Company Participants

George Gadkowski - Vice President, Investor Relations
Brent Saunders - Chairman and Chief Executive Officer
Sam Eldessouky - Chief Financial Officer

Conference Call Participants

Xuyang Li - Jefferies
Patrick Wood - Morgan Stanley
Craig Bijou - Bank of America
Robbie Marcus - JPMorgan
Douglas Miehm - RBC Capital Markets
Matt Miksic - Barclays

Operator

Good morning, and welcome to Bausch + Lomb’s Second Quarter 2024 Earnings Call. [Operator Instructions] 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.

George Gadkowski

Thank you. Good morning, everyone, and welcome to our second quarter 2024 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 to broadly disseminated public disclosure.

With that, it’s my pleasure to turn the call over to Brent.

Brent Saunders

Thank you, George, and thank you, everyone, for joining today’s call. I hope you’re enjoying the summer. I’m going to provide a high-level overview of another successful quarter of execution. Sam will do a deeper dive on our performance, and I’ll close with my favorite part, highlighting the innovations that will help separate us from the pack and keep us on a path to sustainable long-term profitable growth.

There is no change to our three areas of focus, and there won’t be. This is our formula for success. Our constant currency revenue growth progression over the past year has been remarkable, 8% in Q3 2023, 19% in Q4 2023, 20% in Q1 2024 and 20% in the second quarter. What makes it more impressive is our growth continues to come from all businesses and geographies. We are not a one-trick pony to hold into a certain product or category, and we continue to refine what we’re selling and where.

SKU rationalization is an ongoing process that will pay dividends slowly but surely. Something that’s undoubtedly helping fuel that consistent revenue growth is our relentless focus on selling and operational excellence. We’re talking about building those capabilities but we have now hit a point where it feels like a cultural norm within our walls. Colleagues around the world know that our success is inextricably linked to how we make or source our products and get them in the hands of eye care professionals, patients and consumers. They also know that selling and operational excellence is a longing and if you’re not continuously improving, you’re falling behind.

Look no further than the second quarter milestones as proof of our ongoing commitment to innovation. In May, Health Canada approved the enVista NV intraocular lens, the first premium IOL on the enVista platform and another meaningful step towards being a significant player in the high-margin premium IOL space. In June, we launched Blink NutriTears, a clinically proven nutritional supplement for dry eyes. And just 1 week later, we announced the U.S. introduction of Bausch + Lomb INFUSE for astigmatism daily disposable contact lenses. Three innovative products across 3 distinct businesses announced over 12 days. When it comes to being an innovation company, we’re walking the walk and doing so with urgency and purpose.

The roadmap slide, a main stand in our earnings presentations has been given a facelift to coincide with our move into Phase 2, Innovate & Execute. That’s not to say parts of Phase 1 won’t continue but the majority of our focus is on the 5 elements of Phase 2. These include new product launches with a flow of activity expected in the second half of the year and into 2025. Sales execution is another critical component, which we continue to heavily invest in. A prime example is Glimpse, a new proprietary digital sales platform that uses AI and machine learning to provide tailor-made guidance for engaging eye care professionals. We recently trained the U.S. Pharma sales force on Glimpse to ensure they’re bringing the right message to the right doctor at the right time and early results are encouraging.

Investing in innovation means investing in our people. I mentioned a steady stream of impressive new hires last quarter, which has accelerated. We recently fielded our first colleague engagement survey since 2022, and the results buoyed our belief that we’re on the right path. Buy-in from leadership teams is one thing. Buy-in from 13,000 people around the world is what drives results. The last item of my slide is least flashy, driving operational efficiencies and margin expansion. One leads to another, and we’re leaving no stone unturned as we streamline operations to improve the bottom line.

A prime example is our Tampa manufacturing site, successfully rolling out a secondary packaging process for MIEBO that can be completed in a few shifts as opposed to roughly 6 days at our contract manufacturing. At the risk of stealing Sam’s thunder, I’ll cover a few of the financial highlights. It’s a good problem to have when you feel like you’re repeating yourself each quarter. Once again, impressive year-over-year constant currency revenue growth was driven by our holistic strength. Look no further than our business segment performance with 9% constant currency revenue growth for Surgical, 11% for Vision Care and 61% for pharmaceuticals. Absent XIIDRA revenue, Pharmaceuticals still exceeded expectations with 16% organic revenue growth. Key franchises across our business continue to drive that growth. Three takeaways from the list of products shown. It’s a global mix, prescription, OTC, contact lens and surgical products are represented and we’ve made clear our intention to invest in each of these products given opportunities for future growth.

I’ll now turn it over to Sam, who will provide additional context.

Sam Eldessouky

Thank you, Brent, and good morning, everyone. Before we begin, please note that all 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 7. We are pleased to report another quarter of solid revenue growth across all of our segments, geographies and key product franchises. We are seeing the broad-based growth momentum in our business continue. Total company revenue of $1.216 billion for the quarter reflects growth of 20%. As Brent mentioned, we’re executing on our strategy and our focus remains on driving selling and operational excellence and prioritizing innovation. The steady stream of product launches continues to drive growth, and we’re excited about the opportunity ahead of us in the second half of 2024. For the second quarter, currency was a headwind of $27 million to revenue.

Now let’s discuss the results in each of our segments. Vision Care’s second quarter revenue of $697 million increased by 11%, driven by solid growth in both the consumer and contact lens businesses. The consumer business again demonstrated strong performance with growth of 9% in Q2. We continued to see growth across our key consumer franchises. In the quarter, Eye Vitamins were up 8%, Lumify grew by 12%, and the consumer dry eye delivered $94 million in revenue and organic growth of 10%. Contact lens revenue growth was 14% with strong performance across key brands and geographies. In the quarter, we saw solid growth in both the daily and FRP portfolios with our Daily SiHy the way. We are continuing to see strong momentum in the Daily SiHy with 72% growth in the quarter. The Daily SiHy launch is off to a strong start. And as Brent mentioned, we have recently announced the launch of the Daily SiHy toric to expand the product family.

Contact lens revenue growth was broad-based across markets with the U.S. up 18% in the quarter and international up 12%. We have resumed a solid growth trajectory in the U.S. with Lynchburg system upgrade now behind us. Outside the U.S., we saw solid performance across all the regions, which contributed to the strong international revenue growth in Q2. We’re also seeing early positive results from our direct-to-consumer initiative in China, which we recently launched.

Moving now to the Surgical segment. Second quarter revenue was $209 million, an increase of 9%. In Q2, we saw a broad-based performance with growth in each of our 3 surgical product categories. Consumables, our largest product category grew in the quarter by 7%. Implantables grew 9% in the quarter, with our standard IOLs up 3% at our premium IOLs up 36%. Our enVista IOL platform has continued to perform well with enVista Aspire lines making a strong early market entry. We expect the cadence of IOLs launches to continue with the recent approval of the enVista Envy trifocal lens in Canada.

Revenue from equipment was up 15%, mainly driven by Stellaris system sales. Our strategy in the surgical business remains the same. We are delivering growth by focusing on a consistent supply of products to our customers despite absorbing some margin pressure in the near term due to the spot base, which we previously discussed. We’re also continuing to launch premium products with higher margins. We expect a steady stream of these launches over the next number of years to continue to drive revenue growth and sustainable margin expansion.

Lastly, revenue in the Pharma segment was $310 million for the quarter, which represents growth of 61% or 16% organically. MIEBO delivered $42 million in revenue in the quarter. We are pleased with the MIEBO TRx growth, and we continue to work with IQVIA to address some of the variability in the TRx data. MIEBO continued its exceptional launch performance and we remain committed to making investments to drive the strong growth. We continue to build market access with commercial coverage at about 50% and Medicare at approximately 30%. XIIDRA delivered $89 million of revenue in the second quarter. We continue to make steady progress in executing our strategy with the investments in direct-to-consumer marketing campaigns and the field force realignment earlier in the year. We have seen improving XIIDRA TRx trends following the sales force realignment and the Change Healthcare cyber attack in the first quarter. XIIDRA and MIEBO together position us as a leader in dry eye disease. As Brent will highlight, our strategy includes key building blocks to expand our leading position and drive long-term growth. Beyond MIEBO and XIIDRA, we also saw strong growth across other parts of the pharma business. Both U.S. generics and international pharma grew by 11%. As expected, Prolensa continued to decline due to a generic entry in Q1 of this year.

Now let me walk through some of the key non-GAAP line items on Slide 8. Adjusted gross margin for the second quarter was 61.9%, which was up 220 basis points compared to Q2 ‘23. The increase in adjusted gross margin was mainly driven by product mix as we continue our strategy to transition to higher margin products. We also saw a strong production output in our contact lens business, contributing to margin efficiencies. This was balanced by pressure driven by the higher inventory costs in Surgical.

In the second quarter, we invested $84 million in adjusted R&D or approximately 7% of revenue. Second quarter adjusted EBITDA was $209 million, which represents 20% growth versus Q2 ‘23. Net interest expense for the quarter was $99 million and adjusted cash flow from operations was $24 million. Adjusted EPS for the quarter was $0.13. And finally, CapEx was $72 million.

Turning now to our 2024 guidance on Slide 11. We are raising our full year revenue and adjusted EBITDA guidance to reflect the strong and broad-based momentum we’re seeing in the business. We are raising our full year revenue guidance from a range of $4.6 billion to $4.7 billion to a range of $4.7 billion to $4.8 billion. The updated revenue guidance reflects a raise of full year constant currency growth to a range of approximately 16% to 18%. In our dry eye portfolio, we are raising our guidance for full year MIEBO revenue from $95 million to a range of $150 million to $160 million, which reflects a strong launch performance. We are updating our previous guidance for XIIDRA revenue from approximately $400 million to $355 million to $365 million. Our revised XIIDRA guidance reflects the field force realignment and the impact of the Change Healthcare cyberattack earlier in the year. More recently, we have seen an improvement in XIIDRA TRx trends. We continue to see the growth prospects and the synergistic benefits of having MIEBO and XIIDRA in one portfolio.

As we head into 2025, two factors on XIIDRA that we’ll be watching closely. First, are the potential headwind impact of the Inflation Reduction Act, though it’s too early to quantify at this time. And second, our strategy to drive TRx growth while ensuring we have access to coverage through health plans for as many patients as possible. For the full year, we continue to expect currency headwinds of approximately $90 million to revenue.

Shifting to adjusted EBITDA. We are raising our full year adjusted EBITDA guidance from a range of $840 million to $890 million to a range of $850 million to $900 million to reflect the strong business performance. We have made significant investments across our portfolio and in our product launches. The strategy is paying off and the business continues to deliver robust and broad-based growth. As Brent has previously highlighted, the investments we’re making today will maximize the potential of our portfolio in the future. Our launch products, including MIEBO, have a long runway, and we expect there will be an important driver of sustainable growth and margin expansion for many years to come.

In terms of the other key assumptions underlying our guidance, as noted last quarter, we are raising our expectation for adjusted gross margin to a range of 62% to 62.5% compared to our previous guidance of 62%. And we continue to expect investments in R&D to be about 7% to 8% of revenue. As we have previously discussed, we expect to enter into collaboration agreements with external partners to drive pipeline innovation. In the quarter, we absorbed in our adjusted EBITDA approximately $3 million of IPR&D charges related to such agreements.

As we look forward, we anticipate entering into additional agreements in the second half of 2024. It should be noted, as I previously mentioned, that any IPR&D charges related to these agreements are not included in our adjusted EBITDA guidance. We continue to expect interest expense to be approximately $385 million for the full year. We will continue to monitor Fed actions on interest rates for the remainder of 2024. We expect our adjusted tax rate to be roughly 15% and full year CapEx is expected to be approximately $250 million.

To summarize, we’re very pleased with the performance in the quarter. The business continues to deliver strong and broad-based growth. We expect the momentum to drive solid performance in the second half of 2024 and positions the business for a strong year of revenue growth and future margin expansion. And now I’ll turn the call back to Brent.

Brent Saunders

Thanks, Sam. Now let’s focus on the future. We recently launched an unbranded dry eye education campaign in the U.S. to help drive awareness of massively underdiagnosed and undertreated condition, which continues to worsen based on environmental factors and an agent population. In fact, approximately 150 million U.S. adults experience occasional or frequent symptoms of dry eye, and around 38 million are living with dry eye disease. The goal of the campaign is to help facilitate discussions with eye care professionals who can recommend treatment options from OTC solutions to pharmaceutical interventions as appropriate.

No company offers more of these options than Bausch + Lomb, and it’s not up for debate. We continue to expand those offerings, the most recent example being the June launch of Blink NutriTears. While it’s too early to report consumer uptake, the reaction from eye care professionals speaks volumes. They are excited to have a new clinically proven treatment option that could be particularly appealing for patients who may be adverse to eye drops. MIEBO and XIIDRA are the flagship products in our dry eye portfolio and understandably generate quite a bit of interest. Sam covered second quarter performance and updated expectations for both, but let me highlight a few building blocks for long-term growth. New direct-to-consumer campaigns for both medications will be underway soon which will drive awareness and action, especially when coupled with our unbranded efforts. We shared our willingness to invest in marketing these products, which you’ll see reflected in the quality and reach of each campaign. Perhaps more important than reaching consumers is continuing to show prescribers wide MIEBO and XIIDRA are the preferred treatment options for evaporative and inflammatory dry eye disease, respectively. With our sales force as the primary vehicle, we’ll talk new data in creative and engaging ways as we turn conversions and new starts into greater market share.

As dry eye awareness increases, so does our leading position in the category is seemingly unlimited potential. We’ve rounded out our infused product line with the recent launch of Toric lens in the U.S., and we will continue to expand our Daily SiHy offerings globally at a steady pot. As an INFUSE wearer, I told anyone who will listen how comfortable these lenses are and how quickly you notice a difference from other options. But don’t take my word for it, instead look at the numbers. In the last year, we’ve averaged approximately 60% revenue growth in our Daily SiHy portfolio, including 67% in the second quarter or 72% on a constant currency basis. We’re making believers out of customers and patients with each fitting and that’s clearly reflected in our performance. That performance isn’t solely relying on Daily SiHy uptake, however, not by a long shot. We’ve maintained steady growth in our frequent replacement lens business as well, which helped fuel 14% constant currency growth in our overall lens portfolio and continuing a team growth is spread around the globe with 18% constant currency revenue growth in the U.S. and 12% internationally.

We expect that growth will be augmented with the full launch of Opel, our new digital marketplace for eye care professionals and their patients to make it easier to access Vision Care products in the United States, debt, taxes and consistent revenue growth from our consumer business. While there are certainly no guarantees when it comes to sales, we plan to maintain our industry leadership in this category by staying on offense to address evolving consumer needs. While established products like LUMIFY continue to outperform expectations, we’ve leveraged brand awareness and popularity with an eye toward the future. A prime example is the upcoming launch of LUMIFY preservative-free eye drops, which we believe will appeal to an important subset of consumers. Where we sell is another critical component of maintaining our current trajectory in the consumer business. Steady growth products like Artilec continued geographic expansion in Europe and the Middle East and there are pending approvals to introduce LUMIFY in additional countries around the world. When Dr. Adam Busche implanted the first enVista lens in Canada on June 5, it was the latest step in a critical transition for our surgical business.

I’ve spoken about the importance of being a player in the high-margin premium IOL category and that June milestone served as an important reminder of our intent. I’ve shared our rollout cadence previously, but it’s worth repeating. We expect Envy to be available in the U.S. later this year. That’s a question I frequently get at industry meetings and anxious ophthalmologist is a positive sign from a business perspective at least. In 2025, we plan to launch LuxLife brand in Europe and we’re nearing first patient status in a clinical study for enVista Beyond, an extended depth of focus IOL with an expected U.S. launch in 2026. We’re playing to win in the premium IOL space, and we will invest accordingly in product development, manufacturing and sales. We closed with the launch slide to drive home the point we’ve been making. Over the past year, we’ve had a steady drumbeat of new product launches that not only cut across our businesses, but also align with where eye health is heading. In other words, these aren’t launches for the sake of filling shelves or pharmacy inventory; rather, we’re addressing unmet needs and improving products that eye care professionals, patients and consumers have come to rely on. That steady drumbeat continues in the second half of the year and into 2025, which is why excitement about our future continues to build, both internally and externally. Significant work remains to realize our full potential, but the path forward is clear.

Operator, let’s open the line for questions.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] And the first question today is coming from Xuyang Li from Jefferies. Xyuang, your line is live.

Xuyang Li

Alright. Great. Good morning, everyone and thanks for taking my questions. I guess I’ll start a bit high level, maybe for Brent. The quarter was strong all around, beat on the top line, the EBITDA, you also called out really broad strength across segments, geographies, key products. You’ve been CEO for a little bit more than a year now. I just wanted to hear from your perspective how this – I hate to call it a turnaround, but maybe a rejuvenation has been versus expectations when you joined, what’s going better than expected? What can still use somewhat attention? Your thoughts on the sustainability of this broad-based growth? And can you maintain the double-digit growth profile in 2025?

Brent Saunders

Yes. So thank you for the question. So you’re right. I think there is a turnaround/rejuvenation happening inside our company. I’ve commented on this before, but I do think that where we are today, our strategy is absolutely working. We are focused on relentlessly, I think this is the word I’d like to use on execution, sales execution and sales excellence, launch excellence and operational excellence. And both of those are paying huge dividends. When you get 13,000 people around the world, all moving in the same direction with enthusiasm and motivation with clear direction, really good things happen, and I think that’s a testament. As you said, it’s holistic, right? So just some constant currency numbers, I’ll just rattle off as a proof point here, right? Overall, constant currency top line 20% growth; lens, up 14%; consumer, up 9%; surgical, up 9%; pharma, up 61%; organic 16%. In terms of regions, U.S., up 31%; Asia, up 7%; Europe, up 10%; Turkey, Middle East, Africa, up 29%; LATAM, up 31% and Canada, up 16%. And so I think it’s just a – it’s a proof point that you see the focus on execution around the globe and in every business unit we have.

And from my point of view, where we stand today, it’s absolutely sustainable, right? Once you create a culture of executional excellence and you continue to work at it and reinforce it, I think it’s – in my career, it’s proven that, that can be a real driver for the future. As we move into this next phase of our strategy of building innovation and continuing to support the new product launches, so there is a long tail on these products. These are products that in some cases have a decade of patent protection in other cases are consumer brands that last forever or contact lens brands that have a great holding power for decades or more. And so there’s a lot of durability in the portfolio, and I’m excited for the future. So Again, I’ll end with – I think we have a great strategy and our team around the world is executing, and that’s a great combination to have.

Xuyang Li

All right. Great. Appreciate that. I guess for the follow-up, just on the MIEBO performance, 50% sequential growth, fairly above our expectations. I mean we started to see a noticeable uptick in weekly scripts in June. It’s impressive during the summer, while some of the other recently launched eye drugs were impacted by the summer seasonality. Our ECP checks have been really positive on MIEBO. Can you maybe talk a little bit about the performance in the second quarter? Is it outperforming your internal expectations, the guidance increase, maybe talk a little bit about trends in refills and how the integrated sales team is doing?

Brent Saunders

Sure. Yes. So as I mentioned in the first quarter, we integrated the field force. And then just a few weeks ago, we launched Glimpse, our new AI-based tool for the U.S. pharma’s field force. And honestly, a lot of credit to the team, I think really strong execution in our pharmaceutical team in the United States. Very proud of what they’re doing. But MIEBO, I think, has a great potential for the long-term for us. We caught up, obviously, significantly our revenue forecast for the year. I would say we can call up peak sales as well. I see this now 3 quarters into the launch, it’s hard to call the exact peak sales, but I would see it well over $500 million at this point, peak sales. So very excited about that. And look, we’re just starting three quarters in, right? We stop to gain more managed care access. The team is making great progress in 3 quarters to have roughly 50% commercial coverage in about, what, 32% Medicare coverage is pretty impressive for 3 quarters. I suspect those numbers to decline next year and we’ll continue to focus on execution. And so I think a long runway here and a great product and great ECP support behind it.

Xuyang Li

Alright. Thank you very much.

Operator

Thank you. The next question is coming from Patrick Wood from Morgan Stanley. Patrick, your line is live.

Patrick Wood

Amazing. Thank you so much for taking it. It’s a busy morning. So I’ll keep it kind of one holistically, which is, obviously, launch is going very well. The pipeline for H2 and ‘25 sounds pretty stocked. The guide implies slightly very good but slightly slower growth in the second half. A, is that just a function of prudence? There’s a lot of unknowns in the world, et cetera, et cetera, given the build of the innovation and then, B, just maybe slightly more strategically on the launches, what have been some of your key learning’s you’ve had from the first wave, the stuff that’s stuck out that’s going to make you approach? What are you going to change in the market approach for the sort of the next wave in the second half and ‘25 or just more of the same?

Brent Saunders

Yes. So let me ask – answer the second part of the question, I’ll turn it over to Sam for the first part, Patrick. Look, I think we’re in a constant learning mode and adjusting techniques and the different levers to pull. I think with some of these launches were so early that there’s a lot yet to do. Let’s take a big one like MIEBO. The team has been working on some really, I think, impressive creative ads. We plan to launch that somewhere closer to the fourth quarter and turning on DTC for MIEBO will be a big lever. When I look at BLINK NutriTears, right, we’re just in the phase of stocking at retailers, a lot of excitement among the retail community, the ECP community as we get the data out and here’s a great learning. We’re using our medical affairs team and also our pharma dry eye sales force to make sure that ECPs are aware of the clinically proven formula that we have in BLINK NutriTears. Now we’ve got to turn it over to the consumer teams to drive consumption. And so that technique of working across businesses is something that hasn’t happened at Bausch + Lomb in a long time and people here are really embracing it. And so there’s a lot of cross learning’s between consumer and pharma, pharma and surgical, pharma and Vision Care. So there’s just a lot of great work being done. I’m very proud of the team. So constantly learning and improving as we go. But Sam, do you want to take the first part?

Sam Eldessouky

Sure. And good morning, Patrick. When you think about Q2 for us, constant currency was about 20%. If you think about it organically for Q2, that was about 10% and then you think about our sort of guidance that we updated this morning and sort of what does that imply for the second half, if you take midpoint of the guidance to the high-end of the range of the guidance that suggests anywhere between 9% to 10% for the second half in terms of implied. So again, we’re seeing the momentum that we’ve seen in Q2 that continues with us on balance. As you know, the guidance have multiple outcomes, and we’re balanced with our view in terms of the guidance between first half and second half.

Patrick Wood

Love it. Thanks for question guys.

Operator

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

Craig Bijou

Good morning, guys. Thanks for taking the question. I guess I want to start with maybe just some of the strong performance in the contact lens business and the equipment business, specifically on the surgical side and maybe some of the drivers there and specifically on contact lenses, can you just talk about the market growth? What you’re seeing with some of the new launches, Daily SiHy and how are you taking new fit share there?

Brent Saunders

Yes. So I’m very impressed with the team’s execution on the contact lens, really, really strong growth on a constant currency basis, 18% in the U.S. and 12% internationally. So we see it across all regions. When you look at lens growth, you see SiHy up 72%, the FRP portfolio up 13%. And so great execution in a balanced way across the portfolio. And look, so the way I see it is as we focus on execution, we start taking share. You’re talking about a market that’s still growing in the mid-single digits. We’re growing faster than the market. And so we are taking share. It’s hard to pinpoint exactly where that share is coming from. But you see it happening. I think the good news is when you have a product like INFUSE, right, and you continue to launch the modalities around the world, right? We’re just launching, for example, in the U.S., the toric and the reception is truly outstanding, right? An easy fit. It fits on the eye really quick. It saves time for the ECP and the Chair and then great vision outcomes. So exactly what you want to hear and that’s exciting. And even more exciting for me in contact lens is R&D continues to – it’s an area where we have great strength in internal R&D and we’re working on multiple projects on multiple new platforms for the future. So I see a very bright future for us in contact lenses and it’s a combination of great products, great execution and continued innovation, and that’s the formula for success for us.

Craig Bijou

Great. And if I can also ask on you updated or you raised your EBITDA guidance slightly along with the revenue guidance. But I think the implied margin may be a little bit lower than what you saw or what you guided to previously. So can you just help us understand the EBITDA margin opportunity that you have for the rest of the year potential upside and then maybe even any comments on ‘25 would be great? Thank you.

Brent Saunders

Yes. So let me start and then I’ll turn it over to Sam. But I think one thing I would just remind you of, we have consistently said that ‘24 and ‘25 are years of launches, and we’re going to invest behind the launches, particularly with so many of these products having long durable lives ahead of them to make sure that they get off on the right trajectory. So when you look at the big launches like MIEBO, you see great execution. And when you see fire, you want to put gasoline on it to continue to bend the curve upward. We’re seeing great uptake of INFUSE around the world. We continue to invest behind new modality launches and continued execution. We’re investing in a huge new DTC platform that we’re going to launch in September in the U.S. called Opel, really best-in-class consumer ECP portal. It will really be, I think, a great addition to our team there. Glimpse, our new tool for the pharma team that potentially could be rolled out to other businesses as we execute around it. And so a lot of investment behind products, even Blink NutriTears wasn’t in plan. We went from concept to launch in about 6 months, and we see a huge potential in Blink NutriTears as well. So lot of investment in launches and the payoff comes in the out years. And I think that’s the right thing to do for this business. But Sam...

Sam Eldessouky

And Craig, it’s the one – maybe I’ll start just repeating a bit of what Brent said because it’s very important to reflect on it, which is from the beginning of ‘24, we outlined what’s our strategy and the theme of ‘24 for us, which is really building up on sustainable growth because we’re playing the long game here. So we’re thinking about how you can take the launches of the products that we have. They have a long runway ahead of them and how we invest in them to be able to drive the top line growth and drive margin as we go forward and that margin to be a sustainable margin.

So when you now reflect on what we have done with our guidance, when you think about our guidance range now midpoint and I’ll focus on midpoint just roughly about 18.4% EBITDA margin. That’s relatively compared to what we had before restructure about 18.5%, 18.6%. So it’s – I call it still within the range of about the sort of same range of how we’re still thinking. So we’re in the grand scheme of things on a larger view, we’re still holding what our strategy and what’s our view is from top line and EBITDA and margin for ‘24.

Operator

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

Unidentified Analyst

Excuse me. Hi, good morning. This is Anthony on for Joanne. I want to start with just the XIIDRA launch and guidance. Can you just maybe talk about how the XIIDRA launch is rolling out? And then I saw you lowered XIIDRA guidance. Can you maybe just go into a little bit more detail into what your expectations are in the second half? And is any of the lower guidance potentially cannibalization from the launch of MIEBO?

Brent Saunders

Yes. So great question. Look, XIIDRA is a very important part of our leadership in dry eye. I think having both – strategically having both MIEBO and XIIDRA is incredibly important and drives a lot of the early success of MIEBO having the established player like XIIDRA across the board. That being said, we did have a kind of a stop-start situation in the first quarter with the Change Healthcare and that’s an environmental, outside of our control situation. I think the team did a great job in getting new co-pay and vendors on board very quickly within about 2 weeks or so and getting back to focus. And we’re recovering from that reset that happened in the first quarter. But if you look at what happened in the second quarter, I saw great stabilization of scripts TRx, you see growth starting if you followed IQVIA data. July was a good year-over-year growth month and we expect that to continue in the third quarter. So XIIDRA, our goal is TRx growth. I think when we did the deal, we talked about mid-single-digit growth. I think that’s right on a TRx basis. And as you look forward, we have to continue to think about some unknowns, like the Inflation Reduction Act in ‘25 and continued pressure from managed care. But that being said, I see a long runway for TRx growth.

In terms of cannibalization, I don’t think that’s an issue. What you see happening since MIEBO launched is the market is expanding, about 10% expansion of the market and that’s exactly what we wanted to see. And so we think that market has a lot of opportunity to continue to grow. We already gave you the numbers. It’s a massive market of very undertreated penetration. And as a leader across prescription options and OTC options, we are uniquely positioned to really kind of push and drive market expansion. And I talked DTC, that’s one great tool to do it, but you’re going to see new and improved DTC from XIIDRA starting in about a month. And then you’re going to see DTC for MIEBO started in the early fourth quarter. And then, of course, we’re considering continuing pushing OTC. We have Blink on air and then maybe potentially even Blink NutriTears. So I think we have a lot of opportunity to hit a lot of different consumers and patients where they consume and pay attention to media across the spectrum. And so strategically, I don’t think we could be positioned any better to really drive market growth here.

Unidentified Analyst

Very helpful. And second, can you just talk about your expectations for margin cadence in the back half of the year growth in operating?

Sam Eldessouky

Yes. I think what we’re going to be – as you think about – again, we look at what we performed in the first half, first half roughly our margins were just shy of 17%. As you think about the second half with the guidance and the midpoint that suggests we have an acceleration on margin. Just a factor I would talk about is private seasonality and just a good reminder of everyone for seasonality because we talk through that before in previous calls. We start low in the beginning of the year. Q1 is our lowest, Q4 is our highest. And as you think about it for this year, specifically, with this how we’re actually lining up our launches and the investments behind launches, we’re probably going to see a much more emphasized Q4 as you think about Q3 and Q4 for the second half for us. But you always have to – how you start with the 2023 as the starting point of the cadence.

Unidentified Analyst

Got it. Thanks.

Operator

Thank you. The next question is coming from Robbie Marcus from JPMorgan. Robbie, your line is live.

Robbie Marcus

Great. Nice quarter. Thanks for taking the questions. Brent, I wanted to circle back to your comments you just made about margin and the heavy investment ahead. Should our expectation after that, be that any of much of the top line upside you’ll be delivering in ‘24 and ‘25 is going to be reinvested into this heavy investment period? Or is there a commitment to be able to absorb the investment and let the top line upside drop through the bottom line? And I have a follow-up. Thanks.

Brent Saunders

Yes. No, a great question. And no, it’s not – the plan is not to put all the upside into reinvestment. It’s to have a steady cadence of improved margins as we continue to appropriately invest behind each of these launches. And so every investment that we make, Sam and I do a very careful ROI analysis. We look at each one in great detail and spend a considerable amount of time thinking through the return. And so, my view is we run this company for our stakeholders, particularly our shareholders. And so we want to make sure every investment is done appropriately with the right point of view and the right metrics and KPIs around each one. And so absolutely, we’re committed to margin improvement over time. Very important part of our strategy is both revenue growth and margin expansion on a sustainable basis for the long-term. And so absolutely, we want to make sure that we do that the right way.

Sam Eldessouky

And Robbie, if I may add to what just Brent said also is if you think about our margin, again, it’s back to how we set up ‘24. We set up ‘24 with a focus on ensuring that we have a sustainable top line growth and steady margin improvement as we go forward. And if you reflect back in ‘23 to ‘24, we have a steady improvement in terms of margin year-over-year. I think that’s going to be the same philosophy as we start thinking through this in terms of making sure given – especially given the fact that many of the assets that we’re investing in have a long runway ahead of them. So maximizing the value of those assets is a key driver for us. So making sure that we continue to drive the value of those assets and maintain that steady growth and margin.

Robbie Marcus

Great. And maybe as a follow-up to that, free cash flow was minus $48 million in the quarter. How do we think about cash flow for the full year here? And any color on what we should expect in terms of free cash flow conversion into next year? Thanks.

Sam Eldessouky

Yes. So as I mentioned before, when you think about our results for the quarter and especially the first half, we’re in growth mode than usually, when you’re in growth mode, you tend to be more of a use of working capital, either as a source of working capital. These are about benefits of our cash flow. So just to give you a reference, since December to June, our working capital is a consumption of roughly about $250 million. That contemplates all the accounts of working capital. And that’s really feeding that growth. So that’s one element that we have to keep in mind. The other part is the inventory. Our inventory is also an area where we use as a lever to be able to manage through supply challenges that we talked about through ‘23. And the inventory right now, we’re seeing roughly about $1 billion of inventory. That’s a little bit higher than what we would like it to be. But I think that, again, is the lever that we’re using to be able to make sure that we have a steady supply of our products.

So when you think about overall from that, you’re right, when you think about cash flow, year-to-date, it was roughly about $72 million. We’re running from a free cash flow perspective, we’re running at this point are negative. When I think about for the full year, we’re probably going to be a breakeven to a slight negative. One of the key things that we’re also doing is accelerating our thinking around CapEx. You’ve seen the growth that we’re talking about in the Daily SiHy and in our lens business, and we’re accelerating that growth to continue to think about our capacity and what we will need for ‘28 and beyond. So we’re doing those investments as we speak here today. So I think that’s going to have a level of impact on the cash flow for this year.

Brent Saunders

Yes. If I could just add, Robbie, I think on strategy, we talked about earlier in the call, whether this is a turnaround or rejuvenation. But one of the most important tenets we put in place was to make sure we could service our customers, right? Eye care professionals around the world rely on us. And particularly, and I will point out surgical, where we had the most work to do, right. If you are a cataract surgeon and you are expecting to do surgery in the morning, and we can’t deliver you the product or we can’t make the tools that you need to do that surgery, you can lose that customer forever and break that trust. And so we intentionally chose to pick in the short-term, servicing our customer first and build inventory to make sure we can get products in our customers’ hands. And as we work through that, that was a use of cash, right. As we work through that, we expect that to abate over time. But it was absolutely the right thing to do because you can see the growth in that – in the surgical business, finally pulling through, and I am really proud of what the team has been able to do now that we are not dealing with daily out of stocks or unavailable products. And so unlocking that was important. It was detrimental to cash, but it’s short-term, and we should come out of that in a year or 2 years.

Robbie Marcus

Very helpful. Thanks a lot.

Operator

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

Douglas Miehm

Thanks very much. Just wanted to circle back to MIEBO and a couple of things there, I believe it was mentioned that you are keeping an eye on IQVIA. And I just want to know, given some of the strength that we have seen in early July, where there has been a significant pickup. When you talked about potential readjustment, are you suggesting that those numbers may be a little ahead of themselves? And maybe you could expand on that. And the second thing with respect to MIEBO was just – is there any update on potential sampling that you are contemplating for the drug as part of that DTC contribution or introduction in Q4?

Brent Saunders

Yes, so thank you. Let me answer the second part of the question. The sample was finally approved by the FDA, a little delay there. They asked for a little extension and – well, they didn’t ask. They told us they needed an extension, but we did finally get it approved, and we expect that to roll out this fall, so good news on the sample. With respect to IQVIA, I think there are some adjustments to be made on MIEBO, I think XIIDRA, they are pretty good. But on MIEBO, they are still working out how to best track it. And I expect there will be some adjustments there. But Sam, do you want to cover that in a little more detail?

Sam Eldessouky

Good morning Doug. And let me add a little bit more color here. In general, you always get a little bit of variability. But when you – overall, what we have been seeing in MIEBO and now you are also tracking this, you are seeing a positive trend for the MIEBO, so TRx since launch. And if you go back to the beginning of this year, even going back to Q4 of last year, we are about six – averaging about 6,000 TRx per week. You have seen that in Q1 go up to about 10.8, and Q2 is about 15,000. When you think about – what we have seen recently in my comments, in my prepared remarks was focused mainly on the last couple of weeks. What we have seen is a sharp increase on the TRxs for IQVIA. And we know that there is a little bit of sort of variability there. I think the team is still working through the IQVIA to be able to just reconcile and work out the differences. But as we have seen that trending, we always tend to trend serve without a pull and a steady positive growth. What we have seen in the last couple of weeks which you knows as well as a very sharp increase in IQVIA that we are still trying to work through.

Douglas Miehm

Okay. Excellent. And maybe as a follow-up, this is more a philosophical question for Brent. When you think about the company having an 11% float right now and trading at a fairly material discount, especially given the quality of the execution this year, especially with MIEBO and a few other things, what can you talk to us about the opportunity for the ultimately being 100% float in this company at some point?

Brent Saunders

Yes. Great question. I would say this to our team on a regular basis, here is let’s focus on what we can control and what we can control is our own execution. And so I think I am not going to read numbers to you. I think it’s – this quarter, first quarter, second quarter, I think clearly demonstrate that the team is heating that advice and focusing on execution. Clearly, when you look at the float and the separation, it is frustrating, but I would try not to spend much time thinking about something out of my control. And my expectation is that we will see that happen, but I can’t pinpoint a timeline for when it will happen, but I am confident it will.

Douglas Miehm

Thank you.

Operator

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

Matt Miksic

Great. Thanks so much. Can you hear me, okay?

Brent Saunders

Yes.

Matt Miksic

Terrific. Thank you. So, a couple of follow-ups, first on contact lenses. I guess just maybe to try to get an update on just where you are in terms of dailies, in terms of mix or market penetration or how long this can run? And then I have one follow-up. Thanks.

Brent Saunders

Yes. So, I have mentioned before that Daily. Well, I think it was in the data. The Daily portfolio was up about 16% in the quarter. The key driver of growth for us in Dailies is the SiHy, INFUSE or ULTRA One Day outside the U.S. And I think to be fair, we are still in very early innings. If we were a baseball game, maybe we are in the second inning of driving growth there, right. We are still launching the modalities around the world. The U.S. is the lead market for that product, and we are just launching the toric, literally in the last few days. And we still have another modality to go, which is the multifocal toric. But what we see is just tremendous enthusiasm for that lens from both consumers and ECPs. We still have a huge long runway to launch these modalities around the world. We continue to invest behind our execution. We did a tremendous investment in China around a new direct-to-consumer portal and an ability to sell in that country. And it’s – the team there has done an amazing job, but very proud of our China team. We are about to launch our DTC ECP portal Opel [ph] in the U.S. in just a few weeks. And I previewed it, it is an absolute slick, beautiful consumer interface, super simple. And we have tested it with ECPs. We designed by purpose with customers and sales reps working together and it’s going to be a really exciting launch. So, a long way of saying, super early innings and a long runway to go and a lot of growth to come.

Matt Miksic

That’s super helpful. And then just maybe on surgical. You had a pretty steady product flow there and plan for getting deeper into advanced technology lenses, maybe if you could talk about what other types of strategies you can employ whether it’s on the enabling technology side or in terms of the portfolio to just sort of amp up the ramp to higher growth and sort of greater share position in some of those key parts of the surgical market. Thanks so much.

Brent Saunders

Yes. Absolutely. Surgical is a real priority. I think when you look at execution in the quarter, a constant currency basis, equipment up 15%, implantables up 9% and consumables up 7%. But the real basic strategy is to build relationships around placing equipment and then drive through implantables and consumables. And what has hindered us in the past has been perhaps not being able to place equipment because of part shortages and others, and we have solved that. And so now we can get equipment out the door. We are continuing to innovate, particularly around Stellaris and we have a lot of really important work and innovation happening there and more features and functionality for surgeons, which is really important. And so seeing that equipment growth gives me great hope that the second part of the strategy is going to work well, which is moving from monofocal lenses to premium IOLs. And we saw great growth of the premium IOLs in the quarter. Sam, the number was in premium like 30%...

Sam Eldessouky

36%.

Brent Saunders

36% growth. When you look at Aspire, which is our monofocal plus when it’s a monofocal, great reception, early adoption just launched. The toric, which is premium is being incredibly well received. Our Lux platform outside the U.S. is off to a really strong early start. Our trifocal was just approved in Canada, and we are waiting for approval very soon here in the U.S. in this half of the year. And the EDOF lenses, the study is just beginning, and we expect that launch in ‘26. So, we are lining up all the right aspects to service our surgical customers around the world with great innovation on the come. And so I see that business as really important. We continue to look at other areas of innovation across the surgical platform to drive future growth, and I remain pretty excited about the business.

Matt Miksic

Great. Thank you for taking the questions.

Brent Saunders

Thank you. So, operator, I believe that was the last one.

Operator

Yes. Sorry, correct. Over to you, Brent, for closing remarks.

Brent Saunders

Great. Well, thank you all for participating in the call. Another quick call out to our team around the world for a great delivery of great execution, great focus and great service to our customers around the world. And we look forward to continuing to drive momentum in this business and keep you all updated as we proceed. Thank you.

Operator

Thank you. This conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.