Good morning, and welcome to Bausch + Lomb's First Quarter 2025 Earnings Call. All participants will be in listen-only mode. 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 first quarter 2025 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 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, everyone. I'm going to put our first quarter performance in context and provide updates on two timely topics, followed by Sam's focus on the financials, including 2025 guidance. I'll wrap things up with examples of growth and opportunity in each of our businesses that have us excited for what the future holds. Almost two years ago, on my first earnings call after returning as CEO, I outlined our plan to reestablish Bausch + Lomb as the best eye health company. Core to that strategy are the priorities shown here, which have become a mainstay of earnings presentations and part of our DNA internally. Establishing our priorities was critical, but our ability to stay the course will ultimately determine our success. We had a few bumps in the road to start the year, but our core business is performing well, and we remain focused on positioning the company for long-term profitable growth. We delivered mid-single-digit constant currency revenue growth in the first quarter, which we expect will be in line with industry growth. While we did see constant currency revenue growth across all three reporting segments, Pharmaceuticals took a step back for two reasons: underperformance in our high-margin U.S. Generics business and XIIDRA revenue headwinds, which we previously communicated despite impressive TRx growth. Both are being addressed, which we'll get into later. Instead of using our sales and operations update to top market share growth or the latest advances in manufacturing, I'd like to highlight the resiliency of my colleagues around the world. The voluntary recall of IOLs on our enVista platform and the evolving tariff landscape presented new challenges, and I couldn't be more impressed with the response. Grittiness, accountability and customer-first mentality continue to define our team. When it comes to innovation, enthusiasm around our pipeline is at an all-time high. We have big things around the corner with the potential to significantly enhance the standard of care in eye health. I'll preface our recall update with a simple message: Patient safety is non-negotiable. That's why we didn't wait for additional data or regulatory action when a toxic anterior segment syndrome, or TASS, signal was detected in certain intraocular lenses on our enVista platform. We voluntarily pulled the lenses from the market in late March because it was the right thing to do. Our ability to return to market approximately one month later is nothing short of remarkable and speaks to the power of our people I referenced earlier. We immediately began a thorough investigation in collaboration with globally recognized TASS expert and an advisory group of nearly 30 top cataract surgeons, including leadership from the American Society of Cataract and Refractive Surgery. All signs began to point to lots that used raw material from a different vendor, which allowed us to confirm the cause. Inspection protocols for IOLs have been enhanced, and we've established more explicit standards for vendors. With these new processes in place, we've returned to full production of all enVista IOLs. Replenishing the U.S. market is underway, with timing for market re-entry in other countries being handled on a case-by-case basis in collaboration with health authorities. The amount of positive feedback and encouragement from customers over the past month has been overwhelming. Our relationships with the eye care professionals are built on trust, and I am confident our actions and transparency are helping to strengthen those bonds. One of the benefits of being in business for more than 170 years is significant experience in dealing with uncertainty. We've weathered many storms as a resilient business in a resilient industry. That's important in the current tariff environment, which we are approaching with level heads and confidence in our planning. Sam will quantify the potential impact on our business, which is, of course, a moving target. As things currently stand, our biggest exposure is exporting from the U.S. to China, given the escalation of reciprocal tariffs. That said, there are several levers we can pull that we believe will mitigate the overall impact of tariffs. These include inventory stocking, moving more manufacturing in-house and reevaluating pricing where and when it makes sense. But our biggest asset is our global footprint, which we began optimizing well before tariffs were on anyone's radar. Our manufacturing presence spans the globe and is matched by an expansive network of contract manufacturers and distribution facilities. When the dust settles, whenever that may be, we have the ability to shift many elements of our manufacturing based on cost effectiveness. In addition to blunting potential tariff impacts, this flexibility allows us to play offense against competitors with footprints that may not be as advantageous. Production of Daily SiHy contact lenses, our fastest-growing product, is a prime example. Those lenses are made in two places: Rochester, New York and Waterford, Ireland, which could significantly lessen our exposure. While any shift in manufacturing would take time, scenario planning is well underway. Q1 financial highlights include constant currency revenue growth across all reporting segments, once again demonstrating our holistic strength and lack of reliance on one product or region. 5% constant currency revenue growth in Vision Care was fueled by another quarter of dramatic Daily SiHy uptake and the Blink franchise establishing itself as a fast-growing brand in the OTC dry eye space. Stalwarts like LUMIFY and Artelac continue to outperform and build lasting brand equity. Premium IOLs helped to drive 11% constant currency revenue growth in Surgical, which points to the ongoing opportunity and significance of getting enVista lenses back on the market safely and quickly. It's important to remember that our premium IOL portfolio is more than just enVista. In fact, we expect to introduce the full range of Vision LuxLife IOLs in Europe by the end of the second quarter. Earlier, I referenced headwinds in Pharmaceuticals where Q1 performance can best be described as a mixed bag despite 1% constant currency revenue growth. U.S. Generics faced increased competition and lower inventory within the channel, and XIIDRA gross to net adjustments came in as expected. On the flip side, MIEBO, once again, hit the high end of our projections, and International Pharma posted another solid quarter. I'll now turn it over to Sam, who will go deeper on the financials and provide 2025 guidance.

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. Turning now to our financial results on Slide 9. Total company revenue for the quarter was $1.137 billion, which reflects growth of 5%. As Brent mentioned, we are maintaining our focus on executing our strategy, and our core business is performing well. In the quarter, MIEBO continued its exceptional launch performance, and we saw ongoing growth momentum in our consumer and contact lens businesses. Our Surgical segment delivered solid growth across all three product categories, and we're excited to return the enVista IOLs to the market. For the first quarter, currency was a headwind of approximately $19 million to revenue and $7 million to adjusted EBITDA. Now, let's discuss the results in each of our segments in more detail. Vision Care first quarter revenue of $656 million increased by 5%, driven by growth in both consumer and contact lenses. The consumer business grew by 5% in Q1. Let me go over a few highlights. In the quarter, LUMIFY grew by 9%. LUMIFY continues to expand its market-leading position. We continued our strong execution in the dry eye portfolio, which delivered $92 million of revenue in Q1, representing 15% growth. Our two key franchises, Artelac and Blink, once again contributed to the strong performance. Artelac grew by 15% and Blink grew by 85% in the quarter. Eye Vitamins grew by 4% in the quarter, driven by consumer consumption trends. Contact lens revenue growth was 5%. In the quarter, we saw solid growth in both the Daily and FRP portfolios. The Daily portfolio was up 7%. The growth was led by our Daily SiHy franchise, which was up 42% in the quarter. The FRP portfolio grew by 5%, led by our ULTRA franchise, which was up 15% in the quarter. In Q1, we saw growth in both the U.S. and international markets. The U.S. was up 7% and international was up 4%. Our contact lens business in China performed well and was up 6% in the quarter. Moving now to the Surgical segment. First quarter revenue was $214 million, an increase of 11%. In Q1, we once again saw growth in each of our three surgical product categories across the major markets. Consumables, which represents approximately 50% of Surgical revenue, grew by 5%. Revenue from equipment was up 9%, and implantables grew by 26%. Standard IOLs, which are approximately 60% of the implantables portfolio, were up 6%. Premium IOLs were up 77%, led by growth of enVista. Keep in mind that Q1 sales were not impacted by the recall. Prior to the recall, we expected the enVista platform to be a meaningful contributor to our full year guidance, and it continued to perform ahead of our expectations in the first quarter. While we do expect the recall to have a one-time impact in 2025, we are excited about the platform returning to market and are confident that over time, we will see the strong growth trajectory continue. Lastly, revenue in the Pharma segment was $267 million in Q1, which represents growth of 1%. Our U.S. branded Rx business was up 7% in the quarter, led by the continued performance of MIEBO. MIEBO delivered $57 million of revenue in Q1. This represents sequential growth of 8% and year-over-year growth of over 100%. Our investments in MIEBO continue to drive exceptional market adoption with MIEBO TRx having expanded each quarter since launch. As Brent will discuss, average weekly TRx were approximately 20,000 in Q1 and have nearly doubled from the prior year. XIIDRA delivered $67 million of revenue in the quarter. To start the year, the dynamics of XIIDRA are playing out as we have previously discussed. We saw the natural seasonality where the first quarter is typically the lowest and the fourth quarter is the highest. We also saw strong growth in volume with average weekly TRx up 14% on a year-over-year basis. The growth in TRx was offset by higher gross-to-net deductions, driven by the Inflation Reduction Act and our investment to maximize patient access. We remain committed to driving XIIDRA growth and believe our strategy will pay off given the long runway. In other parts of the Pharma segment, our International Pharma business was up 6% with strong performance in our largest markets in Europe. Our U.S. Generics business declined 23% in the quarter, driven by increased competition and lower inventory in the drug retail chain. As we look forward to the remainder of the year, we are executing multiple levers to help manage the dynamics in the generics business. Now, let me walk through some of the key non-GAAP line items on Slide 10. Adjusted gross margin for the first quarter was 59.5%. This includes a one-time headwind of approximately 140 basis points related to the recall of enVista. In Q1, we invested $86 million in adjusted R&D. First quarter adjusted EBITDA excluding IPR&D was $126 million. This includes a one-time impact of $16 million related to inventory write-off as a result of the enVista recall. It also includes a $14 million headwind driven by the decline of our higher-margin U.S. Generics business. In the quarter, currency headwinds to adjusted EBITDA were approximately $7 million. Net interest expense for the quarter was $91 million and adjusted EPS, excluding IPR&D, was a loss of $0.07 for the quarter. Turning now to our 2025 guidance on Slide 13. As I mentioned, our core business is performing well, and we expect the performance to continue throughout the year. We are raising our full-year revenue guidance to a range of $5 billion to $5.1 billion. The updated range absorbs the one-time impact of the enVista recall, offset by favorable currency impact relative to our previous guidance. We are excited to return the enVista IOLs to the market. As enVista ramps back up, for the full year 2025, we estimate one-time recall headwinds of approximately $55 million to revenue and $65 million to adjusted EBITDA. Recently, we saw a significant decline in the U.S. dollar, which reversed our previous FX headwind assumptions. Based on current exchange rates, for the full year 2025, we now estimate currency to be neutral relative to 2024. The updated revenue guidance represents constant currency growth of approximately 4.5% to 6.5%. Excluding the one-time impact of the enVista recall, the constant currency revenue growth is expected to remain in line with our previous guidance range of 5.5% to 7.5%. Shifting to adjusted EBITDA, we are updating our adjusted EBITDA guidance to a range of $850 million to $900 million. This also absorbs the one-time impact related to the enVista recall, partially offset by favorable currency impact relative to our previous guidance. In terms of the other key assumptions underlying our guidance, we expect adjusted gross margin to be approximately 61.5%. The adjusted gross margin absorbs an estimated one-time 60 basis point headwind from the enVista recall. For the full year, we continue to expect investments in R&D to be about 7.5% of revenue. As we monitor market conditions, we continue to expect interest expense to be approximately $375 million for the full year. We expect our adjusted tax rate to be approximately 15%, which is at the low end of our previous guidance range. The lower rate relative to our previous guidance is mainly driven by the impact of the enVista recall. We continue to expect full-year CapEx to be approximately $280 million. In terms of our phasing, we continue to expect a natural seasonality of our business with the first quarter being the lowest and the fourth quarter being the highest. Also, keep in mind the impact of the enVista recall in our phasing this year. We anticipate the recall to have a more meaningful impact in Q2, which will include costs incurred as part of the investigation and a slower ramp as we return to full market supply. We anticipate enVista sales to progressively increase in Q3 and Q4 as surgeon adoption expands. Consistent with our previous guidance, our current guidance excludes any potential one-time IPR&D charges that we may incur in 2025. Finally, let me provide more detail on our perspectives regarding tariffs. As Brent mentioned, the tariff policy continues to be a moving target. We are staying focused and executing on what we can control to help mitigate the potential impact. We have already taken immediate actions to help mitigate part of the impact, and we'll continue to evaluate levers that we believe will provide us with additional benefits to further offset the potential tariff impact. Based on what we know today, we estimate tariffs to be a potential headwind of approximately 120 basis points to adjusted EBITDA margin in 2025. To be clear, this does not include all the potential mitigating levers we are currently evaluating. Given the dynamic environment and as we continue to evaluate various mitigating levers, our updated guidance range does not reflect the potential tariff impact. We'll continue to provide you with an update as we progress throughout the year. Moving to Slide 14. Now, let me provide some additional color on how to think about the updated revenue and adjusted EBITDA guidance in 2025. Excluding the one-time impact of the enVista recall, we continue to expect our business to perform well throughout the remainder of 2025. Our updated 2025 revenue guidance range is $5 billion to $5.1 billion. It absorbs an estimated $55 million one-time impact of the enVista recall. The updated revenue guidance range also includes a positive currency movement of approximately $100 million relative to our previous guidance. Our updated 2025 adjusted EBITDA guidance range is $850 million to $900 million. It absorbs an estimated $65 million one-time impact of the enVista recall, $60 million of which we saw in the first quarter. The updated adjusted EBITDA guidance range also includes a positive currency movement of approximately $20 million relative to our previous guidance. To sum up, we delivered mid-single-digit constant currency revenue growth in the first quarter, and our core business is performing well. We are maintaining our focus on executing our strategy and positioning the company for long-term profitable growth. And now, I'll turn the call back to Brent.

Thanks, Sam. Let's turn our attention to growth drivers for 2025 and beyond. MIEBO prescriptions grew a staggering 98% year-over-year, crossing 20,000 in Q1. Perhaps more impressive was the 37% increase from Q4, which tells us we're still in launch mode with plenty of room to run. Prescribers understand the medication's unique benefits, which we're driving home with data. In February, a Phase 4 study was published showing MIEBO provided relief from dry eye symptoms for nearly 50% of patients in as little as five minutes after first use, adding to an already impressive data set and addressing patient needs. XIIDRA prescriptions grew 14% year-over-year, following steady growth throughout 2024. Both medications, which combined for $124 million in Q1 reported revenue, continue to benefit from effective direct-to-consumer campaigns and coverage that allows us to reach significantly larger patient populations. I referenced the sustained power of Artelac and LUMIFY earlier. Let's focus on two consumer brands that fall under the Blink umbrella and the power of effective direct-to-consumer outreach. Last year, in the U.S., we launched Blink NutriTears, a clinically-proven OTC nutritional supplement for dry eyes. Uptake can be slow with any new offering, especially in a space typically reserved for eye drops, but the latest figures are very encouraging and build on momentum we shared last quarter. Since launching a 30-second ad in January across linear and connected TV, we've seen a 10x increase in sales at major retailers with a positive story emerging in terms of repeat buyers. More than 10% of eye care professionals recommended Blink NutriTears in the first quarter, thanks to convincing data and finally having access to a once-a-day nutraceutical. Uptake for Blink eye drops is equally as impressive. Our DTC campaign is driving that growth, but the upward trajectory can also be attributed to old-school blocking and tackling. We're getting the product in front of eye care professionals through sampling and engagement at industry events, which is even more important following the release of two preservative-free Blink offerings in the first quarter. All told, the Blink family of products, which includes eye drops, lens care, and supplements, delivered 84% reported revenue growth year-over-year. Daily SiHy contact lenses continue to win over customers and consumers with 42% constant currency revenue growth in the first quarter. That growth was even higher at 56% in the U.S., where the full suite of offerings is available. The same will be true later this year in Japan, our second biggest market for contact lenses, when we expect to introduce a toric option. We expect to introduce multifocal and toric options in other markets in 2026, maintaining our thoughtful approach to expansion. In the meantime, existing brands are filling the gap. ULTRA monthly contact lenses is a prime example with 13% reported revenue growth in the first quarter despite a gradual industry shift towards daily lenses. Another Vision Care highlight worth noting is the March launch of Arise, a lens-fitting system that uses cloud-based technology to streamline the OrthoK lens design process. We believe this offering will help us build a foundation in the fast-growing and critical area of myopia control. This slide serves as a reminder that IOLs are not the entirety of our Surgical business, not even close. In fact, consumables, which delivered 5% constant currency revenue growth, account for roughly half of the business, while equipment with 9% constant currency revenue growth accounts for nearly a quarter. Those areas have not and will not be affected by the enVista voluntary recall. That said, implantables will continue to be a critical part of our growth going forward and feature prominently in our pipeline. I mentioned the pending LuxLife launch earlier. We also expect to unveil a new LuxSmart inserter within the next few weeks for select countries and anticipate a soft launch for enVista Envy in Europe later this year with a full rollout expected in early 2026. I'll close with my favorite slide, a top-line view of our refocused pipeline, which cuts across all businesses. Several of these products could be category disruptors, including a first-of-its-kind biomimetic contact lens that would optimize oxygen permeability, the first dual-action therapeutic to address both evaporative and inflammatory dry eye disease, the first product to treat ocular surface pain, and the first glaucoma product to lower intraocular pressure and improve visual acuity. Others, most notably OTC offerings, leverage brand favorability with new science. We're in the process of initiating clinical trials for most of these products, which means we're making meaningful progress in our journey to significantly enhance the standard of care in eye health. That's what continues to motivate us every day. Operator, let's move to Q&A.

Certainly. We will now begin the question-and-answer session. And the first question today will be coming from Patrick Wood from Morgan Stanley. Patrick, your line is live.

Thank you very much. Good morning, everyone. I want to focus on the implantable side rather than tariffs. Before the recall, Envy was clearly performing very well in the U.S. You seem to have a strong assumption about the revenue impact from the recall. How are you evaluating the overall effect? What feedback are you receiving from customers? I’m eager to explore that further. I also have a quick follow-up on this topic.

Sure. Thanks, Patrick. And I like the way you described Envy's performance. I don't know if I could get away with saying that, but thank you, in the first quarter at least. So, look, we made the important decision that really didn't require much thought, right, which is always to put the quality and safety of our products first. And we decided to make the recall when we started to see a signal on TASS. When you look at the work the team did to resolve the issue and identify the problem after a thorough investigation, we feel incredibly confident that we made the right decision also to return to market. We were at ASCRS. I was there as most of the team was this weekend in Los Angeles. And so, we had a really great opportunity to interact with thousands of customers. And I think the message is clear, which is we earned a lot of trust by the way we moved swiftly to put patient safety first and the transparency in which we did it. I heard overwhelmingly from many KOLs that they plan to immediately return to implanting enVista as soon as the next week or two when supply is restored. And then, I've heard from other surgeons who said, let's give it a couple of weeks or a month, given the immediacy of the onset of tests, so we should know pretty quickly, and that should settle the market. So, when I look at it, clearly, the second quarter is what it is because it happened during the second quarter. I do expect the third quarter to start to see a pickup, and my current thinking is by fourth quarter, we should start to restore trust and confidence and be back in business full force.

Super helpful.

Does that make sense?

It does. It dovetails nicely actually because to your point on ASCRS, I guess the second question is, we've seen J&J's number, we've got your number now, but certainly what we had been hearing a little bit for the U.S. on the implantable side, and I understand you guys are much smaller in the U.S. versus OUS, but for the U.S. side on implantables, let's say cataract volumes were actually pretty bad in Q1. I'd assume that would just be the premium side of things, just the economy, etc., and we all saw Rx's numbers. But what are you hearing from your customers around total cataract volumes? I know that's less impactful for you guys given your position in the market, but I'm just really curious.

I don't have concrete data, but I can share that I've spent more time with cataract surgeons recently than with any other customers. I would describe the volumes as normal, with no noticeable decline or significant increase; they seem very steady in the market. Regarding growth areas, monofocal plus is one, and their main competitor is J&J, which will likely benefit in the second quarter due to Aspire's recall. For Envy, there was good adoption in the first quarter and even in the fourth quarter of last year, thanks to the quality of the lens and the positive outcomes surgeons were achieving for their patients. Surgeons are focused on obtaining predictable, strong outcomes for premium IOLs.

Super. Thanks so much, guys.

Thank you. The next question will be from Young Li from Jefferies. Young, your line is live.

All right, great. Thanks for taking our questions. I guess, to start, I wanted to ask a little bit about your consumer exposed businesses. I was wondering if you can talk a little bit about what you saw from those segments in March or even April, if there's any cautiousness or slowdown. And then, if you can focus a little bit on U.S. consumer as well as China consumer sentiment, that would be helpful.

Yeah. So, it's actually, Young, a great question, and it's an interesting paradigm, right, because the data we see and even in April shows strong consumption still. I think there are two things that you have to watch out for, which is, I think, we're still going to see some continued destocking of inventory from retailers as they try to preserve cash or manage cash. We saw that last year in the drug channel. I think we're going to see it in a few other parts of the consumer channel over the coming year. And then, second, sentiment, right? When you look at the sentiment surveys out of Michigan and other places, obviously, they're quite concerning. That being said, the dichotomy exists, and we don't see it in the actual consumption data. That being said, we probably have more resilience than others because most of what we sell are essential healthcare products, and so they tend to be less discretionary. And so, I think we feel cautiously optimistic about the consumer business on a go-forward basis. Demand looks really solid. And that includes China. I mean, even China, our best barometer in the first quarter is contact lenses, and we saw 6% growth in China in contact lenses. So, again, I understand the sentiment. We just don't see it in the consumption data.

All right, great. That's very helpful. I guess, one on tariffs, still a hot topic. You have a pretty diversified manufacturer footprint, lots of mitigation, potential efforts that you highlighted. I guess, just kind of curious, how quickly can you implement some of those things and thoughts on your ability to pass price on through to customers if needed?

Sure, let me provide a general overview and then hand it over to Sam. You're right; most of our tariff exposure is due to the reciprocal tariffs from China. Currently, a significant portion of our surgical products and many contact lenses and solutions are produced in the U.S. and shipped to China, which creates the majority of our current impact. When considering the tariffs, it’s useful to think of mitigation strategies in two categories. The first involves immediate actions, which Sam will elaborate on regarding inventory management and the use of free trade zones. The second category considers long-term strategies, which may include relocating production to facilities in Europe or Asia. This approach requires more time and investment. We are actively engaged in scenario planning and preparation, but we haven't initiated any of the second category actions yet. Sam, over to you.

Sure. We have taken several important steps regarding tariffs, and I have been leading a team focused on this issue. From a manufacturing standpoint, we are well positioned in the U.S. However, the main challenge lies in how we move products from the U.S. to China. I want to break our actions into two parts. The first part includes no regret actions that we have already implemented, such as managing inventory and optimizing how we ship products. The second part is more critical and requires careful evaluation due to the constantly changing situation. These actions will take longer to implement, but we believe they will help mitigate the tariff exposure we discussed earlier. However, they will involve changes, including adjustments to our pricing and supply chain. We are committed to this ongoing work and will continue to monitor developments positively.

Yeah. I would add one other comment. Just you didn't ask the question, but if we did see tariffs in Pharmaceuticals, we're really insulated from that. Our U.S. Pharmaceutical business is made all those products, MIEBO, XIIDRA and Generics and everything else are made in the U.S. for the U.S.

All right, great. Very helpful.

Thank you. The next question will be from Joanne Wuensch from Citibank. Joanne, your line is live.

Good morning, and thank you for taking my question. I want to take a moment to discuss the contact lens market. I'd like to hear your thoughts on the demand in the U.S. and internationally, particularly regarding potential recessionary impacts on the business. Additionally, I'd like to ask about Slide 20, where you have several different contact lenses lined up. Any insights you could provide about these products, what excites you, or the expected timing would be greatly appreciated. Thank you.

Yeah, absolutely. So, Joanne, as you know, the market data on contact lenses that we source comes in, I guess, in a couple of weeks or a month. So, we don't have the actual data. So, I'll have to speak more based on what we're seeing in the market and anecdotal comments from customers. And we see continued mid-single-digit growth of the market. I think there are some of our competitors that have different selling models that had some destocking, just like we saw in our consumer business. That doesn't really impact us as much. But I think all in all, I think consumption or demand remains in that mid-single-digit kind of number. I think in terms of the recession, when you go back and look at other recessions, and I don't think if we entered one, it would be perhaps as severe as the financial crisis-driven one. But there you still saw growth, albeit muted growth. But I think it is a fairly resilient market and people don't drop out of lens use during a recession. You may see less new starts, but not in a significant way. It would be a more modest impact. In terms of the pipeline, Yehia Hashad, our Head of R&D, is here. Do you want to just touch on some of your...

Yeah, sure. Specifically in terms of the contact lenses, we continue to make substantial progress on the development of our biomimetic lenses. We're currently in the final optimization study within our clinic, but we're going for the big clinic, as we announced in JPMorgan, second half of the year and we'll start this study. And then, we obviously also completed recruitment for our myopia contact lens and we are expecting to see some entry analysis data by beginning of 2026. We have also started the program on the premium FRP SiHy lens that will give us also longer duration. So, in terms of the pipeline for the contact lens in particular, we have some very exciting programs that are progressing and on track to deliver results.

And I would add, Joanne, I think also put aside the novelty and technology upgrades of some of these lenses, they were designed for purpose on existing manufacturing infrastructure. And so, thereby, solving one of the biggest issues in bringing new contact lenses to market is the large capital investment usually needed to ramp up manufacturing. We largely avoid that with this pipeline. And so, I’m very proud of the R&D team's ability to drive innovation on existing manufacturing platforms, which is really an added difficulty when trying to innovate, and they did that well. I think I would just add one last thing on the pipeline. Clearly, we have the clinical trials for the Pharmaceutical programs, all starting in the second half of this year. And so, we're super excited about those programs. But also, ELIOS in our MIGS glaucoma, we hope to anticipate an approval by the end of the year. And so, we have a lot of work going on in R&D this year.

Excellent. Thank you.

Thank you. The next question will be from Larry Biegelsen from Wells Fargo. Larry, your line is live.

Hi, good morning. It's Lei calling in for Larry. Thanks for taking the questions. First, just going back to tariffs, Sam, you talked about tariff impact approximating 120 basis points to EBITDA margin this year. Can you give any thoughts on how we should think about the ramp through the year, just given how inventory rose through the P&L? I mean, we would assume Q2 margin impact would be less than 120 basis points and Q4 would be greater. Can you give any sort of order of magnitude or color? And I have a follow-up.

Sure. When we consider the actions we've implemented, I believe we have effectively mitigated the impact for the first half of this year. Therefore, I don't anticipate a significant effect from the tariffs in Q2. Looking ahead, the impact will likely manifest more in the second half of the year, provided that current policies remain stable and we don't encounter any further delays or changes. It's a fluid situation, so as you plan your modeling, keep in mind that Q2 is relatively protected, and the effects are expected to be more pronounced in the second half.

Got it. And would you say second half, Q3, Q4 would be fairly balanced? Or would you expect a ramp from Q3 to Q4?

At this point, I believe it is fairly well balanced. However, this also depends on the actions we take to mitigate risks. I see this as a moment in time, as we are actively implementing measures. We will continue to take further actions that we expect will help alleviate the 120 basis points as we move into the second half.

I think it's also important to recognize that we're basing our assumptions on policies that seem to change frequently. We're currently considering the most stringent policy, which essentially involves no change and many tariffs resuming in June after a 90-day pause. However, if deals are reached or extensions are granted, and if negotiations with China progress, then the situation could change significantly.

Got it. So, this is essentially, call it, worst-case type of scenario based on what you know today?

You would like to think that, but I think given the way the President announces tariffs, it's hard to predict that he couldn't make them higher, but you got to think common-sense-wise that this is the worst case, right?

Got it. Okay. That's super helpful. For my follow-up, regarding XIIDRA, as you mentioned, prescription volume has been growing well, which is solid. You also noted that the headwinds for Q1 were in line with expectations. Has your outlook for the full year regarding these headwinds changed? How should we consider XIIDRA's growth throughout the year? Should we anticipate sales to increase sequentially due to volume growth? Thank you.

Yeah. So, you're exactly right. So, last year, we probably talked almost every quarter about anticipated gross-to-net headwinds in '25, and those are why we say they were expected. That being said, I think when you look at the strategy for XIIDRA in particular, it was really a two-part strategy. One was to gain access to grow volume. Seeing about 14% TRx volume on XIIDRA certainly confirms that, that part of the strategy is working. But now, we have to pull through the profitability through the P&L. And that is helped, in part, by seasonality, right? As you go through the year, the first quarter because of copays and deductibles is always the weakest. The fourth quarter is always the best in that regard. But we are also putting in other programs that go into effect in the next month or two to continue to focus on improving profitability while we continue to try to expand access.

Regarding your last question about our guidance for the full year, it remains unchanged. We clarified this when we communicated the bridge for the guidance; the only adjustment was related to the enVista recall, while everything else stays the same.

Yeah. I mean, keep in mind, first quarter for a product like XIIDRA will have the highest impact from gross-to-net because of the higher copay deductibles patients face in that quarter.

Thank you. The next question will be from Douglas Miehm from RBC Capital. Douglas, your line is live.

Yeah. Thank you, and good morning. Just on pharmaceutical tariffs, if they were introduced, what I'm curious about is where the intellectual property is held for the likes of MIEBO and XIIDRA and anything else of importance relative to where they're manufactured and sold and what the implications could be there?

To be fair, Sam can discuss the intellectual property, but the reality is that the tariffs have been based on the country where the products are manufactured. All of our pharmaceutical products, including MIEBO and XIIDRA, are made in the U.S., either at contract manufacturing organizations in the U.S. or at our large facility in Tampa. From a competitive standpoint, if we manage to address pharmaceutical tariffs, that would be advantageous for us. While U.S. Generics has lagged behind, all of our U.S. Generics are produced in our Tampa facility, which makes them more sensitive to tariffs due to the lower margins of our competitors. Therefore, we are in a strong position regarding potential tariffs on pharmaceuticals. As for the intellectual property, Sam can elaborate further.

Yeah. So, we have the majority of our IP sitting in Ireland. I think we've commented on that before, and that's part of our overall sort of planning in terms of where we hold IP and our tax structure.

Okay, perfect. And then, just my follow-up question. Brent, you mentioned a couple of opportunities. Could you expand on the glaucoma product and when we might expect to see it introduced? Thank you.

I'm going to let Yehia, as the expert, answer that.

We are currently in the process of preparing and optimizing the formulation for our glaucoma product. We acquired this asset in December of last year, which includes clinical data from a study involving about 60 patients. This study clearly demonstrated that the alpha-2 agonist is a new chemical entity capable of reducing intraocular pressure, and it showed positive results in two functional outcomes: low-luminance visual acuity and microperimetry, which aligns with our hypothesis about its mechanism of action. Right now, we are focused on optimizing the formulation and plan to initiate a confirmatory Phase 2 study around November. This study is expected to last about six months. The goal is to replicate the positive results we observed in the initial study. If successful, we can proceed directly to Phase 3. This would mark the first IOP-lowering agent associated with functional improvement in visual acuity and microperimetry.

Yeah, which is when I talk to glaucoma specialists, that is kind of the Holy Grail. And so, we're very excited about the product, but we need to do the work to confirm our findings and then move aggressively into Phase 3.

And we have to remember that the unmet medical need is huge because currently, all treatments are addressing just lowering intraocular pressure. However, patients are still losing vision despite being treated for IOP-lowering agents. So, this is a great opportunity to address this huge unmet medical need as well.

Thank you.

Thank you. The next question will be from Matt Miksic from Barclays. Matt, your line is live.

Hi, thanks so much for taking the questions, and congrats on sort of getting through and getting back to the market on the recalled products. On that front, off to a pretty good start, as you talked about, in the last year and into early this year. Anything else in Surgical, whether it's equipment or any of the strategies that folks have pursued around adjustable or certain next-gen lenses that you think would be important to sort of get a bigger footprint over time in that business? And I have one follow-up.

We are definitely focused on various areas. I mentioned our entry into the MIGS glaucoma space, and we are still expecting approval by the end of this year to launch at the beginning of 2026. We are continuing with the EDOF enVista Beyond studies, which are currently enrolling and progressing well. This will complete our premium IOL offerings. Additionally, we have the new Stellaris program, called seeNOVA, set for the end of 2026. We are very excited about that. There is a lot of ongoing work, including new lasers and femto technologies, among others. There is plenty to do. Yehia, do you have any additional comments?

No, actually, we continue to drive all the franchises from implantable to the equipment. As you mentioned from an equipment perspective, we have the seeNOVA. TENEO, we approved the myopia-only indication. We are actually just completing the study for hyperopia, and we should be also submitting an indication for hyperopia for TENEO. And then, we don't have to forget also that we have a complete range of intraocular lenses, which is the LuxSmart and LuxLife, which is under the cutting-edge technology. We are expecting the approval of the LuxSmart very soon actually in the European Union. And it's a slightly different platform than the enVista because they use a different optical design diffractive technology. So, we are really very excited about all these programs that are going and should be delivering for us on the short term as well.

That's great. Thank you. And just a follow-up, I think we've all liked to sort of believe the tariffs are going to have settled back down, but one of the things that was sort of hopeful during this year and fairly active was general activity on the M&A front. You've been active for the past 12, 24 months. We'd love to get a sense of your posture there. How the environment is affecting your activity level or thoughts on building out the portfolio strategically given the environment?

I agree with you. Many anticipated a boom in mergers and acquisitions, but that hasn’t happened. Similar to capital markets, M&A markets don’t respond well to uncertainty, and tariffs definitely cause some disruption, especially with their constantly changing nature. Additionally, we are noticing a decline in venture funding in this area. This could actually be beneficial for us, as many promising small startups are seeking capital, giving us opportunities to get early access to technologies at favorable prices that we wouldn’t have imagined a year or two ago. However, regarding M&A, we’re not planning any significant deals this year. Our focus remains on acquiring intellectual property and early-stage technologies that can enhance Yehia's already strong pipeline.

Very helpful. Thanks.

Thank you. And we have time for one last question today coming from Robbie Marcus from JPMorgan. Robbie, your line is live.

Great. Thank you for taking the questions. I'll squeeze the two into one here. I appreciate that we all hope tariffs go away and they're transitory, but you're the only company so far in MedTech that hasn't included in the guide. And as of now, they're real and policy. And by my math, some like 20% to 25% EPS headwind for the second half this year, 40% to 50% without mitigation headwind to EPS next year. So, I'm wondering if the tariffs hold, how do you feel about your ability to mitigate the tariffs, assuming that number you gave was a gross number? And are you at risk of tripping any of the debt covenants given the meaningful run-rate impact? Thanks a lot.

Let me begin with a philosophical perspective, and then Sam can add more details. Our approach is driven by two main reasons: first, we want to be transparent about the effects and the measures we're implementing, and second, since the situation appears to change frequently, we prefer not to revise our guidance every time there’s a new press conference at the White House. Therefore, quantifying the current tariffs' impact and our mitigation strategies clearly is the most straightforward way to manage the situation. If these tariffs remain in place and people believe that this current situation will become the norm, it could alter how we respond. While I don't believe that's the likely outcome, the situation is highly dynamic, and I think this is the best approach. Sam, would you like to discuss the other aspects?

No, that's exactly right. When you consider the very dynamic global environment, things can change, sometimes even daily. It's important to keep in mind the movement on tariffs and the policy setting, but I will leave the details of that to the policymakers. The other essential factor to consider is the elements under our control and the actions we can take. As I mentioned in my prepared remarks and in the earlier question, we have several levers we can execute. We are either already implementing them or in the process of doing so, which will help offset the impact of tariffs. There are additional strategies we can apply that will significantly reduce the exposure we discussed. I want to emphasize that there are two moving components: the tariffs themselves are unpredictable, and we are actively addressing multiple factors within our control. This is why we did not include it in our guidance, as it remains a variable situation. I wouldn’t attempt to normalize that number for 2026 or beyond at this point due to its fluid nature and ongoing adjustments. Regarding your last question about debt covenants, we are fully compliant and actively managing our situation with various factors in mind as we uphold our compliance.

Great. Thank you, Robbie. Operator, just some closing thoughts. Thanks to everyone who joined the call. We look forward to continuing to engage around our business. I'd like to end with just thanking our team around the world. Clearly, it was a solid quarter despite some bumps in the road. But I think when you see an issue like we saw with enVista, how a team responds is so critically important and the focus on patient safety first and the absolute mindset of finding the root cause and the amount of hard work our team demonstrated is a testament to their grittiness, to their commitment to patient safety and their commitment to our company and our customers. So, a lot of learnings there and really proud of how the team reacted to a difficult situation. We look forward to keeping you updated, and we'll talk to you soon. Thank you so much.

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