Bausch + Lomb’s Surgical Turnaround and Margin Inflection
Q2 2026 beat-and-raise: 8% constant-currency growth, 28% EBITDA expansion, and a fully recovered premium IOL franchise.
BLCO · Earnings Call · 2026-07-29
Executive Summary
Bausch + Lomb (BLCO) delivered a second consecutive beat-and-raise quarter, with revenue up 8% constant-currency to $1.394 billion and adjusted EBITDA up 28% year-over-year to $246 million. The company’s broad based growth spanned all three segments, and management struck a confident tone around its three-year plan. The most notable inflection is in Surgical, where revenue grew 16% constant-currency and 17% versus the pre-recall baseline, driven by a mix shift toward premium IOLs — a story that has moved from early recovery to a structural margin driver.
Surgical Recovery and Premium Mix Shift
The Surgical segment grew 16% constant-currency, with implantables up 64% and premium IOLs up 175%. Luc Bonnefoy described the trajectory as “compounding,” noting that premium eyewear now represents 13% of Surgical revenue, up from 6% in 2023. Management is candid that the recovery required rebuilding trust and a field force, but the Q2 numbers suggest the recall is firmly behind them. As Brent Saunders put it:
Every one of the leading signals we pointed to last quarter, productivity, execution, sales trajectory is now translating directly into results.
This confidence is reinforced by the pipeline: the implant-free MIGS excimer laser (ELIOS) was filed with the FDA, and enVista Beyond, an EDOF IOL, is on track for approval by the end of 2027. The company is leaning into cataract surgery as a gateway for interventional glaucoma and ocular surface health, further expanding the strategic runway.
Dry Eye and Pharmaceutical Momentum
Pharmaceuticals grew 14% constant-currency, led by the dry eye franchise which grew 23%. Miebo delivered $91 million in revenue, up 44%, while Xiidra grew 6% to $87 million — a sharp acceleration from the prior-year base when the CVS contract was exited. The combined growth of 27% for the franchise underscores the “launch to growth” transition management promised in 2025. The company is also investing in a dual action dry eye candidate (combination of Miebo and Xiidra mechanisms), with Phase II data expected in Q3. This reflects a deliberate strategy to own the treatment paradigm for evaporation and inflammation.
Financial Discipline and Cash Generation
The P&L leverage is now visible: adjusted gross margin expanded 160 bps to 62.2%, and SG&A declined another 130 bps. Adjusted EBITDA margin rose 260 bps to 17.6%. More importantly, cash flow from operations reached $161 million in Q2, up 87% year-over-year, lifting year-to-date conversion to ~46%. Net leverage fell a full turn from Investor Day to 4.7x. CFO Sam Eldessouky highlighted structural working capital improvements: “We’ve taken roughly about 12 days out of our working capital on a year-over-year basis.” This is the same operational discipline that was referenced in prior quarters; as Brent said on the Q1 2026 call, “we are going to focus on revenue growth and profitability of these franchises.” That focus is now clearly paying off.
Total revenue reached $1.394 billion in Q2, up 8% constant-currency, building on the strong first half and supporting the raised full-year guidance.
The full-year guidance was raised by $20 million to $5.44–5.54 billion, with adjusted EBITDA raised by $15 million to $1.025–1.075 billion. The midpoint EBITDA margin of 19.1% implies ~21% margin in the second half, demonstrating confidence in continued operating leverage. The stock’s recent 90-day trend (+4.5%) reflects the market’s cautious but improving reception to this turnaround.
Risks and Outlook
The company is not immune to macro headwinds: consumer spending in the U.S. tracks closely to gas prices, and international markets like China remain soft. However, the diversification across vision care, contact lenses, and a deep pipeline mitigates single-asset risk. The excimer laser entry into MIGS and the pending LUMIFY NXT launch provide additional growth vectors. With the balance sheet deleveraging and cash generation improving, Bausch + Lomb is increasingly positioned to meet or exceed its three-year targets. As Saunders concluded: “Our business has great momentum. Our people are committed and our product portfolio continues to expand.”