Operator: Good morning, and welcome to Bausch & Lomb's Q3 2026 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to George Gadkowski, Vice President of Investor Relations and Business Insights. Please go ahead.
George Gadkowski: Thank you. Good morning, everyone, and welcome to our Q3 2026 financial results conference call. Participating on today's call are Chairman of the Board and Interim Chief Executive Officer, Mr. Tom Appio, and Chief Financial Officer, Mr. Sam Eldessouky. 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. 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.
George Gadkowski: 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 Tom.
Tom Appio: Thank you, George, and thanks to everyone for joining us today. Before we begin, I want to say how honored and energized I am to serve as interim CEO of Bausch & Lomb. Having spent a good part of my career with the company, I have developed a deep understanding of our business, our markets, our products, and most importantly, the exceptional global team who drive our success. That experience gives me confidence in the strength of our organization, the trust our customers and patients place in us, and our ability to execute against our priorities. I am excited to lead Bausch & Lomb through its next phase of growth and value creation. Today's presentation will follow a familiar format. I will start with a few thoughts on my history with the company and my priorities as interim CEO, then share some perspective on our Q3 performance.
Tom Appio: Sam will review the quarter in greater detail before we turn to the performance of our businesses and the opportunities ahead. I have spent enough time at Bausch & Lomb to understand both what makes this company successful and where we can improve. I have seen the strength of our portfolio, the resilience of our business model, and the power of our customer relationships. I have also seen opportunities to operate more effectively and unlock additional value. As interim CEO, my priorities are straightforward. First, we are focused on identifying opportunities to improve profitability and operate more effectively across the organization. Vision 27 established a clear path for improving the financial profile of this business, and we will continue to build on the progress we have already made. I believe there is still room to enhance how we execute, allocate resources, and drive returns from the investments we have made.
Tom Appio: Second, we remain committed to meeting or exceeding the targets we laid out in our three-year plan. The progress we have demonstrated this year reinforces our confidence in the strategy, and we will continue to balance growth, margin expansion, and cash generation as we work towards those objectives. Third, we will continue advancing our pipeline and investing in innovation, from dry eye solutions and surgical technologies to the next generation of contact lenses. Our future growth depends on bringing meaningful innovation to patients and eye care professionals. This commitment remains unchanged. Taken together, the goal is simple: build a stronger, more profitable company while continuing to invest in the innovations that will strengthen our competitive position and improve outcomes for the customers and patients we serve. This quarter represents another milestone for the company.
Tom Appio: It marks the fourth consecutive quarter we have delivered against the commitments we outlined at Investor Day, demonstrating our ability to drive growth, expand margins, and strengthen the financial profile of the business. In the Q3, we grew constant currency revenue by 8%, increased adjusted EBITDA by 34%, and expanded adjusted EBITDA margin to 23.6%. That is a result of disciplined execution, strong commercial performance, and the actions we have taken over the last several years to strengthen the business. What gives me confidence is not just the quarter itself, but the consistency of the performance we have delivered over the past year. We are building momentum across the business and the trajectory is encouraging. One of the things I find most encouraging about the quarter is the breadth of the performance. We are seeing growth across all three of our business segments.
Tom Appio: Pharmaceuticals grew 11%, surgical grew 9%, and vision care grew 6% on a constant currency basis. Just as importantly, that growth is being driven by strong performances across multiple franchises rather than any single product or market. MIEBO continued its strong trajectory. LUMIFY delivered another quarter of impressive growth, and our contact lens portfolio remained a key contributor to growth, led by INFUSE and ULTRA. In surgical, we are also seeing continued momentum from premium IOLs. Reported growth in the quarter approached 70%, with our premium offerings continuing to gain traction. We believe there is significant runway ahead, both in terms of adoption and what these products can contribute to the business over time. Earlier, I mentioned that we have now delivered four consecutive quarters against the commitments we outlined at Investor Day.
Tom Appio: This slide helps explain why we are confident in our ability to meet or exceed the targets we have established. Over the last four quarters, we have consistently achieved strong revenue growth while expanding profitability at an even faster rate. That is exactly the type of operating leverage we said we expected to generate as the business scaled and our strategic initiatives gain traction. Importantly, this is not the result of a single quarter or a single action. It is driven by the breadth of our portfolio and the work we have done to scale the business more efficiently. The progress we have made over the past year gives me confidence in the path we are on. It also reinforces my belief that there are additional opportunities to improve execution, enhance profitability, and create even more value over time. With that, I will hand the call over to Sam. Sam?
Sam Eldessouky: Thank you, Tom, and good morning, everyone. Before we begin, please note that all of my comments today will be focused on growth expressed on a constant currency basis, unless specifically indicated otherwise. In addition, all references to adjusted EBITDA will exclude acquired in-process R&D. Today marks our fourth quarterly report since our 2025 Investor Day, and the results provide clear evidence of the momentum we have built across the business. Revenue grew 8% in the quarter, while adjusted EBITDA increased 34% on a reported basis, bringing our adjusted EBITDA margin to 23.6%. That combination of growth and margin expansion translated into strong cash generation, with $233 million of operating cash flow and $178 million of free cash flow in the third quarter. As a result, we reduced net leverage to 4.1 times. This is the progression we laid out at Investor Day.
Sam Eldessouky: Grow revenue, expand margins, convert the performance into cash, and reduce leverage. One year in, we are delivering on our Investor Day targets, and our results give us even greater confidence in the path ahead. Turning now to our financial results on slide 8. Total company revenue for Q3 was $1.375 billion, up 8%, with broad-based growth across all three segments. Foreign exchange was a headwind to revenue of approximately $6 million in the third quarter. Now let's turn to detailed results across the segments. Vision Care third quarter revenue of $774 million increased by 6%, with growth in both Consumer and Contact Lenses. The Consumer business grew 6% in the quarter. LUMIFY generated $66 million of revenue, up 38%. The Consumer Dry Eye portfolio delivered $115 million of revenue in the third quarter, up 3%. Eye vitamins, PreserVision and Ocuvite, delivered $95 million of revenue in the quarter.
Sam Eldessouky: We saw continued strength in consumer demand, with the positive trends exiting Q2 carrying through the third quarter and consumption growing at 6% in Q3. Contact Lens delivered another strong quarter, with revenue up 6%. Daily SiHy continued to lead the way, growing at 25%, while ULTRA was up 17%. Both the US and international markets contributed to the strong performance. The US was up 9% and international was up 4%. Moving now to the Surgical segment. Third quarter revenue was $234 million, up 9% versus the prior year. Implantables grew 40%, with premium IOLs up 75%. This is another clear indication of the progress we're making in transitioning the portfolio to higher margin premium categories. In the third quarter, equipment was down 11%, which reflects our continued focus on strategic system placements to position us for future pull-through sales.
Sam Eldessouky: Consumables, the largest part of the Surgical portfolio, were up 5% in the third quarter. Pharma delivered another strong quarter, with revenue of $367 million and growth of 11%. US Pharma grew 14%, led by continued momentum in dry eye. The Dry Eye Pharma portfolio was up 22%, with both MIEBO and XIIDRA contributing to the performance. MIEBO remained a standout performer, with revenue increasing 42% to $119 million. XIIDRA generated $89 million of revenue, up 2%. International Pharma added to the performance with growth of 3% in the quarter. Now, let me walk through some of the key non-GAAP line items on Slide 9. Adjusted gross margin in the third quarter was 64.7%, up 300 basis points year over year. This includes a one-time tariff refund of approximately $14 million. Excluding this benefit, adjusted gross margin was a strong 63.6%.
Sam Eldessouky: We are executing on the gross margin plan we outlined at Investor Day, driven by favorable mix from higher margin brands and the results of our productivity initiatives. This is a credit to the strong execution of our manufacturing and supply chain teams. In Q3, we invested $91 million in adjusted R&D as we continue to advance our pipeline. In the third quarter, adjusted SG&A margin continued to trend lower, building on the significant progress we made in 2025 and through the first three quarters in 2026. Our lower fixed cost structure has driven 150 basis points of year-to-date improvement and positions us to continue expanding operating leverage through the remainder of 2026. Third quarter adjusted EBITDA was $325 million, up 34% year over year on a reported basis, and adjusted EBITDA margin was 23.6%, up 460 basis points year-over-year.
Sam Eldessouky: In Q3, we generated $233 million of operating cash flow and $178 million of free cash flow, with CapEx moderating as expected to $55 million. This was our strongest quarter of cash generation since the IPO in 2022. Our strong performance drove net leverage down from 5.7 times a year ago to 4.1 times at the end of the third quarter. With substantial progress already achieved, we are increasingly confident in our ability to achieve our 3.5 times target that we outlined on Investor Day. Net interest expense was $93 million for the quarter. Adjusted EPS, excluding acquired in-process R&D, was $0.34 in Q3, a substantial increase versus $0.18 in the prior year quarter. Now, turning to our 2026 guidance on Slide 12.
Sam Eldessouky: Our momentum continued in Q3, driven by strong execution and a healthy eye care market, and we are now raising guidance for the third time this year. With one quarter remaining, we are raising full-year revenue guidance by $10 million to a range of $5.450 to $5.550 billion. This reflects $15 million increase in the underlying business outlook, partially offset by $5 million of lower currency tailwinds. The updated revenue guidance reflects full-year constant currency growth of approximately 6.1% to 8%, which is 30 basis points above our July guidance. We are also raising full-year adjusted EBITDA guidance by $65 million to a range of $1.090 to $1.140 billion. At the midpoint, our guidance implies an adjusted EBITDA margin of approximately 20.3%, which is about 130 basis points above our full year 2026 outlook provided at Investor Day.
Sam Eldessouky: In terms of the other key assumptions underlying our guidance, for the full year 2026, we now estimate a $40 million revenue tailwind from currency, down from approximately $45 million previously, as exchange rates have moderated. We now expect adjusted gross margin to be in the range of 62.5% to 63%, up from approximately 62% previously. R&D investment is expected to remain in the range of 7.5% to 8% of revenue. Below the line, our expectations for interest expense and CapEx remain unchanged. We continue to expect interest expense of approximately $365 million and full-year CapEx of approximately $285 million. We now expect the adjusted tax rate to be approximately 18%, slightly below our previous outlook of 19%. Our strategy and disciplined execution continue to demonstrate significant and sustained margin expansion. As we close out the year, we remain focused on advancing toward our three-year Investor Day targets.
Sam Eldessouky: Slide 13 highlights the meaningful margin expansion progress we have made since Investor Day, reflecting the strong execution and commitment of our team. Adjusted EBITDA margin was 17.5% in 2025, and at Investor Day, we set a 2026 target of approximately 19%. Our updated full-year guidance now implies an adjusted EBITDA margin of approximately 20.3%, about 280 basis points of expansion versus 2025, and importantly, 130 basis points above our Investor Day target. One year into our three-year plan, the business is delivering results with increasing momentum, and we are clearly tracking ahead. We are proud of our progress and confident in the path ahead. None of these results would have been possible without the dedication and commitment of our colleagues across the organization, and I want to sincerely thank them for everything they do. With that, I will turn the call back over to Tom.
Tom Appio: Thanks, Sam. Earlier, I talked about the breadth of our performance. Let us take a closer look at what is driving the growth across each business. MIEBO and XIIDRA continue to serve as the cornerstones of our dry eye portfolio. MIEBO revenue grew 42% to $119 million in the quarter, while XIIDRA grew 2% to $89 million, further strengthening our position in one of the largest categories in eye health. What stands out to me is the franchise we have built. MIEBO continues to expand its presence in the market, while XIIDRA remains an important treatment option for eye care professionals and patients. Together, they give us two differentiated brands with important roles in a large and growing category. We continue to see strong underlying consumption across our consumer business. US consumption grew 6% in the third quarter, demonstrating continued momentum across our portfolio.
Tom Appio: LUMIFY remains one of the standout brands in the business. Reported revenue grew 35% in the quarter, adding to a remarkable track record of growth. What is particularly impressive is that we are more than 8 years since launch, yet LUMIFY continues to deliver consistent growth. That kind of durability is rare, and it speaks to the strength of the brand and the demand we continue to see from consumers. With the next generation of LUMIFY expected to launch in H1 2027, we believe there is more opportunity ahead. What stands out to me about our contact lens business is the strong performance of the total portfolio, led by SiHy daily and monthly lenses. Our daily SiHy portfolio grew 25% on a constant currency basis in the quarter, building on sustained growth across our contact lens offerings.
Tom Appio: That consistency speaks to the strength and durability of the business. At the same time, we are continuing to invest in the next generation of innovation, such as Project Halo. While we are still early in the development process, we believe this first-of-its-kind bioactive lens material has the potential to further differentiate our portfolio and create a meaningful new growth opportunity over time. When I look at this business, I see a category that is performing well today and one that has the potential to become even stronger in the years ahead. Earlier, I highlighted the strong growth we are seeing in premium IOLs. The slide provides a closer look at what is driving that performance. Our premium offerings are gaining traction, and we are seeing a clear shift towards these technologies.
Tom Appio: This is an important part of the opportunity we see in surgical, not only to grow the business, but to improve the mix and profitability of the portfolio over time. We believe there is significant runway ahead as we drive broader adoption and continue bringing differentiated technology to surgeons and their patients. One of the things that has impressed me since stepping into the role is the breadth of the pipeline we have built. Across each of our businesses, we are encouraged by the opportunities ahead and their potential to support sustained growth over time. Building that pipeline took significant investment, a lot of work across the organization. Our job now is to make sure we are advancing opportunities with the greatest potential to make a difference for eye care professionals and patients, while being thoughtful and disciplined about where we invest.
Tom Appio: We will continue to prioritize innovation because it is fundamental to the long-term growth of the company. At the same time, we will be rigorous about how we allocate resources with a focus on the programs we believe can create the greatest value over time. Before we open it up for questions, let me come back to where I started. I am excited to be leading Bausch & Lomb at this point in the company's journey. We are performing well, we have clear opportunities to continue driving margin expansion and create additional value, and we have an impressive pipeline that can support growth well into the future. I want to thank the global team for everything they have done, and I look forward to working alongside them to build on what we have accomplished and take the company even further. With that, we are happy to take your questions.
Tom Appio: Operator, please open the line for Q&A.
Operator: We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. 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. The first question comes from Patrick Wood at UBS. Patrick, your line is live. Please go ahead.
Patrick Wood: Beautiful. Thank you so much for taking the questions and everything this morning. From my perspective, taking a step back, the numbers, obviously you guys crushed it. Margins, growth, pretty much across the piece. Clearly, the strategy has been working well, and I would love to hear more about that. But I guess, the obvious question on my side is, therefore, what was it that made you feel like a change was the right thing to do in terms of leadership and the board composition? Just any color around the thought process around that, given things are clearly going very well. Thanks.
Tom Appio: Yeah, Patrick. Hi, good morning. Thank you for the congratulations. I will take that question. I think that the way we need to look at it is Brent and the board mutually agreed on this leadership transition as the company enters its next phase of growth. I am not prepared to talk about anything that was more than what was in the press release and the 8-K filing. What I would say is, the company, you saw the performance and the product portfolio, clearly four strong areas on the contact lens side, the consumer side, the surgical side, and the pharma side. I joined Bausch & Lomb back in 2010, so I have a really strong understanding of this business and the team. As we move forward, the focus is going to be to drive operational excellence.
Tom Appio: In my prepared remarks, I talked about some of the things that we can work on to get better on as we move forward. What will be critical as we go forward is our R&D pipeline. I talked about that in my prepared remarks as well, and how we are allocating those resources and getting those very interesting projects through to conclusion and get the data that we would need to file them. Overall, I am really excited about the future. As we look forward, there is a lot of things that this team has been doing that we can continue to build on. Operator, next question.
Patrick Wood: Thanks for that.
Operator: Certainly.
Tom Appio: Thanks, Patrick.
Operator: Your next question is coming from Young Li from Jefferies. Young, your line is live. Please go ahead.
Young Li: All right. Great. Thanks for taking the question. I guess maybe just to follow up on that. First off, welcome back to Bausch & Lomb. You've been there for a long time, since 2010. Definitely had a front row seat to all the changes in recent years. I guess, wanted to hear a little more about what you are going to be doing differently. Definitely sounded like there is more focus on profitability. Also, how will you be splitting time between BHC as well as Bausch & Lomb?
Tom Appio: Yeah, thanks for the question. What I could say is this is, given the fact, if you look at this company and you go back years ago, it was together. Splitting time I do not think is going to be an issue. So, of course, we will have to manage that accordingly. What I would say is, as we look at the future and going forward, Vision '27, as Sam said in his prepared remarks, we are a third of the way through. So it is to drive Vision '27 to meet or exceed those targets that were presented approximately a year ago. The second is to focus on the customers and the patients we serve. That is critical as we move forward, and we will continue to work on that. I mentioned during the last question is focusing on delivering the R&D pipeline. The pipeline has been built over the last few years.
Tom Appio: Investments have been made. Now how we are going to allocate those resources into each of those projects and making sure that each of them has the resources and clearly can get to the end point, because in some of what was discussed in Vision '27, some of that is coming. Then, of course, that will drive future growth at the end of the decade. Want to focus on continuing to drive the top line. The top line is critical. Then we talked about this already, improving the margins, and the operational efficiencies that need to be had there. As you know, in this space, especially with our portfolio of products, manufacturing, the changing of the regulations, continuing to have to invest behind all of those portfolios. So be able to invest behind our facilities and also at the same time driving efficiencies.
Tom Appio: I think that when we look at SG&A, there is opportunities to drive SG&A savings that will drive more to the bottom line. That will be helpful. So I will be spending some time there with all the teams, both on the selling and advertising side, along with the G&A from the functional side to see where we can gain further efficiencies to improve the bottom line. Clearly, as I have always said, profitable growth is critical. You have to be able to have a leverage P&L. Sam and I have talked about this many times. Then the last two things is focusing on the capital allocation, what that is, and the balance sheet. I think that Sam can point to that as well. We have to reduce our debt, and therefore, there is decisions to be made of where you apply capital and where you reduce debt. Then lastly, M&A.
Tom Appio: Still, if we look at the portfolio, there is probably, again, this is only two weeks in, there could be gaps in the portfolio that we will need to take a look at. There could be things out there that we want to bring in, but we also have to bring those in from an accretive basis, and that will be the focus as well. I do not know, Sam, you just want to comment anything on the balance sheet or what we want to do?
Sam Eldessouky: Yeah, no, thank you, Tom. It has been a really important part for us. Young, as you know, when we set our targets, three-year-out targets, we set a 3.5 times leverage for the P&L, for the balance sheet, and it has been really been focused. You see the evidence of the work when we announced that on Investor Day, last year, we were saying roughly about 5.7 times. We are seeing right now the improvement we are seeing today at 4.1 times, which is really remarkable in that period of time, in just a year, to be able to drop down to that level. There is more room for us to go. I think our focus still at the 3.5 times, and I think really makes that 3.5 times very achievable as we plan forward. That is going to be a number one priority.
Sam Eldessouky: But investing in the business comes in second after that from a capital allocation as well, as Tom mentioned, and either investing organically or inorganically. The key is going to be really how you can actually drive the right ROI behind those investments, on both ways and make sure that we keep driving the business on the top line growth.
Tom Appio: Okay. Operator, next question.
Operator: Your next question is coming from Lawrence Biegelsen from Wells Fargo. Lawrence, your line is live. Please go ahead.
[Analyst] (Wells Fargo): Hi. Good morning. It is Leigh calling in for Larry, and thanks for taking my questions. Really strong quarter. My question is really on EBITDA, and it is two-part. You beat in Q3, very strong, even excluding the tariff refund. You raised the guidance for 2026 on EBITDA. Talk about what were the key drivers of the Q3 beat and the raise, and perhaps importantly, you set a target, EBITDA margin target of 23% in 2028, and that is up roughly 600 basis points or so from 2025. A year in, you are nearly halfway there. So how do we think about the remaining path to 23%? And maybe there is potential to kind of exceed that target. Thank you.
Sam Eldessouky: All right, Leigh, good morning. It is a very good question, and it is many parts. Let me try to unpack it here as we go through, and if I miss any of the parts, just tap me on the shoulder and let me know. Let me start with just focusing on the quarter first. I want to just reflect on what we were able to achieve in the quarter because it has been remarkable, and it has been a journey, and the team have done a really fantastic work across the board. It really all starts from the top line, right? We set a really ambitious and sort of goal for us, a high bar on the top line, and the commercial team has been doing a really good job delivering, and we saw that with the 8% constant currency growth.
Sam Eldessouky: But then as you work your way down the P&L, gross margin has been just remarkable for us. I called out the tariff. It is at one time was about $14 million. You would hear the impact is roughly about 100 basis point or so on the gross margin. But when you look excluding the tariff, we are saying roughly about 62.6% gross margin. That is up from 61% last year. Great improvement. A couple of parts here, I will say, on gross margin. The product mix played a really important role for us. The growth that we have seen around the strategy, around execution, around the growth around MIEBO, you have seen the numbers around MIEBO with 42% growth in the quarter. You have seen the IOLs around the premium IOLs with the really great growth that we are seeing there with 70% plus in the quarter.
Sam Eldessouky: And you are seeing LUMIFY hitting at 38%, with Daily SiHy hitting at 25%. So all the key elements of the portfolio that drives high margin has been growing really in a nice trajectory, and that is really driving product mix. That being said, the supply and manufacturing team have been doing a really nice job with what we refer to as the execution of the Vision '27, which is what we talked about at Investor Day, where they network optimization work have launched, as well as the work around our sourcing and network optimization, as well as vertical integration. And you are still early days on those and that work because we still have three years to go as far as the execution of that work to go. But the early signs is really encouraging with the results that you are seeing in the gross margin.
Sam Eldessouky: Now, as you shift from the gross margin and you look at the OpEx. In 2025, we talked about resizing our fixed cost structure around the OpEx, especially around G&A, as well as taking, I will call it, the step from a launch phase to a growth mode around our selling and A&P and the commercial spend around that part of it. And we have seen that really drive roughly about 150 basis point this year on the SG&A side. And that is really, again, great progress. Those were the initial steps Tom talked about. There is going to be that part of our focus, and we are continuing that. We are going to continue to drive more efficiency out of that as we launch new initiatives to be able to still get to our 200 basis improvement for the next couple of years.
Sam Eldessouky: But you see that part of it is driving all into where we regard the EBITDA numbers that we saw this quarter, which is really great work by the entire team and focus on execution. In terms of the long-term plan, which the way I would say is we are very pleased with the guidance, 20.3% EBITDA margin. That is a really good thing for us, 2026. It probably would be one of the things we will look at as we give 2027 guidance. That probably would be the appropriate time for us to be able to talk more about the long-term plan.
Tom Appio: Operator, next question.
Operator: Certainly. Your next question is coming from Joanne Wuensch from Citi. Joanne, your line is live. Please go ahead.
[Analyst] (Citi): Hey, good morning. This is Anthony on for Joanne. Thanks for taking our question. Could you maybe characterize a bit more what you are seeing in the market in contact lenses in the US and outside US, and then maybe talk a little bit about competition? US was up 9%. OUS was a little bit slower, 4%. Just anything more on that would be helpful.
Tom Appio: Yeah, Anthony, thank you for the question. I will take that, and then maybe Sam can add anything onto it. When I look at the contact lens business, I always thought this was an underappreciated business when you look at it. It is a strong, durable business. If you look at the growth that the contact lens franchise has had over the previous years, it is a durable performer that continues to outgrow the market. I think when you look at the portfolio in contact lens, and I said this back many years ago, if you look at the base business, the FRP business, that is a nice base. Building off of it, you have the Daily SiHy portfolio. I think our R&D colleagues in Rochester did a wonderful job when they designed ULTRA ONE DAY and INFUSE.
Tom Appio: If you see that, of course, you look at the growth that that portfolio has been driving. If you look also at the You have the spherical, you have the toric, you got the multifocal, you got the multifocal toric. So there is a lot of runway there to continue to grow as it rolls out across the globe. When you look at the US business, some of our competitors have challenges, but we do not see that for us. If you take a look at 9% growth, well above the market in the US, and then from the international side, growing at 4%. As we look at some of the portfolio, probably more of the legacy portfolio, that has an impact there from an international side. But overall, the contact lens business for us is performing really strong.
Tom Appio: As I said underappreciated in how the durableness of this business and the breadth of the portfolio that we have from a daily to the FRP lenses. I think the other thing, and maybe Yehia can talk about this as well, is Project Halo. This is a very interesting project. I think it is going to be a game changer from a contact lens perspective. Sam can talk about this as well, and Yehia, in terms of being able to run this platform on existing equipment, which is critical to continuing to drive margin expansion. With that, let me just turn it over to Sam and Yehia. Maybe they could add to that.
Sam Eldessouky: Yeah. Thanks, Tom. Let me maybe just focus on the opportunity side, on the lens side, because I think Tom covered it really nice with the broader view and big picture in terms of what we are seeing. The one thing I maybe take a step back and just remind you is we are seeing, for example, a Daily SiHy growing at 25% this quarter.
Sam Eldessouky: That is coming off of double-digit growth in the last two quarters, and that is based on also a 28% growth last year. So you are seeing the momentum here around Daily SiHy is just continuing, and I agree with Tom, we are under-indexed in that category, and there is a lot of room for us to still continue to grow. We are seeing that growth, and the team is doing a great job in terms of the execution and expanding the portfolio across the board.
Sam Eldessouky: What is also important is the FRP, which I do not want to lose sight of it, because I think we are seeing not only the Daily SiHy is growing, but you are seeing also FRP is growing, and we saw that it is growing roughly about 17% this quarter. Just keep in mind that it is coming off roughly about 10% growth of last year as well. Again, it is not a one quarter type of momentum. You are seeing that momentum continues very nicely. Before I turn it to Yehia to talk about Project Halo, the one just aspect I will comment on Project Halo is the fact that we talked about the importance of the cost around the lenses as well as the capital need around a build-out of any type of new lenses.
Sam Eldessouky: One of the opportunities that we have here with this new project is you do not need the build-out capital intensity that is required, because it is going to be on the existing lines. That is a real plus for us, especially from a cash flow perspective. The second part is the starting point of the cost per unit is very attractive. It puts us in a position that you are not starting with the higher cost and having to work your way down with the yield. You are starting at a lower cost point, which really gives us a very good opportunity from a margin perspective on that product. Tayyab, I do not know if you want to add on anything on that.
Yehia Hashad: Yeah, absolutely. I can give just an update on the Project Halo, which the team have been making great progress on that project as well. Since we reported the results earlier in the year about the first external study, the team actually have done several internal insertion studies in order to optimize the lens design. We are also conducting a lot of tear dynamics studies in order to find this is a completely innovative new material. So to understand exactly how they work in the eye and with the tear homeostasis. This is work being in progress now. In addition to this, also, we are doing a lot of studies related to the packaging solution, because at the end of the day, we are targeting the end-of-day dryness that affects the majority of the contact lenses that can happen with it.
Yehia Hashad: This is where the majority of the work being done now. We actually do not want to start the next expected study until we are very confident about the design, the tear dynamics, as well as the packaging solution. So great work being done, and the progress is on track to deliver it as planned before.
Tom Appio: Anthony, that is just an overall view of the business. I believe that this is a really nice growth driver for us going forward. As I said, durable and really need to appreciate what we have. Operator, next question.
Operator: Certainly. Your next question is coming from Robbie Marcus from JPMorgan. Robbie, your line is live. Please go ahead.
[Analyst] (JPMorgan): Hey, this is Henry on for Robbie. Thank you for taking the questions, and congratulations on the strong quarter. Maybe looking a bit at surgical. We did see some softness there in the quarter relative to expectations. Looking like maybe mostly on the capital equipment side. Can you talk a bit about what you are seeing in the market there during the quarter? I just have a quick follow-up. Thank you.
Tom Appio: Yeah, Henry, thanks for the question. Overall, when we look at the surgical business, as we talked about in the prepared remarks and Sam mentioned it as well, driving the premium IOL business, we think we have a really nice product here in the premium sector that is very competitive. Overall, in the quarter, you looked at just our consumable growth, which again, driving procedures through the providers. What I would say is on the equipment, really when you look at the equipment, it is a strategy there of placing equipment versus recording revenue. I think that is what has changed the dynamic there as we really are focusing on the premium IOL business and of course, the consumables. I do not know, Sam, do you want to add anything more to that?
Sam Eldessouky: Not much, Tom. I think you said it well. I think when you think about for the last couple of quarters, we have been calling out the placements of the equipment, and it is really part of our own strategy in terms of how we position our equipment in the marketplace. We are seeing the benefit of that already, and you start to see that where the number of placements is high. The important of that is it also with the expansion of that placement, it also expands our install base, which drives more recurring revenue for us around the consumables. You saw that really play in the quarter with 5%. Consumables is the largest part of our surgical business, and it is the highest margin part of our surgical business. So it is really driving down.
Sam Eldessouky: I know we did not file the 10-Q yet, but when you see the 10-Q later in the day when it gets filed, you will see, for example, the gross margin around surgical was up about 800 basis points in the quarter. So you are seeing that play out from a margin perspective, which is really the strategy that we outlined.
Tom Appio: Yeah, I think, Henry, also to add to that, on the premium IOLs, you look at the premium momentum that we have had in the US now extending into Europe, and with enVista and the launches. The strategy, delivering the top-line growth and margin expansion there is the focus. And then, in the quarter was solid growth in consumables, which is our largest business. As we move forward, and as I spend some time with the surgical team, it has only been 2 weeks since I have been in the role. I will spend some time with the surgical team. I have a really good understanding of the surgical business globally. And hopefully, really do a deep dive into what else we can do to further growth. Operator, next question.
[Analyst] (JPMorgan): Great. Thank you.
Operator: Certainly. Your next question is coming from Peter Chickering from Deutsche Bank. Peter, your line is live. Please go ahead.
Kieran Ryan: Hi there. Yeah, you have Kieran Ryan on here for Peter. Thanks for taking our question. I wanted to ask about the pipeline. I guess, Tom, if there is anything you would want to talk about there that you would want to highlight or are most excited about, but more specifically, wanted to ask if you could provide any updates on the dry AMD program. I think you have some interesting stuff going on there with an earlier intervention oral. Thanks.
Tom Appio: Yeah. Kieran, thank you for the question. Clearly, innovation is critical. Investing behind innovation. There are some very interesting projects that are in our R&D pipeline. I am going to spend some time next week with the R&D team, going through each of these projects. But clearly, the breadth of a healthcare company is to have innovation and provide innovation, and the relentless drive to create better health outcomes. When I look at what is in the pipeline, there are various things in each of the areas where we compete that I think are very interesting. I think the team is working on some projects that of course, are part of Vision '27, but also can help us in the end of the decade, in the beginning of the next decade. Of course, you always need to have the data, and of course, you have to prove it.
Tom Appio: But that is the business that we are in. I will hand it over to Yehia. He can talk more specifically about some of the programs.
Yehia Hashad: Yeah. First of all, thank you for the question on the pipeline. Let me start by the last part that you asked about specifically.
Kieran Ryan: Right.
Yehia Hashad: Then I will give you also a quick update on at least the critical projects that we have. Obviously, you are speaking about the tonabersat that we issued a press release about meeting with the FDA in the dry AMD or the pre-geographic atrophy or pre-wet AMD stage. This is actually an orally administered, once-daily, small molecule that inhibits pathologically opening of the connexin 43. These are hemichannels existing, and once it open pathologically, it release a lot of inflammatory mediators, primarily created by inflammasome. What this product does, it inhibits this type of inflammation. So it works really upstream. This is a high unmet medical need area because there is no available treatment now for these earlier stages or pre-atrophic stages of AMD. Being an orally administered is a great advantage.
Yehia Hashad: In fact, when we met with the FDA, they acknowledge a lot this approach, and they encourage us that we actually try. I think the whole discussion with the FDA went into the clinical program and how we progress on the clinical program. We are trying several doses in the first study, and some of these doses were not tested before, so that is why they ask us for a PK safety study to start with, which we are planning to start at the beginning of next year. The meeting actually was very encouraging from the FDA side towards whether the unmet medical need or even the mechanism of action of this product to work with. The second thing I would like just to mention a very quick one. I think Project Halo, I already gave an update on it.
Yehia Hashad: Some of the critical projects we have, Project ELIOS is still on track, under the FDA review currently, and we are actually still planning to get approval by the end of the year if there is no other issues issued by the FDA. Second, I would like also to mention that we are primarily, from a surgical perspective, we have a pre-submission meeting for the EDOF. We already announced the results of our EDOF study earlier, and we have a meeting that is planned around mid-December for pre-submission on that side. On the vision care, we mentioned Project Halo. Myopia, we are planning to start the myopia study in the US in Q4. On the other pharma studies, you mentioned also dry eye. We are actually in the phase of planning our phase III studies with the dual action products that we also announced the results.
Yehia Hashad: We are expecting very soon the results of the ocular surface pain post-PRK or post-photorefractive keratectomy, a refractive surgery.
Yehia Hashad: These are the quick highlights of the pipeline, but again, happy to receive any other questions.
Tom Appio: Okay. Thank you. Operator, next question.
Operator: Your next question is coming from Daniel Clark from Leerink. Daniel, your line is live. Please go ahead.
Daniel Clark: Great. Thank you, and congrats on the quarter. I wanted to ask about MIEBO. Very strong performance there. How should we think about that strength, whether from a volume side or if there are any changes in gross to net, both in the quarter itself and in Q4 and in the next year? Thank you.
Sam Eldessouky: Yeah, I know. When you think about MIEBO, the performance is really all coming in from the bi-ma. We all can see the TRxs, and we saw the really impressive TRx growth. We are averaging roughly about 37,000 TRxs. So it is really impressive in terms of the work and the execution that the pharma team was able to do there. From a gross to net perspective, really nothing has changed for 2026. We always thought about the gross to net is roughly about the mid-70s for MIEBO, and that continues to be the same part of our thinking as we think about Q4 as well and the full year for 2026.
Tom Appio: Okay. Next question.
Operator: Your next question is coming from Doug Miehm from RBC Capital. Doug, your line is live. Please go ahead.
Doug Miehm: Yeah. Good morning. I think most questions have already been answered. Tom, you are in a very unique position here as CEO of both companies and with a deep knowledge of both those companies, given your history. Is it the best thing for this company to remain public, or should Bausch & Lomb become part of the parent again at some point in the future?
Tom Appio: Hi, Doug. Thanks for joining the call. Appreciate it. What I would say is this, my focus right now as interim CEO is to drive performance, and I laid that out before in a previous question of what my focus is going to be. When we look at Vision '27, what needs to be done there, we are one year into a three-year plan. I am going to stay real focused on driving performance there on the top line, through the gross margin line, through the expense line, invest in innovation, get those R&D projects through the pipeline. Clearly, we can do some M&A that can really help us to fill gaps and help patients. I think that overall, when we execute on that, it is good for B&L shareholders.
Tom Appio: And that is all I can say as in this job now for two weeks, and I really think that we have a great team around the world that can execute on Vision '27.
Doug Miehm: Excellent. Thank you.
Tom Appio: Okay, operator.
Operator: Thank you. We are now out of time, and this concludes our question and answer session, and our conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
