Q4 2023 Bausch + Lomb Corp Earnings Call

[music].

Operator: Good morning, and welcome to Bausch and Lomb's fourth quarter and full year 2023 earnings call. All participants will be in listen-only mode.

Good morning, and welcome to the Bausch and Lomb fourth quarter and full year 2023 earnings call all.

All participants will be in listen only mode.

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Please note. This event is being recorded I would now like to turn the conference over to George Good Koski, Vice President of Investor Relations and business insights.

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George Gutkowski: Thank you. Good morning everyone, and welcome to our fourth quarter and full year 2023 financial results conference call. Participating on today's call are Chairman and Chief Executive Officer, Mr. Brent Saunders, and Chief Financial Officer, Mr. Sam Aldosuke. In addition to this live webcast, a copy of today's live presentation and a replay of this conference call will be available on our website under the investor relations section.

Thank you good morning, everyone and welcome to our fourth quarter and full year 2023 financial results conference call participating on today's call are chairman and Chief Executive Officer, Mr. Brent Saunders and Chief Financial Officer, Mr. Sam I'll just suki.

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.

George Gutkowski: Before we begin, I would like to remind you that our presentation today contains forward-looking information. We would ask that you take a moment to read the forward-looking legend at the beginning of our presentation as it contains important information. This presentation contains non-GAAP financial measures and ratios. For more information about these measures and ratios, please refer to slide 1 of the presentation. Non-GAAP reconciliations can be found in the appendix to the presentation posted on our website. Finally, the financial guidance in this presentation is effective only as of today. It is our policy to generally not update guidance until the following quarter unless required by law and not to update or affirm guidance other than through broadly disseminated public disclosure. With that, it's my pleasure to turn the call over to Brandon.

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 one of the presentation non.

non-GAAP reconciliations 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 not to update or affirm guidance other than through broadly disseminated public disclosure with that it's my pleasure to turn the call over to Brent.

Brandon: Thank you, George, and thank you, everyone, for joining us today. We're going to follow a familiar format. I'll cover highlights from the fourth quarter and full year, and Sam will dive deeper on financials and provide 2024 guidance. I'll close by reviewing growth drivers, and then we'll take your questions. The first of our three key takeaways speaks for itself.

Thank you George and thank you everyone for joining us today.

We're going to follow our familiar format I'll cover highlights from the fourth quarter and full year.

And Sam will dive deeper on financials and provide 2020 for guidance.

I'll close by reviewing growth drivers and then we'll take your questions.

The first of our three key takeaways speaks for itself.

Brandon: Revenue growth in 2023, and in the fourth quarter in particular, exceeded our expectations and set the tone for 2024. Double-digit growth is always impressive, but even more so when you consider how we got there. Our quality of growth is what helps set us apart from others.

Revenue growth in 2023 and in the fourth quarter in particular exceeded our expectations and set the tone for 2024.

Double digit growth is always impressive but.

But even more so when you consider how we got there are.

Our quality of growth is what helps set us apart from others and that will be enhanced as we entered one of the most active watch years in our company's history.

Brandon: And that will be enhanced as we've entered one of the most active launch years in our company's history. You've heard me talk about selling and operational excellence quite a bit. It's central to any discussion I have on company strategy and will dictate our success going forward. So, here's the good news.

You've heard me talk about selling and operational excellence quite a bit.

It's central to any discussion I have on company strategy and will dictate our success going forward.

Here's the good news, we're making solid progress in both areas.

Brandon: We're making solid progress in both areas. Our dry eye franchise is a perfect example. The combined Maibo and Zydro Salesforce is the largest, and I would argue the most sophisticated, in iHealth.

Our dry eye franchise is a perfect example.

The combined <unk> and <unk> sales force is the largest and I would argue most sophisticated and IHOP.

Brandon: And when it comes to operations, our mindset hasn't changed. We're taking a methodical approach to addressing the challenges we face, with the expectation that our supply chain will become a competitive advantage in time. Hasty climbers have sudden falls, as the saying goes, which means we won't lose sight of our long-term goals for short-term gain.

And when it comes to operations, our mindset hasn't changed we're taking a methodical approach to addressing the challenges we face with the expectation that our supply chain will become a competitive advantage in time.

Hey, Steve climbers had southern false as the saying goes which means we won't lose sight of our long term goals for short term gains.

Brandon: The last takeaway is focused on innovation, which has been the driving force throughout Bausch and Lomb's 170-year history. We've made no secret of our desire to put innovation at the forefront once again, and we're doing that in two ways.

The last takeaway is focused on innovation, which has been the driving force throughout Bausch and Lomb is a 170 year history.

We've made no secret of our desire to put innovation at the forefront once again.

And we're doing that in two ways.

Brandon: First, we're expanding our internal R&D capabilities across our entire portfolio. From prescriptions to IOLs, we can and should explore all possibilities when it comes to building on the success of existing brands. Second, we're reloading our pipeline with a focus on areas of unmet need. Our reinvigorated business development function will play a key role there as we cast a wide net for potential game-changers. The roadmap slide has become a fixture in Earnings presentations.

First we're expanding our internal R&D capabilities across our entire portfolio.

From prescriptions to I O wells, we can and should explore all possibilities when it comes to building on the success of existing brands.

Second we're reloading our pipeline with a focus on areas of unmet need.

A reinvigorated business development function will play a key role there as we cast a wide net for potential game changers.

The roadmap slide has become a fixture and earnings presentations and the roadmap itself continues to guide our strategic decision, making as we unlock the company's full potential.

Brandon: And the roadmap itself continues to guide our strategic decision-making as we unlock the company's full potential in a thoughtful and phased approach. Each quarter, our progress indicator shifts steadily to the right as we move closer to phase two. Let's take a look at how we delivered against phase one goals in 2023, a report card of sorts with an understanding that I'm a tough grader. We've already touched on top-line performance last year, but I'm happy to bring it up every chance I get.

Thoughtful and phased approach.

Each quarter, our progress indicators just steadily to the right as we move closer to phase two.

Let's take a look at how we delivered against phase one goals in 2023.

A report card of sorts with an understanding that I'm a tough grader.

We've already touched on top line performance last year, but I'm happy to bring it up every chance I get.

Brandon: 12% constant currency revenue growth would earn the highest grade on its own, but again, I'm more impressed with how we did. When it comes to selling excellence, we made significant strides in 2023 with a focus on high priority areas like dry ice. But with the number of planned launches in 2024, there's even more of an urgency to build on that work with a balanced approach across all categories. Business development is a function that matured in short order last year.

<unk> percent constant currency revenue growth what are the highest grade on its own but again I am more impressed with how we did it.

When it comes to sell the excellence, we made significant strides in 2023 with a focus on high priority areas like dry eye.

But with the number of planned launches in 2024, there's even more of an urgency to build on that work with a balanced approach across all categories.

Business development is a function that has matured and short order of last year.

Brandon: The most obvious example is our acquisition of Novartis' front-of-the-eye asset, in addition to our acquisition of Blink eyedrops from Johnson & Johnson. Equally as important, our growing business development team has laid the groundwork for strategic dealmaking this year and beyond, with an eye toward sustainable growth. I'll group the last two items together, while they appear to have the lowest mark, a single checkmark. It's really more of an incomplete or too new to rate.

Obvious example is our acquisition of Nevada is front of the eye assets. In addition to our acquisition of Black eye drops from Johnson <unk> Johnson.

Equally as important the growing business development team has laid the groundwork for strategic deal, making this year and beyond with an eye towards sustainable growth.

Our group the last two items together, while they appear to have the lowest mark a single check Mark.

It's really more of an incomplete or too new to rate.

Brandon: Building leading digital capabilities in core areas and enhancing agility and innovation are broad organizational competencies that require discipline and time. That said, progress in those areas introducing the roadmap has certainly had an impact on margin expansion. We've covered revenue; my only add there would be that this is our third straight quarter of more than $1 billion in sales, our new norm. When it comes to individual segments, there is no lag.

Building, leading digital capabilities in core areas and enhancing our agility and innovation are broad organizational competencies that required disciplined and time.

That said progress in those areas introducing the roadmap has certainly had an impact on margin expansion.

We've covered revenue might only add there would be that this is our third straight quarter.

The $1 billion in sales our new normal.

When it comes to individual segments. There is no library.

Brandon: In fact, I only see opportunity as both vision care and surgical in particular felt the effects of operational challenges. Some self-inflicted, others out of our control, yet both delivered impressive year-over-year growth. Now let's address individual product performance, and I'll stick with the opportunity theme. Despite an average growth of more than 25% among the key franchises highlighted, they haven't realized their full potential, not by a long shot. Additional geographic expansion, new ways of reaching customers, including direct consumer engagement, and a persistent focus on providing the best customer experience possible will propel these products and others to new heights. Before I turn things over to Sam, I'd like to thank my 13,000 colleagues for their performance in 2023. And it's not just execution.

I only see opportunity as both vision care and surgical in particular felt the effects of operational challenges some self inflicted others out of our control yeah.

Both delivered impressive year over year growth.

Now, let's address individual product performance and I'll stick with the opportunity you see.

Despite an average growth of more than 25% among the key franchises highlighted.

They haven't realized their full potential not by a long shot.

Additional trade graphic expansion, new ways of reaching customers, including direct to consumer engagement and a persistent focus on providing the best customer experience possible will propel these products and others to new Heights.

Before I turn things over to Sam I'd like to thank my 13000 colleagues for their performance in 2023.

And it's not just execution I'm grateful for.

Brandon: I'm grateful for their belief in our potential and commitment to doing what it takes to get there.

Its their belief in our potential and commitment to doing what it takes to get there.

Sam.

Sam Aldosuke: Thank you, Brent, and good morning, everyone. Before we begin, please note that most of my comments today will be focused on growth expressed on a constant currency basis. Turning now to our financial results on slide. In the fourth quarter, we once again saw strong revenue growth across each of our segments and key product franchises, and we were pleased with how we ended the year and our performance for the full year in 2023. Our business demonstrated growth in revenue and adjusted EBITDA, with revenue exceeding our full-year goal. We are excited by the momentum we have heading into 2024, which, as Ben mentioned, we expect will be one of the most active launch years in our history. Total company revenue of $1.173 billion for Q4 reflects growth of 19% on a constant currency basis. For the full year, total company revenue of $4.146 billion reflects growth of 12% on a constant currency basis. This was the first full quarter following the launch of Maiba and the closing of the ZYDRA Act.

Thank you Brent and good morning, everyone.

Before we begin please note that most of my comments today will be focused on growth expressed on a constant currency basis.

Turning now to our financial results on slide eight.

In the fourth quarter, we once again saw strong revenue growth across each of our segments and key product franchises.

We're pleased with how we ended the year and our performance for the full year in 2023.

Our business demonstrated growth in revenue and adjusted EBITDA with revenue exceeding our full year guidance.

We are excited by the momentum we have heading into 2024.

Which as Brad mentioned, we expect will be one of the most active launch years in our history.

Total company revenue of 1.1 dollars 73 billion for Q4 reflects growth of 19% on a constant currency basis.

For the full year total company revenue of 4.146 billion reflects growth of 12% on a constant currency basis.

This was the first full quarter following the launch of Michael and the closing of the <unk> acquisition.

Sam Aldosuke: I'll be discussing the impact of these key dry eye franchises more throughout the, but the headline is that we're highly encouraged by what we're seeing so far. Touching briefly on supply, we have continued to make improvements to strengthen our supply chain in 2023, and we're pleased with the progress. While there's still work to be done, we feel confident about the path forward. As Brent will discuss, we expect to continue our efforts to implement efficiency measures throughout 2021, which we expect will be an important factor to drive sustainable marginal expansion. About a 13-hour currency mix moderated in the fourth quarter and did not have a material impact on the results for the quarter.

I'll be discussing the impact of these key dry eye franchises more throughout the call.

But the headline is that we're highly encouraged by what we're seeing so far.

Touching briefly on supply we are continuing to make improvements the strength of our supply chain in 2023.

We're pleased with the progress.

While there's still work to be done we feel confident about the path forward.

As Brent will discuss we expect to continue our efforts to implement efficiency measures throughout 'twenty 'twenty, four which we expect will be an important factor to drive sustainable margin expansion.

But 13, our currency mix moderated in the fourth quarter and did not have a material impact on the results for the quarter.

Sam Aldosuke: For the full year, currency was a headwind of $68 million to revenue and 51 million to adjust to EBIT. While the currency headwinds are not as sizable as we saw last time, the impact on our results continues to be driven by our geographic focus and the CurrencyMix. Now let's discuss the results in each of our segments. VisionCare's fourth quarter revenue of $662 million increased by 8% on a constant currency basis, driven by growth in both the consumer and launch portfolio. For the full year, VisionCare revenue was $2.543 billion, and it increased by 10% on a constant currency basis.

For the full year currency was a headwind of $68 million to revenue and.

And 51 million to adjusted EBITDA.

While the currency headwinds are not as sizable as we saw last year.

The impact on our results continues to be driven by our geographic footprint and the currency mix.

Now, let's discuss the results in each of our segments.

Vision care fourth quarter revenue of $662 million increased by 8% on a constant currency basis.

Driven by growth in both the consumer and <unk> portfolios.

For the full year vision care revenue was 2.5 dollars 43 billion and increased by 10% on a constant currency basis.

Sam Aldosuke: The consumer business again demonstrated strong performance, both in the U.S. and internationally, with growth of 11% on a constant currency basis in Q4. We continue to see growth across our key franchises, including iVitamins, which grew by 7% in the quarter, and Lumify, which grew by 17% in the quarter. Our consumer dry eye portfolio delivered 88 million revenue in the quarter, representing 12% organic revenue. Reported revenue from daily sight high lenses grew by 31% in the quarter.

The consumer business again demonstrated strong performance both in the U S and internationally.

With growth of 11% on a constant currency basis in Q4.

We continue to see growth across our key franchises, including eye vitamins, which grew by 7% in the quarter.

<unk>, which grew by 17% in the quarter.

Our consumer dry eye portfolio delivered 88 million revenue in the quarter, representing 12% organic revenue growth.

Reported revenue from daily Si Hy lenses grew by 31% in the quarter.

As we discussed in our last earnings call. We recently extended a daily Si Hy family with the launch of the multifocal lens in the U S.

Sam Aldosuke: As we discussed in our last earnings call, we recently expanded the Dehli-Saihai family with the launch of the multifocal lens in the U.S., and the rollout of Daily Thai High in China, will continue to see strong demand globally in the daytime high category. However, revenue in the lens portfolio was negatively impacted throughout 2023 by disruptions at our Lynchburg distribution facility, including the impact of this disruption. Global Lens Constant Currency Revenue Growth was 9% in the quarter and 10% for the full year.

And the rollout of daily Si Hy in China.

We'll continue to see strong demand globally in today's high high category.

Revenue in the lines portfolio was negatively impacted throughout 2023 by disruptions at our Lynchburg distribution facility.

Excluding the impact of these disruptions global length constant currency revenue growth was 9% in the quarter and 10% for the full year.

Sam Aldosuke: Moving now to the surgical segment. Fourth quarter revenue was $204 million, an increase of 7% on a constant currency basis, for the full-year growth was also 7% on a. The consumables portfolio, our largest category in the surgical business, grew in the quarter by 7% on a constant currency basis. Media driven by Cadillac.

Moving now to the surgical segment.

Fourth quarter revenue was $204 million, an increase of 7% on a constant currency basis.

For the full year growth was also 7% on a constant currency basis.

The consumables portfolio, our largest category in the surgical business grew in the quarter by 7% on a constant currency basis.

Media driven by cataract packs.

Sam Aldosuke: The plantables were flat for the quarter on a contract currency basis. Our premium IOL portfolio continues to expand and was up 30% in concert currency in the quarter. As I mentioned last quarter, our standard IC1 IOL continues to be impacted by the product recall issued by our partner in 2023, which offsets the strong growth in our premium IOL portfolio. Including the impact of IC1, the implantables portfolio grew 12% in constant currency in Q4. Revenue from equipment was up 13% versus Q4'22 on a constant currency basis. May be driven by Solaris system failure

Implantables were flat for the quarter on a constant currency basis.

Our premium I O portfolio continues to expand and was up 30% in constant currency in the quarter.

As I mentioned last quarter, our standard IC, one I O L continues to be impacted by the product recall issue by our partner in 2020 three.

Which offset the strong growth in our premium I O portfolio.

Excluding the impact of ICU won the Implantables portfolio grew 12% in constant currency in Q4.

Revenue from our corporate was up 13% versus Q4 'twenty two on it.

Constant currency basis, mainly driven by solar system sales.

Sam Aldosuke: We have recently launched a number of products in our surgical business and will continue to launch new products in 2024 and beyond, including the higher margin, premium end of the market. We intend to continue to invest behind these launches, as this is an important area to drive value and margin expansion. Lastly, revenue of the pharma segment was $307 million for the quarter, which represents constant currency growth of 66%. For the full year, revenue in the pharma segment was $836 million, which represents constant currency growth of 24%.

We have recently launched a number of products in our surgical business and we'll continue to launch new products in 2024 and beyond.

Including the higher margin premium end of the market.

We intend to continue to invest behind these launches.

This is an important area to drive value and margin expansion.

Lastly revenue the pharma segment was $307 million for the quarter.

Which represents constant currency growth of 66%.

For the full year revenue in the pharma segment was 836 million, which represents constant currency growth of 24%.

Sam Aldosuke: Zadra delivered 106 million revenue in the fourth quarter, exceeding our previous guidance range of 80 to 90 million. Following the relaunch of ZYDR and Q4, we saw TRXs stabilize throughout the quarter. Additionally, in the quarter, we had a one-time benefit of $8 million due to lower-than-expected rebate charges for Zyder.

<unk> delivered 106 million revenue in the fourth quarter exceeding our previous guidance range of $80 million to $90 million.

The relaunch of XI during Q4, we sold T. Rx has stabilized throughout the quarter.

Additionally, in the quarter, we had a onetime benefit of $8 million due to lower than expected rebate charges for xyrem.

Sam Aldosuke: As I said before, Zadar will continue to be a primary focus for us in 2020. To date, we're also very pleased with what we have seen from My Belonging. The early performance and feedback from eye care professionals have been incredibly positive, and we're committed to continuing to invest behind it. Together, Zaida and I will provide us with clear leadership and fresh ideas.

As I said before the Idaho continues to be a primary focus for us in 2024.

To date, we're also very pleased with what we have seen from the micra launch.

The early performance and feedback from eye care professionals have been incredibly positive.

We're committed to continuing to invest behind this launch.

Together, <unk> and Mike will provide us with clear leadership in dry eye disease, and we are excited about reaching their full future potential.

Sam Aldosuke: And we're excited about reaching their full future. Now, let me walk through some of the key non-gap lines. Adjusted gross margin for the fourth quarter was 62.5%, which was up 470 basis points compared to Q4-22. For the full year, adjusted gross margin was 61%, which was up 130 basis points compared to last year. The gross margin improvement was mainly driven by favorable product mix, including Xylox. However, this was balanced by pressure on the gross margin, driven by the higher inventory cost in our surgical... In the fourth quarter, we invested $79 million in adjusted R&D, or approximately 7% of revenue. 4th Quarter Adjusted Eva, that was $231 million, which represents 28% growth versus the fourth quarter of 2020. For the full year, I just did ibadah for 738.

Now, let me walk through some of the key non-GAAP line items.

Adjusted gross margin for the fourth quarter was 62, 5%, which was up 470 basis points compared to Q4 'twenty two.

For the full year adjusted gross margin was 61%.

Which was up 130 basis points compared to last year.

The gross margin improvement was mainly driven by favorable product mix, including <unk> either.

This was balanced by pressure on the gross margin driven by the higher inventory cost in our surgical business.

In the fourth quarter, we invested 79 million and adjusted R&D or approximately 7% of revenue.

Fourth quarter, adjusted EBITDA was $231 million.

Which represents 28% growth versus the fourth quarter of 'twenty two.

For the full year adjusted EBITDA was $738 million.

Sam Aldosuke: Full year 2023 at Jussie E Bazaar was negatively impacted by currency headwinds of $51 million, and Lerchberg-related disruptions of 30 minutes. Including the impact of currency, adjusted EBITDA grew 10% compared to last year. Net interest expense for the quarter was approximately $96 million.

Full year 2023, adjusted EBITDA was negatively impacted by currency headwinds of $51 million.

In Lynchburg related disruptions of $30 million.

Excluding the impact of currency adjusted EBITDA grew 10% compared to last year.

Net interest expense for the quarter was approximately $96 million and $252 million for the full year, excluding the onetime upfront financing cost directly related to the <unk> acquisition.

Sam Aldosuke: $252 million for the full year, including the one-time upfront financial costs directly related to ZYDRA. The full year 2023 adjusted tax rate was 4%, which is slightly lower than our previous guidance of approximately 60% of the population. The lower tax rate was mainly driven by the geographic mix of our customers. Adjusted EPS for the core was 24 cents.

The full year 2020, adjusted tax rate was 4%.

Which is slightly lower than our previous guidance of approximately 6%.

The lower tax rate was mainly driven by the geographic mix of our earnings.

Adjusted EPS for the quarter was 24 cents.

Sam Aldosuke: $0.73 for the full year 2023. Justin Cashflow from Operations was $28 million in the fourth quarter, and CapEx was $84 million. Turning now to our 2024 guidance on slide 15. We're saying 2024 revenue guidance in a range of $4.6 billion to $4.7 billion. This reflects expected constant currency growth of approximately 12 to 14%.

And 73 for the full year 2023.

Adjusted cash flow from operations was 28 million in the fourth quarter and Capex was $84 million.

Turning now to our 2024 guidance on slide 15.

We're saying 24 revenue guidance at a range of $4 6 billion to $4 7 billion.

This reflects expected constant currency growth of approximately 12% to 14%.

Sam Aldosuke: We expect the fundamentals of the eye care market to remain strong, and we expect each of our segments to deliver growth in 2024. Along with solid momentum in our base business, recent and upcoming product launches will be an important driver. Following the relaunch of ZYDRA in the fourth quarter, we expect to build on the performance throughout 2024. For the full year 2024, we expect ZYDRA to generate approximately 400 million dollars. As I noted earlier... The micro-launch is off to a great start. Myva has been the strongest launch in dry eye disease in recent years.

We expect the fundamentals of the IPO market to remain strong.

We expect each of our segments to deliver growth in 2024.

Along with solid momentum in our base business, the recent and upcoming product launches will be an important driver.

Following the relaunch of <unk> during the fourth quarter.

We expect to build on that performance throughout 2024.

For the full year 2024, we expect <unk> to generate approximately 400 million in revenue.

As I noted earlier.

The micro launches off to a great start.

Michael has been the strongest launch in dry eye disease in recent years.

Sam Aldosuke: We expect the positive momentum to continue in 2020, and we plan to invest to position the brand to reach its full potential. We expect MIBO to contribute approximately $95 million of revenue in 2020. We've continued to see currency headwinds moderate. Based on current exchange rates, we estimate currency headwinds to have a negative impact on revenue of approximately $40 million for the full year.

We expect the positive momentum to continue in 'twenty 'twenty four and.

We plan to invest to position the brand to reach its full potential.

We expect <unk> to contribute approximately $95 million of revenue in 2024.

We've continued to see currency headwinds moderate.

Based on current exchange rates, we estimate currency headwinds to have a negative impact on revenue of approximately $40 million for the full year.

Sam Aldosuke: Shifting to Adjusted EBITDA. We are setting our Adjusted EBITDA guidance for 2024 in a range of $840 million to $819, at the midpoint of the guidance. This reflects margin expansion of approximately 80 basis points compared to full year 2020. The Margin Expansion is driven by a number of things, including our strategy SHIFT-MIX to high-margin products, our efforts to continue to drive operational excellence, and our focus on maintaining cost justice. As we continue to make investments to fully capture the value potential ahead of us, we expect to sustainably build on the margin expansion in 2024 over multiple years with the growth of our recent and upcoming launches. I have told you in the past, and I will continue to remind you, that there is natural seasonality in our business.

Shifting to adjusted EBITDA.

We are setting our adjusted EBITDA guidance for 'twenty 'twenty four to a range of $840 million to $819 million.

At the midpoint of that guidance range. This reflects margin expansion of approximately 80 basis points compared to full year 2023.

The margin expansion is driven by a number of factors, including our strategy shift mix to high margin products.

Our efforts to continue to drive operational excellence and our focus on maintaining cost discipline.

As we continue to make investments to fully capture the value potential ahead of us we expect to sustainably build on the margin expansion in 2024 over multiple years with the growth of our recent and upcoming launches.

I told you in the past, we'll continue to remind you that there is natural seasonality in our business we.

Sam Aldosuke: We expect 2024 phasing to follow a similar trend as we saw in 2020, with the first quarter being the lowest, and the fourth quarter being the highest, as we continue to drive pipeline innovation. We may enter into collaborations with external partners. It should be noted that our Adjusted EBITDA guidance does not reflect any one-time upfront payments that may be made as part of such arrangements, in terms of the other key assumptions underlying our guidance.

We expect 'twenty 'twenty four phasing to follow a similar trend as we saw in 2023.

With the first quarter being the lowest and the fourth quarter being the highest.

As we continue to drive pipeline innovation.

We may enter into collaborations with external partners. It should be noted that our adjusted EBITDA guidance does not reflect any onetime upfront payments that may be made as part of such arrangements.

In terms of the other key assumptions underlying our guidance.

Sam Aldosuke: We expect gross margin to be approximately 62%. We anticipate investments in R&D to be approximately 78% of revenue, and interest expense to be approximately $385 million for the full year. Our adjusted tax rate is expected to be roughly 15%, which takes into consideration our tax geographic mix and the Pillar 2 minimum tax. Foliar capex is expected to be approximately 250 mm.

We expect gross margin to be approximately 62%.

We anticipated investments in R&D to be approximately 78% of revenue and interest expense to be approximately $385 million for the full year.

Our adjusted tax rate is expected to be roughly 15%, which takes into consideration our tax geographic mix and the pillar two mineral tax rules.

Full year Capex is expected to be approximately $250 million.

Sam Aldosuke: We are pleased with our financial performance in 2023 and the solid momentum entering 2024, as we continue to drive growth in our current portfolio and the launch of new products. We have a clear strategy to deliver strong growth and drive sustainable margin, and now I'll turn the call back. Thanks, Sam.

We are pleased with our financial performance in 2023, and the solid momentum entering 2024 as.

As we continue to drive growth in our current portfolio.

And the launch of new products, we have a clear strategy to deliver strong growth and drive sustainable margin expansion.

And now I'll turn the call back to Brent.

Thanks, Sam let's focus on what we need to do to win in 2024.

Brandon: Let's focus on what we need to do to win in 2024. Recent and upcoming launches have us positioned for success in each of our businesses. But the only way we fully take advantage of those opportunities is by reaching more customers and consumers and separating ourselves from the pack with how we sell. As Sam outlined, we're off to a great start with MyVote, eye care professionals are prescribing it, and consumers are coming back for more. Post-launch excitement hasn't waned; in fact, it continues to build. We need to harness that momentum in 2024 and ensure MIBO becomes the category-altering medication it has the potential to be, which means continuing to invest in sales and marketing. In concert with our Maibo push, we need to not only keep working to restore Zydric to its place as a category leader but unlock its full potential. It's important to remember that ZYDRA's sales and marketing operation we inherited was not in the same condition when at its peak. I'm a dog lover, so I'll use an abandoned pet analogy.

Recent and upcoming launches have us positioned for success in each of our businesses.

But the only way we fully take advantage of those opportunities is by reaching more customers and consumers and separating ourselves from the pack with how we sell.

As Sam outlined we're off to a great start with my bulk eyecare professionals are prescribing and consumers are coming back for more.

Post launch excitement hasn't waned and <unk>.

That it continues to build.

We need to harness that momentum in 2024 and ensure my boat becomes the category altering medication. It has the potential to be.

Which means continuing to invest in sales and marketing and.

In concert with our Mimo push we need to not only keep working to restore <unk> to its place as a category leader.

But unlock its full potential.

It is important to remember that <unk> sales and marketing operation. We inherited was not in the same condition when at its peak.

On the dog lever, so I'll use an abandoned pet analogy, we took it in in our nursing it back to health. So it can thrive once again.

Brandon: We took it in and are nursing it back to health so it can thrive once again. They also pointed to daily sky-high success. There's growing demand for these lenses, which is why we're expanding our offer, including the launch of a multifocal in the U.S. Demand is also a theme in dry eye, as we've made clear. And while the focus is often on prescription medications, we've built a formidable stable of OTC dry eye brands on a global scale, most notably Artelite.

Sam also pointed to daily Si Hy success.

There is growing demand for these lenses, which is why we're expanding our offerings, including the launch of the multifocal in the U S.

Demand is also a theme in dry eye as we've made clear.

And while the focus is often on prescription medications, we built a formidable stable OTC dry eye brands on a global scale, most notably Ottawa.

Brandon: That stable expanded with the acquisition of Blink, which we expect will be a steady and growing contributor for years to come. Finally, premium ILLs continue to represent our biggest opportunity in surgical, where sales are influenced by relationships first and foremost. As we prepare to push deeper into higher-margin offerings, including the expansion of our InVista product line, it's incumbent on our sales force to turn their deep relationships into conversion. Last quarter, we stressed a practical approach to the supply chain. That hasn't changed and won't change.

That stable expanded with the acquisition of Blake, which we expect will be a steady and growing contributor for years to come.

Finally premium <unk> continue to represent our biggest opportunity in surgical.

Where sales are influenced by relationships first and foremost.

As we prepare to push deeper into higher margin offerings, including expansion of our ambitious product line.

Incumbent on our Salesforce to turn their deep relationships into conversions.

Last quarter, we stressed a practical approach to supply chain that hasnt changed and wall <unk>.

Brandon: What has changed is my comfort level and how the challenges we faced are being addressed. We brought Al Waterhouse to Bausch & Lomb with a simple, yet incredibly complex remark: take a full accounting of our global manufacturing and distribution network, put a comprehensive plan in place to turn that network into a competitive advantage, and execute with the understanding that we won't cut corners, ever. It's early days, but I'm very pleased with the initial return, and more importantly, the path forward. In 2024, our focus will continue to be on reducing complexity while streamlining how we put product in the hands of customers and consumers, with DTC efforts in China being the most prominent example. We will also continue to digitize operations using lessons learned from our Distribution Center in Letchburg, Virginia. Remediation is near complete, and we've turned our attention to gaining efficiency over the next few quarters. Optimizing our supply chain will take time.

What has changed is my comfort level and how the challenges we faced are being addressed.

We brought al Waterhouse, the Bausch and lomb with a simple yet incredibly complex Freeman.

Take a full accounting of our global manufacturing and distribution network.

Put a comprehensive plan in place to turn that network into a competitive advantage and execute with the understanding that we would cut corners ever.

It's early days, but I'm very pleased with the initial returns and more importantly, the path forward in <unk>.

2024, our focus will continue to be on reducing complexity, while streamlining how we put product in the hands of customers and consumers with DTC efforts in China being the most prominent example.

We'll also continue to digitize operations using lessons learned from our distribution center in electric Burke, Virginia.

Remediation is near complete and we've turned our attention to gaining efficiency over the next few quarters.

Optimizing our supply chain will take time.

Brandon: Incremental improvements will be reflected in margin expansion, and long-term success will be foundational for a future-proof Bausch & Lomb. Talk of R&D investment is often taken with a grain of salt, and for good reason. Some companies invest in R&D because they think they have to or need to hit a self-imposed minimum.

Incremental improvements will be reflected in margin expansion.

And long term success will be foundational core of future proof fashion law.

Talk of R&D investment is often taken with a grain of salt and for good reason.

Some companies invest because they think they have to or need to hit our self imposed minimal.

Brandon: We invest because innovation has been the lifeblood of Bausch and Lomb for 170 years. In 2023, we invested more than $300 million in a new look, older and better R&D department. And we've infused it with talent. In the last two years, we grew the team by more than a third, including hiring top scientists who want to be part of what we're building. But money and talent only get you so far.

We invest because innovation has been the lifeblood of Bausch and Lomb for 170 years.

In 2023, we invested more than $300 million.

And a new book older at better R&D Department.

And we've infused it with talent in the last two years, we grew the team by more than a third.

Including hiring top scientists, who want to be part of what we're building here.

But money and talent only get you so far.

Brandon: We've refocused the team to better support a reloaded, robust pipeline that cuts across every business, while in-house capabilities are non-negotiable. We can't do it all ourselves. As previously mentioned, our business development team has been working hand-in-hand with R&D leadership to identify and vet potential products and therapies that would benefit from our scale and knowledge. As long as we keep adding products, we'll keep showcasing our launch slide. There's a nod to what we accomplished in 2020 and a preview of what's to come this year. This view best represents the opportunity in front of us. Innovation provides new opportunities. Operational and selling excellence leads to revenue growth and margin expansion, Sam highlighted. It's not a terribly complicated formula, but one that requires a relentless focus on doing the small things incredibly well.

We've refocused the team to better support our reloaded robust pipeline that cuts across every business.

While in house capabilities are non negotiable, we can't do it all ourselves as previously mentioned our business development team has been working hand in hand, with R&D leadership to identify and vet potential products and therapies that would benefit from our scale and knowhow.

As long as we keep adding products will keep showcasing our launch slide theres, a nod to what we accomplished in 2023 and a preview of what's to come this year.

This view best represents the opportunity in front of us.

Innovation provides new offerings operational and sell excellence leads to revenue growth and margin expansion Sam highlighted.

It's not a terribly complicated formula, but one that requires a relentless focus on doing the small things incredibly well.

Brandon: In my regular conversations with eye care professionals and visits to industry meetings, there are two consistent themes around Bausch and Lomb: excitement and anticipation. That's echoed within our company wall. My travels take me all over the world, and from Berlin to Bridgewater, colleagues are anxious to make 2024 a defining year in our company's history. I look forward to keeping you updated on our progress. One quick note, I'm still on the mend from rotator cuff surgery just a few days ago, so take it easy on me in the Q&A.

In my regular conversations with eyecare professionals and visits to industry meetings. There are two consistent themes around Boston la excitement and anticipation.

That's echoed within our company walls. My travels take me all over the globe and from Berlin to Bridgewater colleagues are anxious to make 2024 and defining year in our company's history.

I look forward to keeping you updated on our progress.

One quick note I am still on the man from rotator cuff surgery, just a few days ago. So take it easy on me in the Q&A.

Operator: Operator, let's open the line for questions. We will now begin. Joanne Wuensch, Douglas Miehm, Matthew Miksic, Douglas Miehm, Patrick Wood, Bausch, star, then one on your. If you are using a.

Operator, let's open the line for questions.

Certainly we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.

Matthew Stephan Miksic: Pick up your handset before. To withdraw your question, please press star 1. At this time, we will pause momentarily to assemble our... First question for... WISCAR. Hey, good morning. And thanks so much for taking the questions. And congrats on, you know, a really strong finish year to 2023. One question, if I could, on Zydra. I think you did a pretty great job last year of sort of framing out expectations for Zydra and Maibo and how they would kind of interplay and ended up finishing, you know, as you mentioned, a bit stronger out of the gate. Could you maybe talk a little bit about how we should maybe recalibrate the trajectory of what we're expecting from Zydra, you know, assuming you're still going to invest behind it And I have one follow-up. Sure. Thanks, Matt.

If you are using a speakerphone 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.

Your first question for today is coming from Matt <unk> with Barclays.

Hey, good morning, and thanks, so much for taking the questions.

And congrats on a really strong finish to 2023.

And congrats on a really strong finish to 2023.

Hi, Brian one question, if I could on entendre.

Thank you Dave.

Pretty great job last year of sort of framing out expectations for.

<unk> Mimo and how they would kind of interplay and ended up finishing as you mentioned a bit stronger out of the gate.

Could you maybe talk a little bit about how the.

And we should maybe recalibrate or the trajectory of what we were expecting from <unk>, assuming you're still going to invest behind it and as you mentioned, but is.

Or is that a.

Is that just a quarter or two ahead of plan here or is there some kind of ups and downs, we should expect in the coming quarters and I have.

One follow up.

Sure. Thanks, Matt.

Brandon: So look, Zydra is an incredibly important focus for us in 24. You know, I have to give a nod to our sales team in the fourth quarter, right? We got a product that had been kind of left behind. And what's interesting, when you look at the fourth quarter, there's some seasonality there. The fourth quarter is always the best for chronic, you know, prescription, you know, demand because of deductibles and the like. But when you look at what happened, in the fourth quarter, we brought the Novartis sales team in, and made them a Bausch & Lomb sales team. And they really, we just focused on basic execution. And you saw what happened, right?

So look the <unk> is an incredibly important focus for us in 'twenty four.

I have to give a nod to our sales team in the fourth quarter right. We got a a product that had been kind of left behind.

And what's interesting when you look at the fourth quarter.

There's some seasonality there fourth quarter is always the best for chronic.

Prescription.

Demand because of deductibles and the like but.

When you look at what happened was in the fourth quarter, we brought the Novartis sales team and made them about <unk> sales team and they really were just focused on on basic execution and you saw what what what happens right. We saw really good performance in the fourth quarter I think that's it.

Brandon: We saw really good performance in the fourth quarter. I think that should give us optimism for what can be done. In early January, we actually integrated the field force. And they're actually at their annual sales meeting, their annual sales meeting as we speak this week, Orlando.

It should give us optimism for what can be done in early January we actually integrated the field force.

And they are actually in there their sales meeting their annual sales meeting as we speak.

Brandon: And so, you know, I'm pretty optimistic. When you look at tactics, and when you look at execution on the ground, and couple that now with reinvesting in marketing, right? We're back on TV as of mid-January.

This week in Orlando and so.

I'm pretty optimistic when you look at at tactics and when you look at our execution on the ground and couple that now with reinvesting in marketing right. We're back on television as of mid January.

Brandon: So we've been on TV for a couple weeks with Zydra. I'm pretty optimistic that this can be a growth driver. So if you think about it just in basic terms, you know, Novartis, in the quarters they had, they did about 250. We did 106 in the fourth quarter.

So we've been on TV for a couple of weeks with <unk>.

Pretty optimistic that this can be a growth driver. So if you think about it just in basic terms.

Novartis in the quarters. They had if they did about $2 50, we did 106 in the fourth quarter. So you've got a performance of $3 55 salmon is his comments guided to 400 million, that's a 13% growth if we pull that off.

Brandon: So you've got a performance of 355. Sam and his comments guided it to 400 million. That's a 13% growth if we pull that off. You know, when we bought it and we announced the deal model, we talked about mid-single-digit growth. So we feel like we can get back on track and make this a real growth driver. Now, in all dry, including Maibo, there is seasonality.

We bought it and we announced the deal model, we talked about mid single digit growth. So we feel like we can get back on track and make this a real growth driver now at all dry including Michael There is seasonality the first quarter because of deductibles.

Brandon: The first quarter, because of deductibles, is always the weakest. And the fourth quarter is always the strongest. But, you know, so I wouldn't just divide the 400 by four and look for it that way.

As is always the weakest in the fourth quarter is always the strongest but.

So I wouldn't just to buy the 400 by four and look for it that way, but you will see a nice steady build as we execute and we drive marketing and the seasonality that is a factor I think we're going to set ourselves up for a very nice year its either.

Matthew Stephan Miksic: But you'll see a nice steady build as we execute and we drive marketing and the seasonality that is a factor. I think we're going to set ourselves up for a very nice year in Zydra. That's great. Thanks for that.

That's great. Thanks for that and then one other area that was a pretty strong finish.

Brandon: And then one other area that was, you know, a pretty strong finish, an important category within surgical is around IOLs, and I know you have a pipeline of new products you've talked about, planned out for this year on the ATIOL side, but some of the sort of just underlying growth of that business was quite strong in Q4, and just wondering if you could comment on whether that was a market phenomenon, whether you feel like some of the Yeah, so you're right; we did see some strong demand for IOLs in the quarter and throughout the year. I think, you know, it really is a foreshadowing of what we want this business to look like. You know, so premium IOLs were up 30%, Sam, about 30% in the fourth quarter. You know, I think it's off by a small number, right?

Important category within surgical is around <unk> and I know you have a pipeline of new products, you've talked about planned out for this year.

On the <unk> side, but.

Some of the sort of just underlying growth of that business was quite strong in Q4, and just wondering if you could comment on whether that was a market phenomenon and whether you feel like you have some of the products on the market currently are gaining momentum.

And how sustainable that that is thanks.

Yeah, So you're right we did see some of the strong demand for <unk> and in the quarter and throughout the year I think it really is a foreshadowing of what we want this business to look like.

So premium alloys were up 30% about 30%.

In the fourth quarter.

I think.

It's off a small number right and what we need to transition to if you look at surgical for the year.

Brandon: And what we need to transition to, if you look at surgical for the year, you know, packs were up about 9% for the year, and equipment was up about 11% for the year. So better, you know, we're taking market share, and we're growing faster than the market. What we need to do in 24, and really in 25 and 26, is drive that IOL mix and drive it towards the premium side of the IOL. That actually, you know, is the way you run a surgical business and has a tremendous benefit of driving margin improvement.

<unk> were up about 9% for the year equipment was up about 11% for the year. So better we're taking market share we're growing faster than the market, what we need to do in in 'twenty four and then really in 'twenty five 'twenty six is drive that IL mix and drive it towards the premium side of the Iowa.

That actually is the way you run our surgical business.

And has a tremendous benefit of driving margin improvement and so when we talk about margin improvement mixes is critical in one of our most important strategies is to drive from the lower margin packs and equipment to.

Brandon: And so when we talk about margin improvement, mix is critical. And one of our, you know, most important strategies is to drive from the lower margin packs and equipment to pull through the higher margin IOLs. So, really, good foreshadowing.

Pull through of the higher margin <unk>, so really good foreshadowing.

Brandon: I see that the new launches, you know, we have the Aspire that we launched, we have the IC8, which we're still launching. We have, you know, a trifocal getting approved at the back end of the year. And then we have our EDOF lens, hopefully, getting approved in later 25.

I see that the new launches we have the aspire that we launched we have the ICA, which we're still launching we have.

Tri focal getting approved at the back end of the year and then we have our EDA offline hopefully getting approved in later 25. So the set up there is really nice for constant new product, new innovation and higher margin products to drive through that business and.

Matthew Stephan Miksic: So the setup there is really nice for constant new product, you know, new innovation, and higher margin products to drive that business. And, you know, that's my reason I get excited about surgical is pulling that off, but it is going to take two years to get there. Right. Well, that's super helpful.

That's my reason I get excited about surgical is pulling that out, but it's going to take two years to get there.

Right.

Very helpful and congrats again, Brent into the team on the challenge results. Thanks.

Matthew Stephan Miksic: And congratulations again, Brent, and to the team on the solid results. Thanks. Yeah, thanks, Matt. Thank you. Amazing. Thank you for taking the questions. I've got one and then a quick follow-up.

Yes, Thanks, Matt.

Yes.

Your next question is from Patrick Wood with Morgan Stanley.

Amazing. Thank you for taking the questions I've got one and then a quick follow up.

Patrick Wood: I guess for the first one, sort of a bit more high level, you know, obviously on the consumer side and then the pharma business. You've got a meaty scale now. And so I guess, how are you thinking about things going forward? You mentioned the BD team a bunch of times, but organically and inorganically, how are you splitting your energy between the segments and going forward, you know, where do you think the biggest opportunities are? You obviously talked a little bit about premium IOLs, but there are other areas like Custom Packs, Glaucoma, it's a big market, right? How do you see the direction strategically and where you feel the biggest gaps that you might like to bulk up on?

I guess the first one so it is a bit more high level, obviously on the consumer side and then the pharma business.

You've got you've got meeting scale now.

And so I guess, how are you thinking about things going forward you mentioned, the BD team a bunch of times, but organically and Inorganically, how you're splitting your energy between the segments and going forward, where do you think the biggest change is all you obviously talked a little bit about premium my wells. There's other areas like custom packs cloud I mean, its a big market right Wow.

Do you see the direction strategically and where you feel the biggest gaps that you might like to bulk up and all.

Yes, so great question. So you know.

Brandon: Yeah, so it's a great question. So, you know, a little different than how we report. The way I think about the business is for business units, right? We have the pharmaceutical, consumer, vision care, and surgical. And when you look at it, two are in really good shape, right?

Different than how we report the way I'd think about the business is 444 business units right. We have the pharmaceutical consumer vision care and.

Surgical and and when you look at it too are in really good shape right consumer we are the leader in eye care, we have.

Brandon: Consumer, we are the leader in eye care. We have demonstrated great growth in the consumer business, up 11%. And what's interesting, a lot of that is volume, where in the past years, a lot of that was price. And so, really healthy performance there.

Demonstrated great growth in the consumer business up 11% and what's interesting is a lot of that is volume where in the past year is a lot of that was price and so really healthy performance. There we have some new products coming in and consumer we have some new incremental innovations coming way of packaging innovation coming so.

Brandon: We have some new products coming in consumer, we have some new incremental innovations coming, we have packaging innovation coming. So pretty excited about the consumer business, combined with just a great team, right? We have a really strong team at B&L on consumer. Pharma, you know the story, right?

So pretty excited about the consumer business combined with just a great team we have a really strong team at P&L on consumer pharma you know the story right, we're really investing particularly in the U S.

Brandon: We're really investing, particularly in the US. We have Miba, we have Zydra, we have Izolta, we are, you know, on the hunt for other things to add to the bag. But we have a lot of strength and a lot of growth for several years to come in pharma, and lots of opportunities to add innovation. Vision care, a very strong performance if you normalize for Lynchburg.

We have made but we have XI drop we advised ulta, we have on the hunt for other things to add to the bag, but we have a lot of strength in a lot of growth for several years to covenant in pharma and lots of opportunities to add innovation vision care.

<unk> strong performance, if you normalize for Lynchburg.

Brandon: And we look at vision care as very strategic, but still a work in progress, right? We've got to drive growth. Daily CyHy, you know, infused, as an example, is up 46% for the year. That's our fastest growing product and a great contact lens. And so our job there is simply execution.

And we look at vision care is very strategic but still a work in progress right. We've got to drive growth daily Si Hy.

Infused as an example was up 46% for the year, that's our fastest growing product and a great contact loads and so our job there is simply execution.

Brandon: Surgical is still a work in progress, as I mentioned, and there is a two to three year program to drive towards IOLs and premium IOLs becoming a larger contributor with much higher margins. And so, you know, to summarize, I'd say we have two of our businesses in really good shape and two that are, you know, focused on execution and delivery. That being said, you're right. How do you split your time between the four? For me, it's quite simple.

Surgical still work in progress as I mentioned in there it said two to three year.

Our program to drive towards <unk>, some premium IOL is becoming a larger contributor with much higher margins and so.

To summarize I would say we have to two of our businesses in really good shape and two that are.

Focus on execution and delivering that being said you're right. How do you. How do you split your time between the four for me. It's quite simple you got to build great teams and we've done that you've got to focus on execution and then you have to work with R&D to drive innovation and we've organized ourselves to do that.

Brandon: You have to build great teams, and we've done that. You have to focus on execution, and then you have to work with R&D to drive innovation. And we've organized ourselves to do that, and I think we can pull it off. And then, you know, obviously Aspire looks like it's going very well in the U.S. I think it's like almost 14,000 units just in the 4Q right off the bat. But I think, you know, IC8, I think from memory you guys still have some production challenges there. I think you're probably only at like 1,000 units or so. That seems like a very differentiated lens.

I think we can pull it off.

And then that's Super Handy and then obviously aspires looks like it's done very well in the U S. I think it's like almost 14000 units just in the <unk> right off the bat.

But I think.

I think from memory you guys still have some production challenges there I think I think you'd probably only like a 1000 units or so.

That seems like a very differentiated lens.

Patrick Wood: You know, going forward, is there an opportunity to kind of push that on the production side and get the volumes up a little bit faster? Yeah, absolutely. So you're right. And this Aspire, you know, was launched; we brought about 100 days into the launch, give or take. We've had about 350 surgeons actually implant the Aspire and wear the Aspire Torque, and what we're hearing anecdotally and what we're hearing from our field force is great results by the doctors and absolutely great outcomes from the patients. Now that lens is positioned as a monofocal plastic lens to compete against the J&J iHance.

Going forward is that is there an opportunity to kind of pushed out on the production side and get the volumes up little to foster.

Yeah, absolutely. So you are right.

And this is fire was launched we've dropped about 100 days until the launch give or take we've had about 350 surgeons actually implant this fire.

Where the aspire torque and what we're hearing anecdotally and what we're hearing from our field force is great results by the doctors and absolutely great outcomes.

From the patients now that <unk> is positioned as a model for plaza to compete against the J&J I have.

Brandon: And I think our team's doing a great job there. And there's a really big opportunity. The IC8 or Epthera lens, you're absolutely on the money.

And I think our team is doing a great job there and there is a really big opportunity.

The ICA to up their LNG, you're absolutely on the money. We are third party manufacturing there is struggling.

Brandon: Our third-party manufacturing there is struggling. Al Waterhouse knows that well because he came from Epthera before coming from J&J, the AMO. The issue there is, you're right, driving production capability, and that is in place, but it will take a few quarters to get to where we want to get to. And so, you know, again, great outcomes, great patient satisfaction. Surgeons who have implanted it love it, but we don't want to roll it out, you know, to all surgeons.

Our waterhouse knows that well because it came from up there before.

Coming from.

Hum.

J&J the AML the.

The issue there is is right driving production capability and that is in place, but it will take a few quarters to get to where we want to get too.

So again, great outcomes great great.

Patient <unk>.

Satisfaction surgeons, who have implanted it love it, but we don't want to roll it out to alternatives. A you have to train them and two you have to have supplied and so that is a work in progress without a doubt, but I think that sets us up if you look at the team's performance on aspire. It really gets you excited for the potential for the pipeline Thats.

Brandon: A, you have to train them, and two, you have to have supplies. And so that is a work in progress, without a doubt. But I think that sets us up, you know, if you look at the team's performance on Aspire, it really gets you excited for the potential for the pipeline that's going to pull through later this year and next year. Very helpful, thank you, and I hope the shoulder gets better. Yeah, thank you. It's my right shoulder. I'm right-handed, so even turning pages here left-handed is clumsy.

Pull through.

Later, this year and next year.

Super helpful. Thank you and I hope to show that gets better soon.

Yeah. Thanks, Kevin.

It's my right shoulder I'm right handed so it's even turning pages here left handed quantity.

Yeah.

Your next question for today is coming from Craig Bijou with Bank of America.

Craig William Bijou: Good morning, guys. Thanks for taking the questions and congratulations on a strong finish. I wanted to talk about the margin opportunity for you guys in 24 and maybe beyond, given the strength of Zydro and Libel. Excuse me. The margin expansion that you're guiding us to is in line with some of your comments from earlier in the year. I just want to understand, as you're in this investment mode, to the extent that Zydro and Libel and maybe the rest of the business outperform, how should we think about you either dropping some of that benefit or outperformance for margin improvement, or are you going to reinvest that, you know, to drive even more. Yeah, no, it's a great question.

Okay.

Good morning, guys. Thanks for taking the questions.

<unk>.

<unk> finished.

I'm wondering you talked about the.

The margin opportunity for you guys in.

In 'twenty, four and maybe beyond.

The strength of <unk>.

<unk> excuse me.

The margins.

Expansion that you're guiding to is in line with some of your comments from earlier in the year. So just wanted to understand as you're in this investment mode to the extent that <unk> and maybe the rest of the business outperform but how should we think about you either dropping.

Some of that benefit our outperformance to margin improvement or are you going to reinvest that.

To drive to drive even more growth.

Yeah, no. It's a great question. So obviously the margin expansion is a critical part of our long term strategy right. We wanted to deliver sustained margin improvement.

Brandon: So, as you know, margin expansion is a critical part of our long-term strategy, right? We want to deliver sustained margin improvement for the next several years. And, and, and, you know, I think we were set up to do just that.

For the next several years.

And I think we are set up to do just exactly that but as you mentioned right product mix is a big part of improving margin. The operational excellence, we've been talking about for the last few quarters critical and obviously cost discipline.

Brandon: But as you mentioned, right, product mix is a big part of improving margins. The operational excellence we've been talking about for the last few quarters is critical, and obviously cost discipline. When you think about, you know, 24 2024.

When you think about 24.

2024 remember it is our largest launch here in the history of the company and so let's just take the example, you mentioned my Butt right we say.

Brandon: Remember, it is our largest launch here in the history of the company. And so let's just take the example you mentioned, Maibo. Right, we've got it for around $95 million in sales. Our investment is significantly higher than the $95 million. And so, you know, as in pharmaceuticals, you tend to invest in around two to two to three years, and then they become vastly profitable.

Got it for around $95 million in sales.

Our investment is significantly higher than.

Then the $95 million significant and so as that pharmaceutical you tend to invest in round two to two to three years and then they become vastly profitable. So we have a direct line of sight of extensive margin improvement over the next few years, but you got to set up these <unk>.

Brandon: So we've got a direct line of sight to extensive margin improvement over the next few years, but you have to set up these products to realize their potential. Now, directly to your question, Craig, if we had upside, would we drop it through? I think we would like to do that. The only hesitation I have there is that if we believe we can change the trajectory of the curve on a product like Maibo, you'd probably want to do that as an investor; you'd probably want to set that up for higher peak sales. Because, you know, we have it for a long time.

Alex to realize their potential and that's directly to your question Craig If we have upside would we drop it through I think we would like to do that the only hesitation I have there is if we believe we can change the trajectory of the curve.

Product like Michael <unk>.

Probably want to do that as an investor you would probably want to set that up for higher peak sales.

Because we have it for a long time and.

Craig William Bijou: And, you know, it can drive massive growth and profitability with the right investment. That being said, I think we've made a massive investment; we have a great plan. We're tracking KPIs on a daily, weekly, monthly, and quarterly basis; we make the investment decisions based on performance; we don't just turn over that investment and say good luck. It's gated, and it's done, you know, with stage gates based on hidden KPIs.

It can drive massive growth and profitability with the right investments that being said I think we've made a massive investment we have a great plan.

We're tracking kpis on a daily weekly monthly and quarterly basis, we make the investment decisions based on performance. We don't just turn it over that investment and say good luck <unk>.

Aided and it's done with.

Stage gates based on hitting Kpis, so we're going to watch that carefully, but yes, I think all things being equal we would we would try to drop.

Brandon: So, we're going to watch that carefully. But, all things being equal, we would try to drop greater performance all the way through the P&L. Great, thanks for that Brent. And maybe as a follow-up to some of your comments on the contact lenses in that business, just wanted to get your perspective on what seems like a pretty strong underlying market, and there may be comments on how pricing looks there in 24, and your position within that market, and just any other trends that you're seeing. Yeah, so you're right.

Greater performance all the way through the P&L.

Great. Thanks for that Brent and maybe as a follow up on some of your comments on the contact lenses and that business just wanted to get your.

Perspective on what seems like a pretty strong underlying market and maybe comments on.

How pricing looks there in 'twenty four and your positioning within that market and just any other trends that youre seeing there.

Yes, so you're right the contact lens market globally is very healthy growing around seven 8%. So really good trends good demographics.

Brandon: The contact lens market globally is very healthy, growing, you know, around 7-8%. So really good trends, good demographics, a lot of tailwinds in that business, and a lot of reasons to like contact lenses as a category. You know, I think if you looked at our performance and tried to normalize for Lynchburg, we're growing slightly faster than the market. And, you know, I already gave you the great performance on infused or ultra daily or daily sci-hi.

A lot of tailwind in that business and a lot of reason to like contact lens as a category.

I think if you looked at our performance and you tried to normalize for Lynchburg, we're growing slightly faster than market and I already gave you the great performance on infuse, our ultra daily our daily Si Hy.

Brandon: And, you know, there's a lot to be excited about in that category. Now the trends there, you know, remain the same: a big shift to daily silicon hydrogels.

And there's a lot to be excited about in that in that.

Category now the trends there remain.

We remain the same a big shift to daily silicone hydrogel.

Brandon: You know, as we complete the rollout of the full line of Infuse, we have the multifocal in several key markets. We've got to continue launching that around the world. We have the Toric coming, and then we have the multifocal Toric Plus coming.

As we complete the rollout of the full lineup of infuse we had the multifocal in several key markets. We've got to continue launching that around the world. We have the toric coming and then we had the multifocal toric coming so a lot of work a lot of new launches within that brand over the next let's say 12 to 18 months. So.

Brandon: So a lot of work, a lot of new launches within that brand over the next, let's say, 12-18 months. So I feel pretty good about it. Pricing, you know, look, I think there are pricing opportunities in that market. When you look at the fourth quarter, there was a lot of rebates by our competitors. We did not participate in that given our Lynchburg situation and the launch mode of Infuse.

Feel pretty good about it pricing.

I think there are pricing opportunities in that in that market. When you look at the fourth quarter. There was a lot of rebating by our competitors, we did not participate in that given our lynchburg situation.

The launch mode of abuse.

Brandon: But we look at all the trends, and we do make strategic pricing decisions, particularly, you know, on perhaps some of the older products. But the new products right now, it's about building share, pricing appropriately, and building share. And I think we have a very strong strategy there. So we're thoughtful about it, in other words. Thanks for taking the questions. Sure. Larry Biegelsen, Good morning.

But we look at it very closely we look at all the trends and we do make strategic pricing decisions, particularly perhaps some of the older products.

But the new products right now, it's about building share share pricing appropriately and building share and and I think we have a very strong strategy. There. So we're thoughtful about it and in other words.

Thanks for taking the questions.

Sure.

The next question is from Larry <unk> with Wells Fargo.

Good morning, Thanks for taking the question and congratulations on a strong finish to the year here, Brian and Sam I'd Love to start.

Lawrence H. Biegelsen: Thanks for taking the question. And congratulations on a strong finish to the year here. Brent and Sam, I'd love to start with Maibo.

Lawrence H. Biegelsen: Brandi, could you talk about the adoption so far? What's going well? You know, where do you see opportunities to improve, such as payer coverage? You know, and how are you feeling about the peak sales of $350 million that you laid out recently? Could you exceed that?

With that my bow.

Could you talk about the adoption, so far what's going well, where do you see opportunities to improve such as payer coverage.

And how are you feeling about the peak sales of $350 million that you laid out recently could you exceed that then I had one follow up.

Brandon: Sure. So I think when you look at MIBO, what you'll like is the initial target, as you would in any launch, was against high prescribed and dry eye ECPs, right, eye care professionals. And I think the team did a really good job, and the excitement among that community was strong and remains strong. And their experience with MIBO with patients has been excellent, and the reason you know that is because you look at refill rates, which are trending way above dry eye category refill rates. So that means early KPIs are experienced dry eye ECPs love the product, and their patients love it even more when it's refilled.

Sure. So I think when you look at my but what you like is is the.

The initial target as you would in any launch was against high prescribing dry eye Ecp's eyecare professionals and and I think the team did a really good job and the excitement among that community was strong and remains strong and their.

They are experienced with my bow with patients has been excellent and the reason you know that as you look at refill rates, which are trending way above dry eye category refill rates. So that means you know early kpis are the experienced dry eye ecp's loved the product and their patients love it even more.

In refill. So that's part of the thesis of why Youre going to make such a massive investment in <unk> and 'twenty four is because theres a lot to like there I think.

Brandon: So that's part of the thesis of why you're going to make such a massive investment in MIBO in 24, because there's a lot to like there. I think when you think about what has to happen in 24, there are two probably key activities that our team has to execute against. One is to drive adoption more broadly by ECPs.

When you think about what has to happen in 'twenty four there is two probably.

Key key activities that our team has to execute against wants us to drive the adoption more broadly by Ecp's.

Brandon: We have, you know, order of magnitude, tens of thousands of new targets that the team has to reach this year and drive adoption of MIBO. And that, you know, that's the theme of what they're talking about in Orlando today. The whole field force has been there this week, and that's one of the key themes.

We have.

Order of magnitude.

Tens of thousands of new targets that the team has to reach this year and drive adoption of <unk> and that you know that.

That's the theme of what they're talking about in Orlando.

Force has been there this week.

And that's one of the key themes in the second Larry you hit it right now on the head as to drive managed care adoption.

Brandon: And the second, Larry, you hit it right on the nail on the head, is to drive managed care adoption. That is a big priority for 2024. You know, just the normal cycle. Remember this is a new drug, and new drugs take some time, but given the demand we've seen in the market, managed care is much more open to working with us than they were just a quarter ago.

That is a big priority for 2024.

Just the normal cycle remember this is a new drug and new drugs take some time, but given the demand we've seen in the market managed care is much more open to working with us than they were just a quarter ago. So really positive momentum there I suspect by the back half of 'twenty for commercial coverage will be really really strong.

Brandon: So really positive momentum there. I suspect by the back half of 24, commercial coverage will be really, really strong. There'll be more work to do in 25, but 24 will be ahead of our expectations for commercial coverage. Now, Medicare, you know, has the longest lead time or lag time to drive coverage, but I'm optimistic we'll do a strong performance in 24, and in 25, it will catch up to commercial coverage. And so, you know, I think those two areas are really important for execution.

<unk>.

There'll be more work to do in 'twenty five 'twenty four it will be ahead of our expectations on commercial coverage now Medicare.

Is that has the longest lead time or lag time to drive coverage, but I am optimistic we will do to our strong performance in 'twenty four.

But 25, it will catch up to commercial coverage and so I think those two two areas are really important <unk>.

For execution and when I look at that the $3 50 peak peak number.

Brandon: And when I look at that, the 350 peak number, I'm actually pretty optimistic we can exceed that. I think given the investment we're making in the early KPIs, I think we'll do better than that. That's awesome. Thanks. Hey, just a quick one for Sam. The margin cadence, any help on the phasing of margins in 2024? Thanks for taking the time. Good morning, Larry.

I'm actually pretty optimistic we can exceed that.

Given the investment we're making in the early Kpis.

I think we do better than that.

That's awesome. Thanks.

Just a quick one for Sam.

The margin cadence.

Any help on the phasing of margins in 2020 for thanks for taking the question.

Sam Aldosuke: So it's a good question. Seasonality is a very important part of our business, and that's why I highlighted it in my prepared remarks. So if you think about 2024 for us, we'll follow a similar trend as we saw in 2023, with our first quarter being the lowest in terms of contribution, and the fourth quarter being the highest. So I'll just use that as an example.

Good morning, Larry So it's a good question.

Very important part of our business and that's why I highlighted in my prepared remarks. So if you think about 'twenty four for US will follow a similar trend as we saw in 2023 with our first quarter being the lowest in terms of contribution in the fourth quarter is the highest so just use that as an example last year.

Sam Aldosuke: Last year in Q1, last year, 2023, in Q1, for revenue, we contributed roughly about 22% of the full year results. And for EBITDA, we contributed roughly about 19% of the full year EBITDA numbers that we had for 2023. So if you follow a similar trend and use the midpoint of our guidance that we provided this morning, that should give you a pretty good sense of our phasing as we think about it in 2024. And it builds on from Q1 onwards as you go through to Q4. Thanks. Thanks, Byron.

In Q1 last year 2020 in Q1 for revenue, we contributed roughly about 22% of the full year results and for EBITDA was contribution roughly about 19% of the full year.

EBITDA numbers that we had for 'twenty three so a few follow a similar trend in use the midpoint of our guidance that we provided this morning that should give you a pretty good sense of our phasing as we think about it is in 'twenty four and it builds on from Q1 onwards as you go through Q4.

Thank you.

Thanks, Eric.

Okay.

Your next question for today is coming from Robbie Marcus with Jpmorgan.

Lawrence H. Biegelsen: Oh great, thanks for taking the questions and congrats on a good quarter. Maybe to follow up on Larry's question, Zydra.

Oh, great. Thanks for taking the questions and congrats on a good quarter.

Maybe to follow up on Larry's question.

Robbie: I wanted to spend a minute here. You talked about $400 million for the year. That's basically, you know, if you back out the one time and fourth quarter, it's basically just, you know, roughly $100 million a quarter. And I realize there's seasonality. So maybe just speak to why $400 million, given such a strong fourth quarter here, and how we think about what Zydra is adding down the P&L in terms of adjustment. Yeah, so great question, Robbie. You know, unfortunately, you can't just take the 400 and divide by four, as I said earlier. You know, there's a lot of seasonality in prescription coverage, right? And particularly in this category.

<unk> I wanted to spend a minute here you talked about $400 million for the year, that's basically and if you back out the one time and fourth quarter. It's basically just you know roughly $100 million a quarter and I realize theres seasonality. So maybe just speak to why $400 million given such a strong fourth.

Quarter here and how we think about what <unk> is adding down the P&L in terms of adjusted EBITDA.

Yes, so great question Ravi.

Unfortunately, you can't just take the 400 and divide by four as I said earlier.

There's a lot of seasonality in in in prescription coverage right and particularly in this category.

Brandon: You know, I think putting up about 13% growth on Zydra in 2024, which is what we're guiding towards, would be a very impressive performance by our team, particularly when we announced the deal. We said it was going to be a mid single-digit grower. So this is, you know, more than doubling our expected growth. Now, some of that is just returning Zydra back to where it belonged through tactical execution. And keep in mind, I've said this multiple times, dry eye is a very promotionally sensitive category, right?

I think putting it up about 13% growth on <unk> in 2024, which is what we're guiding towards.

It would be a very impressive performance by our team, particularly when we announced the deal. We said it was going to be a mid single digit grower. So this is more than doubling our expected growth now some of that is just returning <unk> back to where it belongs through tactical execution and keep in mind that I've said this multiple times dry ice.

As a very promotional sensitive category right and so in fairness in 'twenty four we're investing a little bit more enzyme drove then we would have if it had been given to us in a in a bit of a kind of left behind or neglected state from novartis.

Brandon: And so, in fairness, at 24, we're investing a little bit more in Zydra than we would have, you know, if it hadn't been given to us in a bit of a kind of left behind or neglected state from Novartis. But we're very confident that Zydra, you know, once we get it back on track, can be a very strong contributor to revenue or margin via product mix. And so, yeah, you know, we're making a stronger, stronger investment. But I think the data from Q4 proves that, you know, it's a smart investment for us. We're tracking the KPIs on this one very closely as well and investing only when we hit certain stage gates of performance. But, you know, right now, there are a lot of reasons to believe our team can execute on it. And keep in mind, having Zydra with Maibo, right, we've integrated the field force is a win-win. It is absolutely, you know, one plus one equals something greater than three, right?

But we're very confident that <unk> you know.

Once we get it back on path can be a very strong contributor a margin via product mix and so yes, we're making a stronger stronger investments, but I think it.

The data from Q4 proves that that it's a smart investment for us we're tracking the kpis on this one very closely as well.

Investing only when we hit certain stage gates of performance, but.

Right now Theres a lot of reasons to believe our team can execute against it and keep in mind, having designs are with my bow right. We've integrated the field force is a win win it is absolutely one plus one equals something greater than three alright, having our field force be able to promote.

Brandon: Having our field force be able to promote, you know, two differentiated, you know, mechanistically different drugs for dry therapy really positions us as the company for dry eye and our representatives with the greatest portfolio of the best products. And so I'm really optimistic about Zydra, but perhaps we can do better than 400. We'll have to see. It's February, you know, mid February.

Two differentiated mechanistically different drugs for dry eye therapy really positions us as is the company in dry eye and our representatives with the greatest portfolio of the best products and so I'm really optimistic on that either but perhaps we can do better than 400 watts to see its February.

In mid February.

Robbie: And, you know, we're the teams at their sales meeting right now. I think there'll be a lot of momentum coming out of this week and throughout the year as seasonality builds, as investment and marketing build, and the focus on execution in the field. Great. I appreciate that.

And.

The teams at their sales meeting right now I think there'll be a lot of momentum coming out of out of this week and throughout the year as as seasonality builds as the investment in marketing builds and the focus on execution.

Execution in the field.

Great I appreciate that and.

Robbie: And maybe just as a follow-up on free cash flow generation in 2024. I realize you have a lot of integration activities here, but how should we think about free cash flow in 24 and any phasing through the year? Sure, Ravi.

Maybe just as a follow up on free cash flow generation in 2024, I realize you have a lot of integration activities here, but how should we think about.

Free cash flow in 'twenty, four and any phasing through the year, we should consider.

Sam Aldosuke: Good question. When you think about cash, listen. Cash is a very important element for us. It's part of our DNA.

Sure Ravi.

Good question, when you think about cash as.

Cash is very important element for us as part of our DNA is we call it catches culture right.

Sam Aldosuke: We call it cash's culture, right? So it's something we spend a lot of time talking about. We're focused on it. So when you think about that, and maybe before I talk to 24 again, I want to step back and just talk to 22, because it sets the foundation for how we think about 24.

It's something we spend a lot of time talking about it we're focused on it. So when you think about then maybe before I talk to a 24 hour I'd step back and just talk 'twenty because it sets the base for how we think about 'twenty four so when you think about 'twenty three cash paid out exactly as we anticipated the first half of the year, we were in a growth mode with our.

Sam Aldosuke: So when you think about 23, cash paid out exactly as we anticipated. In the first half of the year, we were in a growth mood with our top line and gaining market share. And that was a use of working capital, and we see that in the first half of the year, expecting that we'll turn positive in the second half of the year. So you think of a second half cash flow for us for the year was generated roughly $95 million in Q3 and Q4. Keep in mind that this was all happening as we were building up inventory.

Topline and gaining market share and that was a use on working capital and we see that in the first half of the year expecting that will turn positive in the second half of the year. So when you think of a second half cash flow for us in the year was generated roughly about $95 million in Q3 and Q4.

Keep in mind that was all happening as we were building up inventories. So we built roughly about $250 million of inventory throughout 'twenty three.

Sam Aldosuke: So we built roughly about 250 million dollars of inventory throughout 23 that helped us as we were working through our supply chain challenges that we've talked about. So that's a very important background for us to set the stage for 23. Now when you reflect to 24, we expect cash to, we don't expect the level of inventory buildup that we've seen in 23 to repeat itself into 24 at that same level. So we expect that to be more of a short-term element. We'll probably stay at a higher elevated level, but we don't expect to step up in inventory again. So with that, I expect our cash for 24 to be roughly about the conversion rate from EBITDA to the midpoint of guidance, roughly about anywhere between 30 to 35% conversion rate for our cash flow.

That helped us as we were working through our supply chain challenges that we've talked about.

That's a very important background for us to set the stage on for 2000, and so now when you reflect $2 24.

We expect cash to we don't expect that level of inventory buildup that we've seen in 2006 does not repeat again into 'twenty four at that same level. So we expect that to be a more of a short term element will stay probably at a higher elevated level, but we don't expect a step up in inventory again, so with that I expect our cash for.

2004 to be roughly about conversion rate from EBITDA midpoint of guidance talking about anywhere between 335% conversion rate for our cash flow.

Sam Aldosuke: The phasing will follow a similar phasing as we think about the P&L, so the phasing that I highlighted to Larry, that will probably be something you will have to keep in mind as well as you think about from a cash flow generation standpoint throughout the year. We start low, and we build up high as we get into Q4. Great, I appreciate the color.

The phasing will follow a similar phasing as we think about the.

The P&L.

The phasing that I highlighted to Larry that will probably will be something you will have to keep in mind as well as you think about it from a cash flow generation throughout the year, we start low and build up high as we get into Q4.

Great I appreciate the color.

Thank you.

Vijay Muniyappa Kumar: Hey guys, congrats on a nice print here, and thanks for taking my question. I guess my first question here is, Brent, I just want to clarify. Did you say the investments in Maibo are well above $95 million? So how much of a drag is Maibo on margins right now?

Your next question is from Vijay Kumar with Evercore ISI.

Hey, guys.

Congrats on a nice print.

Sure and thanks for taking my question.

My first one here Brent I just wanted to clarify did you say the investments in mobile are well above the 95 million. So how much of a drag as my bond margins right now and I'm.

Brandon: I'm curious, when do you think those margins will be accrued to corporate? Yeah, so, The, I did say, I did say it was significant, and I chose the word significant on purpose, more than the 95 million, right? And that is very typical of the first year of a very promising pharmaceutical launch. In fact, when you look at the history of pharmaceutical launches, you tend to see the first two to three years in investment mode. And so I see this being a margin contributor in a more meaningful way in 26 and becoming a significant contributor in 27 and for years to come. And so that's the right way to launch a drug. And as I said earlier to Larry, I do think we can exceed our targets on peak sales, but I'm not ready to set a number on it.

I'm curious when do you think those margins will be accretive to corporate.

Yeah. So.

I did say I did say it is significant and I chose the word significant on purpose.

More than $95 million right and that is very typical of the first year of a very promising.

Pharmaceutical.

Watch in fact, when you when you look at.

The history of pharmaceutical launches you tend to see the first two to three years in investment mode.

And so I see this being a margin contributor in a more meaningful way in 2006, and becoming a significant contributor in 2007 and for years to come and so that that's the right way to launch a drug.

And as I said earlier to Larry I do think we can exceed our targets on on peak sales I'm not ready to set a number on it we need more and more experience but.

Brandon: We need more experience, but I'm very optimistic. This is a great drug, and the acceptance is great.

I'm very optimistic that this is a great drug and the acceptance is great we need to execute.

Brandon: We need to execute. We need to expand the prescribers. We need to get the managed care coverage. We have a lot of work to do. But we are, our team is killing it, and we are set up for what could become a very promising product and margin contributor on a significant basis over the mid to long term. Sam, any comment there?

We need to expand the prescribers, we need to get the managed care coverage a lot of work to do but we are our team is killing it and we are set up for what could become a very promising product at margin contributor on a significant basis over the mid to long term Sam any commentary, yes Vijay.

Sam Aldosuke: Yeah. And Vijay, it's a similar sort of comment that we've made before. When you think about the launches and especially MIBO being one of the most important launches for us, we're playing the long game here in terms of the investment. And when I think about it from a margin contribution standpoint, I would probably step back and look at everything we put on the table from sort of a P&L, full P&L. So when you think about our guidance for 2024, we expect margin to expand anywhere between 50 basis points to up to 110 basis points. If you take the midpoint of that, of our guidance, that's about 80 basis points of expansion.

Similar serve comments that we've made before when you think about the launches and especially and Mike will be one of the most important largest for us we're playing the long game here in terms of the investment.

And when I think about it from a margin contribution probably.

Step back and look at everything that we've put on the table from a sort of a P&L full P&L. So when you think about our guidance for 2024.

We expect margin to expand anywhere between 50 basis points to up to 110 basis points. If you take the midpoint of our guidance, that's about 80 basis points of expansion.

Sam Aldosuke: Why we're still investing for the long-term benefit by investing behind Maibo and other launches as well. Just keep in mind that next year is one of our highest numbers of launches, the number of launches that we're seeing in 2024. Yes, 2024.

While we're still investing for the long term.

Benefit by us investing behind Michael and other launches as well just keep in mind that next year is one of our highest launches.

Number of launches that we're seeing this year 'twenty to 'twenty four 'twenty.

Brandon: Yeah, I mean, look, I think Vijay, we have been, you know, and I said this at JPMorgan when I was interviewed by Robbie, you know, I think that we've been very deliberate, right? We want to drive margin expansion, but we want it to be sustainable margin expansion. And we have, you know, said countless number of times 2024 was a massive investment year for launches. Despite that, and despite the fact that we are investing heavily in Maibo and pretty heavily in Zyder as well as several other launches like, you know, Infuse globally and Aspire. We are still going to drive margin improvement in 24. And we hope it's towards the top end of that range, as we talked about upside earlier.

24.

Yeah, I mean look I think Vijay we have been.

I've said this at Jpmorgan with him when I was interviewed by Ravi.

I think that we've been very deliberate right, we want to drive margin expansion, but we want it to be sustainable margin expansion.

And we have said countless amount of times 2024 was a massive investment year and the launches despite that and despite the fact that we are investing heavily in mobile and I'm pretty heavily in the <unk> as well as several other launches like fused globally and aspire.

We are still going to drive margin improvement in 'twenty four we hope it's towards the top end of that range.

As we talked about upside earlier.

Vijay Muniyappa Kumar: But in 25, we're going to have margin improvement. 26, and we're going to have a nice margin improvement. 27 is going to be even greater.

25, we're going to have margin improvement 26, we're going to have nice margin improvement 'twenty seven is going to be even greater we are really committed to driving long term margin improvement and if you look at it over the next three to five years, it will be meaningful, but it's going to take time, because the way to get there is to do the right thing and investing in these various.

Brandon: We are really committed to driving long-term margin improvement, and if you look at it over the next three to five years, it will be meaningful. But it's going to take time, because the way to get there is to do the right thing by investing in these very important launches. That's helpful, Brent.

Important launches.

That's helpful. Brent if I may one follow up to <unk> $95 million, you know that contribute 200 basis points to organic just yeah. You know given your comments your bullishness on this product is that a sustainable number and its contribution to growth. When you look at 'twenty five 'twenty six could my book continue to add in the $50 million to $100 million range.

Vijay Muniyappa Kumar: If I may, one follow-up. To MIBO, 95 million, you know, that contributes 200 basis points to organic growth. Just, yeah, you know, given your comments, your bullishness on this product, is that a sustainable number, this contribution to growth, when you look at 2025-26? Could MIBO continue to add in the 50 to 100 million range? And what is the guidance you're making for Prolenza, loss of exclusivity in fiscal 2021? Yeah, so yeah, I mean, I think you could see Maiba continuing to be a very nice contributor.

And what does the guide assuming for <unk> loss of exclusivity in our fiscal 'twenty four.

Yes, so yes, I mean, I think you could see <unk> continuing to be a very nice.

Brandon: You know, we mentioned 350 million peak sales. You tend to hit your peak sales in year four or five on a product like this. And so, you know, if you model that out, and then, you know, I did put in some optimism that we could do better than that. I'm not ready to call the number yet, but I did put in some optimism. So that's what we're going to watch very carefully this year. As we see execution, we'll, you know, we'll guide appropriately based on performance, which is the responsible way to do it. But again, a lot of optimism there, you know; Prolenza did go generic; generics entered the market in January.

Contributor, we had mentioned $350 million peak sales.

You tend to hit your peak sales in year, four or five on a product like this and so if you model that out and then.

I did put in some optimism that we can do better than that not ready to call. The number yet, but I did put us optimism.

That that's where we're going to watch very carefully this year as we see execution.

We will guide appropriately based on plant performance, which is the responsible way to do it.

But again a lot of optimism there per lender did go generic the generic centered in January.

Brandon: The impact is around, you know, 40 to $50 million this year. That's a very high-margin product, you know, end of life products are very high-margin, you know, and so when you think about, you didn't ask this question, but I'll just use the opportunity. When you think about our guidance for 24, you know, we're covering, you know, a significant amount of headwind. And despite that still having, you know, really nice guidance, you're covering 50-ish million in Prolenza, you're covering, you know, currency. And I think I mentioned this at the JP Morgan conference on the webcast, we're covering another 40, $50 million of SKU reduction that we did and are doing this year to focus on the higher margin products. So there's a lot of headwind there that's meaningful to us.

The impact is around.

$40 million to $50 million. This year, that's a very high margin product end of life product that are very high margin.

And so when you think about that you didn't ask this question, but I'll just use the opportunity when you think about our guidance for 'twenty four we're covering.

A significant amount of headwind and despite that still having.

Really nice guidance, you're covering 50 ish million and polenta you are covering.

Currency and I think I mentioned this at the Jpmorgan conference on the webcast, we're covering another $40 million to $50 million of SKU reduction.

We did and are doing this year.

So on the higher margin products. So there is a lot of headwind there that's meaningful to us and we're jumping right over that and still growing very nicely. So that's why I have a lot of optimism for the business in 'twenty four but start to get really excited.

Brandon: And we're jumping right over that and still growing very nicely. So that's why I have a lot of optimism for the business at 24, but I'll start to get really excited in the coming years as we finish the hard work that we're doing here to reorganize the company, simplify the company, and invest in strategic areas that will drive growth. Very helpful. Thanks, guys. Yep. I think we'll take one more question, Holly.

In the coming years as we finish.

The hard work that we're doing here to reorganize the company to simplify the company.

And to invest in strategic areas that will drive growth.

That's very helpful. Thanks, guys.

Yes.

I think we'll take one more question Howard.

Your final question for today is from Julien winch with Citibank.

Operator: Thank you. Thanks for joining us. Thank you. Thank you. Two quick questions. What percentage... today? That's my second one in.

Thank you for taking the question and good morning, and I'll say upfront I hope your shoulder heals quickly.

Two quick questions. Please.

Of your contact lenses, our silicon hydrogel today versus a year ago and I'll talk to my second one now.

Joanne Karen Wuensch: Where are you feeling, or how are you feeling about M&A? Yeah, so let me take the second part first, and then Sam will give you some guidance on the first part. You know, when I think about M&A, you know, I said this when we did the ZYDRA deal, our priority is to digest and de-lever the Novartis assets, namely ZYDRA. You know, that is our plan for 24. That being said, you know, I mentioned in the prepared remarks investing in R&D capabilities and BD capabilities. We are, you know, actively involved in numerous discussions around smaller products, R&D assets, and the like. And I expect us to use 24 to build our pipeline in pharma and surgical and consumer and the like.

Where are you feeling or how are you feeling about M&A at this stage. Thank you.

So let me take the second part first and then Sam will give you some guidance on the first part.

When I think about M&A.

I have said this when we did the zagury.

Our priority is to digest and Delever, the novartis assets, namely <unk>.

That is our plan for 'twenty for that being said you know I mentioned in the prepared remarks investing in R&D capabilities and BD capabilities. We are actively involved in numerous discussions around.

Smaller products R&D assets and alike.

And I expect us to use 2000 and for it to build our pipeline in pharma and surgical and consumer and the like.

Joanne Karen Wuensch: And there's some really exciting science, and there's some really exciting early-stage products that could be meaningful contributors to us if we make the investment. A long-winded way to say nothing significant in 24 for us, but look for us to be very strategic, adding, you know, smaller products or mid to late stage R&D products for all of our business. Sam, do you want to take that?

And there's some really exciting science and there is some really exciting early stage products that could be meaningful contributors to us.

If we make the investments so.

Long winded way to say nothing significant in 'twenty four for us but.

Look for us to be very strategic adding.

Smaller products or or mid to late stage R&D products for all of our businesses.

Brandon: Yeah. And Joanne, in terms of the site height, it's sitting right now, as we think about 20, it's roughly about 10%. It is growing fast. We've seen it growing really fast between 22 and 23. And as Brent mentioned, it's growing in the high single digits, it's growing in the double digits. So Q4 is about 31% growth just in site height. Thanks, Joanne. And thanks for asking about the shoulder.

Sam you want to take.

And then in terms of the Si Hy is sitting right now as we think about 'twenty is roughly about 10%, but it is growing fast or if we've seen it growing really fast between 'twenty two into 'twenty, three and as we Brent.

Brent mentioned is growing in the high single.

In double digits. So Q4 is about 31% growth just to say hi.

Thanks, Joann and thanks for asking about the shorter.

So let me just conclude with some remarks, if that's okay.

Sam Aldosuke: So, highly, let me just conclude with some remarks if that's okay. Great. So thank you all for joining the call. Reflecting on 2023 for just 30 seconds, I just hit my one-year mark here. It was a very busy year, and I think the team accomplished a lot. We did a lot of activities. We remade the executive management team. We did a complete reorganization of our organization. We invested in big capabilities around selling excellence and digital. We started our strategic planning for the supply chain, and I'm really proud of the team and what they accomplished in 2023. And I think our performance was very strong.

Sure Great.

So thank.

Thank you all for joining the call.

Reflecting on 2023 for just 30 seconds I just hit my one year Mark here.

It was a very busy year I think the team accomplished a lot.

We did a lot of activities.

We remade the executive management team.

We did a complete reorganization of our organization, we invested in big capabilities around selling excellence and digital.

We started our strategic planning on on supply chain and I'm really proud of the team and what they accomplished in 'twenty three and I think our performance was very strong.

Brandon: What gets me really excited is thinking about 24 and beyond, and I, you know, I hope as we continue to interact with all of you in 2024, you'll see a strong focus on execution and driving this company to reach its potential in the years to come. So, very exciting outlook, and I look forward to keeping you all updated. Thank you so much. == References == Thank you for joining us. You may now disconnect.

What gets me really excited as I think about 24.

Beyond and I hope as we continue to interact with all of you in 2024, you'll see our strong focus on execution and driving this company to reach its potential in the years to come so very excited outlook and I look forward to keeping you all updated thank you so.

Much.

Yes.

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