Q1 2023 Bausch + Lomb Corp Earnings Call
Speaker 1: The.
Speaker 2: Good morning and welcome to the Bosch and LOMS first quarter 2023 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 zero.
Speaker 2: After today's presentation, there will be an opportunity to ask questions.
Speaker 2: To ask a question, you may press star then one on your touch tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Allison Ryan. Please go ahead. Thank you. Good morning, everyone, and welcome to our first quarter 2023 financial results conference call.
Speaker 3: Participating on today's call are Chairman and Chief Executive Officer, Mr. Brent Saunders, and Chief Financial Officer, Mr. Sam Eldersukey. In 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.
Speaker 3: 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.
Speaker 3: non-GAAP reconciliation can be found in the appendix to the presentation posted on our website. Finally, 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 to not update or affirm guidance other than through broadly disseminated public disclosure. With that, it is my pleasure to turn the call over to Brent.
Speaker 4: Thank you, Allison, and thank you everyone for joining us today. It's great to be here.
Speaker 4: I'll start off by sharing some high-level comments about my first 50 days as Chairman and CEO of Bausch & Lomb, and briefly discuss the first quarter financial highlights.
Speaker 4: I will then turn the call over to SAM, our CFO , to review the first quarter financial results in detail and discuss our 2023 guidance.
Speaker 4: Finally, I'll cover our key franchises and a few upcoming catalysts before opening the line for questions.
Speaker 4: You're getting a side three.
Speaker 4: I've been involved in iHealth for the better part of my career.
Speaker 4: It's a dynamic industry that is always evolving, full of innovation and collaboration, and with many talented practitioners, surgeons, ophthalmologists, optometrists, and significant to get that needs from millions of people.
Speaker 4: It is an area that I cared deeply about and I continue to stay close to.
Speaker 4: Having an opportunity to work in this great industry again was an important factor in my decision to rejoin Bachelorette alone. The IHealth industry operates an attractive part of the healthcare space with a large addressable market and growth driven by demographic trends and lifestyle changes that create significant unmet needs. Companies that can meet these needs are rewarded for innovation in a favorable competitive environment with significant barriers to entry. The IHealth industry operates an attractive part of the healthcare space with significant barriers to entry.
Speaker 4: There are many other reasons why I returned to Vashelon. An iconic brand, 170 years in the making, a broad, diverse commercial platform, products that touch patients throughout their lives, a massive global infrastructure, and a competitive landscape where we have the most comprehensive footprint. And most importantly, a team that talented and dedicated colleagues who are passionate about making Vashelon the best eye health company in the world.
Speaker 4: My first 50 days here reaffirmed all of this.
Speaker 4: Our challenge and opportunity is to how to reach our company's full potential.
Speaker 4: To possibly oversimplify our situation, our biggest issue as a company is underutilization. That is, we have a very broad commercial structure and supply chain touching almost every iHealth professional in the world.
Speaker 4: but not enough product flow to utilize it efficiently. Historically, we have invested significant resources into building a global infrastructure.
Speaker 4: But due to inadequate sales volumes, our infrastructure is not being utilized to its full potential.
Speaker 4: resulting in inefficiencies and wasted resources.
Speaker 4: Given this, the best plan for a sustainable future for our company.
Speaker 4: Although easy to say but hard to do is to focus on driving profitable growth.
Speaker 4: I'll discuss our path forward to doing just that in a moment.
Speaker 4: After careful thought, I developed a plan with input from the executive team, designed to take Bouchan long to the next level.
Speaker 4: We're calling it the roadmap to accelerate growth. This is a multi-year plan with three phases, all with measurable clear objectives. Let me give you some of the details. Let's start with a deeper dive into phase one of the roadmap. If we do all the following things correctly, we would advance to our next phase, innovate and execute.
Speaker 4: First, grow revenue at or above market.
Speaker 4: We're growing, but we need to do this consistently. Next is a focus on our frontline sales teams with a view toward achieving selling excellence by building a during bonds with our customers. Our sales teams are a talented and dedicated group. And when customers think about shan long, it's our sales reps that come immediately to mind. They are our face to our customers. But the infrastructure around that needs to be improved by giving them the best tools, training and support that we can.
Speaker 4: I cannot understate it. Our sales teams are crucial to our success.
Speaker 4: And we are pivoting to making them the priority for an entire company.
Speaker 4: Third, build an industry leading business development platform. As I mentioned earlier, this is a tremendously dynamic industry with countless opportunities for growth and innovation. We need to build best in industry capabilities to seek out and evaluate the right opportunities and collaborate with smart thoughtful partners. I want ThouSwam to be known industry-wide as the best partner. Next, we need to enhance the use of technology and build leading digital capabilities across our company. From marketing to manufacturing.
Speaker 4: that support the business and enable it to run more efficiently and effectively.
Speaker 4: and eventually for it to become a competitive advantage for our company.
Speaker 4: This investment pay off by increasing our efficiency, improving our customer experience, and expanding our market reach.
Speaker 4: The final part of the road map's first phase is to make work easier. Eliminate bureaucracy and increase accountability. We will reduce complexity and promote clear accountability. Empowering our colleagues with accountability not only increases their sense of ownership and pride in their work. The final part of the road map is to make work easier.
Speaker 4: but also fosters of culture of trust, responsibility, and continuous improvement. As we fold these capabilities into Bowshenlong, we look to build on our legacy and establish ourselves as the best eye-health company in the world.
Speaker 4: Turning now to the portal results on slide 7.
Speaker 4: I'm going to talk about our numbers in constant currency as Sam looks flying in more detail.
Speaker 4: The year is off to a good start with first quarter revenue of $931 million, up 8% year over your on a constant currency basis.
Speaker 4: Adjusted EBITDA of $141 million was impacted by $14 million currency related headwind and higher levels of commercial investment to support key product launches.
Speaker 4: which we will believe will be the future growth drives.
Speaker 4: Importantly, we saw continued high quality growth across all three reporting segments and in most significant geographies.
Speaker 4: Increased demand, improving supply, and expansion in the premium IOL portfolio drove the surgical segment 9% constant currency growth. And the Alphomic Pharmaceutical segment grew by 7% on a constant currency basis during by US generic execution and international portfolio growth. Achieving growth across so many areas of our business in the face of continued hand wins underscores the strength of the Bachelot platform brand and team. My focus going forward will be to build on this foundation.
Speaker 4: and execute the roadmap to accelerate growth that will enable the company to move into its next stage of growth.
Speaker 4: I will now turn the call over to San to cover the first quarter results in more detail.
Speaker 4: We will now turn the call over to San to cover the first quarter results in more detail. Thank you, Brent. Good morning, everyone.
Speaker 5: Before we begin, I would like to point out that most of my comments today and in the future will be focused on growth expressed on a constant currency basis. This is consistent with how we operate the business and we believe it helps us more closely align our reporting to a broader group of comparable companies.
Speaker 5: Turning now to our financial results on slide 8. Our first quarter results demonstrate strong growth and the businesses continuing to build on a solid track record of durable revenue performance.
Speaker 5: The? company revenue of $931 million for the quarter reflects growth of 8% on a constant currency basis and 5% on reported basis compared to the prior year quarter. As Brent mentioned, revenue growth was broad-based and expanded across all three of our reporting segments.
Speaker 5: Virginia, surgical, and op to RX. Consisting with the expectations noted in our last earnings call, while we sow gradual improvement in China in the quarter, we continue to be cautiously optimistic about the pace of the recovery. We remain confident that our business in China is well positioned to return stable growth over time.
Speaker 5: We continue to monitor the economic activity, giving the stop and go recovery we saw last year.
Speaker 5: In the quarter, foreign currency headwinds were approximately 31 million to revenue, and approximately 14 million to adjust the EBITDA.
Speaker 5: As mentioned in our last call, we expect that this currency had went to persist in the first half of 2023 before improving the second half of the year.
Speaker 5: Now let's discuss the results in each of our segments.
Speaker 5: Vigincare arrived near 587 million, increased by 8% on a constant currency basis.
Speaker 5: driven by both the consumer and contact lens portfolios. The consumer business grew by 8% on a constant currency basis and our strategic brands, Lumify, PreserveVision, and buy through multipurpose solution continues to hold market leading positions.
Speaker 5: LUMO FIRA 40 revenue grew by 23% globally compared to the prior year and achieved a record revenue of 38 million in the quarter.
Speaker 5: The brand has continued the momentum in the US where it reached a market share of 50% in the Redness Reliver category.
Speaker 5: The launching Canada has also been very successful and to leverage the brand platform and continue to expand the franchise, who are now in early stages launching the Lumify Eye Elimination's beauty line.
Speaker 5: Revenue from Artholec, a key brand in our dry eye franchise in Europe grew by 29% on a constant currency basis in the quarter. The growth was mainly driven by increased demand.
First core revenue from our I vitamins, preservision and acuivite was flat on reported basis.
and up low single digits on a constant currency basis.
We expect our recent launches of Preservation with Pakistan and Preservation plus CoQ10 to continue to drive the growth.
From a broader macroeconomic perspective, we are encouraged by inflation levels, trending lower and will continue to balance the price and volume dynamic as we progress through the year. We are committed to making the appropriate investments to support launches and drive consumption.
As we believe consumers will continue to reward our trusted brands and innovation. In the lands we're following, we saw 10% constant currency growth in the quarter with strong performance in our key franchises.
Before we're driving from our data site hike grew by 38% in the first quarter driven by strong market demand.
We continue to anticipate the U.S. launch of the Dates-I-Hai multiple-core lens in the second quarter.
which would expand the product family and provide a catalyst to continued growth.
The lens growth in the quarter was brought based across the major product families. On a constant currency basis, ultra-grue by 18% by a true delivered 8% growth in our legacy brand SoftLens Daily grew by 15%.
growth in the quarter was brought based across the major product families. On a constant currency basis, ultra-grue by 18% by a true delivered 8% growth in our legacy brand Softlands Daily grew by 15%. Moving now to the surgical segment.
First-core revenue was 183 million and increased of 9% on a constant currency basis. Implantables grew by 2% on a constant currency basis driven by strong performance in the high margin premium IOL portfolio, which was up 32% in constant currency.
We continue to see momentum in our investor franchise, which includes both the Montfocal and TORC IOLs.
In Q1, we saw strong demand in the US and parts of Europe impacted by revenue decline in China, which is continuing to recover. We're also pleased to announce the earlier launch of the C-Luma visualization platform in the US and in Europe . This platform asked our many product launches in 2023 and we planned to make the appropriate investments to support the commercial execution. Lastly, revenues in the Optorx segment were 161 million for presenting constant currency growth of 7%. With strong performance across all major markets, US generates grew by 16% as we continue to actively capitalize on challenges faced by our competitors.
5% constant currency growth in the international portfolio was made by 14% constant currency growth in the minimums franchise.
By his altar reporter, Brad Mughal grew by 25% the first quarter, and the US chair-axis were up by 25% compared to the prior year.
As a reminder, we have a June 28, 2023 Purdue Fade for Nova 3, and are anticipating a launch in the second half of the year.
Our pre-alunch activities are ongoing and we continue to expect the level of investment to increase as we progress through the year.
Now that we have covered revenues for each of the segments, let me walk through some of the key non-gap line items on slide 9. As a reminder,
The 2022 first-core financial statements were prepared prior to the BNL IPO in May 2022 and do not fully reflect run rate standalone costs. Along the same lines, the base of interest expense and taxes reporting Q1222 financial statements also does not fully reflect the BNL operations of standalone entities. As we have previously mentioned, this impacts the comparability between 2022 and 2023 professionals.
Adjust the gross margin for the core was 60%, a decrease of 90 basis points compared to Q1 2022. The changing gross margin was mainly driven by higher cost of inventory, product mix, and pockets of supply challenges made in our surgical business.
As we noted in our Q4 earnings call, we expect the hard cost of inventory we built in 2022 to increase pressure on gross margins as it flows through the P&L, meaning the first half of 2023.
At just the EBITDA was also impacted by incremental 17 million of standalone costs relative to the prior year. Additionally, at just the EBITDA was impacted by inflation, higher cost of shipping and distribution and investment related to supporting product launches. In the quarter, the investment R&D was approximately 8% of revenue. Interest expense for the course was approximately 47 million, reflecting the rising interest rate environment. For comparability purposes, the lower interest expense in Q1 2022 did not fully reflect BNL stand-alone capture structure. Adjusted tax raising in the first quarter was approximately 6%, which is in line with our expectations for the full year 2023.
Cash-run operations was made impacted by approximately 70 million of strategic inventory built to mitigate potential future supply disruptions and to ensure sufficient inventory levels ready to product launches. First quarter, CAPEX was 37 million made into my investments in the Vision Care segment. Starting now to our 2023 guidance on slide 12, our revenue guidance for 2023 is a range of 3.9 billion to 3.95 billion, which reflects a constant currency growth rate of 5% to 6%. Based on current exchange rates, we anticipated currency headwinds to revenue in Q2 followed by tailwinds in
determine the sustainability of the pace of the recovery and impact on the full year.
In the meantime, we believe we are well positioned to capture the market opportunity and we're optimistic that the market will return to stable growth over time. Overall, our 2023 revenue guidance reflects our expectation that the business will continue to grow in line with the market for the balance of the year. Alright, just to give you that guidance for 2020.
launches in 2023, we remain committed to prioritizing investments to drive revenue growth.
As we mentioned our last call, the quarterly phasing will be an important consideration. We expect adjusted evasions to increase as we progress throughout the year.
This is mainly driven by a number of factors, including the natural phasing of our businesses and the timing of our investments to support launches.
We are fully committed to discipline cost measurement and we will prioritize our spend and optimize our cost structure to drive operating, leverage and accelerate growth.
We expect our 2023 adjusted gross margin to be approximately 60%. This represents a moderate margin improvement relative to full year 2022. While we have increased the production output and efficiencies related to our daily higher-zero approaches, we must properly set an Jackie Hauser model.
We expect gross margins to be impacted by the higher cost inventory we built in 2022, supply availability in our surgical portfolio, as well as potential variability driven by product mix. In terms of the other key assumptions underlying our guidance, we anticipate investment in R&D to be approximately 8% of revenue. We accelerate the level of R&D spending in 2022 and will continue to prioritize R&D investment
to transition to longer-term capital structure upon full separation from BHC. We expect our adjusted tax rate to be roughly 6%, and we expect full-year capics to be approximately 200 million.
As I already mentioned, keep in mind that comparability between 2022 and 2023 results for the full year will be impacted by the timing of the PNL IPO.
Overall, we're pleased with our first quarter performance and continued growth across our segments.
Our 2023 guidance reflects our strategy to increase investment in the business to support product launches that we expect to become important drivers of profitable growth.
Our 2023 guidance reflects our strategy to increase investment in the business to support product launches that we expect to become important drivers of profitable growth. And now I'll turn the call back to Brent.
Thank you, Sam. Let's spend a few minutes on a few of our key franchises and some upcoming cab lists we expect to drive business results. On slide 14. Thank you.
Given the prevalence of dry eye disease and the size of the market, we believe our dry eye disease platform will be a key driver for future growth and is a good example of the benefits of an integrated platform in addressing a large market without met need. We can reach patients and consumers through multiple access points.
leveraging long-standing relationships with the I-HELP professionals, as well as key retailers and e-commerce channels that reach a broad consumer base.
The franchise is on this platform, primarily Artilect, BioTrue, and Suv generate approximately 250 million at annual sales on a combined basis.
In addition to a number of line extensions for our consumer products, we are looking forward to NOVO 3's to doodate on June 28th as the next potential catalyst to further a densest platform with the addition of the pharmaceutical product.
More specifically, this is a category that has long been defined by treatments that work along the inflammatory pathway. And we have an opportunity to launch a potential first treatment for a backer of dry eye in a large and growing market, which is currently estimated to be approximately $2 billion in the United States.
Our Lumify franchise on slide 15 is another example of the power of a fully integrated eye care platform.
Our LUMIFI franchise on slide 15 is another example of the power of a fully integrated I-Care platform to launch, promote and drive the performance of our products.
Today, WIlMify is $125 million franchise with approximately 50% market share in the Redness Reliever category and the number one doctor recommended brand.
Our strategy is to build on this success by expanding into new geographies and adjacent categories. We recently acquired the rights to market limify in 18 additional countries.
This year we will launch Lumify Ioluminations, a line of hyperallergenic eye care so I'm typically developed for the sensitive eye area.
Finally, we are working on a single dose to server to free eye drops and a combination of the nation product with keto typhoon for allergy symptom control.
Moving to slide 16.
The I vitamin franchise occupied in preservation is Bowser and Wom's largest brand with more than 350 million of annual reported revenue and more than 90% share of the Aeroids category.
This franchise has a global footprint with products available in 40 countries and a wide variety of formulations to address unique patient needs.
Our strategic focus is on growing the franchise and driving consumer demand with innovative new product and category expansions.
We are working on launching new products that help support I-Ed hard-held or more easily absorbed and help to support healthy cell function. The good news is that despite our leading position in this market, we have a lot of room to expand. Approximately 70% of households with moderate to advanced AMD.
are not treated with Arrows 2 product. Moving to surgical segment on slide 17, I have been impressed with the surgical team's ability to deliver results while dealing with significant supply constraints.
In addition to crater problem solving, this agile resourceful team is demonstrating selling and marketing excellence and building trusted relationships with eye surgeons that can be a model for our broader organization. On this slide, we showed the evolution of the IEL portfolio towards premium higher margin offerings.
to give surgeons a wide variety of lenses to address their patient's eye health needs, including trifocal and extended depth of focus lenses.
We are also entering new categories in fast growing markets like glaucoma procedures and focusing on digital interconnectivity with the C-Luma 3D microscope and the I-Telegance Digital Platform.
In closing, we stand here today with a durable foundation, a powerful, globally recognized brand.
Established products, a talented and dedicated team of colleagues, and we operate in an attractive part of the healthcare market.
At the same time, we clearly understand what our issues are. Under utilization of our global infrastructure,
challenges to our supply chain and gaps in our innovation cycle. While we have our work in front of us, we now have a plan in place to overcome these obstacles, the roadmap to accelerate growth.
I have faced similar situations in my career and I have led similar efforts. I know from those experiences that with the support of our colleagues around the world, we can turn this plan into reality.
You cannot underestimate the collected power of 13,000 collings who are aligned, focused, and motivated.
Our roadmap to accelerate growth will be my focus, along with that of all of our colleagues around the world.
Although change can be daunting, I am confident that we will come together and accomplish great things.
With hard work, dedication, a commitment to excellence, and to our mission of helping people see better to live better, our company has the potential to thrive and succeed in the years to come. I'm excited about the days ahead and will continue to keep you apprised of our progress as we execute against our roadmap.
Thank you. And with that operator, let's open the line for questions. We will now begin the question and answer session. To ask a question you may press star than one on your touchtone phone. If you are using a speaker phone, please pick up your handset before pressing the keys.
To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster.
Was that 8% a clean number? Were there any catch up one off items? And I think the guidance lies back half of myths and that's some shows why the aid perhaps wouldn't sustain giving confidence and really too hard. Yeah, great. Well, thank you for the question. Yeah, it was a good quarter. And I think we're off to a good start for the year. I think specifically to answer your question, I'll turn it over to Sam on any one off. I don't think there were, but go ahead. Good morning, BJ. Now, we really didn't have anything outside of the normal course of business. Just one thing I would remind you as you think about our first quarter.
One of the things we're mentioning from Q1 is the timing of the pricing. This is lapping a full year of now pricing. As a reminder, we did take pricing last year. We did take pricing again this year, so we did an impact of that. You will see that probably more pronounced in our more than the individual care segment specifically in the consumer side.
Thanks, VJ. And Brian , one that may be follow up on on that. I think you're looking at second half. You mentioned no, what's we is a key catalyst. What would be like a positive good outcome in your mind and what would be sub optimal? And how should we think of the contribution from this product in a bulk case? Yeah, no, great question. Well, we're excited about the hopefully upcoming approval at the end of June . We have a pituitful data at the end of June . So, you know, I always, in my career, I always start with the positive outcome being an FDA approval.
Your next question is coming from Robbie Marcus at JP Morgan. Oh great, thanks for taking the questions. Good morning. I have two questions. I'll just ask them both up front here. First, you know, there's a lot of moving pieces down the P&L and I appreciate the EBITDA guidance, but where do you want people to kind of fall out on EPS and what are you trying to imply in the guidance? And then part two, I wanted to talk about the remaining organic sales growth that's implied in 2Q through 4Q. You know, the comps last year looked pretty similar to first quarter.
So, with new product launches, China improving, you know, why the deceleration versus first quarter? Thanks a lot.
Yeah, so let me take a high-level stab at both and then give it to Sam for some more detail. Look, I think as you look at the bottom line EBITDA or EPS, long term, obviously...
We absolutely want to see leverage in the P&L. We want to see margin expansion or improvement. And we want to see, as I mentioned, real utilization of this massive infrastructure, we have built over years at Bouchlom, which truly is a competitive advantage if and I stress if utilized well.
And so tremendous opportunity, you know, in the medium to long-term to create that leverage. In the short-term, you know, I think we need to see improvement. We have some...
I'm comfortable with. I think we still have supply issues throughout all the businesses. Some of them are hangovers from COVID. Some are just new technologies or top technologies and third party suppliers that we're working to grow out. But it's quite complex. And so.
I think we're trying to put out guidance that's realistic based on what we know today or what I feel comfortable with today, but that will evolve as I get my feet firmly on the ground here. But let me give it to Sam for some more color. Thanks, Brenton. Good morning, Robbie. Let me take in two parts here. The first one on EPS. As you know, we don't guide CPS, but when you think about just EPS and the dynamics of it...
One big factor we spoke about quite a bit is the currency. We've seen the currency has went year over year. We're estimating for full year 2023, that's about 35 million, which we saw about 14 of that come through in Q1. The other big factor you have to keep in mind is interest expense.
We've seen quite a rise in the interest expense. This is a reminder, our debt and capital structure today, we're seeing with a variable capital structure, so for plus 300, 4%, so we're all seeing what's happening with the feds and sort of the impact on the interest expense that we're seeing that we're guiding for roughly about 250 million. That's versus the about roughly 150 of last year. So.
The incremental element does provide headwind on EPS for us as we go through 2023. Keep in mind that we also on the capital structure, we did talk about this is an interim structure that we will transition out of at the time of the separation. So just putting all those different pieces together will give you a sense of how we're thinking about EPS.
In terms of just organic growth and Brent covered it pretty well and maybe I'll take a step back and forth Q1 We're very pleased with what we performed the Q1 There's a lot data point in Q1 that we're excited about and we're pleased to for the good start of the year So that's one core and as you start evaluating for the rest of the year
without thinking about all the puts and takes that you have for the rest of the year. And when you factor all those items in and bake into your guidance, you have to be balanced and prudent to be able to think through what the level of uncertainties are. You touch on China, China, we saw China recover to be very clear. So that's national tourism in the United States and then re-grees with theoutherarinquantities. So think about that part of the story as something that maybe we could then, think through in the next several ManILA's webmaster Silk 4, that might be a got a bigger role to play in thatsquare effect in Ek
see that data point of recovery until March. So the first part of our Q1 was not that strong with China. So we need to see that level repeat of the steadiness of that recovery before we can fully recover. Just given the nature of what we saw last year with the stuff in Go Nature of the China market. And supply change is an area where Brent touched on. I think it's a, we highlighted in our past.
Great. Thanks for having me. Yes. Of course. Next question, Opera. Your next question for today is coming from Joanne Wunch at City Group. Good morning and nice start to hear. Two questions. The first one is, I mean, if you could just sort of give us a lay of the land on a contact lens market where you are and thinking about taking share and the difference between price volume and mix. And then I'll throw the second question out there. Askers is coming up this weekend. What can we expect from Balsam on there? Thank you. Great. So on on the lens market, I'll give you a kind of mic.
two cents, and then Sam can provide some more context. Look, I think we're in a very good competitive position around the world and our contact funds business. Our daily sci-fi or infuse is a very competitive, very high quality lens. But we're ramping up, right? And so.
Most importantly, we have Sphere and we have Sphere launching globally. We have a multi-focal launching in the first half of later in the first half this year in the United States. And we're still working on the Toric, right, to get that out hopefully next year or so. And so, you know, it's a great product and when you look at it, it was up about 30 years ago.
And so what we have to focus on is exactly what Sam hinted at there. We need to be able to manufacture more. We need, you know, we can sell basically everything we make. And the team in both Rochester and Waterford, where we manufactured is doing a great job of improving yield. And come with that comes.
comes profitability of those lines, right? And so we need to continue to work on that because you're trading out in those bio tree, you're trading out a higher margin for a lower margin product that we need to solve for that. So massive opportunity, but some challenges that we need to work through. In terms of the meeting, I'll be heading out there tomorrow to San Diego for the meeting.
and how we show up and how we interact with customers and get them excited about our products and portfolio and our future is really critically important to us. There'll be a bunch of other releases coming out and you'll see that in the news wire as they come out.
Thank you. Anything else you want to answer? You want to add on the price volume max here. Contact lens. We have a little bit of price, but majority of volume. And just a print cover to prove on these are high.
And where the growth is coming from 1 thing I'll just also highlight is when you look at the rest of the portfolio of the lenses, we've seen also nice growth into other parts. Of the brands such as ultra, I called it out this morning at going at 18% and buy through at 8%.
and the soft lens data, which is a legacy brand, outside the US is growing nicely at 50%. So the team is doing a good job managing the data as high as was, sort of, along with the tail and the other brands as well. Yeah, and I should reiterate, that's really important because the way to success...
is by not having a leaky bucket and this quarter, I think, was a good example of exactly that. And so real kudos to our team for managing across all these different platforms.
by not having a leaky bucket. And this quarter I think was a good example of exactly that. And so real kudos to our team for managing across all these different platforms. Thank you.
bucket and this quarter I think was a good example of exactly that and so real kudos to our team for managing across all these different platforms. Thank you. Thanks.
Your next question is coming from Larry Bejeltsen at Wells Fargo. Good morning. Thanks for taking the question, Brent. Welcome back. One question for you, Brent. One question for Sam. I will start with the Sam question. The EBITDA margin I think implied is about 18.5% for the year.
Can you talk a little bit about the cadence from Q2 to Q4 and the drivers over the improvement in Q1, which was about 15.1%. It looks like actually SGNA needs to decline from Q1 in dollar terms. Maybe I'm not looking at that right.
But if you could just level set us on the cadence and the drivers, that would be helpful. Brand, you talked about underutilization of infrastructure a few times. I'd love to hear you flesh that out a little bit more. I mean, you could reduce your footprint or you could add products.
I assume you're talking about adding more products to the bag. So how do you do that? Is that through more M&A licensing? I'd love to hear about how you do that and your areas of focus. Thanks for taking the questions.
So, since you asked Sam first, go ahead. Good morning, Larry, and a very good question. Phasing is very important, and you picked on it, and I made a feature in my remarks this morning. Because when you think about our phasing, especially between Q1 and the rest of the year, it's an important fact that you think of a 20.
Twenty three is that we start. Maybe I'll step back and just reflect back on last year's phasing. When you look at the natural phasing of our business, we tend to have our lowest point in phasing in the first quarter with the highest point being at the end of the year. So you tend to have the second half much stronger than the first half, as you think about this year.
That phasing is called the same natural phasing, but it's actually more pronounced in a couple of factors, and there's a couple of things that you have to factor in. When you think about our first half, adjusted for currency is a big factor. So we see currency headwind in Q1 roughly about 14 million in EBITDA. We got it for the full year, roughly about 35 million. So we see most of that coming into the first half. We expect currencies to be in March in other cases.
that come through with a headwind in Gross margin that you don't expect to play out in the second half. And most of that usually will come away, came in Q1 and will be coming also in Q2. And then the third factor you have to put in is the hard investment in launches. So we're getting up for Nova 3 as one of our major launches, but there's other also
you'll be able to be able to see that the phasing is really heavy weighted towards the end of the second half of this year, the Q3 and Q4. So we look at Q1 as our lowest point, we expect maybe a one, one and a half point into Q improvement as we go into Q2. And then after that, we'll see the ramp up in the second half of the year.
Great, so I'll kind of address what you mentioned with underutilization, but to be clear, I think we have tremendous opportunities, but we have three challenges that I mentioned. Underutilization of our infrastructure, challenges in our supply chain, and gaps in our innovation, they're all kind of somewhat related.
But as you think about underutilization, think of the opportunity here, right? It's a very favorable competitive environment and fashion law itself has probably the most integrated and comprehensive portfolio or focus on this industry, touching all four areas in a meaningful way. But we have operations in virtually every country.
We have a massive supply chain and distribution center. We have relationships with almost every eye care professional in the world, and we've been doing it for 170 years.
Right, but we don't have any big blockbuster brands. We don't have, you know, big high margin products. We do it, we're kind of a workhorse, right? We do it with a big portfolio, lots of SKUs, lots of products and we do that well considering the complexity of that.
But that being said, the easiest thing to solve here is to put more sales through that channel. We can do a whole lot of additional costs by leveraging our distribution and sales relationships. And so clearly we want to do more. We want to sell more. And so that starts with first.
making the most of the things you have, right? So making sure we continue to launch great products like infuse or daily, Si-Hi, keep lumify, chugging along, keep preservation moving forward, right? Doing great things with the things that are already in the market. ILOs and the like, like, Inbista had great performance in the quarter in the ILOs segment. The second thing we do is we launch, well, right? Launch excellence. And so we have some important launches.
around the world in eye care and there are a lot of them and so we need to be really best in class at doing that to bring more product flow into our business. You're right the second part of that is trimming that infrastructure and we are going to take a hard look at that as well but to be fair it it was built over a long period of time and it is a huge competitive advantage.
small cuts around the corners, not necessarily the way to win. And so we have to do all those things. They're all equally important, but that's what I mean by solving the underutilization problem. Hopefully that gives you some clarity, Larry.
Thank you. Your next question for today is coming from Cecilia Furlong at Morgan Stanley . Emily.
talked about really what you're seeing from a demand side on the surgical or equipment side versus your capacity today to meet it and how you're thinking about that in your guidance range just in terms of being able to meet capacity to the balance of the year. Yeah no it's a great question and you know this is true
in a lot of our product lines, we can sell almost everything we make. And so if you think about Stolaris, we have a backorder of demand, if you will. Every machine we can make, we sell. And our issue there is a third party supplier of microchips. And so we're working incredibly hard.
a great example of the types of issues that we're dealing with when I say we're supply challenges around the world. And so if we had...
If we had most of those solved, and I think we will in time, we'd have a lot more confidence in our ability to put up a, you know, perhaps a stronger guidance as well. Anything else you'd add, too? No, I think so very well, Brent. And so, yeah, I would just add to say that when you think about the supply chain, one of the things I called out is that we are our team is working through.
trying to do what I refer to as spot buys and really trying to secure the inventory where they can. And that's why you will see sort of about that where you saw like the Q1 had a 7% increase or growth in the equipment, but we're still because of that spot buying that there's an elemental volatility of the how we're working through that demand.
Great, and if I could follow up as well, just some of the comments you talked about just around supporting product launches. Can you speak to what in 1Q was reflected around NOVO 3, how you're thinking about that to balance the year in terms of the investment side, and then really how we should think about launch cadence, whether it's reimbursement, getting on formularies, assuming a positive decision in June . Thank you for taking the question.
Yeah, so look, I think, you know, there was some expense code in the first quarter. I think it starts to ramp really in the second and continue into the year. You know, if the proof of dates at the end of June .
The real launch of this product will probably be early fall. It's hard to launch any product in any space in the dead of summer. You want doctors and ophthalmologists to be around. Think of this as more September , October for the full launch of the product.
given the PDUFA date. But you know, it's a huge opportunity for us. I don't know, do you want to talk anything else about it, Tim? No, I think that's true. It ramps up, like I said, it will ramp up in we're seeing it in the first half of the year, getting ready for June . But there will be also spend afterwards once you launch the team, the commercial team will continue to launch to be able to support the launch.
Our main focus right now is a successful launch, so I think we're bringing up whatever we need from an investment behind that launch to make sure it's successful. Great. Next question, Oprah. We have time for one last question, and it comes from Craig Bijoux at Bank of America.
focused right now is a successful launch so I think we're bringing whatever we need from an investment behind that launch to make sure it's successful. Great, next question, Apre. We have time for one last question and it comes from Craig Bijoux at Bank of America. Good morning guys, thanks for...
Thanks for taking the question. So wanted to start along with daily sci-hi, you know, prior management can highlighted premium IOLs as you know, a growth area or a potential for opportunity. So, you know, Brent, as you step in, would love to hear how you think Bausch and Lomb is positioned in that market specifically. And then the opportunities that you see there over the next couple of years. And then I do have a follow up on you, but yeah, so, you know, the, the, I.
The cataract market is a great market, right? It will continue to grow, it's a disease of aging. For many, it's inevitable. And the demographics are quite favorable over the next several years or decade or more. So it's an area that is important to the success of Bausch and Lomb and more specifically to our surgical business.
You know, when you look at our offerings there, we have a really strong set of offerings. And this is a great platform, particularly as we continue to expand the offering across that line.
And when you look at the premium side, you know, we just did a deal to bring in some new technology. Also, you know, we need to ramp our ability to manufacture and supply those lenses, but the early reception from customers is incredibly positive. So, I think we're moving in the right direction. We need to continue to focus on
creating tri-focus extended depth of focus lenses and the light. But the innovation is in process. I think there's a lot of innovation externally here as well. And so we've just got to keep our heads down and keep focused on it. The premium IELP portfolio was up about 32% in constant courtesy in the quarter. So I think that's a proof point that we can do it. We just need to drive it harder and with more product flips.
Sam, anything you'd add to that? Got it. Yep. I'm on eBeta. So, Brian , appreciate your comments on the profitable growth, leveraging the infrastructure. So I guess the question is, you know, I know you're not going to provide guidance for 24 or the out years. But, you know,
How should we think about your ability to drive margin expansion in those out years and relative to what the message has been?
over the last year, how should we think about, has that changed at all? Yeah, well, I mean, I can tell you, as you guys get reacquainted with me at this business, I'm pretty much a straight shooter about this stuff. Well, I think we have a massive opportunity for out your margin expansion.
That being said, 50 days in, I wanted to make sure we had good guidance for this year. So I'm not sure I'm ready to give you for next year just yet. Give me a little bit more time to get my feet on the ground. That being said, the easiest way to think about it and the way I really look at this is, all the massive investment in building out infrastructure has been made.
we have a presence everywhere. We have a global field force across four different unique businesses. We have relationships around the world with every ECP imaginable. So the significant investments were made. The question is, how do you put more through this channel that we call Bachelor in Law?
to get expansion, right? And so that's the key. We gotta get more product flow through this. And if you do that, margin should expand very quickly and very naturally. And so to me, that's the massive opportunity. And frankly, I guess it's our last question. So it's a good point to end on. That's what makes me so excited about being here. I see this massive opportunity.
to grow this business profitably, right, with all the things you want to see. It may take us a year or so, maybe longer. I can't, you know, 50 days in, I can't put an exact date on it. But the opportunity is there, and this is such a dynamic industry. We'll have multiple choices on how to seize those opportunities. We just have to do it smartly.
Thanks, Jess. Okay. Well, I believe operator that concludes the remarks or the Q&A. I would just add a closing comment of thanking everyone for joining us. I'm super excited to be here. I think as I just mentioned to Craig, the opportunities are real and exciting. But just give me some time to get my feet on the ground and we will be.