Q4 2024 Bausch + Lomb Corp Earnings Call
Speaker Change: [music].
Greetings and welcome to the Bausch and Lomb, a fourth quarter 2024 earnings call. At this time, all participants are in a listen only mode.
A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded.
Speaker Change: I'll now turn the conference over to your host George got Koski, Vice President of Investor Relations you may begin.
George Gotkoski: Thank you good morning, everyone and welcome to our fourth quarter 'twenty to 'twenty four financial results conference call participating.
Speaker Change: Participating on today's call are chairman and Chief Executive Officer, Mr. Brent Saunders and Chief Financial Officer, Mr. Sam Aldo Suki.
Speaker Change: 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.
Before we begin I would like to remind you that our presentation today contains forward looking information.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: non-GAAP reconciliations can be found in the appendix to the presentation posted on our website.
Brent: 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.
Brent: Thank you George and thank you everyone for joining us today.
Speaker Change: I'm going to show progress against our strategy through the lens of our fourth quarter and full year results and Sam will go deeper on our performance and provide 2025 guidance.
Speaker Change: I'll close by highlighting the products and technology that will advance our strategy in 2025 and beyond.
Speaker Change: We booked our fifth straight quarter of double digit constant currency revenue growth contributing to 17% constant currency revenue growth for the year.
Speaker Change: While top line growth isn't the only metric that matters. Our trajectory is clear, we're capturing market share in an industry with significant growth potential and carving out leadership positions in areas of unmet need.
Speaker Change: There's no secret sauce behind that growth in fact, the Formula is simple we continued to introduce new products across businesses and geographies at a steady clip, while optimizing our manufacturing process, which includes deploying AI tech.
Speaker Change: Technology is also a key component of an ongoing investment in our sales force.
Speaker Change: Our reps are leveraging digital tools to establish new relationships and deepen existing ties.
Speaker Change: The easier we make their jobs the better they perform again, it's a simple formula.
Speaker Change: Underpinning our recent success is our commitment to long term growth.
Speaker Change: We are once again, an innovation company.
Speaker Change: I couldn't say when I rejoined bausch and lomb two years ago.
Speaker Change: Our R&D organization has been completely overhauled and infused with top talent.
Speaker Change: Our refocused pipeline is now filled with promise and potential to significantly enhance the standard of care and I hope.
Speaker Change: This section of our roadmap to accelerate growth, which we highlight every quarter focus is on phase to innovate and execute.
Speaker Change: I can't think of a more appropriate way to describe our current state.
Speaker Change: Innovation is driving our decision, making process and positioning the company for long term sustainable growth at.
Speaker Change: And our relentless focus on execution is clearly reflected in our results.
Speaker Change: Words on our road map, our hollow without concrete examples.
Speaker Change: Consider the following when it comes to execution.
Speaker Change: Our organic revenue CAGR over the past two years is approximately 10%.
Speaker Change: The success of recent product launches as well documented particularly in dry ice space, where our comprehensive portfolio is approaching $1 billion in annual revenue.
Speaker Change: Proof of our commitment to innovation deserves its own slide.
Speaker Change: These are the pipeline products were most excited about with representation from all businesses.
Speaker Change: Our in House engineers are developing a first of its kind biomedical type lines.
Speaker Change: Would optimize oxygen permeability and critically can be produced on existing lines, which means minimizing future capital expenditures. We're also developing a myopia control solution for children and young adolescence.
Speaker Change: Our consumer pipeline is all about building on the success of category, leading brands with new formulations for.
Speaker Change: We're once again working with the National Eye Institute to develop and the Arabs three offering.
Speaker Change: Which we believe would expand the market for our high performance preservation franchise and address a significant growth opportunity in dry AMD.
Speaker Change: Linda walks as currently underdevelopment and would represent the next chapter of premium redness relief.
Speaker Change: The recent addition of earliest procedure to our surgical portfolio unlocks new opportunities to treat glaucoma in conjunction with cataract surgery, and we hope to secure an FDA approval later this year.
Speaker Change: Meanwhile, we continue to roll out premium I O L offerings in a staged approach with an expected 2026 U S launch, Brian just to be odd and an ingestible I O L and early stages of development.
Speaker Change: Finally, we transformed our pharma pipeline to potentially introduce several novel treatments music.
Speaker Change: These include our first dual action therapeutic to address both evaporated and inflammatory dry eye disease.
Speaker Change: First product to treat chronic ocular surface pain, and the first glaucoma product to lower intraocular pressure and approve visual acuity.
Speaker Change: Our revamped pipeline positions us to significantly enhance the standard of care for patients across the spectrum of by health needs.
That's where our focus will continue to be.
Speaker Change: I referenced our holistic strength every quarter. So it's no surprise that I'll do the same when providing our full year review.
Speaker Change: The key takeaway is there continues to be no library.
Speaker Change: All three reporting segments delivered double digit constant currency revenue growth for the year. Thanks to a focus on execution in particular, we're bringing new products to market.
Speaker Change: Of note absence of either revenue pharmaceutical saw approximately 15% organic revenue growth for the year.
Speaker Change: The franchises, we highlight speak to that holistic strike.
Speaker Change: We updated our 2024 projections for my vote in November and still outperformed expectations with 172 million of revenue.
Speaker Change: So I drew a hit the high end of our projections with 364 billion and full year 2020 for revenue and a 14% year over year growth for <unk> is a reminder, that our holistic strength extends to performance across geographies.
Speaker Change: Daily Si Hy lenses uptake continues to leap off the page with over 70% reported revenue growth for the year.
Speaker Change: Three things are driving that growth, our superior product offering sales excellence and a thoughtful approach to how we introduce multifocal toric options and new markets around the world.
Speaker Change: I referenced our premium IOL pipeline earlier, but it's important to recognize that we're carving out a significant presence in the category with existing offerings rare.
Speaker Change: Revenue from premium lenses was up 35% in 2024, despite several law just taking place later in the year.
Speaker Change: I'll now turn it over to Sam for a closer look at the financials.
Sam: Thank you Brent and good morning, everyone.
Sam: Before we begin please note that all my comments today will be focused on growth expressed on a constant currency basis, unless specifically indicated otherwise.
Sam: Turning now to our financial results on slides eight and nine.
Sam: We saw yet another quarter of solid performance.
Sam: With revenue growth across all our segments geographies and product franchises.
Sam: The broad based momentum in our business continued during the quarter driven by our sustained focus on execution.
Sam: Total company revenue of 1.28 billion for the quarter reflects growth of 11% and 10% on organic basis.
Sam: For the full year total company revenue of $4 79, 1 billion reflects growth of 17% and 10% on an organic basis.
Sam: As we have said before.
Sam: 'twenty 'twenty four was one of the most active product launch years in our history.
Sam: Our steady stream of product launches continues to drive growth and we are excited about the opportunity ahead of us in 'twenty to 'twenty five and beyond.
Sam: For the fourth quarter translational currency was a headwind of $17 million revenue and 4 million to adjusted EBITDA.
Sam: For the full year. It was a headwind of 69 million to revenue and 11 million to adjusted EBITDA.
Sam: Now, let's discuss the results in each of our segments.
Sam: Rishi care fourth quarter revenue of $723 million increased by 11%.
Sam: Driven by growth in both the consumer and contact lens businesses.
Sam: For the full year vision care revenue was 2.7 hundred 89 billion.
Sam: It increased by 10%.
Sam: The consumer business grew by 10% in Q4.
Sam: Let me go over a few highlights on the consumer business.
Sam: In the quarter <unk> grew by 24% and continued to expand its market leading position.
Sam: Our consumer dry eye portfolio delivered $103 million in revenue, representing 20% growth in the quarter.
Sam: Our two key franchises Arthur Lai and blank, we're once again big contributors to the strong performance.
Sam: Arthur Lai grew by 18% and blinked grew by 12% in the quarter.
Sam: The dry eye portfolio continued its outstanding performance with growth of approximately 27% on average over the past four quarters.
Sam: Hi, vitamins grew by 7% in Q4, as we continued to see solid consumption trends.
And let's care grew by 2% for the full year led by our <unk> M. P. S franchise.
Sam: Contact lens revenue growth was 13% with strong performance across modalities key brands and geographies.
Sam: For the full year contact lens revenue growth was 11%.
Sam: We are continuing to see very strong momentum with daily Si Hy, which grew 17, 5% in the quarter.
Sam: We also saw growth across other key franchises, including by true, which was up 3% in the quarter and ultra which was up 10%.
Sam: Contact lens revenue growth was broad based across markets with the U S up 17% in the quarter and.
Sam: And international up 11%.
Sam: For the full year the U S was up 12% and international was up 11%.
Sam: Outside the U S. We saw solid performance across all of the regions with growth in China at 12% in the quarter and 18% for the full year.
Sam: While we are still in the early innings, we are seeing over investments in Opal and the U S and.
Sam: Indirect to consumer in China pay off.
Sam: We believe the future of our lens business is highly promising our execution continues to be strong and we have a robust pipeline of innovation.
Sam: Moving now to the surgical segment.
Sam: Fourth quarter revenue was $231 million, an increase of 15%.
Sam: For the full year.
Sam: Revenue was $843 million representing growth of 11%.
Sam: In Q4, we once again saw growth in each of our three surgical product categories.
Sam: And we also saw growth across all regions.
Sam: Consumables, our largest product category grew in the quarter by 10%.
Sam: Revenue from equipment was up 21%.
Sam: Implantables grew by 19% in the quarter with our standard Iowa's up 4% and our premium was up 67%.
Sam: Our in Vista iOS platform is continuing to perform well.
Sam: With a M best to aspire lens and Evista NV showing strong early results.
Sam: We are very excited about the surgical business, we are delivering growth that's faster than the overall market.
Sam: And our strategy remains the same we will continue to focus on the top line growth.
Sam: And drive margin expansion with our premium products.
Sam: Lastly revenue in the pharma segment was $326 million for the quarter.
Sam: Which represents growth of 7%.
Sam: For the full year revenue in the pharma segment was 1.209 billion, which represents growth of 45%.
Sam: Such a menorah pharma dry eye portfolio.
Sam: Likewise continued its exceptional launch performance and delivered $53 million in revenue in the quarter for.
Sam: For the full year.
Sam: <unk> delivered 172 million exceeding our latest guidance.
Sam: I will once again highlight our commitment to making investments to drive my both strong growth, including investments in our direct to consumer campaign.
Speaker Change: Zack are delivered 104 million revenue in the fourth quarter.
Speaker Change: This represents 6% growth when excluding the onetime 8 million rebate benefit we saw in Q4 of last year.
Speaker Change: This was driven by the acquisition from Novartis.
Speaker Change: For the full year.
Speaker Change: So either delivered $364 million in revenue coming in at the high end of our guidance range.
Speaker Change: As we look to 2020 five.
Speaker Change: Our strategy remains unchanged.
Speaker Change: We will continue our efforts to maximize access to old xyrem patients.
Speaker Change: Our team delivered strong <unk> growth in Q4.
Speaker Change: And we expect the Rx growth to continue in 2020 five.
Speaker Change: As I have previously stated we.
Speaker Change: Also expect a one time impact from the inflation reduction act to be about 25 million in 2025.
Speaker Change: Looking at our broader pharma portfolio.
Speaker Change: We are seeing solid performance.
Speaker Change: For the full year U S generics grew by 10% and international pharma grew by 8%.
Speaker Change: Now, let me walk through some of the key non-GAAP line items on slides 10 and 11.
Speaker Change: Adjusted gross margin for the fourth quarter was 62, 5%.
Speaker Change: For the full year adjusted gross margin was 62, 6%, which was up 160 basis points compared to last year.
Speaker Change: The increase in adjusted gross margin was mainly driven by product mix.
Speaker Change: We continue to execute our strategy to transition to higher margin products.
Speaker Change: In the fourth quarter.
Speaker Change: We invested $93 million adjusted R&D.
Speaker Change: And $342 million for the full year.
Speaker Change: Which is about 7% of revenue.
Speaker Change: Fourth quarter adjusted EBITDA, excluding IP R&D.
Speaker Change: It was $259 million.
Speaker Change: Which represents 14% growth versus Q4 of 'twenty three.
For the full year.
Speaker Change: Adjusted EBITDA, excluding IP R&D was $878 million up 20% versus 2023.
Speaker Change: Net interest expense for the quarter was $93 million and $384 million for the full year.
Speaker Change: Adjusted EPS, excluding <unk> was 25 cents for the quarter and 63 for the full year.
Speaker Change: Over the course of 'twenty 'twenty four we have discussed our targeted efforts to drive cash flow.
Speaker Change: These efforts are paying off.
Speaker Change: Adjusted cash flow from operations was $263 million for the full year.
Speaker Change: Compared to $56 million in 2023.
Speaker Change: We are pleased with this performance and we will remain focused on this front in 2025.
Speaker Change: Turning now to our twenties 25 guidance on slide 15.
We expect full year revenue to be in a range of $4 95 to 5.05 billion.
Speaker Change: This reflects constant currency growth of approximately $5 five to seven 5%.
Speaker Change: The fundamentals of our business and the eye care market remains strong.
Speaker Change: We expect each of our segments to deliver growth in 2025.
Speaker Change: Shifting to adjusted EBITDA.
Speaker Change: We are setting our adjusted EBITDA guidance in the range of $900 million to $950 million.
Speaker Change: Consistent with our guidance in 2024.
Speaker Change: Our current guidance excludes any potential one time IP R&D charges that we may have in 2025.
Speaker Change: As we exited 2024.
Speaker Change: We saw a swift strike of the U S dollar.
Speaker Change: Based on current exchange rates.
Speaker Change: Full year 2025, we estimate currency headwinds of approximately 100 million to revenue.
Speaker Change: And $20 million to adjusted EBITDA.
Speaker Change: We expect 2025 fading to follow the natural seasonality of our business.
Speaker Change: With the first quarter being the lowest and the fourth quarter being the highest.
Speaker Change: I do however want to highlight a couple of factors that will impact our typical phasing.
Speaker Change: Burst.
Speaker Change: Given the success, we're seeing in the micro direct to consumer campaign, we plan to continue the investment through the early part of this year.
Speaker Change: Second we also expect to increase our investment in R&D in the first part of the year as we continued to drive our innovation pipeline based.
Speaker Change: Based on these factors.
Speaker Change: In Q1, 2025, we expect to achieve roughly 17% of the full year adjusted EBITDA guidance.
Speaker Change: We expect to build on that as we progress throughout the year.
Speaker Change: While these factors are expected to have a short term impact on phasing data represents a strategic opportunity that we believe will generate significant growth and sustainable margin expansion over many years.
Speaker Change: In terms of the other key assumptions underlying our guidance, we expect adjusted gross margin to be approximately 62, 5% keep in mind that we are absorbing an estimated $25 million impact from the inflation reduction Act and adjusted gross margin.
Speaker Change: For the full year, we expect the investments in R&D to be about 75% of revenue.
Speaker Change: As we continue to monitor fed actions, we expect interest expense to be approximately $375 million for the full year, which reflects a moderate decrease relative to 2024.
Speaker Change: We expect our adjusted tax rate to be roughly 15% to 17%.
Speaker Change: And in full year Capex is expected to be approximately $280 million.
Speaker Change: Now on Slide 16, let me provide some additional color on how to think about the adjusted EBITDA guidance in 2025.
Speaker Change: The midpoint of our 2025 guidance range is $925 million.
Speaker Change: It absorbs currency headwinds of approximately $20 million.
Speaker Change: It also absorbs an estimated impact of approximately $20 million related to our recent acquisition of values as we prepare for the approval and the launch in the U S.
Speaker Change: We are excited about bringing <unk> to the U S market and believe it will be an important and profitable contributor to the surgical business for years to come.
Speaker Change: Excluding the impact of the currency headwinds and the earliest acquisition.
Speaker Change: At the midpoint of our guidance range.
Speaker Change: Adjusted EBITDA margin is 18, 9% in 2025.
Speaker Change: This reflects a 60 basis point EBITDA margin expansion in our base business relative to 2024.
Speaker Change: To sum up we are continuing to see solid execution and strong performance across all segments.
Speaker Change: Our strategy is paying off.
Speaker Change: There's a clear momentum to further drive revenue growth and sustainable margin expansion.
Brent: And now I'll turn the call back to Brent.
Speaker Change: Thanks, Sam let's highlight the categories and products that will help fuel our growth in 2025.
Speaker Change: Earlier, I mentioned that we're nearing 1 billion in annual revenue for our dry eye portfolio, which is impressive on its own but how we got there is noteworthy organic revenue growth increased nearly 50% year over year.
Speaker Change: My bow enzyme drop volumes played a prominent role in that growth as weekly T Rx trend lines illustrate.
Speaker Change: Both have benefited from effective direct to consumer campaigns at a full core press when it comes to educating prescribers on the distinct advantages of each medication.
Speaker Change: But I'll once again point out that our dry eye portfolio is all encompassing.
Speaker Change: In addition to our flagship pharmaceutical products, we have OTC solutions that address all needs.
Speaker Change: One prominent example is our blank franchise, which reported 12% revenue growth on a constant currency basis in the fourth quarter.
Speaker Change: We'd become a one stop shop for dry eye sufferers, and that's not only true for the approximately 150 million U S. Adults that experience occasional or frequent symptoms of dry eye or roughly the 38 million living with dry eye disease, we offer relief on a global scale.
Speaker Change: To OTC products with recognizable names are poised to have an impact in 2025.
Speaker Change: We will know five preservative free eye drops received FDA approval last year and make a wildly popular brand even more attainable.
Speaker Change: The product was developed in response to feedback from consumers and eye care professionals. In fact earlier this year I had an ophthalmologist tell me she was compounding little mifi for a patient in need of a preservative free option.
Speaker Change: The drops are now available on Amazon and should be on shelves at most major U S retailers by June.
Speaker Change: Another example, being responsive to the needs of consumers and eye care professionals was last year's launch of Blink neutral tiers are clinically proven OTC supplement for dry eyes.
Speaker Change: Some dry eye sufferers have an aversion to eyedrops are simply prefer adding another perl to their daily regimen and.
Speaker Change: And we've heard countless times from doctors the importance of having a once a day nutraceutical that they can recommend to patients.
Speaker Change: The opportunity for both products is significant.
Speaker Change: In January we launched a new 32nd AD for Blake nature tiers that will run throughout the year across linear and connected TV.
Speaker Change: It's early days, but there are promising signs since the AD went live we seen a four X increase in sales at major retailers.
Speaker Change: Unlike neutral tiers Wilma five preservative free doesn't have to cultivate a nascent category instead it can ride the coattails of a brand that saw 24% reported revenue growth in the fourth quarter.
Speaker Change: Our contact lens growth is outpacing the market, which may surprise some in the industry not us as highlighted earlier daily Si Hy lens are driving that growth and having the full family of offerings makes it much easier to convert eyecare professionals, most of whom don't prefer to mix and match.
Speaker Change: While we typically lead with daily side performance.
Speaker Change: It's important to remember that other products are contributing to our success.
Ultra monthly contacts are a good example, with 6% revenue growth in 2024.
Speaker Change: How do we offer contact lenses to patients is increasingly important which is why we're encouraged by the initial interest in Opal our E Commerce platform launched in October.
Speaker Change: As more practices adopt this complimentary service product distribution will become increasingly automated and easier with an expected boost in patient loyalty as well.
Speaker Change: On another note on distribution, putting the issues in Lynchburg behind US last year had an obvious impact on our performance.
Speaker Change: It's no coincidence that the loan quarter single digit constant currency revenue growth for our <unk> business was at the tail end of our remediation process.
Speaker Change: Our steady drumbeat of premium IOL watches continues with an anticipated first quarter launch of locks lights in Europe.
Speaker Change: Windsor offers a continuous range of vision and adds to the buzz around our aggressive push into the category.
Speaker Change: I've mentioned this before but it's worth repeating giving the surgical business is relationship driven.
Speaker Change: Ophthalmic surgeons are excited about our products and anxious for what's next I hear it at the industry meetings around the world and in conversations not only with our biggest customers, but our newest customers as well.
Speaker Change: That excitement is certainly reflected in our premium IOL revenue growth and supports our pipeline strategy.
Speaker Change: I'll close with a reminder, that cutting edge technology is foundational to how we source make and sell it.
Speaker Change: I covered Opel earlier, let me highlight some other important platforms and partnerships.
Speaker Change: We're leveraging collaborations pharmaceutical data curation and machine learning expertise to identify new drug candidates.
Speaker Change: I Telegent software simplifies the complex and time consuming surgical planning process and enables device integration.
Speaker Change: Our collaboration with character bio will focus on developing innovative M. D treatments through the company's patient data platform and AI powered analytical engine.
Speaker Change: We've partnered with Irina AI to help drive yield and output gains at our contact lens manufacturing sites by utilizing predictive analytics and.
Speaker Change: And finally glimpses our proprietary digital sales platform that uses AI and machine learning to provide tailor made guidance for engagement eyecare professionals.
Speaker Change: As made clear by our investments technology will continue to be a driving force behind our ongoing evolution.
Speaker Change: Before we take questions I'd like to thank my colleagues around the world for everything we accomplished in 2024.
Speaker Change: It's remarkable what we finished at 12 months and not just talking about the more visible achievements. We made significant strides in every area of our company thanks to their hard work and buy it.
Speaker Change: Operator, let's take questions.
Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: One moment, please while we poll for questions.
Speaker Change: On the first question today is coming from Patrick Wood from Morgan Stanley.
Speaker Change: Patrick Your line is perfect.
Speaker Change: Perfect. Thanks, so much appreciate taking the question I'll keep it to one just so everybody gets a chance but Brent.
Speaker Change: Brent you touched on at the end about sort of customer side of things and we can see the pipeline and the innovation that's coming through in the company, but I'd love to hear a little bit more about you know I know you spend a lot of time on the ground with wraps and things what you're seeing at the customer level. So you know is a lot of the growth also coming from I don't know on the <unk>.
Speaker Change: <unk> side more shelf space more gondola ends you know what.
Speaker Change: Are you seeing in terms of the rates that bringing new surgeons in who previously wouldn't have had the discussion on I'm trying to pull out the execution component of the school card relative to the innovation under that links but I'm just interested to hear more about that thanks. So much.
Patrick: Yeah, Great Great question, Patrick well count.
Speaker Change: Yes.
Speaker Change: As we sit here today kind of marks my two year anniversary.
Speaker Change: With with Bausch and Lomb or my returned about Sean.
Speaker Change: And you know I think you hit the nail on the head when when I joined two years ago. I think we were struggling with customer service on multiple fronts right, but it started with operational issues of being able to supply products. Some of it due to the COVID-19 supply chain disruption some to our own self self.
Speaker Change: Forced errors.
Speaker Change: In Lynchburg, and and the like.
Speaker Change: And and you know I think we spent a lot of time focused on the operational excellence because it's really hard to have selling X. Once if he can't supply your products and you know al Waterhouse Center at our team in and supply chain and manufacturing have done a really great job over the last two years stabilizing and you don't hear us talking about anymore and earning report.
Speaker Change: Supply issues of recalls.
Our quality metrics and our plants are trending all in the high levels. Our back orders are at all time lows and so we're really delivering great operational excellence you know over the last two years.
Speaker Change: We then focused on selling the axons write them and.
Speaker Change: And in a great proof point is since I joined the last two years, our revenue growth CAGR for the last two years is 10% on an organic basis, so growing much faster than our industry.
Speaker Change: Taking market share and I think that that was broad based right. If you look at over the two years, you see where we're at.
Speaker Change: 24, you see consumer up 9% on constant currency contact lens, all time high at 11% surgical at 11% and pharma I had at a 15% organic constant currency, so really broad based growth by geography. So it would be a very similar story and so that's not a one trick pony, it's really a holistic commit.
Speaker Change: Mr selling excellence.
Speaker Change: And then you know the.
Speaker Change: The third component of my roadmap plan was innovation and you're right, we see that that playing out in and the depth of the pipeline and the new product launches, but you know as we think about the next two years, it's really about driving continued growth and now coupled that with with with margin.
Speaker Change: Chen and profitability improvement and it sounds like we ignore that if you look at 'twenty four P&L leverage right margin expansion was about 50 bps.
Speaker Change: You exclude some of the one off items that Sam mentioned in the prepared remarks twenty-five there's about another 60 bps of improvement.
Speaker Change: But really I start to get excited when I look at 26, and 27 of the opportunity we have to to continue that journey of margin expansion, all while investing in and the new products and the pipeline. So as I sit here today, you know I give the team a really good report card on on the last two years of accomplishing.
Speaker Change: Doing what we said, we would do and and I look at the opportunity over the next two years and I'm I'm I'm, probably even more excited so all in all it's good I think more specifically and then I'll I'll conclude when I go out and talk to customers I'll be in China next week and meeting with customers and the team.
Speaker Change: I'll be at at at the acres meeting in and out West This weekend.
Speaker Change: So I'm out of out of quite a bit there is just renewed excitement about the what they call the new V and al I don't know if I'd call. It the new band out, but they do and and you know <unk>.
Speaker Change: Surgeons in particular that really didn't consider being L. In the past are looking at products like N. B are you know in this the NV and the chatter there early days, but you know about 10000 lenses now implanted about 900 surgeons doing N b's more in the queue that want to do.
Speaker Change: We are really getting great patient outcomes. They they are noticing the difference and and that's what drives customers to want to be with with fashion a lot of innovation and great execution.
Speaker Change: Beautiful thanks, so much for the question Yeah. Thank you Patrick.
Speaker Change: Thank you. The next question will be coming from Joanne Wuensch from Citibank, John Your line is live.
Joanne Wuensch: Good morning, and thank you so much for taking the question I wanted to spend just a minute talking about contact lenses. We saw another quarter of very strong double digit growth both in the United States and outside the United States and I was curious how you thought about the continuous nature of that continue holiday whatever the right where it is.
Joanne Wuensch: And in particular, what you can tell us about the biomimetic lens and myopia control.
Speaker Change: Great Great Joanna and I Should've mentioned get here I wish I had is is with US for Q&A is our head of R&D and Chief Medical officer. So so I'll ask him to weigh in here as well on the pipeline, but but you know look I couldn't be more proud of our contact lens performance and the team 11% for the year of <unk>.
Joanne Wuensch: 14% on a constant currency basis for the quarter.
Joanne Wuensch: We're hitting numbers that really we haven't hit.
Joanne Wuensch: In terms of growth at Bausch and Lomb and probably 2030 years right, then and really you know I dare to say, we don't have all the numbers from competitors, but really probably sales leadership for the year and for the quarter based.
Joanne Wuensch: Based on what we believe will happen in the industry and a lot of contact lens is a great business right. It's a great market. Its got strong growth I think we were slightly more optimistic about market growth and twenty-five than than even 24, which was a very solid year and our performance I think is quite broad based I look at you know what.
Joanne Wuensch: What we're doing in the U S with the full family of infused now and Opal a big investment. We made last year is really making a difference I look at a big market like China, where I'll be next week and our direct to consumer capabilities that we invested in it and a 23 and into 'twenty four.
Joanne Wuensch: Really are making a difference in terms of how we interact with customers and and and and deliver contact lenses, but our product type pipeline is probably what makes me even more excited not just the biomedical lines, which you hear can conduct but touch on but but also our myopia control programs and quite a.
Joanne Wuensch: A few other programs there so I look at the next couple of years executing on the current pipeline of sustainable growth and leadership.
Joanne Wuensch: And Ed and then the future probably 27 and beyond get Super exciting with the new products that are coming but you hear you want to talk to you on the biomedical yes, sure so actually.
Speaker Change: As you know always mentioned Brent that there hasn't been a lot of innovations in the material side of the contact lenses and so many years.
Speaker Change: And in fact, the bolt on long one of it's a strength says is the capabilities. We have in research and development for the contact lenses and one of the areas that we focused on is what's next in terms of the material and can we create really a new materials segments for the future and this is actually what came up about we started that.
Speaker Change: Project about theater, and a half ago, its a less than done from a biomaterial substance that's designed to mimic the natural environment inside the eye from a chemistry and biology perspective added to this also we are revamping completely also the packaging solution for the contact lenses to add also to the comfort.
Speaker Change: Yes, Ken the consumer can can feel and also considering the global sustainability piece that also allow us to be expanding globally. So.
Speaker Change: We have done a massive strides in terms of the development. We have done conducted over eight internal clinical studies and the study is showing promising results. We are going forward. The first external big study during mid this year and actually.
Speaker Change: We hope that what we have put from a target product profile that we will be able to see from this clinical study. So that's that's yeah and I think that when you.
Speaker Change: I won't say this but but.
Speaker Change: Outside of the Great work his team has done and in developing this biomedical material. The one requirement I gave the R&D team was they had to design for purpose on existing equipment, yes to really you know essentially.
Speaker Change: Minimize or really not have any significant capital expenditure that generally comes with new material development and they did just that so not only is a breakthrough innovation, it's gonna be a high margin lines at the get go in and and not require a big cash capital expenditures to get up and scale. So we're super excited.
Speaker Change: About it obviously the clinical trial date.
Speaker Change: Data is is critical to the success of the lens, but we're really excited about it.
Speaker Change: Next question operator.
Speaker Change: Thank you and the next question is coming from Craig Bijou from Bank of America.
Craig: Craig Your line is live.
Craig Bijou: Good morning, guys. Thanks for taking the questions.
Craig: Just wanted to start with the dry dock franchise.
Craig: Just on the prescription side, and obviously <unk> seen a significant ramp since it launched and true 24 larger looks like it's rebounded so would just love to understand the expectations that we should be thinking about for both of those in 25. So for my Bo can you.
Craig: Can you grow sales sequentially like you like you have been.
Craig: And then preside here is the mid single digits revenue growth that you've talked about in the past is that still the right way to think about growth for that franchise.
Craig: Yeah. So let me start and then I'll ask Sam to chime in as well.
Speaker Change: So great question Craig. Thank you look I think both of those products are really that the the workhorses of our U S. Pharmaceutical business. My bow is is the.
Speaker Change: I think it is the most successful launch in ocular surface history, and we're really proud of what we've done there.
Speaker Change: Do have very high expectations for my bow to continue to drive growth in 'twenty five and for the long term and I. You know look it's one data point you guys get the weekly report card in and I can't be a data, but you know January looked quite strong the momentum from Q4 has carried into January and I think that's more impressive when you think.
Speaker Change: About the seasonality of this this category drag category tends to see the first quarter and in particular January would be the weakest months of the year because of the way that co pay co pays work and deductibles work and so you know I think that's good XI draw.
Speaker Change: Sam can provide some more commentary our goal is to Rx growth. We had this asset for the next several years and we're making an investment in in managed care coverage and in 25, which.
Speaker Change: Which we talked about quite a bit I think that every quarter last year about the investment we needed to make to maintain coverage.
Speaker Change: But clearly we see a real opportunity to continue momentum in N T Rx growth and.
Speaker Change: And and believe this is going to be a growth driver for us for the long term, but Sam you want to touch on.
Speaker Change: Any financial metrics sure and I'll start with my button Gregg.
Speaker Change: Greg I think when you reflect back on Q4 for.
Speaker Change: Michael we had sales of roughly about $53 million, that's a pretty good baseline for us to think about as you think about run rate or and growth into 2025, just keeping in mind.
Speaker Change: Sequential element that you asked about you pointed out is very important to understand that seasonality Q1 is always the lowest Q4 is the highest so you look at Q4 to Q1, you just have to keep that in mind as you think about the Q1 and you start feeling the growth for Michael.
Speaker Change: In terms of Zebra our strategy has been working.
Brian I think you've seen that in the <unk>, especially in the second half of 'twenty 'twenty four and we ended the year with the average <unk> of 23000, plus that Brent highlighted.
Speaker Change: This is a very important factor.
Speaker Change: The team is executing very well and as you think about 2020 five that momentum in terms of driving the volume will continue with us and we expect to see that in 2025. The two things that we've been highlighting throughout 'twenty 'twenty. Four is first is the IRI data.
Speaker Change: Nation reduction act, which would quantify as roughly about 25 that would be a onetime headwind for us as we think about <unk> 25 versus 24 in zebra. The other part is the level of confidence that we have developed as we've started seeing the execution in the <unk>. We always highlighted though we have to invest also in may.
Speaker Change: Do you have the right access and that's something we will be doing we highlighted in 'twenty for it that will make sure that's taking place in 'twenty five.
Also will be a one time sort of investment I referred to it as a it's a short term investment in 25, it does pay a love dividends.
Speaker Change: <unk> 25, as you go on and you start driving those volume up.
Speaker Change: The simple Ottawa no brainer.
Speaker Change: Kind of an investment with the directions that we're seeing so far.
Speaker Change: Okay next question.
Craig Bijou: Go ahead Craig.
No.
Brent: Thanks, Brent I was just going to ask one quick follow up if I may so on the market contact lens performance.
Brent: Just wanted to get your comments on your market share versus maybe transitioning your.
Brent: Existing customers too.
Brent: Or I guess, some mixed benefit from transitioning transitioning some of your existing customers to the daily disposables.
Brent: Yeah, I mean, I think it is.
Brent: Theres a combination here of obviously.
Brent: Transitioning some of our existing customers.
Brent: And and also focusing on new fits are new starts.
Brent: And I think Theres, a real nice balance being being accomplished throughout the execution in the field and you'll see that we saw ultra let's play up 6% for the year. So.
Brent: When you look at this it's not all just coming from <unk>.
Brent: The the new products, it's it's maintaining growth.
Brent: And in the older products, while we use the new products to accelerate and and so it's not a leaky bucket. It's it's filling the bucket you know higher and higher.
Speaker Change: Got it thanks for the extra question guys.
Craig Bijou: Sure. Thanks, Craig.
Speaker Change: Thank you. The next question will be from Larry <unk> from Wells Fargo. Larry Your line is live.
Larry: Oh good morning, Thanks for taking the question and congrats on a strong finish to the year here.
Speaker Change: Brent and Sam.
Larry: You talked about 10% organic growth in it.
Speaker Change: Last two years Brett.
Speaker Change: And in Q4 two.
Speaker Change: So clearly a lot of momentum here, but you're guiding to about six 5% at the midpoint in 2025 why is that the right. Starting point, you know, which businesses are slow relative to 'twenty four and Sam I didn't hear you talked about revenue seasonality. Thanks.
Speaker Change: Yes.
Speaker Change: Thanks, Danny and maybe I'll take it in parts here and I when I reflect on sort of all businesses. We don't see any business that slowly actually maybe take a step back and look at the overall market dynamics. The market dynamics are solid then we've seen the market is growing roughly around mid single digits and as.
Speaker Change: As you pointed our guidance bracket roughly about anywhere between five 5% to seven and a half with the mid 0.6 and a half in terms of revenue top line growth.
Speaker Change: Really the framework that we've been following and we've seen that work very nicely in 'twenty 'twenty four is driving outperformance to be growing above market and that's really what our guidance is just the growth in terms of what we're seeing going down faster than the market and continuing to gain share.
Speaker Change: One of the elements that you have to keep in mind is we're also absorbing some of the elements of the eyrie died.
Speaker Change: And earlier in terms of the growth on a year to year basis, and also the market access elements over that that's absorbed on a year.
Speaker Change: Overall still growing person enter markets. So given the fact, where this is the first time, we're setting our guidance for 2025, we think it's a reasonable place to start with the guidance range and we factor in all the different elements of our business and it's pretty well balanced guidance started the year.
Speaker Change: And then seasonality Tam.
Speaker Change: Ah seasonality it follows the natural seasonality that we've seen in 'twenty to 'twenty four right.
Speaker Change: On the revenue side EBITDA.
Speaker Change: Really the two factors that were unusual or unique for us and 25, that's why I called them out.
Speaker Change: The investments that we're continuing and Michael DTC, which will continue in Q1 that we didn't have enough Q1 last year as well as the acquisition and registration, which we expect to be taking place in the first half of 'twenty four so that's why I called out the EBITDA.
Speaker Change: Other than that she's not just should fall 'twenty for Cincinnati.
Speaker Change: Alright, thanks, so much guys.
Laura: Thanks, Laura next.
Speaker Change: Next question operator.
Speaker Change: Thank you. The next question will be from a dog man from RBC capital Doug Your line is live.
Yeah.
Speaker Change: Good morning, everyone. Thank you.
Speaker Change: My question.
Speaker Change: It has to do with Michael.
Speaker Change: I'm really curious if you could update us on how.
Speaker Change: Managed care insurer contracting has gone over the last year I know that you had been hoping for one mid year of last year, but that got delayed to the beginning of this year I'm wondering if you could update us there and then finally.
Speaker Change: When you think about the profitability of the product and the fact that you've extended that DTC campaign.
Speaker Change: Do you expect that product as it leaves this year 2025 to be profitable are we really looking at 'twenty six 'twenty seven.
Speaker Change: To see that profitability come through and I'll leave it there. Thank you.
Speaker Change: Yeah. So thanks, Doug Yeah. So my vote coverages is quite strong.
Speaker Change: We're we're just starting the second year of launch here right. This is the sixth quarter.
Speaker Change: Since launch and we're at 74% commercial coverage and 64% Medicare So nearing full coverage I, usually say when both numbers in the seventies youre at full coverage. So we're just a hair away and and so that that's a that's why you invest in the D. T C. Because.
Speaker Change: Do you have that coverage, we have the reps the doctors or experience they get the patients are happy and.
Speaker Change: So all that comes together for strong execution.
Speaker Change: Clearly what.
Speaker Change: What we see with <unk>, which we have.
Speaker Change: In our approximately another decade.
Is a path to driving real profitability, starting next year and so you know as most pharmaceutical launches. The first two years are investment years, and then you see the profitability improve I think will follow that that's very customary path, but the good news is in our numbers just keep improving improving like we did last year, we kept taking guidance up.
Speaker Change: We kept over achieving I do think that mobile has the potential to could just continues to outperform the category as it's Ed so incredibly well tolerated and effective medicine for.
Speaker Change: For patients that suffer from dry eye disease. So I think we're strongly positioned.
Speaker Change: Thank you.
Speaker Change: Thank you. The next question will be from Matt <unk> from Barclays match. Your line is live.
Speaker Change: Hey, thanks, so much for taking the question.
Speaker Change: So maybe just a clarification on the on the comments you made about organic growth and the guidance for this year it sounds like.
Speaker Change: We were to think about the.
Speaker Change: The difference are the double digits, and then and then they slightly lower 25 growth. It's it's the I R. A impact and then it sort of maybe setting your goal to grow above market, but not really.
Speaker Change: Running for double digit growth each year that it took me one quick clarification and then on surgical if I could.
Speaker Change: Maybe it would be it would be great to hear your patent success with envy you you've got a pipeline of new lenses coming to the market.
Speaker Change: Where do you think.
Speaker Change: You still have the key kind of gaps that you're that you're aiming to close that you think.
Speaker Change: Could could significantly step up the competitive and share trends within that market or are there any and what what are those in addition to the products that you've rolled out. Thanks so much.
Speaker Change: Yes, let me answer the surgical one and I'll pass it over to Sam for the guidance question Matt.
Speaker Change: Look on surgical.
Speaker Change: You know our strategy was to you know starting two years ago was to really drive into the premium category.
Speaker Change: And that really just kicked off in the fourth quarter.
The launch of NV so.
Speaker Change: We're just a few months into it and obviously we have a N.
Speaker Change: That'd be launching and and really keep gaining early quick adoption, where we're very pleased with that early days, but great reported outcomes from from surgeons and patients.
Speaker Change: And now in Europe were lunching launching blocks life right now.
Speaker Change: The Investor platform will launch in the back half of the year in Europe as well he and his team are or got the eat all floods in Vista beyond and in clinical trials with a launch towards the end of 'twenty six and so that the I O portfolio is is the table is set right waiver.
Speaker Change: We have to add one more piece to it but that's in clinical studies and I feel like we have arguably the most comprehensive we actually do have the most comprehensive IL portfolio. Once we are beyond it in place.
Speaker Change: You know I think on the equipment side, we have Sonoma or upgrade to two are our FICO machines.
Speaker Change: <unk>, which we expect to an FDA approval for it and in later this year.
Speaker Change: You know it is a I think really a game changer in minimally invasive glaucoma surgery, and so I think all the pieces are coming together I had mentioned in the prepared remarks, we have you know adjustable I O L. In very early development, we continue to look at add technologies and both accommodation and adjustability.
Speaker Change: And <unk> and so I think I don't think we have any significant gaps we have work to do but I don't see any any real significant gaps.
Speaker Change: But.
Speaker Change: In the near term at least over the next couple of years, Sam you want to touch guidance, Jack and Matt When you think about the revenue I think.
Speaker Change: Given the fact that again, you're starting setting up the guidance in the beginning of the year for 12 months out you started by anchoring into where the market is and the market growth is in the market.
Speaker Change: It is about mid single digits.
Speaker Change: Our framework is to continue to grow faster than the market. That's why we positioned ourselves between the five five to seven and a half in terms of growth.
Speaker Change: You pointed to I read that's definitely a headwind for us in 2025 also I did mentioned axis.
Speaker Change: I was talking about either that will also be a headwind for us in 2025, but putting those two points.
Speaker Change: Ah side, there's always going to be puts and takes with all of our sort of guidance range. I think there's definitely areas, where we can have the opportunity to be able to outperform.
Speaker Change: But we will have to be able to work our way through as we see those areas how they play out throughout the year and that's our guidance factor in multiple scenarios as we think about it.
Speaker Change: Thank you for the color and good questions.
Speaker Change: Yes, Thanks, Matt.
Speaker Change: Thank you. The next question will be from Robbie Marcus from Jpmorgan, Robbie you're allowed to five Oh, great. Thanks for taking the questions two from me.
Speaker Change: I'll just ask them together.
Robbie Marcus: One maybe I missed it how do we think about free cash flow and 2025. It was negative in 24 can that turn positive and how positive.
Robbie Marcus: And second my rough math based on the guidance gets made at something like two to four cents of EPS growth is that the right ballpark and how do you think about taking this good top line growth, you're seeing in driving EPS and free cash flow in the future. Thanks.
Speaker Change: Alright, Thanks, Robbie let me take them enough parts here. So let me start with the cash flow. We are very pleased with what we've seen in 'twenty four with the cash generation and we've seen that really comes to.
Speaker Change: To fruition for us in the second half start with Q3, and then full year as well all our cash adjusted cash flow as we reported to $262 million or as we think about when you're five year, Robbie I would say that the momentum that we had with the adjusted cash from operation.
Speaker Change: That will continue pretty much were not like not served.
Speaker Change: Any steps back from all the actions we were pleased to continue to drive great cash flow. So I expect that level of conversion to continue.
Speaker Change: With potential.
Speaker Change: Continue to improve as we go into 'twenty five in there.
Speaker Change: Capex.
Speaker Change: <unk> guided to roughly about $280 million, there's always going to be a literal about timing around the spend of those capex and the timing of projects launches and spend it when it takes place I do expect that we would be in a positive free cash flow in 'twenty five all based on what we see today in terms of our actions were taken in place for the cash generation.
Speaker Change: We're thinking about the capex, but that's something we'll continue to update on that as we go throughout the year.
Speaker Change: In terms of the other part of your question on EPS.
Speaker Change: So I would.
Speaker Change: There's a couple of things when you think about that you guys were gonna see EPS growth on a year over year basis. We ended the year right now at 63.
Speaker Change: We expect to be a growth on a year to year basis, There's two things I'll probably highlight for you to keep in mind as you think through is our tax rate.
Speaker Change: We're guiding to a 15% to 17% tax rate in 2025, so that would be a logo or a headwind as we think about the EPS growth.
Speaker Change: As well as the currency, which I highlighted on the EBITDA is about $20 million, obviously that slowed that currency.
Speaker Change: It goes through the ABS.
Speaker Change: And just to clarify it is free cash flow positive in 'twenty, five or just improving towards positive. Thanks a lot.
Speaker Change: What we expect to be positive.
Speaker Change: Great. Thank you very much.
Charlie: Thanks, Charlie.
Speaker Change: Thank you and our last question.
Speaker Change: The last question today will be from Gary Nachman from Raymond James Your line is live.
Speaker Change: Hey, guys. Good morning. This is Dennis Razmak on for Gary Nachman. Thank you for taking my question and congrats on the quarter.
Speaker Change: Just for the dry eye franchise are there any metrics or color that you can share as our patients compliance with the dosing and then any color on the refill rates.
Speaker Change: And then in the third quarter you previously mentioned about how you begun sampling the <unk> six ml for my Bo can you just talk about the conversion efforts there and as I was able to activate any new prescribers. Thanks, so much.
Speaker Change: Sure.
Speaker Change: So one of the I think one of the important.
Speaker Change: Differentiating characteristics of mimo versus the B.
Speaker Change: The other drugs, including the <unk> either in the inflammatory category.
Speaker Change: Is is higher refill rates I don't have the exact number in front of me I can have George send it to you but.
Speaker Change: It is it is.
Speaker Change: Its repo rate is significantly higher than that of the other than the category, which goes to the I think strong clinical profile and safety profile.
Speaker Change: Of the medicine, and I think people just feel better on it to be fair and that drives a lot of a lot of a refill. So you know in essence, my bow is potentially a harder working prescription because it's a stickier prescription versus the other drugs that tend to take a little longer to work and require a little bit more persistence.
Speaker Change: From the patient to get relief.
Speaker Change: And so that's why that investment of my boat and the and the long term outlook for mobile is particularly exciting for us.
Speaker Change: Great. Thank you okay.
Speaker Change: Yeah. So so operator, maybe just a quick.
Speaker Change: Closing remarks, first and foremost I really do want to thank my colleagues at Bausch and Lomb.
Speaker Change: For first delivering such a strong year and quarter and I look forward to working with them in 'twenty five to continue to deliver on our expectations and then also a quick thank you to all of our customers and patients who rely on bausch and lomb to provide great products and continue to drive innovation.
Speaker Change: We look forward to keeping you updated and talk to you next quarter. Thank you.
Speaker Change: Thank you. This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.