Bausch + Lomb Corporation — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; compared with Q1 2023. Amounts are U.S. dollars. Unaudited financial statements are prepared under U.S. GAAP. The company develops and sells eye-health products across Vision Care, Pharmaceuticals and Surgical. Bausch Health Companies Inc. (BHC) owned approximately 88.3% of Bausch + Lomb’s shares as of April 24, 2024.
Financial performance and liquidity
| Metric | Q1 2024 | Q1 2023 / prior balance |
|---|---|---|
| Revenue | $1,099 million | $931 million |
| Operating income (loss) | $6 million | $(2) million |
| Net loss | $(163) million | $(88) million |
| Net loss attributable to Bausch + Lomb | $(167) million; $(0.48) per share | $(90) million; $(0.26) per share |
| Operating cash flow | $41 million | $(56) million |
| Cash and cash equivalents | $315 million | $331 million at Dec. 31, 2023 |
| Total debt, carrying value | $4,584 million | $4,562 million at Dec. 31, 2023 |
| Total current assets / current liabilities | $2,743 million / $1,617 million | $2,742 million / $1,579 million at Dec. 31, 2023 |
- Revenue and segment performance: Revenue rose 18% reported and 20% in constant currency. Vision Care revenue was $635 million (+8%), Pharmaceuticals $267 million (+66%) and Surgical $197 million (+8%). Segment profit was $178 million, $53 million and $11 million, respectively; corresponding segment margins were 28%, 20% and 6% (versus 26%, 29% and 6%).
- Margins and expenses: Cost of goods sold was 38.7% of product sales, versus 40.0% a year earlier (implied product gross margin approximately 61.3% versus 60.0%). SG&A rose 21% to $504 million, primarily from selling, advertising and promotion for XIIDRA and MIEBO launches. Amortization increased to $74 million from $57 million.
- Cash flow: Operating cash flow improved by $97 million year over year, but the quarter still used $57 million in investing activities, including $67 million of property, plant and equipment purchases. Cash and restricted cash together declined $9 million to $325 million.
- Debt and liquidity: Gross principal debt was $4,654 million; the weighted average stated interest rate was 8.62%. March 31 debt included $300 million drawn on the revolving facility; $174 million remained available after $26 million of letters of credit, subject to conditions. Term facility rates were 8.68% and 9.33%; the secured notes bear 8.375%. The company reported covenant compliance and expects to meet debt service and remain compliant over the next 12 months. Principal maturities are concentrated in 2027 ($2,692 million) and 2028 ($1,879 million).
Material changes versus Q1 2023
- Revenue increased $168 million. Management attributed the increase to $88 million of incremental acquisition sales, $70 million of higher volumes and $32 million of higher net realized pricing, partly offset by $20 million of unfavorable foreign exchange and $2 million from divestitures and discontinuations.
- Pharmaceuticals’ growth primarily reflected XIIDRA acquisition sales of $79 million, MIEBO launch and increased generic-product demand. Vision Care benefited from pricing, volume and Blink; Surgical growth came from consumables, implantables and systems.
- Reported net loss attributable to Bausch + Lomb increased $77 million. Interest expense nearly doubled, to $99 million from $50 million, mainly reflecting acquisition-related borrowing and revolving-facility interest. Income tax expense increased to $73 million from $33 million despite a pretax loss of $90 million; management cited jurisdictional earnings mix and discrete tax effects.
- Gross-to-net sales provisions increased to 36.7% of gross product sales from 27.4%, principally because of higher rebates, including those associated with XIIDRA and MIEBO. The rebate provision for the quarter was $333 million versus $133 million.
Outlook, risks and unusual items
- Outlook: The filing does not provide clear full-year revenue or earnings guidance. Management expects cash and cash equivalents, customer collections and available financing to meet liquidity needs for the next 12 months, while noting there is no assurance. For April–December 2024, it expects approximately $300 million of interest payments, $23 million of mandatory debt amortization and $185 million of capital expenditures.
- Products and investment: Management describes a pipeline of more than 60 projects and anticipates launches including Blink NutriTears in Q3 2024, enVista Envy in the U.S. and Canada in 2024, and additional SiHy Daily launches. XIIDRA and MIEBO commercialization, acceptance and expected acquisition benefits remain execution risks.
- Separation and control: The proposed full separation from BHC remains conditional on targeted debt leverage ratios, shareholder and other approvals, and additional factors. Timing and completion are uncertain; BHC remains the controlling shareholder.
- Operating and market risks: Risks include high floating-rate debt costs, inflation and supply costs, pricing and reimbursement pressure, generic competition, supply disruptions, regulatory oversight, foreign exchange and geopolitical conditions. Russia, Ukraine and Belarus together represented approximately 3% of revenue; Israel and Iran represented less than 1%.
- Legal and tax matters: The company recorded $4 million of accrued current loss contingencies; it cannot estimate outcomes or potential losses for other proceedings. Matters include generic-drug pricing litigation, product-liability claims and intellectual-property disputes. Certain Shower to Shower claims are subject to Johnson & Johnson indemnification. A German tax audit remains contested; the company recorded no provision and believes any liability would be indemnified by BHC. On April 29, 2024, the Ninth Circuit affirmed dismissal of the California Proposition 65-related case described in the filing.
- Other items: Q1 restructuring, integration and separation costs were $11 million. No goodwill or other asset impairment was recorded in the quarter. On April 19, 2024, the company agreed that Canadian-dollar loans under its credit agreement would cease to be available from June 28, 2024, pending a benchmark-rate amendment.
Most important facts for investors to verify
- Whether acquisition-led growth, especially XIIDRA and MIEBO, translates into durable sales and segment profitability after launch-related promotional spending.
- Whether elevated rebates and other gross-to-net deductions stabilize, and how they affect reported net revenue and receivables.
- Cash generation, inventory and receivables trends, and the company’s ability to fund planned capital spending and substantial interest costs.
- Debt covenant headroom, refinancing options and preparations for the 2027–2028 maturity concentration; verify available revolver capacity and borrowing costs.
- Progress, conditions and timing of the proposed BHC separation, including leverage targets and required approvals.
- Developments in generic competition and patent litigation, material legal contingencies, and the status of tax audits and related indemnification arrangements.