管理層發言
Greetings, and welcome to the Bausch Health Second Quarter 2026 Earnings Conference Call. As a reminder, this conference is being recorded. I'll now turn the conference over to Garen Sarafian, Vice President, Investor Relations. You may begin.
Good afternoon, and welcome to Bausch Health's Second Quarter 2026 Earnings Conference Call. My name is Garen Sarafian, Vice President of Investor Relations. Participating in today's call are Thomas Appio, Chief Executive Officer; J.J. Charhon, Chief Financial Officer; and Jonathan Sadeh, Chief Medical Officer and Head of Research and Development. Before we begin, I would like to remind you that today's presentation contains forward-looking information. Please take a moment to review the forward-looking statements disclaimer at the beginning of the slides accompanying this presentation, as it contains important information. Actual results may differ materially from those expressed or implied in these forward-looking statements; you should not place undue reliance on them. Please also refer to our SEC filings and our filings with the Canadian Securities Administrators for discussion of certain risk factors that could cause actual results to differ materially from expectations. We use non-GAAP financial measures to help investors better understand our operating performance. These non-GAAP measures may not be comparable to similarly titled measures used by other companies and should be considered in addition to, and not as a substitute for, measures calculated in accordance with GAAP. Reconciliations to our non-GAAP measures are included in the appendix of the slides accompanying this presentation, which are also available on Bausch Health's Investor Relations website. Finally, the financial guidance in this presentation is effective as of today only. We do not undertake any obligation to update guidance. Our discussion today, Wednesday, July 29, will focus on Bausch Health, excluding Bausch + Lomb. However, we will briefly comment on Bausch + Lomb's results announced this morning. We will refer to year-over-year comparisons with the same period last year unless otherwise noted. With that, I will turn the call over to our CEO, Thomas Appio. Tom?
Thank you, Garen, and thank you to everyone joining us today. Bausch Health had an exceptional quarter in Q2, marking the 13th consecutive quarter of top-line and bottom-line growth, with all our segments contributing to segment profit growth. Performance was outstanding from revenue to adjusted EBITDA to cash flow generation. More importantly, we achieved several milestones in Q2. First, we grew revenue 16% and adjusted EBITDA 28%, our highest growth for both metrics in the last three years. Second, we generated a historical high of 59% adjusted EBITDA margin, up 530 basis points year-over-year. Third, we generated our strongest quarter of adjusted cash flow from operations since the fourth quarter of 2024, allowing us to lower our net debt to $13.7 billion since our debt refinancing in 2022. While there were many business accomplishments in the quarter, let me highlight a few areas that stand out the most. Our Salix segment grew 21% in the quarter, fueled by net realized pricing and continued Xifaxan demand in the channels we serve today. Within International, EMEA continued its streak of organic revenue growth, now achieving 14 consecutive quarters. And in LATAM, we also delivered strong underlying performance supported by continued expansion of our cardiometabolic franchise. Finally, Solta had another outstanding quarter with revenue up 38% and segment profit up 69%, illustrating for the first time the expected margin accretion associated with the integration of our full-service distributor in China. These outstanding results underscore the strength of the global organization. I want to personally thank and congratulate our teams worldwide for their dedication, collaboration, and exceptional execution throughout the second quarter. The achievement that stands out the most is the consistency of our performance over the past three years. Thirteen consecutive quarters of revenue and adjusted EBITDA growth reflect the strength of our strategy, disciplined execution, and the consistency of our application of management principles that have become embedded throughout our organization. It starts with revenue and the intention of capitalizing on every single operating lever to drive profitable growth. Whether it's maximizing Salix performance through our customer insights engine, improving sales force effectiveness in Solta, launching new products in Mexico or Poland, or driving performance organically. It is all grounded in the belief that we have market-leading commercial capabilities across our segments. Without sustainable profitable growth, there is no lasting value creation. The best illustration of that consistent and relentless drive is the evolution of our last 12 months, or LTM, revenue, which has grown every quarter since year-end 2023, leading to 20% revenue growth. Second, the focus on growth does not minimize the need to manage resources effectively and drive operating leverage. While there are at times purposeful strategic investments, there is a continuous effort to tighten our G&A infrastructure as much as possible through productivity initiatives. The result is an adjusted EBITDA margin that has steadily grown over 400 basis points when compared to 2023. Finally, these achievements have been realized without any major investments or acquisitions. This disciplined approach has enabled cash flow generation to grow disproportionately relative to the business while supporting a consistent reduction in net debt every quarter since Q4 of 2023. The consistent application of these management principles across our business is fundamental to our success. Our Q2 performance is a strong testament to the sustainable value we have strived to generate for our stakeholders, patients, customers, and employees. With that, I will turn the call over to J.J. for further details on our financial results.
Thank you, Tom. Let's start with our consolidated non-GAAP financial results for the second quarter, which you will find starting on page 12. Revenue was $2.852 billion, a 13% increase on a reported basis and 11% on an organic basis compared to the same period a year ago. Adjusted gross margin was 72.9%, which was 230 basis points higher year-over-year. Adjusted EBITDA was $1.075 billion, an increase of $233 million, which was a 28% increase year-over-year. Finally, adjusted cash flow from operations was $637 million, an increase of $195 million, or a 44% increase year-over-year. Moving to the performance of Bausch Health, excluding Bausch + Lomb, for the second quarter starting on page 14. As Tom indicated earlier, we had an outstanding second quarter with several milestone achievements across the board. The highlights for the quarter were as follows. Revenue was $1.458 billion, a 16% increase when compared to the second quarter of 2025. Adjusted EBITDA was $865 million, up 28% year-over-year, reflecting the full impact of all the growth and productivity initiatives we have executed since the beginning of the year. Finally, adjusted cash flow from operations was $471 million, an increase of $116 million year-over-year, reflecting strong business performance across the portfolio together with favorable working capital change. The largest driver of growth remains Salix, which we'll review shortly, but it is important to note that our portfolio, excluding the Salix segment, grew revenue and segment profit respectively 12% and 19% year-over-year. We continue to advocate for the strength of our portfolio outside of Xifaxan, and our Q2 results were a good illustration of that. Moving now to our second quarter performance by segment, starting with Salix on page 15. Salix had another quarter of double-digit revenue and segment profit growth in 2026. Revenues were $758 million, an increase of $131 million, or 21% up when compared to the same period last year. Xifaxan remained the key driver of Salix's performance in the quarter, with revenue increasing 26% year-over-year. Xifaxan volume continues to be strong in the distribution channels we serve. Total retail scripts excluding Medicaid were up 4%, while expanded units excluding Medicaid were down 2% year-over-year, reflecting the reduction of volume associated with 340B institutions. Separately, we benefited from favorable net pricing as we continue to optimize the volume-price trade-off following our exit of Medicaid and the 340B program. Now moving to the International segments. Revenues in the second quarter were $305 million, which was up 10% on a reported basis and up 5% on an organic basis compared to the second quarter of last year. Performance by region was mixed. On an organic basis, LATAM was up 16% and EMEA was up 9%, while Canada declined 9%, reflecting the absence of prior one-time net pricing benefits. More specifically, here are the highlights of each geography. EMEA delivered a remarkable 14 consecutive quarters of organic revenue growth. In LATAM, revenue growth was supported by both volume expansion and favorable net pricing across our portfolio, led by Bedoyecta and our newly launched cardiometabolic franchise. In Canada, excluding the $6 million one-time pricing benefit recorded in Q2 of last year, our promoted brand portfolio grew 14% led by Ryaltris, which was up 64% year-over-year. Now, moving to page 17 for a review of our Solta Medical segment. Revenues were $176 million, an increase year-over-year of 38% on a reported basis and 12% on an organic basis. Separately, segment profit grew 69% on a reported basis. Solta delivered once again strong revenue growth in the quarter led by performance in China, where revenue increased 136% year-over-year. Growth was further supported by double-digit organic growth, reflecting the successful integration of our full-service distributor, Shibo, in China and continued momentum across other key APAC markets such as South Korea and Taiwan. More specifically, South Korea, our second largest revenue contributor, grew 8% in the second quarter. While medical aesthetics tourism remains a positive driver, the market has stabilized when compared to the growth experienced over the prior two years. Taiwan, our third largest market in APAC, delivered strong growth of 42%, reflecting robust local dynamics. The integration of Shibo has been executed exceptionally well and has already created significant value for Bausch Health in just six months, a testament to the quality of the asset, the strength of our teams, and our disciplined approach to integration. Let me be more specific. As Tom indicated, Solta recorded a segment profit of $91 million in the second quarter, which was the first true indicator of the value accretion associated with the integration of our full-service distributor in China. Even if we adjust for revenue seasonality and expense phasing, management believes that the full-year run rate for Solta segment profit now stands at approximately $330 million, which is approximately a $100 million increase when compared to 2025. If we apply a conservative 10x earnings multiple, it does not seem unreasonable to assume that everything being equal, this should translate into an increase in our Bausch Health enterprise value of roughly $1 billion or $2 to $3 per share. We do not believe that BHC's current share price fully reflects that. Turning now to our Diversified segment, which you will find on page 18. Revenues were $219 million, flat on a reported basis compared to the same period a year ago. Growth in neuroscience driven by favorable net pricing was offset by lower revenue in dermatology, generics, and dentistry. Finally, Bausch + Lomb's revenue was $1.394 billion, up 9% on a reported basis and 8% on an organic basis compared to the same period last year. Now, turning our focus to our balance sheet, adjusted operating cash flow and adjusted free cash flow were outstanding in the quarter and stood at $471 million and $465 million, respectively. Our strong operating performance was the primary driver, together with a favorable change in working capital. Even more impressive was our ability to reduce our net debt by $434 million in the second quarter, thanks to low outflow associated with legacy litigation and restructuring payments. As a reminder, we have fully settled our opt-out litigations in the U.S., and the last payment was executed in the first quarter of 2026. In summary, and at the half-year mark, we are well ahead of expectations with revenue and adjusted EBITDA growing respectively 15% and 23% when compared to the first six months of 2025. This allows us to raise our full-year guidance for Bausch Health, excluding Bausch + Lomb, across all metrics. More specifically, we are increasing the midpoint of our full-year guidance by $100 million for revenue, $150 million for adjusted EBITDA, and $200 million for adjusted cash flow from operations. As a result, the new guidance for the full year now stands as follows. Revenue is expected to be between $5.35 billion and $5.50 billion. The midpoint of that range translates into a 5% increase year-over-year. Adjusted EBITDA is now expected to be between $3.025 billion and $3.100 billion. The midpoint of that range represents a 10% increase versus 2025. Finally, we now anticipate adjusted cash flow from operations to be between $1.4 billion and $1.475 billion. The midpoint of that range would translate to a 21% increase year-over-year. Before I hand it back to Tom, let me conclude with some additional color on quarterly phasing as well as the implied adjusted EBITDA guidance for 2027. Let's start with the difference in anticipated growth rates between the first and the second half. Even with the increase in the full-year guidance, our growth rate year-over-year for revenue and adjusted EBITDA will be lower in the second half of the year when compared to the first half, primarily for the following three reasons. First, the change of our gross-to-net accrual associated with the channel inventory is anticipated to be a headwind of roughly $150 million. As a reminder, we recorded approximately a $60 million benefit at the end of Q3 last year to reflect the exit of the Medicaid and 340B channels. Conversely, we anticipate recording approximately a $90 million expense in the fourth quarter of this year in anticipation of the increase in rebates to CMS, which is due to start on January 1, 2027. Second, Aplenzin sold through our neuroscience business within our Diversified segment recently lost exclusivity at the end of June. We expect to have generic competition starting in Q3, which should translate into a $50 million headwind for the second half of 2026. And third, while revenue for the Medicaid channel and patients originally covered by the 340B institutions has been more resilient than originally anticipated, we still expect gradual erosion over the course of the following quarters. This is expected to represent approximately another $75 million headwind in the second half versus the revenue recorded in the first half. In conclusion, 2026 is shaping to be a much stronger year than originally anticipated. Given that most of the drivers of overperformance in the first half could be qualified as transitional, we are not yet ready to increase the implicit adjusted EBITDA guidance for 2027, which still stands at $2.7 billion. Please note that the 2027 guidance still assumes that we will maintain market exclusivity for Xifaxan until January 1, 2028. With all of that said, I will now hand it back to Tom.
Thank you, J.J. As J.J. outlined, we delivered a very strong first half, growing revenue and adjusted EBITDA respectively 15% and 23%. Moving forward, our business priorities remain unchanged. First, drive peak performance across our portfolio, including the disciplined optimization of Xifaxan revenue and margin profile for the duration of its exclusivity period. Second, enhance the value of our portfolio through consistent organic growth and operational excellence initiatives while strengthening our competitive position and earning power for 2028 and beyond. Third, build a sustainable pipeline of future growth opportunities through selective business development and investments that maximize the value of our commercial reach and R&D capabilities. And finally, an unwavering focus on maximizing the value of Bausch + Lomb for Bausch Health shareholders. As previously discussed, business development remains one of our highest strategic priorities and represents a compelling opportunity to strengthen our pipeline, accelerate innovation, and build the next generation of growth drivers for Bausch Health. While opportunities exist across all of our businesses, U.S. Pharma represents one of the most attractive platforms for future value creation. Supported by a best-in-class commercial organization, an AI-powered customer insights engine that provides unparalleled visibility into market dynamics and prescribing patterns, and deep scientific expertise, we are exceptionally well-positioned to maximize the value of both our existing portfolio and future business development investments. Given the strength of our market-leading commercial infrastructure, we remain open to pursuing opportunities in new therapeutic areas where there are meaningful unmet patient needs and where we can leverage our capabilities to accelerate growth, enhance patient outcomes, and create long-term shareholder value. In closing, our first half performance reinforces our firm belief that 2026 is shaping up to be another exceptional year for Bausch Health. The substantial increase in our guidance for revenue, adjusted EBITDA, and cash flow generation is a clear reflection of the strong momentum across our businesses and the disciplined execution of our strategy. While uncertainty remains in the broader environment, our focus is unwavering to continue driving operational excellence, strengthening our portfolio, and pursuing every opportunity to create long-term value for our stakeholders. I would like to again extend my sincere thanks to our colleagues around the world. Their passion, dedication, resilience, and commitment to excellence are the foundation of our success and the reasons we continue to outperform expectations. We enter the second half of the year with considerable momentum, a clear strategic direction, and optimism in the opportunities ahead. We are committed to continuing to unlock the full potential of Bausch Health for the benefit of all stakeholders. With that, I will turn the call over to the operator so we can open the line for Q&A.
分析師問答
Our first question comes from the line of Michael Freeman with Raymond James.
My first question, you talked about business development as a priority. I wonder if you could maybe give us a few ideas of areas of interest where you think Bausch could really add value to assets. And I wonder if you could describe some financial guidelines around—or guardrails that you might set around business development. For instance, would you be willing to increase leverage to pursue this? Thanks.
Hi, Michael, thanks for the question. When we look at business development, I think the first thing is we could be a great partner for companies out there looking to do business with us. If you look at the infrastructure we have and the great commercial engine we have, we think we have a competitive advantage there over many companies. In terms of therapeutic areas, of course GI, specifically liver, our neuroscience business, our dermatology business, and we also have a pain team. Adjacency categories to where we compete are very interesting to us. As we did with the acquisition of DURECT, those kinds of opportunities can be compelling. We keep an open mind to assets that can drive future growth. There are adjacent categories and other categories where we believe we can add value, given our commercial infrastructure and our AI engine that provides visibility into market dynamics and prescribing patterns. In terms of capital allocation, this is always a discussion that J.J. and I have, looking at our assets today and where we can allocate capital. It also depends on the asset and the cost. I'll hand it to J.J. to make a few other comments on capital allocation.
Yes, absolutely. Hi, Michael. The strategy that we've set out for capital allocation remains the same. The first priority is to fix the capital structure and reduce our net debt leverage. Second is to reinvest in the business. And then if there's any return to shareholders at some point in time, we may consider it, but it's not a topic for discussion at this point in time. That leads us to different types of assets we could pursue. As we've communicated in the past, there are really two buckets. The first would be relatively small investments that could be at the development stage—DURECT is a good example of that, which we did in Q3 of last year. We can digest the upfront cost and also fund further development until the product comes to market. DURECT fits our strategy and our scientific and commercial capabilities. On the other end of the spectrum, we could pursue a larger asset, either a single asset or a company, but the payback would have to be relatively quick. It would have to be close to commercialization or have good line of sight into significant synergies and the ability to turn around the P&L of the acquired asset because it cannot stand in the way of our primary strategy to fix the capital structure.
I think also, Michael, when we look at business development, the greatest opportunities are in the U.S. Pharma platform in terms of those therapeutic areas. On the international side, we continue to do tuck-in type acquisitions in our branded generics businesses in EMEA and Latin America. When we look at North America, we're also focused on deals that allow us to bring new products into Canada. That's an area of focus because our promoted brands in Canada are doing well; it's the LOEs that have been a drag. So North American deals that cover both the U.S. and Canada are attractive.
Okay, all right, thank you for that fulsome answer. Just one follow-up. I wonder if you could describe what might be the next observable milestone in monetizing the Bausch + Lomb asset?
I will start with the high-level strategy. We completed a large refinancing in 2025, and the objective was to extend the runway and increase flexibility around the timing of the process to realize the value of our B+L asset for BHC shareholders. That continues to be the mindset. There are a number of considerations to evaluate how to translate the value of B+L into BHC share price, and we're looking at all avenues to do so. The company B+L communicated financial targets under its Vision 2027 plan, with a significant increase in EBITDA and revenue by 2028. That's an important consideration as we evaluate our options.
Our next question comes from Michael DiFiore with Evercore ISI.
This is Mike DiFiore on for Umer. Congrats on a great quarter. Two for me. Excluding B+L, what EBITDA do you expect to settle at once Xifaxan is fully generic? And my other question is, if payers have referenced IRA pricing in your 2027 commercial contracting, has this happened? And what leakage are you assuming into the commercial book? Thank you.
Michael, I will take those questions. We haven't provided guidance for 2028. One of the variables is the pending IP litigation associated with Xifaxan. Once that is settled, we should be in a better position to guide on what 2028 looks like. We have provided guidance for 2027 that currently stands at $2.7 billion. That includes the impact of the incremental CMS rebate that we are contractually obligated to provide starting January 1, 2027. So, if you look at our guidance for 2026 and 2027, everything being equal and factoring some growth in the rest of the portfolio, you should be able to deduce the magnitude of the additional rebate associated with CMS.
On the second part of your question, I don't believe payers have referenced the Part D pricing in 2027 contracts, but we will need to monitor how that evolves.
Our next question comes from the line of Douglas Miehm with RBC Capital Markets. Please proceed.
I just wanted to go back to Solta. Very strong numbers in the quarter and J.J., I think you talked about baseline business now at $330 million, but would you be able to maybe provide a bit more detail on that $330 million? And then as we look into next year, is there the opportunity for margin growth? Or if we use what we're seeing for this year and then look at revenue growth, that would be a good yardstick in terms of how we should think about the opportunity available to Solta as we look to next year?
Yes, Doug, I'll give the question to J.J. I'll just make an opening comment. When you look at the performance, we had an outstanding quarter in China. Our business in Asia Pacific continues to perform well in China and Korea. Taiwan had a very good quarter as well, returning to growth. We're pleased with the results and continue to drive the business forward. In the U.S., we are looking to do more direct-to-consumer activity and invest in field force effectiveness. The Solta franchise is a great platform, and the acquisition of Shibo in China has powered our growth on the top line and the bottom line. I'll hand it to J.J. for more color on the $330 million.
First, if you look at the halfway mark, you're not far away from half of the $330 million, which is $165 million. One thing to take into consideration is that in Q1 we still had the residual impact of the inventory step-up from the Shibo acquisition when we fully integrated the distributor, so Q1 margin was a bit depressed. This is why Q2 is a good starting point for thinking about the full-year run rate. You should also factor in the phasing of expenses, particularly G&A and commercial, which were a bit light in Q2. That's why the $330 million doesn't reconcile to $91 million times four, but Q2 is a good baseline. The $330 million includes the benefits from vertical integration, the price increases, and the continued growth in China and South Korea, which drives the run rate to the $330 million I referenced.
Okay, that's very helpful.
A couple of additional points for next year. From a gross margin perspective, gross margin is fairly stable. The integration of our full-service distributor in China hasn't materially changed the gross margin profile for the business. When you grow the top line and manage expenses tightly, you get operating leverage. It's already a fairly high-margin business, so we want to make sure we fund innovation and commercial investment to continue supporting growth across geographies. We've communicated that we expect medium-term double-digit top-line growth for Solta. The key will be rebalancing contribution from growth in Asian markets beyond China and Korea, and also expanding the U.S. contribution, which is very important for us.
When we focus on China, now that the integration has taken place, we continue to look for areas to invest and build out more of our field force capabilities. In the U.S., we're investing behind the field force and direct-to-consumer advertising to drive revenue growth and ensure profitability.
Our last question comes from the line of Michael Nedelcovych with TD Cowen.
I have one. We recently got some news on the tariff front from the current administration indicating that tariffs on generics in the United States may be forthcoming. I know that generics strictly speaking is kind of a small portion of your business, but I'm just curious how you estimate the impact of that announcement one way or the other, given that generics are also an important part of the ecosystem.
As you know, those tariffs are not going to be effective until the middle of 2028. We will need to understand the size of our generic business at that time to better assess the impact. To your point, it should be fairly small relative to the other components of our business, and we should be in a better position to assess it as we approach that time, assuming those tariffs remain in place.
Thank you. There are no further questions. I'll pass the call back over to Tom for any closing remarks.
Thank you, Operator. I want to just say thank you for all the questions today and the continued interest in Bausch Health. We're exiting this quarter with strong momentum. We have a favorable outlook, we raised guidance, and we have confidence in the ability to execute against our strategic priorities. Across the organization, our teams are continuing to operate with focus, discipline, and accountability, positioning us to capitalize on the opportunities ahead. While there is always more to achieve, we remain committed to driving profitable growth and unlocking the full potential of our company for all stakeholders. Thank you for your continued engagement and support. We look forward to updating you on the progress in the quarters ahead. Thank you and have a pleasant evening.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.