volume growth.
Overall, we feel good about the growth trajectory and the recovery trends to pre COVID-19 levels within our Salix business.
To provide you with a point of reference the current core performance was up 1% as compared to second quarter of 2019.
Despite the impact of a priest on users Louise excluding day low impact the BSL ex business grew organically, 9% and the current quarter as compared to Q2 of 2019.
Now turning to the international Rx segment.
Core revenue of $313 million was up 17% organically driven by higher volumes of <unk> 19 per cent, partially offset by lower net realized pricing.
Europe, and <unk>, Paul and led the growth for the International Rx segment.
Moving on to Ortho Derm segment second quarter revenue of 137 million was up 14% organically the global Solta business delivered another strong quarter with growth of 64% organically per module <unk> continues to demonstrate and impressive growth trend, mainly in China and the U S.
Medical Derm business was down 15% organically, mainly driven by declining LOE assets and lower net realized pricing.
Finally, our diversified segment second quarter revenue of $200 million down 7% organically, our neuro business was down 4%. The decline was due to low assets, partially offset by growth and advent and net planted.
Our generics business was down 48% organically with the biggest factor being the natural erosion of volumes and net pricing as additional competitors enter the market of our generic products. Finally, dentistry posted a strong 225% growth organically driven by restaurant as a true bounce from prior year COVID-19 impacts.
Turning now to the core P&L on slide 6 we already covered revenues. So I'll start with the gross profit gross profit margin was favorable by 60 basis points versus Q2.2020, all of our businesses contributed to the improvement in gross margin, which is coming from favorable manufacturing variance as a result of higher sales volume with a favorable year over year comparison.
We continue to identify and implement operating efficiencies within all of our global supply chain, which enable us to absorb COVID-19 factors and other mix impacts no debt and our guidance for the full year 2021 gross margin is expected to be roughly 71%.
Within operating expenses on an adjusted basis SG&A costs were unfavorable by $118 million versus Q2.2020. This represents our efforts to redeploy our sales promotional resources as the market recovers to support our growth trajectory in 2021 and beyond if you recall second quarter of 2020 and performance was negatively impacted.
And by Covid, 19 restrictions, which requires to dramatically reduce our opex spend last year that said, we are reducing our expectation for SG&A for the full year 2021 from roughly $2.5 billion to roughly $2.4.5 billion to reflect our expectation of the full year spend trend.
R&D increased by 6% as compared to Q2, 2020 as we gradually continue to return to a more normalized run rate and supporting our future pipeline and key projects. We do expect that spend trajectory will increase and the second half of 2020.1.
That said, we're updating our expectation for R&D for the full year from roughly $525 million to roughly $500 million.
Adjusted EBITDA of $826 million for the quarter up 28% on a constant currency basis from Q2.2020 keep in mind that the current quarter. Adjusted EBITDA was negatively impacted by the product recall and our consumer business. Our adjusted EBITDA margin. The current quarter is 39% ex.
Excluding the impact of the recall, our adjusted EBITDA margin would have been in line with our normal run rate of 40% looking forward to the full year, we do expect our adjusted EBITDA margin to be approximately 40%.
Turning to slide 7 during the quarter, we generated $395 million of cash from operations and on a GAAP basis adjusted for the sum of legacy legal liabilities and Moon, Divesture and separation related costs. The cash generated from operations was $425 million.
We are very pleased with the strong cash generation and the quarter and the year to date and therefore, we're updating our guidance for adjusted cash generation for the full year from roughly $1.5 billion to roughly $1.6 billion.
Turning to slide 8 we'll continue to make very nice progress and our debt paydown during the second quarter, we repaid $300 million of debt with cash from operations, bringing our year to date debt repayment and 2.500 million on.
Our focus and commitment to reducing our debt combined with our strong recovery from Q2 of last year has drove our net leverage ratio to decline and a whole half a turn from 7 times last quarter to 6.5 times and Q2.
And we're very proud of this accomplishment continuing our progress on debt repayment. After the quarter close we repaid $150 million of debt with cash from operations and effective today, we will have repaid an additional 600 million and connection with that moving divesture, bringing our year to date towards debt repayment as of today too.
125 billion. Furthermore, we today announced the planned redemption of $350 million of bonds on September <unk> 2021, using cash on hand, and cash from operations, bringing year to date aggregate debt reduction to 1.6 billion.
Something to keep in mind, while we're very pleased with our progress on all our debt pay down so far looking forward, we don't expect to see such a rapid decline and our leverage ratio and the second half of 2021. If you recall Q2.2020, you had an exceptionally low EBITDA due to the negative impact from COVID-19, and we began to recover and the second half of 2020 was sold.
Reducing our op expense.
Such the strong EBITDA from Q3, and Q4.2020, coupled with the anticipated legal settlement will impact our second half 2020, 1 leverage ratios and debt paydown.
For the remainder of 2021, we expect our net leverage to remain flat or slightly increased versus our $6.5 times leverage we have today.
On slide 9 we continued to make a nice progress with our debt maturities.
And as of today, we don't have any debt maturities or mandatory amortization payments until 2025.
Now turning to our guidance on slides 11 and 12.
Today, we revised our guidance for revenue per full year 2021 by 200 million to new guidance in the range of $8.4 billion to $8.6 billion.
This change is the result of 3 factors first which reflect a loss of $120 million of Amun revenue. Following the July 26th closing.
Second it reflects unfavorable currency movements relative to our may guidance of $30 million.
And it reflects the impact of the product recall of roughly $50 million.
We're also updating our adjusted EBITDA guidance to reflect the EBITDA contribution from <unk>, and a $40 million and unfavorable currency movement of $10 million.
Our revised guidance for adjusted EBITDA is in the range of 335 billion to $3.5 billion EBIT after absorbing the roughly $50 million impact of the product recall. In addition, we also updated number of our key guidance assumptions on slide 11, now back to you Joe.
Thank you Sam let's begin with <unk> on Slide 14 Global vision care saw strong organic revenue growth both in the U S and internationally.
Organic revenue growth was driven by rebound and the Asia Pacific region, and the strong performance of <unk> daily lenses, and Japan, which saw revenue growth of 114% versus the second quarter of 2020.
Global consumer organic revenue growth of 9% was driven by occupied present vision and Lula and <unk>.
As I previously mentioned, we initiated a recall of the multi purpose solution product based on a quality issue and a third party supplier that provide sterilization services for our lens care solution bottles and caps for our Milan, Italy facility based on our internal analysis. It was determined that this.
Issue did not.
<unk> safety and performance of the product however out of abundance of caution we conducted a recall down to the consumer level on a limited number of affected lots and.
Importantly, this issue has been addressed and them on facility has now returned to full production capacity approximately $30 million of the expected $50 million total impact from recall is reflected in our second quarter results.
Finally, and global Ophthalmology prescription business <unk> grew by 31% compared to the second quarter of 2020, and we've received statistically significant topline results from the first phase III trial for Novo 3.
The charts on slide 15 show the recovery trends in key areas across this segment, all of which point to a recovery and progress for the BNS business.
Turning now to slide 16 for an update on sales organic revenue demonstrates the recovery and progress up 28% compared to the second quarter of 2020, <unk> revenue grew by 28% and the quarter and overall, new Rx market share grew to an all time high of 87, 1% and the second quarter of 2021.
<unk> grew by 27, 8% and the second quarter versus last year compared to a market growth of approximately 5% and Trs markets grew.
<unk> grew 2.7% and the second quarter compared to 5.9% last year finally, relistor and <unk> grew by 12, 5% and the second quarter versus last year compared to a market growth of about 1 point for the chart on slide 17 demonstrates the positive sales and Trs trends, we are seeing for our key promoted product, which are either and recover.
And from the impact from the Pam <unk>, such as and the cases by fax and for continuing to perform well on the case of Trulia and Relistor.
Moving to slide 18, the international Rx segment grew organically by 17% compared to the prior year quarter driven by ongoing business recovery. This segment has a broad and diverse portfolio of RF product and we've shown on the strong track record of quarterly organic growth for this segment going back to the first quarter of 2019 and the.
On the top left I'd like to thank a moment now to talk about our sulfur medical business and the proposed IPO that we announced this morning. The key terms are outlined on slide 20, we are pursuing and IPO of sulfur medical a leading global provider and the medical aesthetics market post IPO, we expect the company would have a tax rate and the <unk>.
<unk> will be domiciled in Canada, and we intend to file the list <unk> on the NASDAQ.
Total medical had $253 million of revenue and 2020, a revenue CAGR of 32% from 2017 to 2020, and adjusted EBITDA margin of 53% and a gross margin of 75% with me today is Scott Hirsch, who lead to Solta business as CEO effective September 1.2021.
Scott joined Bausch Health and 2016, and currently serves as the president of Ortho Dermatologic and our pharma and our Chief Strategy Officer and addition, Paul Heritage will service the chairman of the Salt and medical post IPO I'll turn it over to Scott now to give us some additional background on why we think this business is poised for continued growth.
Thank you Joe and good morning, everyone.
First let me start by saying how incredibly excited I am about this opportunity with the soap and medical business and.
And let me express our collective appreciation to the <unk> team, especially Tom Hart and the management, but really the entire sales the team, which has made and continues to make solta is such an exciting growth business.
Global Solta generated 48% organic revenue growth and 95% adjusted EBITDA growth during the first half of 2021 versus the first half of 2020 anchored by <unk> franchise organic growth of 36% as Joe mentioned Solta has some of the strongest operating margins within the bausch.
Health branded businesses.
Moving to slide 21 by way of background Solta was founded and 1995 launched its first commercial product in 2002 and was acquired by Bausch Health and 2014.
It has a track record of pioneering technologies and the non surgical skin tightening and skin resurfacing categories, along with body contouring.
<unk> Medical's energy based medical devices are sold and dermatologists plastic surgeons and physicians and medical spa practitioners around the world.
So all of those key products include <unk> clear and brilliant fraxel and laser and slide 27, and the appendix contains more detail about each product.
Over the past several years Bausch health investing in R&D for Solta, we launched new products, including <unk> and clear and brilliant touch and expanded the businesses geographic footprint.
Furthermore, the business as a cash pay business has effectively no reimbursement risk.
Moving on to slide 22.
The growth drivers of the business include exposure to the strengthening underlying market dynamics and the aesthetic industry, along with geographic expansion and product portfolio advancements. The business is today, primarily centered in Asia, and the United States and and the early stages of a broader European expansion with Latin America.
As a next potential market to systematically enter.
Here, we provide the historical financials for Solta, where you can see from the chart on the left that Solta has demonstrated consistent double digit revenue growth for the past 3 years with a revenue CAGR of 32% from 2017 through 2020.
Strong sales performance has resulted in significant operating leverage and the business had an adjusted EBITDA CAGR of approximately 87% from 2017 through 2020.
I will note that we do expect salted to have approximately $30 million of standup costs and with the law of large numbers. We do expect these extraordinary growth rates to moderate as the business scales, but we continue to believe solta medical can generate greater than mid teens revenue growth, while leveraging the bottomline.
Finally, I will point you to additional information about the portfolio and the peer group on slide 27, and 28 and the appendix to help you develop your contextual reference for the business I will now turn it back over to you Joe.
Thank you Scott we are looking forward to work on Paul and Scott as we continue to grow and unlock the value of the total business.
Moving to slide 24, we have identified the key members of the team that will lead both pharma post separation and please know that upon completion of the IPO, Tom <unk> will serve as CEO of all Sharma, Tom joined the company from Bausch and Lomb and 2013 and had been serving as our president and co head Bausch and Lomb international businesses on.
And of 2018.
In addition, we are announcing that Bob Spurr, who is currently the president of sales pharmaceuticals will be the president of Biopharma U S business finally, Bob powers, 1 of our current directors, who will serve as chairman and the board about pharma upon completion of the separation I would like to invite Tom happy to say a few words.
Thank you, Joe it's an honor and a privilege to lead Bausch and pharma at this important point and its history. We see many opportunities ahead for our global diversified pharmaceutical business with leading positions and gastroenterology dermatology neurology and international Pharmaceuticals.
The teams have been working hard to complete all of the internal objectives necessary to separate the businesses and I am looking forward to working with Bob power and Bob spur and the rest of the management team to build and deliver value for Bausch and pharma shareholders.
I will turn the call back over to Joe now.
Thank you Tom and look forward to working closely with you as you transition into your new role turning to slide number 25, we are dedicated to unlocking the value for our shareholders and and we are making good progress on the planned spinoff of Bausch and Lomb, we've completed the Bausch and Lomb financial segmentation, we've named key members of Bausch and Lomb and.
<unk> pharma and leadership team and are on track to complete by October 1 our internal objectives necessary for the spin of being health beauty.
<unk> filed a S..1 for Bausch <unk> lomb with the SEC and we are now working to achieve the leverage ratio targets and financial objectives that we previously outlined.
We're actively pursuing all opportunities to expedite leverage improvement and deliver shareholder value, including using cash from divestitures to help delever accessing equity capital markets through the Ipos with Optionality organic deleveraging and improving working capital efficiency.
The proposed Ipos total medical is a key part of this effort.
And we have selected the chairman and CEO, we have hired Morgan Stanley and Goldman Sachs to advise us on the strategic alternatives.
Typically for many a first S..1 for Solta medical and the third quarter of 2021 and believe that the proposed IPO of Solta medical can be completed by the fourth quarter of 2021 or the first half of 2022, we remained committed to unlocking shareholder value across our 3 attractive businesses as soon as possible and today's announced.
And that represents a step forward and that process to summarize the steps. We are taking will enable us to pay down debt by accessing the equity capital markets with <unk> and the Solta ipos by unlocking the value of these attractive assets that have been undervalued as part of and aggregated company. Our goal is to create 3 distinct.
And focused businesses Bausch and lomb, a pure play integrated eye Health company Bausch pharma, a global diversified pharmaceutical business and total medical a leading global provider and the medical aesthetics market.
With that operator, I would like to open up the line for questions. Please thank you.
We will now begin the question and answer session if you'd like to ask a question. Please press star is on 1 on your Touchtone phone.
And they're using a speakerphone and we ask you. Please pick up your handset before pressing the keys.
All your question. Please press Star then 2 today.
Today's first question comes from Chris Schott with Jpmorgan. Please go ahead.
Hey, guys I appreciate the questions.
And 2 probably centered around the same topic trying to get at what the Solta IPO implies for the timing of our P&L separations. So maybe first on the Solta IPO with the plans be for a smaller kind of let's say, 20% spin of the business then distribute the shares to shareholders or would you look to do a larger capital raise.
And I was wondering my hands around just how much the solta IPO could help address the debt load obviously, it seems like a really nice value unlock but just maybe specifically on the on the debt load and then on my second question, which I guess is really the hardest is what's what's a reasonable timeline to think about our P&L IPO and separation at this point I guess with the Solta IPO later this year early next.
Should we assume a b and el separation would occur after that event or could these processes can be done and relatively similar timeframes, assuming that the financials are where they need to be thanks. So much.
Thank you Chris I'll take that question.
First of all good question on our expectations on the Solta IPO is that we would look to.
Register somewhere in that 20% to 30% of and equity sale of Solta medical somewhere in that range and normal type of IPO to help address our debt.
We do believe that we can do and as early as the end of 2021. So we'll look to try and do it in the fourth quarter, but obviously it could go longer on <unk>.
Obviously market conditions.
Question on the P&L spin I go back to what we said previously.
Our view on the BNS spin as we will complete all the necessary internal objectives to be ready for being all spin. After October 1 of 2021. However, as you appropriately pointed out we do need to.
Through the debt issues in front of us to get to that target that we previously talked about and our view is that the solta IPO will unlock value of filter if you.
And compare it with some of the other peer companies in this space I think youll youll see that opportunity, but we clearly will use that to help us to pay down the debt opportunity for our company. So that's the plan I'm not going to give a specific timing from the <unk>. Other thing we will be ready after October 1.2021.
We just need to solve all the debt question, obviously you saw today.
Made great progress and what we paid down already this year based on the sale of the wound business based on the EBITDA based on the cash generation, we've had based on improving working capital efficiency all of the things that we've talked about before are all helping us to unlock this value.
Operator next question please.
Absolutely and our next question today comes from Doug <unk> with RBC capital markets. Please go ahead.
Yes, good morning, and just.
When I go back to the <unk>.
<unk> cash flow I know that we reported just shy of 400 million from this quarter, but can you talk about the puts and takes that you are expecting Sam.
Over the next several quarters should we be using a 400 or something a bit lower than that and can you explain to me how all of the lean.
Legal settlement and is going to impact.
Outlook on ongoing basis. Thank you.
Sure Doug and good question. So so far we've been very pleased with the cash generation as I mentioned is 425, adjusted and this quarter on which brings a really a good number for year to date as.
As you look forward Air Inc. We have to step back and think about couple of factors here. We've made very nice progress on our working capital and initiatives and I think we've had all our inventory starting from last year into this year come down to probably all quality at the lowest levels that we've seen and a wild about roughly just shy of 1 billion total.
A little over a $1 billion and.
We've made very nice progress on all other elements of working capital so with that strength on the working capital.
And that's where you see debenture into cash flow generation year to date, I don't expect on working capital and inventory specifically to be coming down much further as we look into the second half and Thats why when you start thinking about the second half we will see benefits still come from working capital buys and I'm going to be at the same levels that we've seen and the first half.
That's why we're upping our guidance from 1.5 to 1.6 in terms of the legal.
Expansion that will be a call on the cash we do expect that we will pay a turn.
And elements of legal expenditure and the second half of the year, the terms and the timing still not 100% certain and determined but we do have and our plan and thats factored into all of our $1.6 billion.
Okay. Thank you.
And operator next question.
Absolutely and next question comes from Annabel <unk> with Stifel. Please go ahead.
Hi, Thanks for taking my question so.
Inc.
Clearly a high growth component of term.
And in the last several years.
Net leverage this ortho term platform I guess.
To help the growth there how much are you going to have to build in terms on infrastructure.
Can keep the company growing as it is and is there already and a tremendous amount of leverage and that you have there.
And then just secondly bigger picture.
And noticing a different pattern and with all other valuable components and Dash health.
Do you have any intention of doing this with balance as well because what you're left with is dash 5 on which is that relative to many.
Diversified company.
We've already spoken about how pure play companies such as say a.
Gi companies could unlock greater value. So are there any further intentions here with dash batch pharma. Thanks.
Sure Let me, let me try and take them in order here first of all on the solar business, we arent really excited.
And any business that you can see the kind of company and the growth that we've seen in terms of revenue with both the 30 plus percent revenue growth 80, plus percent compound annual growth on the EBITDA side, obviously, you speak to that high growth capability for this business and importantly.
And opportunity, we think to unlock some significant value and.
And go after that IPO. So we're really excited about that in terms of the infrastructure we have.
<unk> put forth a.
Belief on exactly what's there today Scott.
Scott made a comment that it will take approximately standup costs and the ballpark of $30 million to do that but with the growth overall flow.
The business, we feel that that focus that we can put on it will only allow us to continue to accelerate the opportunity with our sulfur business going into the future. So we do think that thats, a great opportunity and in the meantime, what we've been doing with the rest of the medical derm as we've been managing that business.
And to increase the profitability and to be smart about where we're going with the promotions and the medical derm. So we're going to continue that approach as we think about the future.
The question about any intention to do anything further with sales for any of our other businesses I think and answer is that as a company.
And we knew going back to 2016, we had too much debt I think at that time, we had over $32 billion of debt, we paid down over 90, plus $95 billion of debt since that time.
But we knew we had too much and we've been working very diligently to reduce net debt and we also had to clean up some of the legacy legal issues and I think if you sum all that up and somewhere in the $2.5 million range. So we've had a cleanup I say somewhere close to $12 billion of some of the challenges we found herself and going back 5 years, having said that.
And we're going to continue to look to try to unlock shareholder value and all of our businesses. We think we've done a really good job of putting incremental sales promotion resources behind the Salix business done incredibly well.
<unk> is starting to bounce back as we've seen in the quarter. So all of those things are part of our plans for the future, but I don't want to make any specific comment about and IPO or spin with the sales business I think I'll just leave it with excited to unlock what we think are 3 great businesses.
And our pure play Health company.
Bausch pharma global business and then obviously now the announcement today the Solta aesthetics business. So I think we'll leave it at that in terms of our strategic alternatives in terms of where we're going.
Operator next question please.
Thank you. Our next question today comes from all over.
Net.
Evercore. Please go ahead.
Hi, Thanks, so much for taking my question I had.
I have 3 if I may.
And first Joe I wanted to say congratulations to Tom to Bob FERC to Scott and Paul.
And my question really was.
The leadership team across the P&L across Solta as well as across the <unk> pharma.
It's a very capable leadership team however.
And if you had asked a group of investors, where each of which business. Each of this leadership team will be spearheading.
On the current presentation is not what they would've guessed for example, Tom backgrounds and <unk>, but he is heading the non P&L business and vice versa. So on.
Just trying to understand how board thought about all of this and was this 1 on the reasons with value act departure or not.
And secondly.
On sold I'm trying to understand how youre thinking about structuring the debt Sam how much are you how much leverage are you willing to put on that.
And more importantly, what about the legal liability how installed by shielded from that or not.
And then finally.
And Scott did you ever get a real offer from a strategic on sold out for more than $2 billion.
Okay. So I'll start and then I'll turn it over to Sam from the second question and and.
Between Scott and I will answer that last part of your.
Question So leadership.
We conducted.
Search as we thought about Bausch pharma, and we look internally and externally and the board was very involved with the search and <unk>.
He went through the research we felt that the best person to head up the Bausch pharma business with Tom <unk> and therefore, we made that decision with top.
I'd also say that.
As we thought about the opportunity to create value for our shareholders as we thought about solta and.
<unk> Scott has that business today has done a good job on that business and importantly.
Obviously, we believe Paul has done a great job as well and we thought the combination of Pall as chairman Scott as CEO another great opportunity to take advantage of some of the great resources, we have within the team. So it's a process that the board is very involved with.
On internal external searches and.
And in past conversations with candidate, we felt though to be clear that Thomas.
<unk> for the the Biopharma business and Scott was the best for taking on the total CEO roles and terms of going forward.
And that's probably the best way I can answer that question.
I believe that value.
Nothing to do value and I think Rob Hey, all have stated and as he agrees with our strategy and part of the company and importantly, still as a significant shareholder and our business. So really no no. It has no impact on on value added their decision.
The board and it was really just a time management issue for Rob Hale and what he was taking on some incremental.
Board positions and you want to take the Solta leverage and legacy legal pleas sure. It's a good question Omar so.
Let me start by saying that our main objective here is to unlock that value.
And unlike the value for Salto and if you look at the slides that we went through and what Scott covered it as a business to have a very strong EBITDA.
As we think about it is probably maybe for modeling purposes, you could probably assume maybe a 1 time type of debt on it. So it's really going to be and the structure, where you would want to make sure that you actually unlock that value and position that business to be continues that growth that they haven't continued sort of the trajectory that you have from a growth perspective.
And unlocking the value in terms of other legal liability or legal legacy liability. There is no direct liability that.
Seated with Solta. So there will be all theres nothing really there foreign exposure from a total perspective.
So on the only thing I'm going to add to it would seem that because I think it is an important comment to also say if you think about what we've been trying to solve is trying to solve this debt issue for the company I think everybody realizes that we've had a debt issue. What we think we can do with the sofa IPO as well as the <unk> IPO is too.
Leverage our position and 2 highly attractive businesses and.
<unk> raised equity not at the total Bausch health care level, but as the level of these individual attractive businesses.
And I'll, let the markets tell me, where but certainly.
And probably a significantly higher multiple than what we would expect with the overall Bausch health companies. So book It appears of BNS business, where the Alcon.
<unk> or the Cooper trades and I think that gives you some sense of P&L and I don't want to make any comments specifically on salt, but you all know the peers and you can make that youre judgments on things like that so that's the concept of what we're trying to do there Scott do you want to talk about the health businesses.
Thanks, and I won't.
To directly answer your question, but I will say there has been a great deal of interest and the business and I'll leave it to you to do a deep dive on peer valuations, but needless to say, adding salt there remains at the early stages of its growth and that's because of its geographic expansion as well of it as well as it is.
Enhancement profile and and also the exposure to this market that is growing exponentially.
And the IPO enables bausch health to participate and that forward growth and evaluation accretion over time, and so thats really the logic behind it but I will say, yes, theres been great interest and the business and <unk>.
High confidence and your ability to do a deep dive on valuation.
Okay. Operator next question please add on.
Next question today comes from David and I am so on with Piper Sandler. Please go ahead.
Thanks, So just a couple 1 on salto and 1 on medical dermatology. So just on Salto maybe.
And maybe sort of.
A little bit of a different angle and I really.
And this could be a backward looking question, but and.
As you certainly know on the medical aesthetics space.
M&A has been.
And historically a real theme here so.
How should we interpret your decision.
To go the IPO route regarding Salto.
In terms of what that could imply regarding strategic interest from potential buyers.
And again, realizing that's a backward looking question, but I'm, just trying to get a little bit of background on.
How you got to this particular decision as opposed to the M&A route.
That's number 1.
And number 2 is in terms of medical dermatology, Joe you'd certainly historically have had high hopes.
And for new launches there.
And quite panned out the way you might have hoped I'm thinking of the significant 7 so once the spin is actuated can you talk about.
Investment and medical dermatology and how should we think about that in terms of it being a core business.
As part of a broader pharma business. Thanks.
Sure Good question.
And on the Sofa camera angle.
And in terms of thinking about it from an M&A per portfolio I want to be very quick expense over the last several months a lot of time thinking at all the different iterations, we could think about from Solta as Scott said, we did receive.
Several inbound interest expressions of interest and the <unk>.
Business.
As we thought about what do we do we look at the financial performance and I think if you look at the financial performance that we outlined and Scott walked through in terms of that.
<unk> historical growth CAGR as we think that that was clearly 1 part of it what you probably haven't seen until today is we wanted to also provide you some understanding of the business that our shareholders on today in terms of the EBITDA generation of this business with 80 plus percent.
Compound annual growth rate for the EBITDA, we wanted to make sure our current shareholders understood that but importantly, as we thought about what does that mean for value creation of Solta.
And there's obviously a couple of different ways, we could have done it and if we sold the business.
It would simply compensated the value of that business.
Whenever price it was today and what we said is that by going forward with and IPO. It gives us an opportunity to raise additional funds to allow us to help expedite the P&L spin, which is 1 thing we wanted to do but it also allows the company and and Bausch pharma.
<unk> health to also remain for the Optionality of that business going forward.
Our belief a good opportunity to realize that upside value rather than cap the value at whatever the price of today and when you have a business growing and 87% company on a growth rate on the revenue side, we felt that that was important and and I certainly know as you look at the peer companies Youll make your judgment out too.
Relative value and all that each 1 of you.
Think about that as.
And as you go through it on the question on Med Derm absolutely correct.
<unk> looked at the medical Derm several times over and what we've made decisions on his let's promote the product that will get the return on investment and our business is all about looking at ROI for our business. We did attempt to launch a number of product. We've had some positive some negatives that we certainly have looked at all the opportunities and measure.
And we've decided the best way to approach that business is with a a very critical eye on return on investment for where we can go with this business and.
And launch products and make sure that we get an appropriate return on investment for our shareholders and we still think there is some opportunity there as we are continuing and before with some of our net.
Products that are and the R&D portfolio and we'll still continue to move those forward, but we're going to approach it with a clear and return on investment approach.
Operator next question please.
Next question comes from Ken Cacciatore with Cowen and company. Please go ahead.
Thanks, so much thanks, Joe and team just going back to the kind of the same here I think we can all agree the public markets will give bumps alarm and.
Salto, a better value and I think we can kind of correspondingly they will agree that maybe private equity or private markets would give the diversified businesses are better value kind of given the new growth profile. So can you talk about the parallel process that might still be going on here.
We think through the eventual and stage of of the spin does it is it active would you call it or.
Is is there any kind of nuance you can give us around what might be happening behind the scenes.
Sure well I think Vince I arrive and Paul arrived I think we've sold somewhere in the range of $4.5 billion.
And of proceeds accounting now the Amun business.
<unk> and that and we're always going to look to opportunities to get an appropriate return for our shareholders and optimize the value for our shareholders.
Businesses that we've sold to date the average.
EBITDA multiple we received is somewhere in that range of about 11 times.
Based on how much EBITDA we've sold.
Business and we think that that's been the right decision here for as we continue to go forward, we're going to always listen to strategic alternatives, but we do think that the as you stated the.
Public markets and the IPO for being all the IPO for Salto and clearly we think will be the best way to unlock the value of both of those businesses and in fact, we will create as I said before 3 great businesses to being a pure play health the Solta aesthetics medical aesthetic company and of course, our Bausch pharma business, which we think will be a very good.
Good diversified business, which has had a good track record of growth. If you. If you look at what we've been able to do with that business. As you look at the international pharma business and Thats a business that Tom <unk>, who has done a really nice job of continuing to show growth with that international pharma business. So I think on balance we are going to be open.
And to other considerations, we've done that and the past, we'll continue to do that but I clearly believe the right now the best way. We can proceed as street. These 3 great businesses.
Next question please.
Absolutely. Our next question today comes from velocity Brassard with Barclays. Please go ahead.
Hello velocity on the Qs.
And as you're on mute and perhaps ISI Allison and yet.
Hi, Marni and Thanks next question just going back to the IPO on Salt all again lots of for clarification on that.
And at any point of time, we do consider keeping salto and the eye care business, our confidence all fit together.
The same dynamics, <unk> lagged and cash pay and bus mind, and maybe you and iterations on the management team being trained on this.
Okay.
So it's a very fair question, we do recognize that there have been some very successful companies out there where the combination of aesthetic business with an eye care business. So it is something we evaluate we felt the best way to unlock value and this market and going forward for the future is to create the pure play companies that pure play <unk>.
Health Company, which we will be Enel, and then a pure play medical aesthetic company with Solta and there are some synergy your comment is fair there are some synergies, but we felt the pure play allow us to focus on these individual business was the approach that we realize the best value for our Bausch health.
Shareholders.
Thanks, So just a follow up also on yes on the recent headlines around $3 billion of claim and the implications from the spin off book.
Boston Nama and filter.
Yes, we are.
And obviously you have seen it.
We don't agree.
And with the we think Theres, some mis characterizations and misrepresentations by the plaintiffs.
In terms of that that claim against us in terms of the recent Bloomberg story.
We believe that the bausch and lomb.
Spin off as no connection to the pending litigation and we think that we announced to be announced spinoff going back now a year ago. So we don't think theres any any misrepresentations and we think they've made Mr. Expectations. We think we're going to be able to continue to move forward with our programs and we don't think there's any legal basis basis for the concerns raised.
By the plaintiffs and we believe it is merely a litigation tactics that they are employing.
To go forward with this we obviously have already settled with the class and we believe that we've taken care of certainly the majority of this and to suggest that 3 billion numbers.
Leave that for them to try to rationalize why they suggest that but we certainly think misrepresentation mischaracterizations of what they've stated.
Okay, Let me take.
And maybe for 1 more question. Please absolutely and our final question comes from John and just 1 Goldman Sachs. Please go ahead.
Hi, This is Dan on for Terence. Thanks for taking my question just 1 on the U S contact lens market I was wondering if you could provide a little more commentary on the day on the dynamics Youre seeing within the Si Hy daily space and then what Youre seeing in terms of recovery from the pandemic and whether you think the upcoming back to school season will be somewhat normalized.
Sure.
I was actually just with our U S Si Hy daily and actually entire vision care team.
About 2 weeks ago.
And are really excited about what they're seeing and the marketplace. They shared with me on some of their data obviously, Tim went through the data in terms of their share.
And the quarter, albeit off of a.
Covid impacted 2020 quarter has been outstanding but we are really pleased with what we're seeing in terms of the uptake of our Si Hy daily product. We believe that we have found a very important opportunity with our Si Hy daily product.
And known in the United States is infused ultra 1 day outside of the United States, we have and opportunities truly health those patients who are facing the difficulty of wearing their product for a full 16 hours a day and.
That opportunity, where we've infused the.
And the infuse product concludes and auto protected and intellectual life is something that we think is really important to the patient, allowing the patient to have greater comfort through the entire day and we've got great data and his team and seeing great data in terms of where they are able to talk to the doctors about the opportunity with the product to date the.
Any of the product that we are receiving new patients is coming from other players in this space. So we're cannibalizing other companies not our own business, which obviously, we think that helps us to continue to pick up market share for the future. So we do think the Si and market today, and United States and somewhere in the let's call it mid teens level, but.
Do expect that.
And to see that continue to grow as a percentage of the overall all right.
Clear vision care business.
So I had daily growth from the mid teens to beyond that.
A real significant future growth potential for us and the United States, but also around the world. So very pleased team is really motivated they've been out working and just coming off of new sales meeting. So really excited about what it's going to mean for the future.
Well. Thank you everyone for joining us today very much appreciate your interest and the company look forward to talking to and the future.
Thank you very much. Thank you. Thank you. So all of this concludes today's conference. We thank you all for attending today's presentation and you may now disconnect your lines and have a wonderful day.