Good morning, and welcome to the Bausch + Lomb’s Fourth Quarter and Full-Year 2023 Earnings Call. All participants will be in a listen-only mode. [Operator Instructions] 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.

Thank you. Good morning, everyone, and welcome to our fourth quarter and full-year 2023 financial results conference call. Participating on today's call are Chairman and Chief Executive Officer, Mr. Brent Saunders, and Chief Financial Officer, Mr. Sam Eldessouky. In addition to the 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. Finally, the financial guidance in this presentation is effective as of today only. It is our policy to generally not update guidance until the following quarter, unless required by law, and not to update or affirm guidance other than through broadly disseminated public disclosure. With that, it's my pleasure to turn the call over to Brent.

Thank you, George, and thank you, everyone, for joining us today. We're going to follow a familiar format. I'll cover highlights from the fourth quarter and full year, and Sam will dive deeper on financials and provide 2024 guidance. I'll close by reviewing growth drivers, and then we'll take your questions. The first of our three key takeaways speaks for itself. Revenue growth in 2023 and in the fourth quarter in particular, exceeded our expectations and set the tone for 2024. Double-digit growth is always impressive, but even more so when you consider how we got there. Our quality of growth is what helps set us apart from others, and that will be enhanced as we've entered one of the most active launch years in our company's history. You've heard me talk about selling and operational excellence quite a bit. It's central to any discussion I have on company strategy, and will dictate our success going forward. Here's the good news. We're making solid progress in both areas. Our dry eye franchise is a perfect example. The combined Miebo and Xiidra sales force is the largest, and I would argue most sophisticated in eye health. And when it comes to operations, our mindset hasn't changed. We're taking a methodical approach to addressing the challenges we face, with the expectation that our supply chain will become a competitive advantage in time. Hasty climbers have sudden falls as the saying goes, which means we won't lose sight of our long-term goals for short-term gains. The last takeaway is focused on innovation, which has been the driving force throughout Bausch + Lomb’s 170-year history. We've made no secret of our desire to put innovation at the forefront once again, and we're doing that in two ways. First, we're expanding our internal R&D capabilities…

Thank you, Brent, and good morning, everyone. Before we begin, please note that most of my comments today will be focused on growth expressed on constant currency basis. Turning now to our financial results on Slide 8. In the fourth quarter, we once again saw strong revenue growth across each of our segments and key product franchises. We're pleased with how we ended the year and our performance for the full year in 2023. Our business demonstrated growth in revenue and adjusted EBITDA, with revenue exceeding our full-year guidance. We are excited by the momentum we have heading into 2024, which as Brent mentioned, we expect will be one of the most active launch years in our history. Total company revenue of $1.173 billion for Q4 reflects growth of 19% on a constant currency basis. For the full year, total company revenue of $4.146 billion reflects growth of 12% on a constant currency basis. This was the first full quarter following the launch of Miebo and the closing of the Xiidra acquisition. I'll be discussing the impact of these key dry eye franchises more throughout the call, but the headline is that we're highly encouraged by what we're seeing so far. Touching briefly on supply, we have continued to make improvements to strengthen our supply chain in 2023, and we're pleased with the progress. While there's still work to be done, we feel confident about the path forward. As Brent will discuss, we expect to continue our efforts to implement efficiency measures throughout 2024, which we expect will be an important factor to drive sustainable margin expansion. Volatility in our currency mix moderated in the fourth quarter and did not have a material impact on the results for the quarter. For the full year, currency was a headwind of $68…

Thanks, Sam. Let's focus on what we need to do to win in 2024. Recent and upcoming launches have us positioned for success in each of our businesses, but the only way we fully take advantage of those opportunities is by reaching more customers and consumers and separating ourselves from the pack with how we sell. As Sam outlined, we're off to a great start with Miebo. Eyecare professionals are prescribing, and consumers are coming back for more. Post-launch excitement hasn't waned. In fact, it continues to build. We need to harness that momentum in 2024 and ensure Miebo becomes the category-altering medication it has the potential to be, which means continuing to invest in sales and marketing. In concert with our Miebo push, we need to not only keep working to restore Xiidra to its place as a category leader, but unlock its full potential. It's important to remember that Xiidra sales and marketing operation we inherited was not in the same condition when at its peak. I'm a dog lover, so I'll use an abandoned pet analogy. We took it in and are nursing it back to health so it can thrive once again. Sam also pointed to daily SiHy success. There's growing demand for these lenses, which is why we're expanding our offerings, including the launch of a multifocal in the US. Demand is also a theme in dry eye, as we've made clear, and while the focus is often on prescription medications, we’ve built a formidable stable of OTC dry eye brands on a global scale, most notably Artelac. That stable expanded with the acquisition of Blink, which we expect will be a steady and growing contributor for years to come. Finally, premium IOLs continue to represent our biggest opportunity in surgical, where sales are influenced…

[Operator Instructions] Your first question for today is coming from Matt Miksic with Barclays.

Hey, good morning, and thanks so much for taking the questions, and congrats on a really strong finish here to 2023. I have one question if I could on Xiidra. I think you did a pretty great job last year of sort of framing out expectations for Xiidra and Miebo, and how they would kind of interplay, and ended up finishing, as you mentioned, a bit stronger out of the gate. Could you maybe talk a little bit about how we should maybe recalibrate the trajectory of what we are expecting from Xiidra, assuming you're still going to invest behind it as you mentioned, but is that just a quarter or two ahead of plan here, or is there some kind of ups and downs we should expect in the coming quarters? And I have one follow up.

Sure. Thanks Matt. So, look, Xiidra is an incredibly important focus for us in 2024. I have to give a nod to our sales team in the fourth quarter, right? We got a product that had been kind of left behind. And what's interesting when you look at the fourth quarter, there's some seasonality there. Fourth quarter is always the best for chronic prescription demand because of deductibles and the like. But when you look at what happened was, in the fourth quarter, we brought the Novartis sales team in, made them a Bausch + Lomb sales team, and they - really, we just focused on basic execution. And you saw what happens, right? We saw really good performance in the fourth quarter. I think that should give us optimism for what can be done. And in early January, we actually integrated the field force and they're actually in their sales meeting, their annual sales meeting as we speak this week in Orlando. And so, I'm pretty optimistic. When you look at tactics and when you look at execution on the ground and couple that now with reinvesting in marketing, right? We're back on TV as of mid-January. So, we've been on TV for a couple of weeks with Xiidra. I'm pretty optimistic that this can be a growth driver. So, if you think about it just in basic terms, Novartis, in the quarters they had it, they did about $250 million. We did $106 million in the fourth quarter. So, you've got a performance of $355 million. Sam, in his comments, guided to $400 million. That's a 13% growth if we pull that off. When we bought it and we announced a deal model, we talked about mid-single digit growth. So, we feel like we can get back on track and make this a real growth driver. Now, in all dry, including Miebo, there is seasonality. The first quarter, because of deductibles, is always the weakest, and the fourth quarter is always the strongest. So, I wouldn't just divide the $400 million by four and look for it that way, but you'll see a nice steady build as we execute and we drive marketing and the seasonality that is a factor, I think we're going to set ourselves up for a very nice year in Xiidra.

That's great. Thanks for that. And then one other area that was - you had a pretty strong finish, important category within surgical is around IOLs, and I know you have a pipeline of new products you've talked about, planned out for this year on the IC-8 IOL side, but some of the sort of just underlying growth of that business was quite strong in Q4. Just wondering if you could comment on whether that was a market phenomenon, whether you feel like some of the products in the market currently are gaining momentum and how sustainable that is. Thanks.

Yes, so you're right. We did see some strong demand for IOLs in the quarter and throughout the year. I think it really is a foreshadowing of what we want this business to look like. So, premium IOLs were up 30%, Sam, about 30% in the fourth quarter. I think it's off a small number, right? And what we need to transition to, if you look at surgical for the year, packs were up about 9% for the year. Equipment was up about 11% for the year. So, better - we're taking market share. We're growing faster than the market. What we need to do in 2024 and really in 2025 and 2026 is drive that IOL mix and drive it towards the premium side of the IOL. That actually is the way you run a surgical business, and it has a tremendous benefit of driving margin improvement. And so, when we talk about margin improvement, mix is critical and one of our most important strategies is to drive from the lower margin packs and equipment to pull through the higher margin IOL. So, really good foreshadowing. I see that the new launches, we have the Aspire that we launched. We have the IC-8, which we’re still launching. We have a trifocal getting approved at the back end of the year, and then we have our EDOF lens hopefully getting approved in later 2025. So, the setup there is really nice for constant new product, new innovation and higher margin products to drive through that business. And that's my reason I get excited about surgical is pulling that off, but it is going to take two years to get there.

Right. Well, that's super helpful and congrats again, Brent, and to the team on the solid results. Thanks.

Your next question is from Patrick Wood with Morgan Stanley.

Amazing. Thank you for taking the questions. I've got one and then a quick follow-up. I guess for the first one, sort of a bit more high level, obviously on the consumer side and then the pharma business, you've got meaty scale now. And so, I guess, how are you thinking about things going forward? You mentioned the BD team a bunch of times, but organically and inorganically, how are you splitting your energy between the segments? And going forward, where do you think the biggest opportunities are? You obviously talked a little bit about premium IOLs. There’s other areas like custom packs, glaucoma. It's a big market, right? How do you see the direction strategically and where you feel the biggest gaps that you might like to bulk up in are?

Yes, so great question. So, a little different than how we report. The way I think about the business is four business units, right? We have the pharmaceutical, consumer, vision care, and surgical. And when you look at it, two are in really good shape, right? Consumer, we are the leader in eyecare. We have demonstrated great growth in the consumer business, up 11%. And what's interesting, a lot of that is volume, where in the past years a lot of that was price. And so, really healthy performance there. We have some new products coming in consumer. We have some new incremental innovations coming. We have packaging innovation coming. So, pretty excited about the consumer business, combined with just a great team, right? We have a really strong team at B+L on consumer. Pharma, you know the story, right? We're really investing, particularly in the US. We have Miebo. We have Xiidra. We have Vyzulta. We have - on the hunt for other things to add to the bag, but we have a lot of strength and a lot of growth for several years to come in pharma, and lots of opportunities to add innovation. Vision care, a very strong performance if you normalize for Lynchburg. And we look at vision care as very strategic, but still a work in progress, right? We've got to drive growth, daily SiHy. INFUSE, as an example, is up 46% for the year. That's our fastest-growing product and a great contact lens. And so, our job there is simply execution. Surgical, still a work in progress, as I mentioned. And there, it's a two-to-three-year program to drive towards IOLs and premium IOLs becoming a larger contributor, with much higher margins. And so, to summarize, I'd say we have two of our businesses in really good shape, and two that are focused on execution and delivery. That being said, you're right. How do you split your time between the four? For me, it’s quite simple. You’ve got to build great teams, and we've done that. You've got to focus on execution, and then you have to work with R&D to drive innovation. And we’ve organized ourselves to do that, and I think we can pull it off.

That's super handy. And then, obviously Aspire, it looks like it's done very well in the US. I think it's like almost 14,000 units just in the 4Q right off the bat. But I think IC-8, I think from memory, you guys still have some production challenges there. I think you probably only have like 1,000 units or so. That seems like a very differentiated lens. Going forward, is there an opportunity to kind of push that on the production side and get the volumes up a little bit faster?

Yes, absolutely. So, you're right. enVista Aspire was launched with about 100 days into the launch, give or take. We've had about 350 surgeons actually implant the Aspire, where the Aspire Toric, and what we're hearing anecdotally and what we're hearing from our field force is great results by the doctors and absolutely great outcomes from the patients. Now, that lens is positioned as a monofocal plus to compete against the J&J Eyhance. And I think our team's doing a great job there and there's a really big opportunity. The IC-8 or Apthera lens, you're absolutely on the money. Our third-party manufacturing there is struggling. Al Waterhouse knows that well, because it came from Apthera before coming from J&J, the AMO. The issue there is, right, driving production capability, and that is in place, but it will take a few quarters to get to where we want to get to. And so, again, great outcomes, great patient and satisfaction. Surgeons who have implanted it love it, but we don't want to roll it out to all surgeons. A, you have to train them, and two, you have to have supply. And so, that is a work in progress without a doubt. But I think that sets us up - if you look at the team's performance on Aspire, it really gets you excited for the potential for the pipeline that's going to pull through later this year and next year.

Super helpful. Thank you. And I hope the shoulder gets better soon.

Yes, thank you. It's my right shoulder. I'm right-handed. So, it's - even turning pages here left hand is clumsy.

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

Good morning, guys. Thanks for taking the questions and congrats on a strong finish. I wanted to talk about the margin opportunity for you guys in 2024 and maybe beyond, given the strength of Xiidra and Miebo. The margin expansion that you are guiding to is in line with some of your comments from earlier in the year. So, just want to understand, as you're in this investment mode, to the extent that Xiidra and Miebo and maybe the rest of the business outperform, how should we think about you either dropping some of that benefit or outperformance to margin improvement, or are you going to reinvest that to drive even more growth?

Yes, no, that's a great question. So, margin expansion is a critical part of our long-term strategy, right? We want to deliver sustained margin improvement for the next several years. And I think we're set up to do just exactly that, but as you mentioned, right, product mix is a big part of improving margin. The operational excellence we've been talking about for the last few quarters, critical, and obviously cost discipline. When you think about 2024, remember it is our largest launch here in the history of the company. And so, let's just take the example you mentioned, Miebo, right? Sam guided for around $95 million in sales from Miebo. Our investment is significantly higher than the $95 million, significant. And so, as that pharmaceutical, you tend to invest around two to three years, and then they become vastly profitable. So, we have a direct line of sight of extensive margin improvement over the next few years, but you’ve got to set up these products to realize their potential. Now, directly to your question, Craig, if we have upside, would we drop it through? I think we would like to do that. The only hesitation I have there is if we believe we can change the trajectory of the curve on a product like Miebo, you'd probably want to do that as an investor. You'd probably want to set that up for higher peak sales because we have it for a long time, and it can drive massive growth and profitability with the right investment. That being said, I think we’ve made a massive investment. We have a great plan. We’re tracking KPIs on a daily, weekly, monthly and quarterly basis. We make the investment decisions based on performance. We don't just turn over that investment and say good luck. It's gated and it's done with stage gates based on hitting KPIs. So, we're going to watch that carefully. But yes, I think all things being equal, we would try to drop a greater performance all the way through the P&L.

Great. Thanks for that, Brent. And maybe as a follow-up on some of your comments on the contact lenses and that business, just wanted to get your perspective on what seems like a pretty strong underlying market, and maybe comments on how pricing looks there in 2024 and your positioning within that market and just any other trends that you're seeing there.

Yes, so you're right, the contact lens market globally is very healthy, growing around 7%, 8%. So, really good trends, good demographics, a lot of tailwinds in that business, and a lot of reason to like contact lens as a category. I think if you looked at our performance and you tried to normalize for Lynchburg, we're growing slightly faster than market. And I already gave you the great performance on INFUSE or Ultra daily or daily SiHy. And there's a lot to be excited about in that category. Now, the trends there remain the same, a big shift to daily silicon hydrogels. As we complete the rollout of the full line of INFUSE, we have the multifocal in several key markets. We've got to continue launching that around the world. We have the Toric coming, and then we have the multifocal Toric coming. So, a lot of work, a lot of new launches within that brand over the next, let's say 12, 18 months. So, feel pretty good about it. Pricing, look, I think there are pricing opportunities in that market. When you look at the fourth quarter, there was a lot of rebating by our competitors. We did not participate in that, given our Lynchburg situation and the launch mode of INFUSE. But we look at it very closely. We look at all the trends and we do make strategic pricing decisions, particularly on perhaps some of the older products. But the new products right now, it's about building share, pricing appropriately and building share. And I think we have a very strong strategy there. So, we’re thoughtful of that, in other words.

Thanks for taking the questions, guys.

The next question is from Larry Biegelsen with Wells Fargo.

Good morning. Thanks for taking the question and congratulations on a strong finish to the year here, Brent, and Sam. Love to start with Miebo. Brent, could you talk about the adoption so far? What's going well? Where do you see opportunities to improve, such as payer coverage? And how are you feeling about the peak sales of $350 million that you laid out recently? Could you exceed that? Then I had one follow-up.

Sure. So, I think when you look at Miebo, what you like is the initial target, as you would in any launch, was against high prescribed and dry eye ECPs, right, eye care professionals. And I think the team did a really good job, and the excitement among that community was strong and remains strong. And their experience with Miebo with patients has been excellent, right? And the reason that is you look at refill rates, which are trending way above dry eye category refill rates. So, that means early KPIs are the experienced dry eye ECPs love the product, and their patients love it even more in refill. So, that's part of thesis of why you're going to make such a massive investment in Miebo in 2024 is because there's a lot to like there. I think when you think about what has to happen in 2024, there's two probably key activities that our team has to execute against. One is to drive adoption more broadly by ECPs. We have order of magnitude tens of thousands of new targets that the team has to reach this year and drive adoption of Miebo. And that's theme of what they're talking about in Orlando today. The whole field force has been there this week, and that's one of the key themes. And the second, Larry, you hit it right on the nail on the head is to drive managed care adoption. That is a big priority for 2024. Just the normal cycle, remember, this is a new drug and new drugs take some time, but given the demand we've seen in the market, managed care is much more open to working with us than they were just a quarter ago. So, really positive momentum there. I suspect by the back half of 2024, commercial coverage will be really, really strong. There'll be more work to do in 2025, but 2024 will be ahead of our expectations on commercial coverage. Now, Medicare has the longest lead time or lag time to drive coverage, but I'm optimistic we'll do a strong performance in 2024. But 2025, it will catch up to commercial coverage. And so, I think those two areas are really important for execution. And when I look at the $350 million peak number, I'm actually pretty optimistic we can exceed that. I think, given the investment we're making in the early KPIs, I think we do better than that.

That's awesome. Thanks. Hey, just a quick one for Sam. The margin cadence, any help on the phasing of margins in 2024? Thanks for taking the question.

Good morning, Larry. So, it's a good question, and seasonality is a very important part of our business, and that's why I highlighted my prepared remarks. So, if you think about 2024 for us, we'll follow a similar trend as we saw in 2023, with our first quarter being the lowest in terms of contribution and fourth quarters is the highest. So, I just use that as an example. Last year in Q1, last year 2022 in Q1 for revenue, we contributed roughly about 22% of the full-year results. And for EBITDA was contribution roughly about 19% of the full-year EBITDA numbers that we had for 2023. So, if you follow a similar trend and use the midpoint of our guidance that we provide this morning, that should give you a pretty good sense of our phasing as we think about it in 2024, and it builds on from Q1 onwards as you go through to Q4.

Thank you.

Your next question for today is coming from Robbie Marcus with J.P. Morgan.

Oh, great. Thanks for taking the questions and congrats on a good quarter. Maybe to follow up on Larry's question, Xiidra, I wanted to spend a minute here. You talked about $400 million for the year. That's basically - if you back out the one time in fourth quarter, it's basically just roughly $100 million a quarter, and I realize there's seasonality. So, maybe just speak to why $400 million, given such a strong fourth quarter here, and how we think about what Xiidra is adding down the P&L in terms of adjusted EBITDA.

Yes, so, so great question, Robbie. Unfortunately, you can't just take the 400 and divide by four, as I said earlier. There's a lot of seasonality in prescription coverage, right? And particularly in this category. I think putting up about 13% growth on Xiidra in 2024, which is what we're guiding towards, would be a very impressive performance by our team, particularly when we announced the deal, we said it was going to be a mid-single digit grower. So, this is more than doubling our expected growth. Now, some of that is just returning Xiidra back to where it belonged through tactical execution. And keep in mind, I've said this multiple times, dry eye is a very promotionally sensitive category, right? And so, in fairness, in 2024, we're investing a little bit more in Xiidra than we would have if it hadn't been given to us in a bit of a kind of left behind or neglected state from Novartis. But we're very confident that Xiidra, once we get it back on path, can be a very strong contributor or margin via product mix. And so, yes, we're making a stronger investment, but I think the data from Q4 proves that it's a smart investment for us. We’re tracking the KPIs on this one very closely as well, and investing only when we hit certain stage gates of performance. But right now, there's a lot of reasons to believe our team can execute against it. And keep in mind, having Xiidra with Miebo, right, we've integrated the field force, is a win-win. It is absolutely one plus one equals something greater than three, right? Having our field force be able to promote two differentiated, mechanistically different drugs for dry eye therapy, really positions us as the company in dry eye and our representatives with the greatest portfolio of the best products. And so, I'm really optimistic on Xiidra, but perhaps we can do better than 400. We'll have to see. It’s mid-February, and the team is at their sales meeting right now. I think there'll be a lot of momentum coming out of this week and throughout the year as seasonality builds, as the investment and marketing builds, and the focus on execution in the field.

Great. appreciate that. And maybe just as a follow up on free cash flow generation in 2024, I realize you have a lot of integration activities here, but how should we think about free cash flow in 2024 and any phasing through the year we should consider? Thanks.

Sure, Ravi, it’s a good question. When you think about cash, listen, cash is a very important element for us. It's part of our DNA. So, we call it, cash is cultural, right? So, it’s something we spend a lot of time talking about it. We're focused on it. So, when you think about - and maybe before I talk to 2024, I want to step back and just talk 2022 because it sets the base for how we think about 2024. So, when you think about 2023, cash played out exactly as we anticipated. The first half of the year, we were in a growth mode with our topline and gaining market share, and that was a use on working capital, and we see that in the first half of the year. Expecting that will turn positive in the second half of the year. So, you think of a second half cash flow for us in the year was generating roughly about $95 million in Q3 and Q4. Keep in mind that was all happening as we were building up inventory. So, we built roughly about $250 million of inventory throughout 2023 that helped us as we were working through our supply chain challenges that we've talked about. So, that's a very important background for us to set the stage on for 2023. Now, when you reflect to 2024, we expect cash to - we don't expect the level of inventory buildup that we've seen in 2023, does not repeat again into 2024 at that same level. So, we expect that to be a more of a short-term element. We'll stay probably at a higher elevated level, but we don't expect that step up in inventory again. So, with that, I expect our cash for 2024 to be roughly about - conversion rate from EBITDA to midpoint of guidance, roughly about anywhere between 30% to 35% conversion rate for cash flow. The phasing will follow a similar phasing as we think about the P&L. To the phasing that I highlighted to Larry, that probably will be something you will have to keep in mind as well as you think about from our cash flow generation throughout the year. We start low and we'll build up high as we get into Q4.

Great. I appreciate the color. Thank you.

Your next question is from Vijay Kumar with Evercore ISI.

Hey, guys, congrats and nice print here, and thanks for taking my question. I guess my first one here, Brent, I just want to clarify, did you say the investments in Miebo are well above the $95 million? So, how much of a drag is Miebo on margins right now? And I'm curious, when do you think those margins will be accretive to corporate?

Yes, I did say it is significant, and I chose the word significant on purpose more than the $95 million, right? And that is very typical of the first year of a very promising pharmaceutical launch. In fact, when you look at the history of pharmaceutical launches, you tend to see the first two to three years in investment mode. And so, I see this being a margin contributor in a more meaningful way in 2026 and becoming a significant contributor in 2027 and for years to come. And so, that's the right way to launch the drug. And as I said earlier to Larry, I do think we can exceed our targets on peak sales. I'm not ready to set a number on it. We need more experience, but I'm very optimistic. This is a great drug and the acceptance is great. We need to execute. We need to expand the prescribers. We need to get the managed care coverage. So, a lot of work to do, but we are - our team is killing it, and we are set up for what could become a very promising product and margin contributor on a significant basis over the mid to long term. Sam, any comment to add?

Yes, And Vijay, it’s a similar sort of comments that we made before. When you think about the launches, and especially Miebo being one of the most important launches for us, we're playing the long game here in terms of the investment. And when I think about it from a margin contribution, I would probably step back and look at everything we put on the table from sort of a P&L, full P&L. So, when you think about our guidance for 2024, we expect margin to expand anywhere between 50 basis points to up to 110 basis points. If you take the midpoint of that, of our guidance, that's about 80 basis points of expansion, while we're still investing for the long -term benefit by investing behind Miebo and other launches as well. Just keep in mind that next year is one of our highest number of launches that we're seeing - in 2024. Yes, 2024.

Yes. I mean, look, I think Vijay, we have been, and I said this at J.P. Morgan when I was interviewed by Robbie, I think that we've been very deliberate, right? We want to drive margin expansion, but we want it to be sustainable margin expansion. And we have said countless amount of times, 2024 was a massive investment year in the launches. Despite that, and despite the fact that we are investing heavily in Miebo and pretty heavily in Xiidra, well as several other launches, like INFUSE globally and Aspire, we are still going to drive margin improvement in 2024. We hope it's towards the top end of that range, as we talked about upside earlier. But in 2025, we're going to have margin improvement. 2026, we're going to have nice margin improvement. 2027 is going to be even greater. We are really committed to driving long-term margin improvement. And if you look at it over the next three to five years, it will be meaningful, but it's going to take time because the way to get there is to do the right thing and investing in these very important launches.

That's helpful, Brent, and if I may, one follow-up to Miebo, the $95 million that contributes 200 basis points to organic. Just given your comments, your bullishness on this product, is that a sustainable number contribution to growth? When you look at 2025, 2026, could Miebo continue to add in like $50 million to $100 million range? And what is the guidance you made for Prolensa loss of exclusivity in fiscal 2024?

Yes, so yes, I mean, I think you could see Miebo continuing to be a very nice contributor. We had mentioned $350 million peak sales. You tend to hit your peak sales in year four or five on a product like this. And so, if you model that out, and then I did put in some optimism that we could do better than that. Not ready to call the number yet, but I did put in some optimism. So, that's where we're going to watch very carefully this year. As we see execution, we'll guide appropriately based on performance, which is the responsible way to do it. But again, a lot of optimism there. Prolensa did go generic. The generics entered in January. The impact is around $40 million to $50 million this year. That's a very high margin product, end of life product or very high margin. And so, when you think about - and you didn't ask this question, but I'll just use the opportunity. When you think about our guidance for 2024, we're covering a significant amount of headwind. And despite that, still having really nice guidance. You're covering $50-ish million in Prolensa. You're covering currency. And I think I mentioned this at the J.P. Morgan conference, on the webcast, we're covering another $40 million, $50 million of SKU reduction that we did and are doing this year to focus on the higher margin products. So, there's a lot of headwind there that's meaningful to us, and we're jumping right over that and still growing very nicely. So, that's why I have a lot of optimism for the business in 2024, but start to get really excited in the coming years as we finish the hard work that we're doing here to reorganize the company, to simplify the company and to invest in strategic areas that will drive growth.

That's very helpful. Thanks guys.

I think we'll take one more question, Holly,

Your final question for today is from Joanne Wuensch with Citibank.

Thank you for taking the question and good morning. And I'll say upfront, I hope your shoulder heals quickly. Two quick questions. What percentage of your contact lenses are silicone hydrogel today versus a year ago? And I'll toss my second one in now. Where are you feeling, or how are you feeling about M&A at this stage? Thank you.

Yes, so let me take the second part first and then Sam will give you some guidance on the first part. When I think about M&A, I've said this when we did the Xiidra, our priority is to digest and delever the Novartis assets, namely Xiidra. That is our plan for 2024. That being said, I mentioned in the prepared remarks, investing in R&D capabilities and BD capabilities. We are actively involved in numerous discussions around smaller products, R&D assets and the like. And I expect us to use 2024 to build our pipeline in pharma and surgical and consumer and the like. And there’s some really exciting science and there's some really exciting early stage products that could be meaningful contributors to us if we make the investment. So, long-winded way to say nothing significant in 2024 for us, but look for us to be very strategic, adding smaller products or mid to late stage R&D products for all of our businesses. Sam, you want to take that?

Yes. And Joanne, in terms of the SiHy, it is seeing right now as we think about 2022, it is roughly about 10%, but it is growing fast. So, we've seen it growing really fast between 2022 into 2023. And as Brent mentioned, it is growing in the high single - it’s growing in the double digits. We saw Q4 was about 31% growth, just in SiHy.

Thanks, Joanne, and thanks for asking about the shoulder. So, Holly, let me just conclude with some remarks, if that's okay. Great. So, thank you all for joining the call. Reflecting on 2023 for just 30 seconds, I just hit my one-year mark here. It was a very busy year. I think the team accomplished a lot. We did a lot of activities. We remade the executive management team. We did a complete reorganization of our organization. We invested in big capabilities around selling excellence and digital. We started our strategic planning on supply chain, and I'm really proud of the team and what they accomplished in 2023. And I think our performance was very strong. What gets me really excited as I think about 2024 and beyond, and I hope as we continue to interact with all of you in 2024, you'll see a strong focus on execution and driving this company to reach its potential in the years to come. So, very excited outlook and I look forward to keeping you all updated. Thank you so much.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.