BLCO

Bausch + Lomb Corp. Q1 2026 Filing Summary

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended March 31, 2026. Bausch + Lomb Corporation is a global eye health company operating in three segments: Vision Care, Pharmaceuticals, and Surgical. The Company remains a subsidiary of Bausch Health Companies Inc. (BHC), which holds approximately 87% of outstanding shares. The filing details the Company's ongoing efforts to separate from BHC, a process contingent on achieving targeted debt leverage ratios and regulatory approvals.

Key Financial Metrics

Margins: Gross margin (Product Sales less COGS) improved to approximately 61.1% in Q1 2026 compared to 57.5% in Q1 2025. Operating margin turned positive at 2.7% compared to a negative 7.3% in the prior year.

Material Changes vs. Prior Period

• Revenue Growth: Total revenue increased 9% ($107 million) year-over-year, driven by favorable foreign currency impacts ($42 million), increased net realized pricing ($38 million), and volume growth ($29 million).
• Segment Performance:
  • Vision Care: Revenue up 8% to $711 million; profit up 15% to $202 million.
  • Pharmaceuticals: Revenue up 14% to $305 million; profit surged 500% to $66 million, aided by the exit of launch-phase costs for XIIDRA and MIEBO and the absence of prior-year inventory step-up amortization.
  • Surgical: Revenue up 7% to $228 million; profit improved from a loss of $7 million to $9 million.
• Expense Management: Selling, General, and Administrative (SG&A) expenses decreased 3% ($19 million) due to lower business transformation costs and reduced promotional spend. Research and Development (R&D) expenses increased 17% ($15 million) due to pipeline development.
• Debt Refinancing: In January 2026, the Company entered a refinancing transaction, issuing a new $2.8 billion term facility to refinance existing term loans, resulting in a $1 million loss on extinguishment of debt.

Outlook, Risks, and Contingencies

• Separation from BHC: The Company continues to evaluate the separation from BHC. Completion is subject to achieving targeted debt leverage ratios and shareholder approvals. No assurance is given that the separation will occur or on what timeline.
• Geopolitical and Trade Risks: Management highlights risks from the Russia-Ukraine conflict, Middle East tensions, and U.S. tariff policies (including the "One Big Beautiful Bill Act"). While current impacts are not material, potential tariffs on pharmaceuticals and supply chain disruptions remain significant risks.
• Legal Proceedings:
  • Antitrust: BHC and affiliates face multidistrict antitrust litigation regarding generic pricing; B+L is no longer a named defendant in the primary U.S. MDL but remains involved in related matters.
  • Product Liability: Ongoing litigation regarding "Shower to Shower" talc products, though B+L expects full indemnification from Johnson & Johnson.
  • Intellectual Property: Patent litigation regarding Lumify has largely been resolved via settlements or dismissals, with generic entry dates set for 2027.
• Liquidity: The Company maintains a $800 million revolving credit facility with $668 million available as of March 31, 2026. Management expects to remain in compliance with financial covenants for the next 12 months.

Investor Verification Checklist

• Verify the specific debt leverage ratios required to trigger the separation from BHC and the Company's current progress toward these targets.
• Monitor the status of the "One Big Beautiful Bill Act" and potential U.S. tariff implementations on pharmaceuticals to assess margin impact.
• Review the timeline for generic entry of key products (e.g., Lumify, PreserVision) and the Company's mitigation strategies.
• Assess the outcome of the Doctors Allergy Formula lawsuit trial, which began in April 2026, regarding potential milestone payment liabilities.
• Track the Company's ability to maintain covenant compliance given the high interest rate environment (weighted average debt rate ~7.43%).