Bausch + Lomb Corporation (BLCO) Q4 2025 Earnings Report, Transcript and Summary

Good morning, and welcome to Bausch + Lomb's Fourth Quarter 2025 Earnings Call. [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 2025 financial results conference call. Participating on today's call are Chairman and Chief Executive Officer, Mr. Brent Saunders; Chief Financial Officer, Mr. Sam Eldessouky; and President of Global Pharmaceuticals and International Consumer, Mr. Andrew Stewart. 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. 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 good morning. I'm going to start by highlighting Q4 and full year results, which show we don't just talk about strategy, we execute it. Sam will put more context around our performance and provide 2026 guidance, and Andrew will cover opportunities to expand our leadership in dry eye. I'll close with a look at why we continue to be so excited about 2026 and beyond. When you hear me talk about execution today, this is exactly what I mean. In the fourth quarter, we didn't just grow. We grew smarter and faster than the market. When you see 7% constant currency revenue growth and 27% adjusted EBITDA growth, that's real operating leverage and a clear sign of our commitment to financial excellence. The discipline we built into the organization is paying off. This isn't a onetime exercise. It's the direct result of teams making better decisions, a fundamental shift in our cost structure and executing consistently across our businesses. We plan to harness that momentum to deliver on our 3-year plan. Results don't come from slides or strategy decks. They come from people who believe in what they're doing, take ownership and execute every day. That mindset across our company is what made our record performance in the fourth quarter possible, and it's a privilege to lead a global team committed to winning together. I highlighted fourth quarter growth on the previous slide, but would note that both $1.4 billion in revenue and $330 million adjusted EBITDA are a high watermark for our company that's been around for quite some time. While it's important to remember that there is seasonality to our business, which is especially true as our Pharmaceutical segment becomes more prominent, we did what we said we would do in the quarter. Our ongoing focus on selling excellence is best illustrated by our continuously expanding dry eye portfolio with Miebo generating $112 million in the fourth quarter revenue. We continue to be impressed by Miebo's trajectory and turn towards profitability as we exit the launch phase. The latest demonstration of our commitment to operational excellence and staying nimble to drive sustained, profitable growth comes from our Surgical business, where we made several strategic fourth quarter moves to position us for margin improvement. Finally, as I shared at Investor Day, our pipeline isn't theatrical. It's active in delivering. From the imminent launches to active recruitment for forthcoming trials, we're translating R&D into revenue and impact. That's what builds confidence in future growth. If there are any skeptics of our 3-year plan coming out of Investor Day, this slide is for you. We didn't overpromise in 2025, we executed, and the outcomes speak for themselves, 6% constant currency revenue growth, excluding the enVista recall, was faster than the market and at the midpoint of our planned CAGR through 2028. Adjusted EBITDA margin came in at 17.5%, with an impressive 23.5% in the fourth quarter. Importantly, margin expansion steadily increased throughout the year, putting us on a path to achieve margin targets in 2026 and beyond. You've heard me and Sam reference say-do mentality before. Here it is on paper. Financial discipline is no longer a onetime effort or a cost savings program. We've built the muscle around planning, prioritization and accountability, which puts us in a much stronger position to drive sustained margin improvement over time. People hear pipeline and think long term. What they should think is momentum because something meaningful is happening across our portfolio at all times. PreserVision AREDS3 started to ship on February 2, and Blink Triple Care preservative-free is expected to ship on March 1. CE mark submission for seeLYRA, our next-generation femtosecond laser is expected to take place next week with anticipated approval in the second half of the year. All trial recruitment is on schedule, and we recently received top line data from our first external study for our new bioactive contact lens material. We're pleased to report the study met our expectations and heightens our probability of success. Our in-house R&D team has started its analysis, which will allow us to make improvements to the lens, and we remain on track for our second external study and plan 2028 launch. When it comes to our pipeline, the future isn't waiting, it's already underway. This 2025 performance summary highlights the breadth of our offerings and shows why diversification is a competitive advantage. We've built a company that covers eye health end-to-end, and today, every part of the business is contributing. That's what durable growth looks like. The spotlight products drive that point home. They can be found behind the pharmacy counter, in the operating room or a few clicks away. Some, like Artelac, have demonstrated strong growth in important markets outside the U.S., as we implement our strategy to focus on core formulations. Others, like LUMIFY, are prime for additional exposure and opportunity as next-generation offerings are introduced. I'll now turn it over to Sam for a deeper dive on Q4 and full year financial metrics including cash flow figures that I know he is particularly proud of. He'll also provide 2026 guidance, which is aligned with our 3-year growth plan. Sam?

Thank you, Brent, 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 of my references to adjusted EBITDA will exclude acquired IPR&D. As Brent mentioned, Q4 was a record quarter. We delivered the highest revenue and the highest adjusted EBITDA in the history of Bausch + Lomb. We also delivered an adjusted EBITDA margin of 23.5%, which is the highest level we have achieved as a stand-alone company since our IPO. In the quarter, we drove meaningful operating leverage with adjusted EBITDA growth of 27% on a year-over-year basis. Building on our strong third quarter performance, in Q4, we continued to deliver on the commitments we outlined at Investor Day and showed how our relentless execution will set us up to achieve the 3-year targets we outlined in November. Turning now to our financial results on Slides 9 and 10. Total company revenue for the quarter was $1.405 billion, up 7%. Full year revenue was $5.101 billion, up 5% and up 6% excluding the enVista recall. We saw revenue growth across all our segments, both in the quarter and the full year. Currency was a tailwind to revenue of approximately $37 million in the fourth quarter and approximately $58 million for the full year. Now, let's dive into each of our segments in more detail. Vision Care fourth quarter revenue of $778 million increased by 5%, driven by growth in both consumer and contact lenses. Full year Vision Care revenue was $2.923 billion, up 6%. Let me go over a few highlights. Following double-digit growth in Q4 in the prior year, the Consumer business delivered 3% growth in the quarter. For the full year, the Consumer business grew 5%. LUMIFY generated $63 million of revenue, up 24% in Q4, and $221 million of revenue for the full year, up 16%. The Consumer dry eye portfolio delivered $116 million of revenue in the fourth quarter, up 6%. The growth was led by Blink, which grew 33%. Full year Consumer dry eye revenue was $436 million, up 14%. Eye vitamins, PreserVision and Ocuvite grew by 2% in the fourth quarter and 2% for the full year. Contact Lens revenue growth was 8% in the fourth quarter and 7% for the full year. The growth was again led by DD SiHy, which was up 17% in the fourth quarter and 28% for the full year. Additionally, Ultra was up 16% in the fourth quarter and 9% for the full year. In Q4, our Contact Lens business saw growth in both the U.S. and international markets. The U.S. was up 11% and international was up 6% in the quarter. For the full year, the U.S. was up 9%, and international was up 5%. In China, Contact Lenses continued to perform well and grew by 7% in the quarter and 8% for the full year. Moving now to the Surgical segment. Fourth quarter revenue was $249 million, an increase of 3%. Excluding the impact of the enVista recall, Q4 revenue growth was 6%. For the full year, Surgical revenue was $894 million, up 4% and up 10% excluding the recall. In Q4, Implantables were up 5% and 24% sequentially. For the full year, Implantables were up 4%. Premium IOLs were up 20% for Q4 and 26% for the full year. Consumables were up 4% in the fourth quarter and 5% for the full year. Finally, Equipment was up 2% in Q4 and 3% for the full year. Revenue in the Pharma segment was $378 million in Q4, which is an increase of 14%. For the full year, Pharma revenue was $1.284 billion, up 6%. Our U.S. Branded Rx business was up 21% in the quarter and 13% for the full year. Strong Miebo execution once again led the growth. Miebo delivered $112 million of revenue in Q4, an increase of 111% year-over-year and 33% sequentially. For the full year, Miebo revenue was $316 million, which represents impressive growth of 84%. Xiidra continues to track in line with our expectations, and our team is executing our strategy. In the quarter, Xiidra revenue was $95 million and $331 million for the full year. Our International Pharma business was up 5% in the quarter and 6% for the full year. Finally, we are seeing meaningful progress in our U.S. Generics business, where we saw growth sequentially and on a year-over-year basis. In the fourth quarter, U.S. Generics was up 4% on a year-over-year basis and 24% sequentially. Now, let me walk through some of the key non-GAAP line items on Slides 11 and 12. Adjusted gross margin for the fourth quarter was 62.1%. This absorbs an impact of approximately 80 basis points related to tariffs. For the full year, adjusted gross margin was 61%. In Q4, we invested $94 million in adjusted R&D, in line with Q4 2024. Full year adjusted R&D was $371 million, up 8%. Fourth quarter adjusted EBITDA was $330 million, up 27% on a reported basis. The adjusted EBITDA margin was 23.5% in Q4, which represents year-over-year expansion of 330 basis points. As I previewed at Investor Day, we are continuing to focus on efficiencies in SG&A, and we are seeing the benefits in operating leverage. Full year adjusted EBITDA was $891 million. We are pleased with the work we've done on cash flow optimization. Adjusted cash flow from operations was $152 million in the quarter and $381 million for the full year. Adjusted free cash flow for the quarter was approximately $76 million and $32 million for the full year. CapEx for the full year was $349 million, which includes approximately $30 million of capitalized interest. Net interest expense was $95 million for the quarter and $376 million for the full year excluding a $33 million charge related to refinancing fees. The full year 2025 adjusted tax rate was 10%, which is lower than our previous guidance of approximately 15%. The lower tax rate was mainly driven by the impact of the enVista recall and other onetime adjustments. Adjusted EPS, excluding Acquired IPR&D was $0.32 for the quarter and $0.51 for the full year. Adjusted EPS in Q4 includes a onetime noncash charge of $0.08 related to a revaluation of stock-based compensation to reflect our strong performance and favorable long-term outlook for the company. Excluding this charge, EPS for the quarter was $0.40 and $0.59 for the full year. Now, turning to our 2026 guidance on Slide 16. For 2026, we expect to build on the results we have delivered in 2025 and to continue to execute to achieve our 3-year financial targets outlined at Investor Day. The fundamentals of our business and the eye care market remains strong. We expect our revenue to once again grow faster than the market, and we expect each of our segments to deliver growth in 2026. We expect full year revenue to be in the range of $5.375 billion to $5.475 billion, which represents constant currency growth of 5% to 7%. Based on current exchange rates, for the full year 2026, we estimate currency tailwinds of approximately $30 million to revenue. We expect to continue to execute our margin expansion strategy. We are setting our adjusted EBITDA guidance in the range of $1 billion to $1.050 billion. This reflects a margin of approximately 19% at the midpoint of the guidance range and adjusted EBITDA growth of approximately 15% on a year-over-year basis. We expect to drive meaningful operating leverage in 2026, with adjusted EBITDA growing at a rate of nearly 3x that of revenue. In terms of the other key assumptions underlying our guidance, we expect adjusted gross margin to be approximately 62%, and we expect investments in R&D to be in the range of 7.5% to 8% of revenue. Throughout 2025, we've taken steps to address our debt maturities and cost of debt. We expect interest expense to be approximately $365 million. We expect our adjusted tax rate to be approximately 19%, and we expect our full year CapEx to be approximately $285 million. In terms of our quarterly phasing, we continue to expect the natural seasonality of our business with the first quarter being the lowest and the fourth quarter being the highest. This seasonality is expected to become more pronounced as the dry eye franchise continues to grow. To conclude, we have laid the foundation for revenue growth and margin expansion. We started seeing early results in Q3 2025 and delivered a record quarter in Q4. This gives us a clear signal that the strategy is working. The business is proving to be on a solid path to delivering our long-term targets, and our focus for 2026 will remain on execution. And now, I'll turn the call back to Brent.

Thanks, Sam. I'm now going to turn it over to Andrew Stewart for a look at Miebo and Xiidra performance and an overview of the immense opportunity in dry eye.

Thanks, Brent. Miebo performance in 2025 was exceptional, with 113% year-over-year prescription growth that generated $316 million in revenue. We hit a significant milestone on January 2, crossing the 2 million prescription mark. Going forward, we expect a steady increase in prescription growth and profitability as more patients experience the therapeutic benefit of Miebo and our level of investment stabilizes. With broad market access and natural progression in the medication's life cycle, we anticipate normal seasonality from Miebo prescriptions, similar to what we see for Xiidra and other branded medications in the category. We previously shared that Miebo peak sales could reach $500 million. Based on its success, less than 3 years since launch, we now believe peak sales could exceed $600 million. I'm going to pick up on Brent's theme around execution. When describing Xiidra's 2025 performance, we said we would drive prescription growth, and that's exactly what we did. Total prescriptions grew 6% year-over-year in the fourth quarter, marking the highest quarterly total since launch. In 2026, we anticipate revenue growth and higher profitability, as we evolve our market access strategy. Xiidra and Miebo continue to have best-in-class commercial and Medicare coverage with 4 out of 5 patients covered. Ultimately, we expect both of our flagship dry eye medications to be even bigger contributors to the bottom line in 2026. Dry eye disease is one of the largest and most underpenetrated categories in eye health. Today, approximately 1 in 10 patients are actively treated with prescription therapy, leaving substantial runway for increased adoption. The global market is expected to nearly double in the next 4 years, and much of the recent prescription growth can be attributed to Miebo. For the past 2 years, eye care professionals have been able to more effectively treat patients with the first therapeutic product that can manage evaporative dry eye. This has helped lead to a 5x increase in year-over-year average weekly dry eye prescribers. The overall dry eye market continues to expand due to several factors, most notably an aging population, environmental factors and a dramatic increase in screen time. From over-the-counter products that provide symptomatic relief, prescription therapies that treat both signs and symptoms and diagnostic tools that help eye care professionals better serve their patients, our comprehensive portfolio of dry eye products is second to none and positions Bausch + Lomb to be the biggest beneficiary as more consumers and patients seek treatment. We're not just participating in dry eye, we're leading it. We have the broadest portfolio, the deepest expertise and the strongest presence in the category and in one of the fastest-growing areas of eye health. That's exactly where you want to be.

Thanks, Andrew. Earlier, I mentioned 2 imminent consumer launches, which tell very different but equally powerful stories. One is about evolution, taking a proven product and unlocking a much larger opportunity. The other is about acceleration, a brand we brought back to life that's now growing faster than ever. Two distinct paths, both driving meaningful upside. Let's start with PreserVision, the #1 eye vitamin brand. We partnered with the National Eye Institute for decades to help reduce the risk of progression in moderate-to-advanced AMD, which has led to continuous evolution of the product. The latest and most advanced iteration is AREDS3, which incorporates B vitamin Science. This new formulation allows us to engage patients earlier when the population is significantly larger and the opportunity is greatest. It transforms our role from treating progression to supporting the full continuum of care. Blink is a great example of what focused execution can do. We revitalized the franchise and built real momentum with 38% constant currency revenue growth in 2025, but we're not standing still. We're building on that success with an advanced preservative-free lipid-based formulation of Triple Care to reach even more consumers as demand continues to rise. These launches show how we create growth from strength, science and momentum. Our Contact Lens business has outperformed the global market for 2 straight years with 9% average constant currency revenue growth over 2024 and 2025 compared to mid-single-digit growth for the industry. Where others have faced significant headwinds, the impact for Bausch + Lomb has been less pronounced. China is a prime example. While there is some consumer softness, our lens business there grew 7% on a constant currency basis in the fourth quarter. Our consistency comes from disciplined execution and a steady, deliberate global rollout of innovation. Activity in the first half of this year drives that point home. In January alone, we launched Daily SiHy multifocal lenses in several European countries with an anticipated April launch in France. The same offering launched in Korea and New Zealand this month. In Surgical, I'm happy to report that this will be the last time we proactively referenced the voluntary enVista recall at earnings, and here's why. When we returned to market in late April, we said our plan was to reach Q1 2025 levels by Q1 2026. We met that goal in the fourth quarter, well ahead of schedule, and the strong uptake we're seeing is the result of great execution, trust and offering a product surgeons genuinely prefer. What did that mean for our Premium IOL portfolio last quarter? It helped drive 20% constant currency revenue growth, contributing to 5% constant currency revenue growth in our Implantables business. The fact that Implantables grew despite the recall is particularly noteworthy and speaks to the potential in this category. We expect to build on that momentum in 2026 and beyond as our existing premium offerings become further entrenched and new options are introduced around the world. As made clear by fourth quarter and full year 2025 results, we're not just talking about execution, we're proving it. We said what we were going to do, and then, we went out and did it product by product, milestone by milestone, business by business. The results are real and measurable. We view our progress to date as a foundation, not a finish line. The most important chapters of this story are yet to be written, but our commitment to execution makes us confident in what comes next. Our pipeline is the envy of the industry and puts Bausch + Lomb firmly on the path to sustained growth and long-term success. Let's take your questions. Operator?

[Operator Instructions] Your first question for today is from Patrick Wood with Morgan Stanley.

Perfect. I guess the first one, just big picture, when we're looking forward into '26 and the growth guide that we have, how are you guys thinking about the composition of that? Brent, from your perspective, what are the key areas to execute on to make that happen? And should we look at the strong momentum as we exited '25 by product line as a good inference for like where we should be hitting in terms of growth by category for '26?

Yes. Thanks, Patrick. Look, you heard me in the presentation using the word execution. You heard me probably mention the word execution at least a dozen times throughout the prepared remarks. And let me just try to take a step back and then come at your question. Look, as you just heard, in Q4 '25, we delivered 7% growth and the highest revenue and highest EBITDA in the history of our company, right, 172-plus years. More importantly, we delivered 27% EBITDA growth and 23.5% EBITDA margin. Yes, Q4 is seasonally our strongest quarter, but seasonality alone, right, doesn't produce that level of operating leverage. What you're actually seeing is real structural improvement in the P&L. The quarter reflects the impact of Vision 27, our program that we put in place at the beginning of the year, and we're shifting mix towards higher-margin products, improving pricing discipline, driving productivity across the organization and operating with a more fixed cost infrastructure. That means growth now drops through at a higher rate. So when we grow, we see it in the bottom line. Remember, we're only 1 year into the 3-year program that -- of Vision 27. So what Q4 shows is what disciplined execution can do. It's not a one-off result. It really is evidence of the foundational change we now have in how we run this company. Execution really isn't a slogan. It's really about the daily work of aligning the organization around clear priorities, making trade-offs and following through. It's focusing on the few things that matter and doing them consistently well. And over time, that builds consistency, and it builds credibility, both internally and externally, with all you and our shareholders. Look, I get it, trust is earned quarter-by-quarter. When we say we'll improve margins, we're going to improve margins. When we commit to advancing the R&D pipeline, we hit those milestones. And so that steady drumbeat of delivery is how we change perceptions, and most importantly, create long-term value. So as we continue to progress the pipeline, where we're making strong scientific and clinical progress, really the financial model becomes more compelling if you take a step back and think about it. We now have a platform in Bausch + Lomb that can absorb the innovation and scale it efficiently. So I think, Patrick, when you look at it, Q4 really demonstrates what strong, good execution looks like, and it shows our culture is changing, our model is improving and our leverage in the P&L is real. And most importantly, we're really early in the journey. I really do believe our best days are ahead because of the foundation we have built is stronger than it's ever been. And so look, as I think about '26, Q4 showed a lot of momentum, and we're going to ride that momentum into this year.

Super clear. And then just as a quick follow-up. Miebo, now potentially $600 million, everyone was bullish about this when it first came into the market. But I would guess it's come in quite a bit ahead of certainly where we expected, probably where you guys expected, too. Are there any like key lessons for that when you're thinking about your pipeline going forward, the surprise of how well Miebo has done? What do you put that down to? And what are the kind of lessons associated with that, that you then can use for the rest of the pipeline?

Yes. I'll take a shot at it, and then, maybe Andrew wants to add a few thoughts as well since we have him on the call for the first time. Look, when I arrived, Miebo was finishing its what was being filed and waiting approval. And you're right, the organization had good plans for it, but nothing -- its peak sales were lower than current sales are today, right? And what we did is we upgraded the team, right? Talent matters across the whole organization, including the field force, most importantly. . We made some big investments, which some investors were skeptical of, right, because it did impact the P&L. But we said, look, we have a really good medicine here. We have a great category that's untapped. And we think that we can do something special with this Miebo because of its benefit-risk profile is so positive. And we made very strategic smart, thoughtful investment. And now, it's time to harness that. And keep in mind, Patrick, the $600 million is not $600 million. It exceeds $600 million, right? We're not satisfied at $600 million, right? That's just our latest, I guess, elevation of peak sales. But I think this thing can keep going from there. And so we have what we need. The table is set, right? We have our fixed -- as I mentioned in the previous answer, we have a fixed cost infrastructure. It's now getting leverage through that. And so don't take away from this that we're not investing in Miebo. What we are is we're holding our investments steady, so the benefit of all the growth flows through the P&L to the bottom line. But Andrew, anything else you'd add?

Yes. Look, 2 things, Brent. I think, one, when you take a great medicine, as you mentioned, something that has a phenomenal safety profile with an extremely fast, rapid onset in terms of efficacy for patients and you marry that to great execution, best-in-class field force execution and a marketing approach that I think has been second to none in the dry eye space, you put those 2 ingredients together and you have great success. And I think when we look at our pipeline for the future, taking those types of execution successes forward will be a key to how we move forward with the company.

Your next question is from Young Li with Jefferies.

I guess, first one, maybe a follow-up on Miebo, really strong results and you upped the peak rev. It sounded like you're sort of holding the investment on that side relatively steady. Can you maybe comment a little bit more about the -- how that impacts the growth trajectory of Miebo? Hard to comment on steady growth, but would love to hear a little bit more about that.

Yes. So I mean, I think what you're going to see is continued strong growth of Miebo. I would -- Sam and I both said in the prepared remarks, I think as you think about particularly modeling 2026 or any -- frankly, any year on a go-forward basis, you have to think about the seasonality, right? Just the way copays and deductibles work in the prescription market make Q1 the softest and Q4 the strongest. And so where in the past, when you're in launch mode, you see kind of quarter-by-quarter continuous improvement, you're going to see more seasonality on a go-forward basis there. But if you look at Miebo for the year, we have big expectations for growth in Miebo and profitability. I don't know, Sam or Andrew, if you want to add anything?

Yes. That's exactly right. And I think Young, one of the key things we talked about at Investor Day, and hopefully, you guys have seen it in our results in Q3, and then, also you've seen in Q4 is that we said we're going to be focused with more targeted investments. We built the infrastructure around the dry eye franchise and really shifting from what we refer to as the launch phase to the growth phase, which is really continuing to invest behind the franchise as a whole and making sure we're targeted with this investment to continue to drive the top line growth.

Look, I think another key theme for 2026 is as we think about our access and affordability strategy. We're coming to a point of steady state. We're comfortable with the access that we have. We're nearly 4 out of 5 patients for both commercial and Medicare have access to Miebo. And so that puts us in a great position to continuing to support patients and physicians, as they get more experience with the product and add more patients to Miebo's as we go through the year.

Young, did you have a second question?

Yes. That was very helpful. Yes, it would be great if I can ask a second one. I wanted to get your thoughts on sort of the state of the market as well as the competitive dynamics. Your portfolio right now has improved significantly since the IPO. You've got a really robust pipeline of products. But for this year, there's players that's coming with more supply on the contact lens side. There's new entrants on U.S. IOLs, recent launches that's ramping for Premium IOLs, capital, dry eye drugs. So just wanted to hear your thoughts on how that can impact '26? And maybe which segment faces the toughest competitive challenges?

Yes. So look, I think we take all competition seriously. I think if we break it down into kind of 3 -- the 3 markets you just discussed, I think pharma, while we have a real competitor there from a very strong company, I think we feel very good about our position, right? We have the #1 and #2 brand. Andrew mentioned we have very strong access for patients, and we have a lot of momentum. And we have frankly, for evaporative, inflammatory dry eye, which are the largest 2 components of the market, we have the best medicines for patients. And so I think we're established very well there in competition. If you take contact lens second, I think when you look at the state of the market in '25, the market probably grew -- data is not perfect in contact lens. It's a little harder to put together, but our numbers suggest that the market grew somewhere around 4% in 2025. For the full year, we grew 7% and 8% in the fourth quarter. So fourth quarter almost doubled market growth. A lot of that is based off of 2 things. It's our Daily SiHy putting up incredible growth, right, 17% in the quarter, 28% for the year, I believe, in the numbers. And that's driven by continued launch of modalities. And in the prepared remarks, I mentioned we're still -- the only market that has the 3 main modalities is the U.S. The rest of the world is still in launch mode. And so you're going to see a continuous speed over the next year or 2 of launching those modalities and driving growth. But Ultra was still up in the fourth quarter, 16%. So we're not creating a leaky bucket. We're doing what we need to do. And where the industry saw some weakness in Asia and China, as an example, we grew lens 7% in China in Q4 and 8% for the year. So our DTC model, we're direct with a fully integrated direct-to-consumer model in China, gives us a lot of flexibility to meet the consumer where they need to be and where they're purchasing. Southeast Asia still remains a little flat. But I suspect the market is going to grow a little better and improve overall in '26, maybe 4.5% or better. And so I think we're in a strong position. And then, of course, we're moving full steam ahead with new product launches in 2028 that we're pretty excited about. So I think our cycle of growth and in the competitive state in the lens -- contact lens market is -- I think we're in a strong position. Surgical, probably the most competitive market of the 3. But again, I look at our execution and the quality of the products we have. I mean, 4% implantable growth in 2025 is pretty damn impressive when you consider we had a significant recall of our entire enVista platform in the year, right? And so I'm not excluding anything to get the 4%. That is the actual growth. And when you look at what happened in the quarter, you have 20% premium IOL growth and 26% full year premium growth. And so that -- what I mentioned in the prepared remarks, this move to higher-margin mix products is happening in surgical. We know that surgeons do like the enVista platform and really do like our trifocal Envy. We're also launching Lux products outside the U.S., premium brands. And of course, enVista Beyond is completing its clinical trial. So we have a steady cycle of new launches and continued execution there. And I feel pretty good we can grow faster than market in all 3 businesses. And that's why we're putting up top line numbers that are faster than the market.

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

You gave us a little, I think they're called, Easter eggs, but I'm going to call it a nugget as that would be early, like that I'm seasonally moving forward. About the clinical data that you saw for the new material for the contact lenses, could you expand on that a little bit? And what did you see that increased your confidence?

Yes, Joanne, thank you. I'm going to turn it over to Yehia in a second, but I'm going to steal that Easter egg thing that, that I feel like I'm playing a video game. So that's awesome. No, look, we got the top line. The team just got it right before earlier, I think late last week or thereabout. So we're still going through the data. It's quite an immense amount of data, but we're pleased. And I'll just say this, and then, turn it over to Yehia, getting the way you develop contact lenses are different than a lot of other products. And I think we told you at Investor Day, we plan to do one external clinical study to get data to iterate. We'll do a second external study, and then, we'll do the registration and claim studies for a 2028 launch. So we're exactly where we need to be. But every time you pass one of these thresholds, your confidence about the fact you have a real product that can make a difference increases. And that's why I'm so excited about where we are right now. But let me turn it over to Yehia.

Yes. Thank you, Brent, and good morning, Joanne. Yes, we are really pleased to share the early highlights from the first clinical evaluation of our Halo daily disposable contact lens. Actually, this study was designed to assess the overall clinical performance, safety and tolerability in a controlled setting. The study enrolled about 130 participants, all of whom have completed the study. And importantly, there were no adverse events or device deficiencies have been reported. But the most important thing, this is the first time we actually apply our optical system to this, and all participants, the majority -- the vast majority of them experienced very good visual acuity. Based on the investigators even, they agreed that the lens has delivered a clear vision in almost 98.5% of subjects. So currently, we are -- as Brent mentioned, we are -- actually just got the results, and it's even ahead of schedule. And we are digging deeper doing deeper analysis to inform further optimization and also the lens design for the next external study. As Brent mentioned, we remain on track with our development timeline and targeting 2028 launch, and actually, this study increased our confidence in the platform as we are moving forward.

Yes. I think, Joanne, our probability of success that this is real and a real product is significantly higher than it was at Investor Day, which is why we're excited.

Excellent. I'll ask my second question, which is you're making progress on pulling the financial levers for EBITDA expansion? As you look throughout 2026, and we think about setting up our models, is there anything we should think about the progression throughout the 4 quarters?

Yes, absolutely. I'll turn it over to Sam. But I said it in the prepared remarks, I think as you look at phasing, right, we've always had seasonality as long as I've been here since the IPO of Q1 being the weakest, Q4 being the highest. But I think you're going to see that be more pronounced now as a lot of that seasonality is driven by the prescription dry eye business. And as we continue to have great success with Miebo and Xiidra, they become a bigger part of our overall sales and profitability. And so that will have a larger impact on seasonality than we've seen in years past. But Sam, why don't you?

Yes. Thank you, Brent. And Joanne, I -- let me give you a little bit more details on the phasing. But it's just important to highlight the point that Brent made, which is the whole aspect of Q1 being the lowest, Q4 as being the highest, that's the natural business. And again, as we see the progress that we're making in dry eye franchise, that's going to be even more pronounced as we go forward. So that's a very important framework as we think about phasing. But what's important here with all the work that we've done in the second -- especially in the second half of 2025, setting up our, I'll call it, building blocks for our leverage, operating leverage as we go forward, both in Q3 and Q4, and we're seeing that work. We expect that sort of to carry forward with us in 2026. So when you think about from a revenue perspective, we usually start our first quarter achievement on revenue roughly about 22% of the midpoint of the guidance. That probably remains a good starting point for 2026. On EBITDA, we -- if you look at last year achievement, midpoint was about 14%. We expect this year with all the work that will be about 18% achievement of the midpoint of the guide. So we're seeing a nice improvement because when you step back and reflect on the guidance, we're growing our -- the guidance that we provided this morning, midpoint of that is about 6% of the top line, but it's about 15% growth on EBITDA at the midpoint. So we're seeing that really leverage pull through throughout the next 2026, especially in the first half of the year.

Yes. I mean, I think one of the things I'm most proud about what we're starting to do is that leverage in the first slide in the deck, right -- in the quarter, right, 7% top line and 27% bottom line; guidance, midpoint of 16% -- 6% on the top line and 15% on the bottom, right? So you're seeing like 3x leverage or better in the P&L. And that's financial excellence in action, right? And so we said we're going to focus on financial excellence, and now, we're going to deliver it.

Your next question is from Larry Biegelsen with Wells Fargo.

This is Lei calling in for Larry. Can you hear me okay?

Yes, we hear you, Lei. Yes.

My first question is on Xiidra. It looks like 2025 played out as you expected. There was some volume growth, but you had headwinds like IRA and such. How should we think about Xiidra performance in '26? You had the recent payer change at the start of the year, can we think about maybe -- but you also expect net price to be better in '26, so can we think something along the lines of maybe mid-single-digit sales growth? Is price improvement offset by volume decline? And then, I have a follow-up.

Yes. So, Lei, I think I'll ask Andrew to make a comment here, too. But I think you're exactly right. 2025 for Xiidra was setting a new base between a onetime payment for managed care in the IRA, right? We kind of set that new base. And now, it's important to grow off that base. And I think we will. I think that mid-single digit is exactly how we're thinking about it. But Andrew, do you want to add some comments on Xiidra '26?

Yes. Look, Brent, I think you covered the operational aspects of '25 versus what our expectations are in '26 exactly right. When we think about the totality of coverage, we're very happy there with the rates that we're able to achieve across all of our different commercial and Medicare stakeholders. Look, when you think about CVS, specifically when we're talking about coverage, they're a really important customer. We'll continue to find ways to partner with them as we do in our Consumer portfolio, as they manage a large number of Medicare lives today. And when it comes to the commercial book of business, we're eager to find ways that we can continue to work together. And right now, we have to always balance the affordability of the asset versus our ability to invest long term for the stakeholders of B&L.

But I think it's fair to say you'll see slower TRx growth as a result of that, but higher revenue growth.

That's correct.

Yes.

And, Lei, maybe just I'll add a couple of data points to what Andrew and Brent said and just to help you as you think about your modeling and how you guys think about Xiidra. So as a starting point, it did play out exactly as we expected in 2025. But what's more important is we knew that as we start jumping into 2026, the net revenue for Xiidra will grow. So we're expecting that growth -- to see that growth. How that growth will come through is, as Brent said, it will be an element where we see a slower TRxs, but we'll see a much better net pricing. We usually talk about our, call it, gross to net roughly about the mid-70s. We start seeing that to step down to closer to the low 70s. So that net benefit you'll start seeing into how Xiidra will play out between '25 and '26.

That's very helpful. And then just 1 follow-up is your -- is on EBITDA margin. So at Investor Day, you talked about roughly 600 basis points of EBITDA margin through '28 to get to roughly 23% margin. That's roughly 200 basis points a year. So you guided to roughly 19% for this year. Can you just talk about your confidence for -- through 2028 on the margin? And how we think about maybe just the next couple of years, if we should think about fairly equal steps of margin improvement?

Yes. So I think we feel very confident about what we presented the 3-year plan at Investor Day. In fact, I would say sitting here almost, what, 8 weeks later, I feel more confident than I did. And the reason being is you saw execution improvement in the fourth quarter. Now, there's some seasonality, as I mentioned, but still you're seeing that foundational change in the P&L and the leverage that it can drive as we continue. So I think that's right. We've got a running start, right? We thought we'd end the year at around 17%. We got to 17.5%. And so we're going into the year with a running start. And there's nothing better than momentum. But I would say this. When I think about my 13,000 colleagues in Bausch + Lomb around the world, they all know our goal on this one, and everyone is focused on it. We have very disciplined project teams, many of them, lots of people working on margin improvement from commercial teams to supply chain. This is a full court press with a lot of focus inside the company. We are going to do everything we can to make sure we not only meet but potentially exceed those margin goals.

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

Congrats on a strong quarter here. I had 1 question on IOLs. So bounced back pretty nicely from the recall. It seems like 20% growth in AT-IOLs, and the feedback we get from clinicians is positive on the enVista line. Maybe if you could talk about any puts and takes that you're still kind of working through with respect to the recall? And what we should expect in terms of folks kind of getting back on board with that launch that had pretty strong momentum into the end of '24 and early '25, but kind of obviously got stopped there for several months in the middle of last year?

Yes, a great question. So if you really dig into it and look at what happened as a result of the recall. And as I said in the prepared remarks, hopefully, this is the last time we talk about the voluntary recall. The fact that we got back to the market the way we did, the way we communicated with customers and surgeons so openly and transparently, I think really created a bond of trust with our customers. But the reality of the market is those patients were implanted with different IOLs during the period we were out of the market, right? You don't get those patients back. You have to earn each implant back one by one, doctor by doctor. And so what happens in this market, as you may know, is for the premium IOLs, you have a much more instant sales cycle, right? A lot of surgeons can buy whatever premium IOL they want. But for monofocal, they tend to contract. And so the bounce back came faster for Envy and Aspire to some degree. But for the base monofocal lens, we still have some work to do because when we were out a lot of ASCs and practices signed contracts for monofocals that we have to wait until they expire to get that business back. And so there is still a little bit of a hangover in the monofocal portion of the market, but we'll earn that back this year. And so I think we feel very confident that it's clearly in the rearview mirror, and now, it's back on our front foot and winning trust with doctors and patients day by day.

Your next question is from David Roman with Goldman Sachs.

I want to just actually maybe to focus a little bit on the consumer business. If you kind of look across the different product families there, we do see kind of a divergence in trends across a number of the different categories. Can you maybe help us think about just the direction of travel in the consumer franchise? And what we should -- how we should expect some of these different LUMIFY driving growth? Or how we should think about some of the different factors in '26 in that franchise?

Yes. So for the full year, we grew about 5%. There was probably about 100 basis points of destocking, remember, throughout the year. It started with -- as a kind of impact of tariffs, right, as retailers made room for -- in their warehouses for products that were tariff impacted. They destocked roughly about 2 weeks across the board and virtually across all customer classes. And so we absorbed that in the year. And so consumption in '25 was higher than sales, which is obviously a sign of destocking. I think when you look at the hero brands, LUMIFY, obviously, up 16% for the year. We launched preservative-free. And of course, we're getting ready to file LUMIFY Lux for a launch next year. So we have a nice continuous innovation stream there. Blink, a brand that we brought back to life, was up about 14% for the year, right? I think that's the number, Sam, right? So really good growth. We're launching the preservative-free for Triple Care in the second quarter or late this quarter. So again, innovation helps drive growth. But I think the area where we saw kind of a little bit more flatness is in our largest product line, PreserVision or vitamins, which were only up 2% in the quarter and in the year. And to be fair, when you think about PreserVision, right, it's a very large category. We have roughly 90-plus percent market share, so we kind of are the category. There's been no innovation there for 13 years. And the way to get growth back into that category, and I hope, significant growth over time, is through innovation. So AREDS3, which started to ship to retailers within the last week or 2, and you'll start to see really launching throughout this quarter and next, is really going to revive that market and bring it back to growth again. And I think you'll see that really play out in the back half of the year, as we build the foundation with ECPs first and then turn on consumer. And the fact that we're expanding the market, almost tripling the size of the market of who should be recommended PreserVision, I think, gives us a lot of optimism that, that category can grow again, meaningfully.

Our final question is coming from Robbie Marcus with JPMorgan.

This is Lily on for Robbie. I want to circle back to the EBITDA guidance. Can you help give a bit more color and bridge us to the 19% EBITDA margin this year and walk through some of the pieces on operating expenses, especially that get you there? When I look at the fourth quarter, gross margin was a bit softer than what we were thinking. You have R&D increasing as a percentage of sales this year. And so what's driving all that SG&A leverage this year? And what gives you the confidence and visibility in that improvement?

Yes. Well, I think Sam is probably best to answer this. Sam?

Sure. So, Lily, when you think about the components of how we think about the leverage and expansion in the EBITDA margin, it's really the building blocks for this is a couple of areas. One is we talked about the SG&A and the leverage that we talked in terms around -- the efficiency around our fixed cost structure and how we're bringing the fixed cost structure down. And we saw that play out very nice for us in Q4. Starting Q2, we saw that in Q4. That will continue with us as we think about '26. We also talked about the operating leverage within sort of shifting from the growth -- from the launch to the growth mode, and you're seeing that with the targeted investments that we're doing around selling in A&P. So as you think about where -- as we end 2025, just keep in mind, we -- you mentioned gross margin is soft. It does absorb roughly about 80 basis points of tariffs that we're seeing. So when you look at that on a comparable basis to '24, you have to factor that in. But now, pivoting and looking forward to 2026, we're projecting roughly about 200 basis points improvement coming -- 100 basis points coming from the gross margin moving from about 61% to 62%. Also, the SG&A will probably yield another 100 basis points of improvement. Offsetting that would be about 50 basis points of increasing our R&D investment, moving up from about 7% to roughly more towards the 7.5%. So you'll see that movement in sort of taking and that gives you the -- really the 150 basis points that we'll see jumping from our 17.5% EBITDA in 2025 to about 19% EBITDA in 2026 margin.

The other thing I would say, Lily, is as you think about the fourth quarter, delivering 7% top line and 27% EBITDA growth, what -- if you really peel that onion one more step, what makes me so proud that we could deliver those results as we did it with about 500 fewer colleagues than we had in the same quarter of the year before. And so you're really seeing a change in the foundational structure of our company being more efficient and really focusing on driving that leverage in the P&L to get that margin improvement.

Great. That's helpful. And then, just as a quick follow-up, can you talk about how you're thinking about reported free cash flow this year on a reported basis in 2025? I think that was about $66 million. So how should we be thinking about that trending in 2026? And what are some of the puts and takes we should be keeping in mind?

Yes. So we're very pleased with the work that we've done throughout '25 on the cash flow in general. And I'll tell you, when we -- how we think about sort of cash flow where we ended the year roughly about 42% conversion. And you keep in mind that the business has been growing throughout 2025. And with that growth that we've seen in the business, we've taken roughly about 12 days out of working capital in terms of operationally throughout 2025. So that's really helped us with driving both on the cash flow from operation that I referenced in my prepared remarks, $152 million in the quarter, that's $381 million for the full year, and also being a positive from a free cash flow this year. So as we look forward to 2026, that progress will continue. So I expect we're going to be progressing towards the -- about 45% or so of conversion. Keep in mind, we targeted 50-plus conversion by 2028. So we're really making nice strides and nice progress towards that target. And more importantly, our CapEx is also stepping down as we communicated at Investor Day. So roughly -- in '25, our CapEx was roughly about anywhere between 6% to 7% of revenue. As we look into 2026, we expected that to be about 5% to 6%. So you're seeing that step down in CapEx spend, which provides even more support around the free cash flow. So it's really a lot of great work that's been done by the team here, and we're very proud of it, and it's a nice progress in the right direction.

One more question, operator.

Your final question for today is from Douglas Miehm with RBC.

Brent, this is a question that has more to do -- I believe that you're going to have a strong 3 years ahead of you. Margins are going to continue to increase, et cetera, et cetera. But as we think about valuation and the multiple that should be assigned to this company over time, especially given the strength in the operations, the various businesses, your execution, et cetera, et cetera, 1 thing that's going to likely hold the company back in terms of that multiple expansion is the float. And is there anything that you can speak to us today about how you're hoping to resolve that situation? Because it looks like you're going to have a lot of good news on the operational front. But I'm just thinking from a market perspective, how you'd like to guide us.

Yes. So look, I agree with you. And I think one point I'll make, and then, I'll answer the question. As I said in the -- I think it was in the first question from Patrick, what's really exciting about the R&D pipeline that really starts to kick in meaningfully in '28 and beyond is that we actually have the structure or platform that allows us to absorb that innovation and scale, right, and flow through to the bottom line much more rapidly than it would have otherwise, right? The pipeline was built to enhance our existing markets and selling infrastructure. And so that really is strategically important for us as we think about launching those products in the future. But you're right, I think obviously, we hear from investors about the float. I fully agree with you. It's something that has to be resolved in time. Unfortunately, as I've mentioned many times, it's not within our control. It's a BHC issue. But if you listen to their commentary at JPMorgan earlier in January, they do plan to sell shares in time. I just don't have a timeline to provide and maybe you want to get on their call tomorrow or today end of day -- end of day today. It feels like that's a day away. But at the end of the day today and ask them as well because it's really their decision. But I do expect it to happen. I just can't give a timeline. All right. So operator, I'll just make a quick closing remark, thank everyone for joining us. Most importantly, I'd like to thank my colleagues from Bausch & Lomb around the world for their great execution in 2025, and we look forward to watching them execute and build our company in 2026. But look, as I mentioned at the beginning, I think Q4 really is another proof point in what good execution looks like. And it shows that we are immensely focused on execution. It is really part of our culture now. And we have all the building blocks we need in our bag today to deliver on our 3-year plan, and we are immensely focused on getting it right and delivering. So we look forward to keeping you updated, and we will obviously always be available to answer any questions if you need us. Thank you.

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