Good morning and welcome to the Bausch + Lomb Third Quarter 2023 Earnings Call. All participants will be in a listen-only mode. After today's presentation there will be an opportunity to ask questions. 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 third quarter 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 one 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. I'll start by providing highlights from the quarter. After Sam does a deeper dive on financials and updates guidance, I'll share how we'll continue to drive profitable growth for the remainder of 2023 and beyond. I'm going to start with three things that define the quarter, which we expect will be familiar themes going forward. First, we are growing revenue at or above market, thanks to the strength of established and emerging brands that cover the entire spectrum of eye health. We're excited about our trajectory as we enter 2024, which we expect will be one of the most active launch years in the 170-year history of our company. Second, we're equipping our sales team with the tools, training, and the product portfolio they need to turn our market leadership potential into reality. Look no further than our powerhouse Dry Eye Disease portfolio and the outsized opportunity in that area. Bringing MIEBO to market and reinvigorating the XIIDRA brand comes at a crucial time as 96% of the estimated US population suffering from Dry Eye Disease is not treated with a prescription product. Finally, we're focused on addressing the supply chain challenges we faced. We're nearing the finish line on upgrades to our Lynchburg distribution facility and our new Chief Supply Chain and Operations Officer is establishing a multiyear blueprint for turning our scale and global manufacturing footprint into a competitive advantage. As made clear when I introduced the roadmap to accelerate growth on my first earnings call this May, this is a multiyear journey that will fundamentally change how we operate. Rewiring the company is no easy lift, but I'm proud of our ongoing progress in Phase I. Our leadership team, which has been almost entirely remade since my arrival earlier this year, has largely completed the process of flattening the respective organization to improve efficiency. But rethinking how we work goes much deeper. From making life easier for our sales representatives to strategically investing in digital capabilities, we're maximizing our potential by focusing on what matters most. And critically, we have buy-in from approximately 13,000 colleagues around the world who want to see Bausch + Lomb back on top. While early in the process, changing how we operate is already helping improve our performance. We had another quarter of solid revenue growth, up 8% year-over-year on a constant currency basis. That growth is being driven across key franchises, which speaks to our holistic strength. Performance from consumer brands like LUMIFY continues to exceed expectations while premium IOL offerings in surgical represent a high-growth, high-margin opportunity. Promoted pharmaceutical products like VYZULTA, which saw revenue growth of 54% year-over-year on a constant currency basis, help offset issues with contract manufacturers for two mature non-promoted products. Dynamics in the fourth quarter and beyond will obviously change with the focus on MIEBO and XIIDRA. Before turning things over to Sam, I'd like to acknowledge his team's work in securing favorable financing terms for the XIIDRA transaction, one of the biggest in our history. Our focus and his in particular, now turns to deleveraging.

Thank you, Brent, and good morning everyone. Before we begin, as I noted in our last earnings call, most of my comments today will be focused on growth expressed on a constant currency basis. Turning now to our financial results on slide seven, in the third quarter, we saw strong revenue growth across our key product franchises. Total company revenue of $1.007 billion for the quarter reflects growth of 8% on a constant currency basis and 7% on a reported basis compared to the prior year. Market demand remains strong and our strategic focus continues to be on investing in the business to drive growth. We're committed to executing this strategy as we look forward to launching more new products in 2023 and 2024. In the quarter, we achieved two major milestones with the launch of MIEBO and the closing of the XIIDRA acquisition. It is still early, but we believe we have a significant opportunity with these products, which combined with our OTC offering, give us a leading position in the Dry Eye Disease category. While we have made solid progress in the quarter and market demand remains healthy, we fully recognize there is more work to be done. Supply remains a work in progress. As I will discuss further, we are implementing mitigating steps and have seen improvements, but it will take time to reach a point where we are fully confident we can supply products to meet our business demand on a consistent basis. Volatility in our currency mix, including the strength of the US dollar, led to foreign currency headwinds of approximately $10 million to revenue and approximately $14 million to adjusted EBITDA in the third quarter. While the currency headwinds are not as sizable as we saw last year, the impact on our results continues to be driven by our geographic footprint and currency mix. Our China business was down 1% on a constant currency basis relative to strong comps in the prior year quarter. As a reminder, the market in China saw a recovery in the second half of 2022 after the shutdown in last year's second quarter. As we lap the 2022 stop and go progression, we remain confident that our business in China will return to stable and consistent growth over time. Notably, year-to-date constant currency growth in China has been 6%. Now let's discuss the results in each of our segments. Vision Care revenue of $648 million increased by 11% on a constant currency basis, driven by growth in both the consumer and contact lens portfolios. The consumer business grew by 14% on a constant currency basis, led by our LUMIFY, Eye Vitamins and Artelac franchises. LUMIFY revenue grew by 47% globally compared to the prior year and achieved a record $44 million of revenue in the third quarter. LUMIFY has continued its strong momentum in the US, where it has a leading market share of approximately 50% and has built substantial brand equity. In the quarter, we launched the LUMIFY Eye Illuminations to leverage the brand platform and expand into the eye beauty category. Revenue from our Eye Vitamins franchise, PreserVision Ocuvite grew by 6% on a constant currency basis. PreserVision continues to be the market leader with over 90% market share in the US. The launch of OCUSorb has helped expand the franchise and PreserVision continues to demonstrate the ability to drive growth in the AMD market. In our international consumer business, Artelac has continued to perform well and grew by 11% on a constant currency basis in the quarter. Artelac is one of the brands in our consumer dry eye portfolio. The dry eye portfolio is continuing to expand and reached approximately $78 million of revenue in the quarter with 9% organic growth. Finally, our lens care portfolio grew 8% on a constant currency basis. We have continued to see strong demand in our consumer business. Our strategy is to maintain focus on our key franchises and continue investing in product launches. In the lens business, we saw 5% constant currency growth in the third quarter. Reported revenue from our Daily SiHy lenses grew by 79% in the quarter. We recently expanded the Daily SiHy family with the launch of the multifocal in the US. We've also recently rolled out the Daily SiHy in China. We continue to see strong demand in the Daily SiHy category. As Brent discussed, revenue in the lens portfolio was negatively impacted by disruptions at our Lynchburg distribution facility. We have made progress in the quarter and we expect to reach an optimized level of order processing at Lynchburg in Q1 2024. Excluding the impact of the disruptions, global lens constant currency revenue growth was 7% in the quarter. On a constant currency basis, our value-oriented daily brand SofLens grew by 9% in the quarter. Biotrue was down 3% and Ultra was up 10%. Moving now to the Surgical segment, third quarter revenue was $185 million, an increase of 6% on a constant currency basis. The consumables portfolio, our largest category in the surgical business, grew by 8% on a constant currency basis, mainly driven by cataract packs. Implantables declined by 2% on a constant currency basis. Our premium IOL portfolio continues to expand and was up 33% in constant currency in the quarter. As I mentioned last quarter, our standard EyeCee One IOL continues to be impacted by the product hold issued by our partner earlier this year, which offset the strong growth in our premium IOL portfolio in the third quarter. Excluding the impact of EyeCee One, the implantables portfolio grew 10% in constant currency. We anticipate EyeCee One to impact the remainder of the year. We're focused on expanding our implantables portfolio and have recently announced the launch of our enVista Aspire lens. We expect the enVista platform to continue to expand with future launches of the enVista Envy, Trifocal and the enVista EDOF lenses. Our Surgical business has a number of new product launches scheduled in 2024, especially in the premium end of the market. We intend to invest behind these launches as we see this as an important area to drive future margin expansion. Revenue from equipment was up 10% versus Q3 2022 on a constant currency basis, mainly driven by Stellaris system sales. We continue to see strong market demand in our surgical business and we're taking steps to improve our ability to consistently supply products to our customers. We're implementing various mitigating measures, including strategic spot buying of components and securing multiple supply sources. As we progress through the remainder of the year, we anticipate that supply will remain volatile and that supply constraints will continue to lead to a build-up of higher cost of inventory and pressure on margins. Lastly, revenue in the Pharma segment was $174 million, which represents constant currency growth of 1%. VYZULTA grew by 54% in the quarter on a constant currency basis with TRxs in the US up 19%. We also saw growth in our international Pharma business, offset by supply impact on non-promoted mature brands in the US. We are pleased to have recently launched MIEBO. The early performance and feedback from eye care professionals have been strong, which Brent will talk about more. In the quarter, we made investments in the MIEBO launch, and we're committed to continuing to invest over the next 18 to 24 months to position MIEBO for success. Our acquisition of XIIDRA closed at the end of September and we're excited to bring XIIDRA and MIEBO together in one portfolio. This closing date was earlier than our initial estimate for the end of the year. We expect the remainder of the year to be a transition period for XIIDRA as we continue our efforts to successfully integrate it into our portfolio. We believe our investment in the re-launch of XIIDRA is an important step in unlocking XIIDRA's full potential. The acquisition of XIIDRA is transformative to our Pharma business and XIIDRA and MIEBO together provide us with the leadership in Dry Eye Disease. Now that we have covered revenues for each of the segments, let me walk through some of the key non-GAAP line items on slide eight. Adjusted gross margin for the quarter was 61.3%, which was up 80 basis points compared to Q3 2022. The gross margin improvement reflects a mix of factors. Product mix was favorable, driven by higher growth in our consumer business. This is balanced by pressure on the gross margin driven by the higher inventory costs in our surgical business. In the third quarter, we invested $81 million in R&D or approximately 8% of revenue. Our spend in the third quarter reflects our investments behind key products, including the MIEBO launch. We're committed to investing in our product launches in the remainder of this year and in 2024. Third quarter adjusted EBITDA was $187 million. It was negatively impacted by currency headwinds of approximately $14 million and Lynchburg related disruptions of $7 million. Excluding the impact of currency, adjusted EBITDA grew 7% compared to last year. Net interest expense run rate for the quarter was approximately $56 million, excluding a one-time upfront financing commitment cost of $16 million related to the XIIDRA acquisition. The adjusted tax rate in the third quarter was 6%, which is in line with our expectation for the full year 2023. Adjusted EPS for the quarter was $0.22. Adjusted cash flow from operations was $66 million in the third quarter and CapEx was $33 million. Year-to-date, cash flow from operations include a strategic inventory build of approximately $150 million, mainly related to the surgical business. It also includes an investment in working capital to support new launches and growing sales. As part of the XIIDRA transaction, we raised $1.9 billion in financing at the end of the quarter. This consists of a $500 million term loan and $1.4 billion secured notes. XIIDRA is a highly cash generative asset and we believe that we have a path to deleveraging over the next 24 months. Turning now to our 2023 guidance on slide 11. We're raising our revenue guidance for 2023 to a range of $4.035 billion to $4.085 billion. This reflects a constant currency growth rate of approximately 9.5% to 10.5%, which represents an increase of 300 basis points from our previous guidance. Based on current exchange rates, we expect currency headwinds to have a negative impact on revenue of approximately $85 million for the full year, which is about $35 million unfavorable from our previous estimate. In the fourth quarter, we expect XIIDRA to generate $80 million to $90 million of revenue. Our constant currency revenue guidance raise of 300 basis points takes into consideration the 225 basis points contribution from XIIDRA, with the remainder of the 75 basis points raise or $30 million, reflecting the strong performance in our base business. We're increasing our adjusted EBITDA guidance for 2023 to a range of $710 million to $760 million. This includes full year currency headwinds of approximately $55 million, which is about $20 million unfavorable from our previous estimate, offset by the contribution from XIIDRA of approximately $30 million. While the market demand remains healthy, we're balancing our performance with the investments in launches including MIEBO, the transition required to integrate and relaunch XIIDRA, and the work in progress in the supply chain. Also, our adjusted EBITDA guidance includes the negative impact related to Lynchburg, which has been approximately $20 million year-to-date. We expect our 2023 adjusted gross margin to increase by approximately 50 basis points to 60.5%. In terms of the other key assumptions underlying our guidance, we anticipate investments in R&D to be approximately 8% of revenue and interest expense to be approximately $270 million for the full year. The increase in the interest expense reflects the recent financing related to the XIIDRA acquisition. Our adjusted tax rate is expected to be roughly 6% and full year CapEx is approximately $175 million. As a reminder, keep in mind that the comparability between 2022 and 2023 results for the full year will be impacted by the May 2022 timing of our IPO. I recognize that many of you are currently focused on updating your models for next year. Looking forward, I want to provide some initial considerations for 2024. We expect the fundamentals of the eye care market to remain strong and the overall market growth to be about mid-single digits. We anticipate 2024 to be one of the most active launch years in our company's history. We expect to launch products across our entire portfolio, including in high-margin, fast-growing areas of the market. We also expect to strengthen our leadership in Dry Eye Disease with the recent launch of MIEBO and the full year contribution from XIIDRA. We're excited about the XIIDRA market opportunity under our ownership and our holistic approach to Dry Eye Disease treatment. As we have previously mentioned, once we launch, we believe XIIDRA has the potential to be a mid-single-digit growth asset. We expect to have an opportunity for margin improvement, driven by the addition of XIIDRA and the performance of our base business while also recognizing the need to invest in all of our launches, including MIEBO. As we invest during the XIIDRA re-launch period, we expect the XIIDRA contribution to margin to increase as we progress throughout the year. The re-launch is a key priority, and we are encouraged by the recent TRx trends in the past few weeks. But we anticipate that it will take some time for us to see the full benefit of our investments. In our base business, we believe our supply chain will continue to strengthen, but we recognize there's more work to be done. Pressure on margins related to supply challenges and the mitigation efforts I mentioned earlier, such as spot buying, will continue to be a factor in the short-term. To be clear, our priority will remain to invest in our product launches. While still early, MIEBO is off to a great start. We will monitor the MIEBO performance over the coming months and evaluate the need to accelerate investment to maximize the strong performance trajectory. Based on current rates, we estimate currency headwinds to revenue of approximately $100 million in 2024. This is our current estimate and we will continue to monitor and update it as we approach the end of this year. We expect the LOE for our brand PROLENSA to occur in Q4 of this year. We estimate PROLENSA to be approximately $50 million in revenue. We don't expect the LOE to have a material impact on our 2023 results, but we do expect to see the full year impact in 2024. We anticipate investments in R&D will continue to be a focus as we advance our product pipeline and bring new products to market. Our tax rate is expected to be approximately 15%. As previously mentioned, this is in line with our expectation, and it takes into consideration an estimate of the impact of the OECD's Pillar Two Minimum Tax Rules, which are expected to be implemented in certain EU countries and Canada in 2024. We expect interest expense to increase in 2024 due to incremental debt related to the XIIDRA financing and a higher interest rate environment for the variable rate portion of our debt. As we continue the momentum in our current portfolio and launch new products, we have an opportunity to continue to deliver at or above market growth and leverage our platform for longer-term margin expansion. And now I'll turn the call back to Brent.

Thanks, Sam. I'd like to spend some time talking more about where we are investing to drive growth. Months ago, I described our second quarter as being defined by performance and progress. The same holds true for Q3, but I'd like to introduce a third descriptor when it comes to our supply chain, practicality. We have a significant global manufacturing and distribution network that relies on thousands and thousands of inputs. Look no further than surgical where some equipment has more than 1,000 components. With any operation of this size, if you don't have a consistent supply of those components and dependability when it comes to pushing your products out the door, you're not going to realize your full potential. There's no quick fix when it comes to addressing supply chain issues, and it's not a question of just throwing money at a problem. We've made nearly $900 million in capital investments toward improving and expanding our facilities over just the past five years. Instead, we are taking a practical approach to the supply chain. We started by bringing in a respected industry veteran who has been making complex systems run smoothly for more than 25 years. He has taken the reins on addressing our Lynchburg issues and is systematically working to improve surgical component availability. Bigger picture, he is creating a thoughtful and staged game plan for supply chain success that will keep up with demand for new and existing products. Being practical requires patience with the understanding that we're going to do it right. Let's turn to one of the biggest events of the quarter and a serious source of pride for our employees, the launch of MIEBO. We'll launch that as just one input when it comes to a product's success. In the case of MIEBO, early returns are truly impressive. TRx performance since our mid-September launch shows a steady rise in prescription volume. What's driving that uptake? Two things. First, our sales force. I attended the MIEBO kickoff meeting in early September and was immediately impressed by the team. They believe in what they're selling and we're making it easier for them to do their jobs. They recognize the promise of MIEBO, both medically and commercially. Second, excitement among eye care professionals. We brought MIEBO to market because there was a real need for a medicine that targets tear evaporation. Physicians believe in what they're prescribing and are thrilled to have a new and differentiated treatment option for millions of patients suffering from Dry Eye Disease. Enthusiasm among the MIEBO salesforce is shared by the XIIDRA team that we onboarded just two weeks ago. When I met with them at orientation, it was clear that they felt reinvigorated. Most, if not all, have never been part of a company solely dedicated to eye health. Why does that matter? Because we have the existing infrastructure to hit the ground running, and it's mission-critical we make XIIDRA central to our strategy. Recent lack of investment in XIIDRA sales ends now. The team we brought over went from selling a medication that wasn't deemed a priority by its former owner, to representing the biggest product in our portfolio by revenue. It's time for a rebirth as we leverage XIIDRA's brand equity and increasing importance in the Dry Eye category. MIEBO on its own represents a significant opportunity for Bausch + Lomb, but the acquisition of XIIDRA gives us a formidable 1-2 punch. As made clear when we first announced our acquisition of XIIDRA, these are complementary medications that target distinct elements of Dry Eye Disease. Being able to offer both means we can treat the disease holistically and more fully address a staggering unmet need. How do our products become the primary option for approximately 36 million Americans suffering from Dry Eye Disease not currently on prescription medication? It starts with raising disease awareness for consumers and physicians. For the latter, we'll rely heavily on a combined salesforce that will be the largest in the dry eye category and one of the most impressive in eye health. While we spent a fair amount of time highlighting MIEBO and XIIDRA over the past few quarters, it's important to understand that pharmaceuticals account for roughly a quarter of our revenue. In other words, we're much more than a handful of prescription medications for a single category. Highlights from other areas include LUMIFY, which continues to impress with exponential revenue growth. We've built on that success through the upcoming full launch of LUMIFY Eye Illuminations in the US, a perfect example of capitalizing on a product that has quickly built a significant and loyal following. Daily SiHy continues to be an emerging force in our contact lens business with third quarter revenue growth of nearly 80% year-over-year. Ongoing brand extensions mean even more opportunity on a global scale. In Surgical, high-margin premium IOLs continue to outperform. After debuting IC-8 Apthera earlier this year, we soft launched enVista Aspire just weeks ago and expanded enVista offerings are planned for 2024 and beyond. This slide may look familiar, but that doesn't make it any less impressive. With so many launches across our businesses on the horizon, you can see why we're focused on selling excellence and improving our supply chain. Getting those right means getting more products to people who need them. It's the key to everything for us. I returned to Bausch + Lomb because I saw a company with incredible potential. Eight months in, I can tell you that I sold us short. The opportunity we have is even more transformative than I initially thought. We have the products, people, and plan to shape up an industry that continues to evolve and grow. This Friday is the official anniversary of our founding when John Bausch and Henry Lomb embraced a start-up mentality to build a 170-year legacy. We're rekindling that entrepreneurial spirit as we redefine the company and create lasting value in the process. Operator, let's open the line for questions.

Thank you very much. We will now begin the question-and-answer session. Thank you. The first question comes from Patrick Wood of Morgan Stanley. Patrick, your line is live.

Amazing. Thank you very much for taking the question. I'll keep it to one. I'd love to drill down a little bit into MIEBO given the launch. I'm just curious how you're getting the feedback, how it's coming through from the docs a little bit, prescription trends rather than the numbers, but the kinds of patients that you think are typically being treated at this stage and how you feel about I think it was a $350 million opportunity longer term. I know it's very early days, but really curious to see how you're feeling about that longer term given the launch. Thanks.

Yes, thank you, Patrick. MIEBO is a major priority for me and our teams. As you mentioned, it's still early, and we need to be cautious about interpreting just a few weeks of data. That said, I am quite optimistic about our progress. The market response from physicians and ECPs has been very positive. The data from IQVIA appears to be significantly underreported, and they will provide an update on November 17th, which should give us a clearer picture. There were some reporting issues, but it's clear that MIEBO is performing better than expected, even better than what many may realize. Feedback from ECPs has been encouraging. I will be attending the American Academy of Ophthalmology conference in San Francisco this weekend, where we plan to engage in several MIEBO and XIIDRA events and programming. The enthusiasm is remarkable, and we are starting to see refill activity already. Overall, things are progressing better than anticipated, and my expectations were already high. However, I want to emphasize that it’s still early and we will have a better sense of this once we have more months of data. The team is doing an excellent job.

Okay. Thanks for taking the question.

Thank you very much. Your next question is coming from Larry Biegelsen of Wells Fargo. Larry, your line is live.

Good morning. Thanks for taking the question. Congrats on a nice print here. I'll try to get two in here. One for Sam on margins next year. If you sum all this up, I think at our conference, Brent talked about 200-basis point margin benefit from XIIDRA plus some underlying margin expansion. Does that still hold? And I had one follow-up.

Sure. Good morning, Larry. When you step back and you look at sort of what we've done in '23 and how we're thinking about '24, we do expect to see margin improvements from our base business and also the addition of XIIDRA. But you also have to balance this with a couple of factors here. One is the level of investment that we would need to make in XIIDRA. Brent talked about XIIDRA and sort of our expectation especially now that's in our hands. And we've previously talked about that this brand, and not only this brand but the Dry Eye market in general is very responsive to promotional investment. So we need to be able to allow and allocate the right level of investment to get XIIDRA to the level of expectation that we would like it to be and re-recognize the value of that. There will be an element of investment going behind XIIDRA going into starting from Q4 and going into the early part of next year and again forward into '24. The other part, which I would want to also talk about, would be the early read that we're seeing from MIEBO. It's very positive. We're excited about it and we're very encouraged. But it's still early and I think we will need to see a couple more datapoints to be able to make that trend solid for us. And this is what I think we will be thinking about the decision in terms of do you accelerate investment behind MIEBO to be able to and for incremental investment to be able to accelerate growth into the future years. So again, MIEBO for us is not just a one-year brand. We're thinking about this as a long game here, so we're thinking about not only '24, but '24, '25 and beyond. So that's going to be a very critical decision, but we will need to see a little bit more datapoints to be able to see that positive trend that we've seen in the last couple of weeks continue with us for a little bit longer.

That's helpful. Just one follow-up on XIIDRA and MIEBO sales next year. XIIDRA, the guidance, it declined 40% in Q3 revenue. The guidance here that you gave implies another 40% decline, so $335 million for the year at the midpoint. What's your expectation for '24? And on MIEBO, the prescription data you gave us today implies it's annualizing at over $100 million in sales already. Do you think it could be a $100 million product in '24? Thank you.

Yes, so maybe I'll just start, and then Sam can jump in. Look, I think the sales number for Novartis in Q3 is not an accurate picture of performance of the brand. There were some accounting charges that Novartis took there and so I think that's distorted and probably not a true picture. Clearly, it was underinvested in their hands, and we saw that. We've had it for essentially two weeks. And I actually was with the Novartis team, 97% of the team, sales team came over and joined us. We're super excited to have them. I spent some time with them two weeks ago here in New Jersey. And they are super motivated. And again, very early data, but we're starting to see stabilization in the script trends, which is really important. I do think the fourth quarter here is clearly about stabilizing. And then as Sam mentioned in his remarks, the first quarter and going into the second quarter is going to be about recharging that brand and reenergizing that brand, given that we have roughly nine, 10 years of exclusivity to stand behind that brand. So super excited about that. I think when you look at sales for next, for '24, we're not giving guidance for '24, we were just trying to give you some direction. We'll certainly provide that in due course. But Sam, anything else you want to add to this?

Yes. I think, Larry, as we think about XIIDRA based on the remarks we've made thus far, we want to make sure we invest behind the brand. I think the comment I made in my prepared remarks was, as we think about XIIDRA once it balances out, it probably will be a still five call it sort of mid-single-digit growth asset and that's been our thinking around XIIDRA.

Thank you.

Thank you very much. Your next question is coming from Young Li of Jefferies. Young, your line is live.

Alright. Great. Thanks so much for taking our questions. Maybe pivoting a little bit to contact lenses, I wanted to hear a little bit on the health of the US consumer. Is there still a lot more demand than capacity for the industry? All the Daily SiHy adoption trends seem very favorable and very strong growth. But are you seeing any signs of consumers trading down or extending their wear? And any high-level thoughts on that might happen in 2024?

Yes. Great question and thank you for that. Across our businesses globally, we don't see any pullback from the consumer whether that be in lenses or in our consumer business. And in fact, some interesting data perhaps out of the consumer business, not exactly what you asked, was we're seeing strong drive of consumption in our consumer products. So another datapoint that shows that the consumer in the US, and frankly globally, is still pretty active. In fact, when you look at GDP data, I think we saw consumer drive most of the GDP growth in the US in the third quarter, so a healthy consumer. Our lens business in the US, the market was up around 7%, 8%. Sam can give us the exact number. But I think we're seeing really healthy trend. Daily SiHy was about 80% growth in the quarter. So I think our issues there have been just distribution and being able to ship and that is solving itself this quarter, and we're starting to move into a good spot. But overall, the market I think is robust. It's big, it's growing. And we finally have a good product portfolio. We just need to be able to ship to customers on a more consistent basis.

Alright, great. Very helpful. And I guess for my follow-up, so on the China business, minus 1% due to tough comps, year-to-date 6%. I guess I was wondering if maybe you can comment a little bit about what you're seeing on the ground currently. It's high single-digit percent of your business. We read all the macroeconomic and consumer consumption headlines. There's also some anticorruption campaign color that doesn't really impact contact lenses as much, but it's in the background. What's your view on the health of the Chinese consumer for the contact lens business in the near term? What indicators are you more closely tracking? Are there noticeable differences in the different tiered cities?

Yes. It's a great question. So, first, I'd just talk, take a step back and look at the opportunity in China. It's a massive market. We have a tremendous opportunity to grow into that market. Unlike perhaps one of our competitors that has more market share, I think our opportunity is to take share in a growing market is pretty strong. And we're just really getting started there with the Daily SiHy launch. It just happened a quarter ago. So we still have to bring the multifocal and other modalities into China. The other thing is our team in China. I was over there not that long ago. We have a really strong team. I was very impressed by the B+L colleagues in China. And in fact, this quarter, they stood up a DTC model that was quite impressive. So we'll see how that works out, but they did a lot of really good work with a strong entrepreneurial spirit. So I'm excited about China. I think when we look at the consumer in China, they're resilient, perhaps a little less resilient in the Tier 2 or 3 cities versus the 1, but still strong. I think our opportunity is clearly in this Tier 1 and 2 cities. So we're participating in the market where the consumer is strong. And again I think we're going to be less focused on the macroenvironment versus the opportunity we have to grow within a massive market. Sam, any color you'd want to add?

Yes. When considering this year, the year-to-date data is likely more relevant than looking at any specific quarter. So far this year, we have seen a 6% growth in constant currency. It's important to remember that last year, the first half was largely impacted by shutdowns, making the comparisons difficult. For instance, last quarter, we reported a 25% constant currency growth in China, but this quarter saw a decline of 1%, which reflects the strong rebound and comparisons from last year when people were emerging from shutdowns. For this year, I recommend focusing more on the year-to-date data for China, as it may provide a clearer picture.

Alright. Thank you very much.

Thank you. Your next question is coming from Craig Bijou of Bank of America. Craig, your line is live.

Good morning, guys, and Congrats on a strong quarter and closing the XIIDRA deal. I wanted to start with a follow-up to Larry's question on XIIDRA EBITDA. So if I look at your implied guidance or your guidance for the year and the EBITDA margin for XIIDRA is about 35%. So given your comments on investment in XIIDRA, what I want to understand is, is that 35% margin a jumping off point? Should we think about you can improve upon that throughout, sequentially throughout '24? Or how else should we think about that?

Good morning, Craig. I would think about it as 35% as a baseline. When you think about 35% for Q4 and as you start now progressing into 2024, we should expect that 35% in terms of margin to continue to expand as you go forward. So my commentary was highlighting on the fact of the investment in XIIDRA, we're starting Q4, we do expect that will take a couple of quarters to be able to get to the level that will meet our expectations. That will be just a phasing as you go into 2024.

Got it. That's helpful, Sam. And then just as a follow-up, I wanted to ask on the Lynchburg facility. It looked like the revenue impact was less in Q3 than it was in Q2. I appreciate your comments that you expect to be back to a more normalization in Q1. But wanted to understand, how should we think about any revenue and EBITDA impact in Q4 and even Q1?

Year-to-date, we are experiencing an impact of approximately $20 million on EBITDA. I mentioned this while discussing the guidance update for this quarter, which reflects that $20 million year-to-date. We anticipate that some of this will continue into Q4, and more will come in, but that has already been incorporated into the guidance ranges we provided. Regarding next year, it is still too early to discuss the impact of Lynchburg. However, I can share that we are making progress, and by Q1 of '24, we expect to reach an optimal level of performance at that facility, thanks to the upgrades we've implemented.

Yeah, look, I mean, I think, yeah. Go ahead, we're good.

Okay. Thank you very much. Your next question is coming from Joanne Wuensch from Citi. Joanne, your line is live.

Good morning and thank you for the question and nice quarter. Two, and I'm going to put them both out upfront, the Rx portfolio grew about 1% off of a somewhat tougher comp. Obviously, this is before you're really layering in XIIDRA and MIEBO. But I want to make sure that I understand if there were any onetime headwinds, et cetera that I need to think about. And then my second question is, in the lay press, the FDA warned against certain eye drops. Bausch wasn't on that list, but I was curious if you have a view on how that might create market opportunity for you. Thank you.

Yes, sure. So with respect to Rx growth in the quarter, 1%, the key metric I track there is the promoted products, which was anchored by VYZULTA, which was up 54% I think in the quarter. And so the sales team and what we focus on saw good growth in the quarter. We did have two older non-promoted products that had supply constraints in the quarter. If you took those out, pharma would have been up around 4% versus the 1%. But I think the dynamics and the reporting there will change dramatically in the next quarter when we have MIEBO and XIIDRA in there. I think as you look to next year, we have a PROLENSA LOE, and we've talked about that quite a bit. But outside of that, that's the only puts and takes in there. And I think there's more puts with XIIDRA and MIEBO going in than takeouts, Joanne. Hopefully, that clarifies that for you. On the FDA recall, it doesn't in and of itself present any kind of specific opportunity for us. But I think it underscores the importance of quality control in manufacturing and supply. I think what I've seen from the ECPs, there's a lot of promotion on staying with the branded companies in this category, whether it be us or our competitors being mentioned as alternatives. And I think lastly, it shows how hard it is to make these products in a sterile environment and provide high-quality supply. So all-in-all, our focus and our absolute commitment is to supply high-quality products. And to the extent there is an opportunity, perhaps retailers take some of these drops off their shelf and give us more shelf space for our products, whether it be LUMIFY or Blink or any of the other products in the reset that will happen as a result of these SKUs coming off shelf. So small opportunity, but I think more importantly, underscoring the importance of high-quality supply.

Thank you.

Thank you very much. Your next question is coming from Vijay Kumar from Evercore ISI. Vijay, your line is live.

Hey, guys. Thanks for taking my question. I had two questions. Maybe, Brent, first one for you on revenues here. Some of your comments you made here on fiscal '24 were helpful. The Lynchburg disruption, can you quantify the revenue impact in fiscal '23? Are they, lost revenues, should they come back in fiscal '24? And I think you did touch upon consumer strength. How should we think about consumer business in a recessionary environment?

Yes. We have made significant progress in Lynchburg over the past couple of months. In the fourth quarter, Lynchburg is starting to ship on time, particularly for domestic orders. While we still need some additional time to optimize operations there, overall, we’re seeing improvements. There are still some challenges with international orders, but the fourth quarter shows a notable enhancement. The revenue impact for 2023 is approximately $20 million due to lost sales, as patients ended up using alternative lenses since we couldn't provide our products. However, there is strong demand for our offerings, and we anticipate a rebound in our product line, which we are starting to witness in the fourth quarter. This situation is unfortunate, and it emphasizes the importance of strategic leadership in our global supply operations. Ultimately, delivering products to patients and consumers is crucial for building a sustainable business. In a recessionary environment, while we would need to be cautious and might feel some effects, people typically do not stop caring for their eyes. We believe our business has some resilience against potential consumer downturns. While some might opt for cheaper alternatives, there can be quality issues with lower-cost eye care products, making it a challenging decision. We currently do not see signs of a recession affecting our business globally or in the data we monitor.

Understood. Helpful comments, Brent. Sam, one for you on the margins here. I think you mentioned FX $100 million headwind on was it the revenue impact. What's the drop down here on EBITDA? Should that be similar to fiscal '23? Where it sounds like there's some incremental investments to support new product launches. Should we be thinking of that as incremental versus where we were three months ago?

Vijay, I'll start with the currency. It's challenging to predict it. I'm basing the $100 million figure on today's rates. A good way to gauge our thinking about currency is to look at what we've experienced so far in 2023; that will give you a sense of our outlook. However, I will provide updates on this as we conclude the year and provide guidance for all of 2024, which will include more details on currency projections. Regarding investments and product launches, I'll divide this into two parts. Brent presented a slide showcasing all the launches scheduled for 2024, which marks the highest number of launches in a single year in our company's history. This requires careful consideration of how we allocate resources. I want to highlight MIEBO specifically as it represents a significant asset and brand for us. The early data we have for MIEBO is very promising, and we want that positive trend to continue. If it does, we may decide to invest additional funds to accelerate its growth. Ultimately, this is a long-term strategy for us, and we'll provide more updates as we issue our complete year guidance for 2024.

Perhaps said another way, we have a big opportunity with MIEBO and XIIDRA and other launches across the portfolio in '24. Many of those launches lead us to higher-margin product mix for the long term. And so being successful in those are really an investment in improving margins. That being said, making that investment impacts margins to the negative in '24. And so what we want to do is be thoughtful about that. We are committed to margin improvement, but we want it to be sustainable and we want margin improvement for the long term. And so that's the balancing act that we would normally make in these decisions.

Helpful comments. Thanks, guys.

Thank you very much. The next question is coming from Doug Miehm from RBC Capital Markets. Doug your line is live.

Thank you. Two questions. Number one, with respect to XIIDRA, given the importance of the drug to the company now, how long do you believe it's going to get to that mid-single-digit growth profile? And then my second question just has to do with the success of LUMIFY. Brent, maybe you could delineate in a little bit greater detail. We've had a number of launches, but what seems to be resonating with people? And how soon can we expect the other products within that LUMIFY pipeline to come to market? Thank you.

Sure. XIIDRA has faced some challenges under its previous ownership, which were more severe than we anticipated. This drug was neglected, but now it's part of a dedicated eye care company, making it one of our most significant products. The sales team is more motivated than ever as they shift from being an afterthought to a priority. The Dry Eye category is highly responsive to promotions. I recall the launch of XIIDRA during my time at Allergan, where many expected RESTASIS to decline, but instead, the market adapted and expanded, benefiting both brands. We are well-positioned with XIIDRA and MIEBO to address the treatment needs of approximately 38 million untreated patients. While XIIDRA requires some stabilization in the fourth quarter, I believe we can restore it to growth in the latter half of 2024. I'm confident in our team's ability to execute on this. LUMIFY has also performed exceptionally well, posting 47% growth year-over-year, with record revenues of $44 million this quarter. We are currently launching Eye Illuminations commercially, and a consumer campaign is planned for the first quarter of next year. I believe we need to market LUMIFY not just as an OTC drug, but as a beauty product, as beautiful eyes enhance overall facial aesthetics. Our experience in the aesthetics market has shown the importance of this approach. We will continue to invest in LUMIFY and expand its market presence, including new preservative-free versions and potential formulation improvements. We view this as a long-term investment with significant growth potential ahead.

No, that appears to be the end of the question-and-answer session.

Yes. Thank you, Operator. Well, again, thanks to everyone for joining us this morning. We remain very committed to focusing on driving our roadmap to accelerate growth. The quarter was another great testament to our teams around the world focused on execution and driving growth. And we look forward to keeping you updated as we progress and certainly excited for our future. Thanks for joining us.

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