Executive Summary / Key Takeaways

• Bausch + Lomb is executing a strategic rejuvenation focused on innovation and operational excellence across its Vision Care, Pharmaceuticals, and Surgical segments, driving broad-based revenue growth that is outpacing the market.
• Key product launches like MIEBO, the Daily SiHy contact lens portfolio, and premium enVista IOLs are significant growth drivers, leveraging differentiated technology and supported by strategic investments in R&D and commercial capabilities.
• Despite strong underlying performance and positive outlook for core businesses, the company faces near-term headwinds from the enVista IOL recall, gross-to-net pressures on XIIDRA, and potential impacts from evolving tariffs, which are factored into the 2025 guidance.
• Management is committed to sustainable margin expansion and expects to achieve positive free cash flow in 2025, balancing necessary investments in launches and capacity expansion with operational efficiencies.
• The company's competitive positioning is strengthened by its comprehensive eye health portfolio and technological advancements, though it navigates challenges from larger, more profitable competitors and risks associated with its ongoing separation from Bausch Health Companies Inc. (BHC).

Reestablishing a Visionary Leader

Bausch + Lomb Corporation, with a heritage spanning over 170 years, is undergoing a significant transformation aimed at reestablishing its position as a premier global eye health company. Following its IPO in May 2022, the company embarked on a strategic roadmap centered on relentless execution, prioritizing innovation, and cultivating a high-performance culture. This focused approach has yielded tangible results, marked by a period of robust, broad-based revenue growth that has outpaced the overall eye health market. The company operates across three core segments: Vision Care, encompassing contact lenses and consumer eye care; Pharmaceuticals, offering a range of proprietary and generic treatments; and Surgical, providing equipment, consumables, and implantables for ophthalmic procedures.

The eye health industry itself presents a compelling backdrop for growth, driven by factors such as an aging global population, increasing awareness of eye conditions like dry eye disease, and technological advancements. The dry eye market, in particular, is highlighted as a massive, underdiagnosed, and undertreated condition, representing a significant opportunity. The contact lens market continues to see mid-single-digit growth, with a notable shift towards daily disposables. Against this backdrop, Bausch + Lomb competes with established players like Alcon (ALC), Johnson & Johnson (JNJ), CooperCompanies (COO), and AbbVie (ABBV), each with distinct strengths in various segments.

The Engine of Innovation: Technology and Pipeline

At the heart of Bausch + Lomb's strategy is a commitment to innovation, leveraging both internal R&D capabilities and strategic external partnerships and acquisitions. This focus is designed to build a competitive moat and address unmet needs across the eye health spectrum.

In the Vision Care segment, the company's Daily SiHy contact lens platform (marketed as INFUSE, ULTRA ONE DAY, and AQUALOX ONE DAY) is a prime example of successful technological differentiation and execution. This product is described as the company's fastest-growing, with constant currency revenue growth reaching 42% in Q1 2025 (56% in the U.S.). The technology offers a comfortable wearing experience, and the strategic rollout of different modalities (spherical, multifocal, toric) across geographies is expected to sustain this momentum. The company's R&D pipeline in contact lenses is also exploring next-generation materials, including a first-of-its-kind biomimetic lens designed to optimize oxygen permeability. This initiative is particularly noteworthy as it aims to utilize existing manufacturing infrastructure, minimizing the significant capital expenditure typically associated with new material development. Additionally, the company is developing a myopia control contact lens for children and young adolescents, with entry analysis data anticipated in early 2026, targeting a critical and growing area of need.

The Pharmaceuticals segment is being transformed by novel treatments and strategic acquisitions. MIEBO, acquired via license, is the first and only FDA-approved treatment for dry eye disease that directly targets tear evaporation. Its launch has been exceptional, with Q1 2025 revenue reaching $57 million, representing over 100% year-over-year growth and 37% sequential growth in TRx from Q4 2024. This performance underscores the clinical differentiation and market acceptance of its unique mechanism of action. XIIDRA, acquired in September 2023, complements MIEBO by targeting inflammation associated with dry eye. Despite facing gross-to-net pricing pressures, XIIDRA demonstrated strong TRx growth, up 14% year-over-year in Q1 2025, highlighting the effectiveness of commercial strategies to drive volume. The pharma pipeline includes ambitious projects such as a first dual-action therapeutic for dry eye, a first product to treat chronic ocular surface pain, and a glaucoma product acquired in December 2024 that aims to not only lower intraocular pressure but also improve visual acuity. Clinical trials for these novel candidates are expected to begin in 2025, signaling potential future category disruptors.

In the Surgical segment, the focus on premium Intraocular Lenses (IOLs) represents a strategic move into higher-margin products. The enVista platform, despite the recent recall, has shown strong performance, with premium IOLs on this platform driving a 77% constant currency revenue increase in Q1 2025. The company is expanding its premium IOL portfolio with launches like LuxLife Trifocal IOL in Europe (2025) and the anticipated U.S. launch of enVista Envy later in 2025 and enVista Beyond (EDOF) in 2026. These products aim to provide surgeons and patients with advanced options for vision correction following cataract surgery. The acquisition of Elios Vision in December 2024 adds the ELIOS procedure, a minimally invasive glaucoma surgery (MIGS), to the portfolio, with U.S. FDA approval anticipated by the end of 2025. This expands the company's surgical offerings beyond cataract procedures and into the growing MIGS market. The interconnectedness of the surgical business means that strength in equipment (up 9% constant currency in Q1 2025) and consumables (up 5%) supports the adoption of implantables, creating a synergistic effect.

Beyond product-specific technologies, Bausch + Lomb is investing in digital capabilities to enhance sales execution and customer experience. Tools like Glimpse, an AI/ML-powered sales platform, and Opal, a digital e-commerce marketplace for Vision Care products, aim to streamline interactions with eye care professionals and patients, driving efficiency and loyalty. Operational efficiencies are also being pursued through initiatives like network optimization and deploying AI in manufacturing to improve yield and output.

Performance and Financial Health

Bausch + Lomb's recent financial performance reflects the impact of its strategic initiatives and market dynamics. In Q1 2025, the company reported revenues of $1.137 billion, a 3% increase (9% constant currency excluding FX and acquisitions) compared to Q1 2024 revenue of $1.099 billion. This growth was primarily driven by increased volumes across all segments and contributions from recent acquisitions, partially offset by unfavorable foreign currency impacts and decreased net realized pricing, particularly in Pharmaceuticals.

Profitability metrics in Q1 2025 showed pressure. The company reported an operating loss of $83 million, compared to operating income of $6 million in Q1 2024. This shift was largely due to increased selling, general, and administrative (SGA) expenses (up $59 million, primarily from MIEBO marketing and business transformation costs) and a decrease in contribution margin. Segment profit analysis reveals the drivers: Vision Care profit saw a slight decrease ($176M vs $178M) despite revenue growth, impacted by higher cost of sales and selling expense. Pharmaceuticals profit declined significantly ($11M vs $53M), primarily due to high MIEBO marketing spend and XIIDRA gross-to-net pressures. The Surgical segment reported a loss of $7 million compared to a profit of $11 million in Q1 2024, heavily impacted by a $15 million inventory obsolescence charge related to the enVista IOL recall and higher selling expenses.

Net loss attributable to Bausch + Lomb Corporation was $212 million in Q1 2025, wider than the $167 million loss in Q1 2024. This was primarily driven by the decrease in operating results, partially offset by a lower provision for income taxes ($31M vs $73M), influenced by jurisdictional mix and discrete tax effects related to acquired assets and the enVista recall.

From a liquidity perspective, the company's primary sources are cash on hand, cash from operations, its revolving credit facility, and potential future debt or equity issuances. Net cash used in operating activities was $25 million in Q1 2025, a decrease from $41 million provided in Q1 2024, mainly due to the lower operating results, including the $28 million R&D expense from the Whitecap Biosciences acquisition. Net cash used in investing activities increased to $116 million from $57 million, primarily due to higher capital expenditures ($110M vs $67M). Net cash provided by financing activities increased to $31 million from $12 million, driven by net borrowings under the Revolving Credit Facility. As of March 31, 2025, the company had $202 million in cash and cash equivalents and total debt of $4.83 billion (net of issuance costs). The company was in compliance with its debt covenants as of March 31, 2025, and expects to remain so over the next twelve months.

Competitive Dynamics and Strategic Positioning

Bausch + Lomb operates in a competitive landscape with both large, diversified healthcare companies and more specialized eye care players. In Vision Care, it competes with global leaders like Johnson & Johnson (Acuvue) and CooperCompanies (CooperVision). While these competitors may hold advantages in scale or specific product efficiencies (e.g., COO's cost leadership), Bausch + Lomb differentiates itself with a comprehensive portfolio spanning contact lenses, lens care, and consumer eye drops/vitamins. Its rapid growth in Daily SiHy lenses and the success of brands like LUMIFY and Blink demonstrate effective execution and market share gains.

In Pharmaceuticals, Bausch + Lomb's dry eye portfolio, anchored by MIEBO and XIIDRA, positions it as a leader against competitors like AbbVie (Allergan). While AbbVie benefits from scale and a deep pipeline, Bausch + Lomb's strategy of offering distinct mechanisms of action (evaporative vs. inflammatory) and investing heavily in commercialization aims to capture a larger share of the undertreated dry eye market. The U.S. Generics business faces intense competition, contributing to recent declines, but management is evaluating levers to manage these dynamics.

The Surgical segment competes directly with Alcon and Johnson & Johnson in IOLs and equipment. Alcon is a dominant player in surgical devices. Bausch + Lomb's focus on building out a competitive premium IOL portfolio (enVista, LuxLife, Beyond) and investing in surgical equipment (Stellaris, TENEO) and new procedures (ELIOS) is key to gaining ground and improving margins in this high-value segment. The recent enVista recall, while a setback, was handled with transparency and a focus on patient safety, which management believes will help maintain trust with ophthalmic surgeons, a critical factor in this relationship-driven business.

Overall, Bausch + Lomb's competitive strategy leverages its broad portfolio and increasing pace of innovation to gain market share. While it may face disadvantages in scale or profitability compared to some larger rivals (e.g., lower net margins compared to ALC, JNJ, ABBV), its focused execution in key growth areas like dry eye and premium IOLs, coupled with investments in digital and operational efficiency, are intended to drive sustainable growth and improve its financial profile over time. The ongoing separation from BHC remains a factor, with potential impacts on capital structure and strategic flexibility, but management is focused on the operational aspects within its control.

Outlook and Forward Guidance

Bausch + Lomb has provided updated guidance for the full year 2025, reflecting confidence in the underlying business momentum while incorporating expected headwinds. Full year revenue is projected to be in the range of $5.0 billion to $5.1 billion. This updated range absorbs an estimated one-time impact of $55 million from the enVista IOL recall. Excluding the recall impact, the guidance implies constant currency revenue growth of 5.5% to 7.5%, consistent with previous expectations and reflecting anticipated growth faster than the overall market.

Adjusted EBITDA guidance for the full year 2025 is set at $850 million to $900 million. This range absorbs an estimated one-time impact of $65 million related to the enVista recall (including a $16 million inventory write-off seen in Q1). The guidance also incorporates expected favorable currency impacts relative to previous assumptions ($100 million to revenue, $20 million to adjusted EBITDA). Adjusted gross margin is expected to be approximately 61.5%, absorbing a 60 basis point headwind from the recall. Investments in R&D are expected to be around 7.5% of revenue, reflecting the commitment to advancing the pipeline. Interest expense is projected at approximately $375 million, and the adjusted tax rate is expected to be around 15%, influenced by the recall impact. Full year CapEx is anticipated to be approximately $280 million, supporting capacity expansion and strategic initiatives.

The company expects 2025 phasing to follow typical seasonality, with Q1 being the lowest and Q4 the highest. However, the enVista recall is expected to have a more significant impact in Q2 due to investigation costs and a slower ramp-up, with sales progressively increasing in Q3 and Q4 as surgeon adoption expands. A key factor not reflected in the guidance is the potential impact of tariffs, which management estimates could be a 120 basis point headwind to adjusted EBITDA margin based on current policy, but they are actively evaluating mitigation levers. Management expects to achieve positive free cash flow in 2025, a critical step in improving financial flexibility.

Conclusion

Bausch + Lomb is executing a focused strategy of innovation and operational excellence that is driving strong, broad-based revenue growth across its diverse eye health portfolio. Key product launches and a robust pipeline, particularly in dry eye and premium IOLs, leverage differentiated technology and are positioned to capture market share and address significant unmet needs. While the company's near-term financial performance and outlook are impacted by specific headwinds, including the enVista recall and pricing pressures, management's guidance reflects confidence in the underlying business momentum and a commitment to investing for long-term sustainable growth and margin expansion. The ability to successfully navigate the ongoing separation from BHC, mitigate tariff impacts, and continue translating top-line growth into improved profitability and positive free cash flow will be critical factors for investors to monitor as the company progresses on its strategic roadmap.