On November 4, 2019 Bausch Health Companies Inc. (NYSE/TSX: BHC) ("Bausch Health" or the "Company" or "we") reported its third-quarter 2019 financial results (Press release, Bausch Health, NOV 4, 2019, View Source [SID1234550217]).

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"In the third quarter, Bausch Health delivered another strong quarter with both reported and organic revenue growth1,2, demonstrating that our efforts to grow our core businesses are continuing to gain traction. In addition to organic revenue growth1,2 in both the Bausch + Lomb/International and Salix segments due to higher revenues in several of our durable, established brands, such as XIFAXAN, BioTrue ONEday and Bausch + Lomb ULTRA, our performance was also strengthened by the success of newer products, such as LUMIFY and Thermage FLX, " said Joseph C. Papa, chairman and CEO, Bausch Health. "Additionally, we are excited by the potential we see from the early days of the launch of DUOBRII, the newest product in our dermatology portfolio."

Company Highlights

Executing on Core Businesses and Advancing Pipeline

The Bausch + Lomb/International segment comprised approximately 53% of the Company’s reported revenue in the third quarter of 2019

Increased reported revenue in the Bausch + Lomb/International segment by 2% compared to the third quarter of 2018; revenue in this segment grew organically1,2 by 5% compared to the third quarter of 2018; growth was primarily driven by the Global Consumer, International Rx and Global Vision Care business units

Delivered 12th consecutive quarter of organic revenue growth1,2
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1 Please see the tables at the end of this news release for a reconciliation of this and other non-GAAP measures to the nearest comparable GAAP measure.
2 Organic growth/change, a non-GAAP metric, is defined as a change on a period-over-period basis in revenues on a constant currency basis (if applicable) excluding the impact of recent acquisitions, divestitures and discontinuations.

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Launched Ocuvite Eye Performance vitamins in the United States, which are formulated to help protect the eye from digital device blue light and UV exposure from the sun

The Salix segment comprised approximately 25% of the Company’s reported revenue in the third quarter of 2019

Increased reported revenue in the Salix segment by 20% compared to the third quarter of 2018

Increased reported revenue of XIFAXAN by 24% compared to the third quarter of 2018

The Ortho Dermatologics segment comprised approximately 7% of the Company’s reported revenue in the third quarter of 2019

The U.S. Food and Drug Administration accepted the New Drug Application for ARAZLO3 (IDP-123) Lotion with a PDUFA action date of Dec. 22, 2019; if approved, ARAZLO3 will be the first tazarotene acne treatment available in a lotion form

Expanded the cash-pay prescription program, Dermatology.com, to all Walgreens U.S. retail pharmacy locations

Reported revenues in the Global Solta business unit increased by 62% compared to the third quarter of 2018, driven by continued strong demand of Thermage FLX following the launch in the Asia Pacific region

Released annual Corporate Social Responsibility report

Strategic Capital Allocation and Debt Management

Increased Research and Development (R&D) by approximately 15%, or $16 million, compared to the third quarter of 2018

Repaid debt by approximately $450 million in the third quarter of 2019, including the net impact of activity under our revolving credit facility

Third-Quarter 2019 Revenue Performance
Total reported revenues were $2.209 billion for the third quarter of 2019, as compared to $2.136 billion in the third quarter of 2018, an increase of $73 million, or 3%. Excluding the unfavorable impact of foreign exchange of $15 million, the impact of a 2019 acquisition of $14 million and the impact of divestitures and discontinuations of $13 million, revenue grew organically1,2 by 4% compared to the third quarter of 2018, driven by organic growth2 in the Salix and Bausch + Lomb/International segments.

Bausch + Lomb/International Segment
Bausch + Lomb/International segment revenues were $1.175 billion for the third quarter of 2019, as compared to $1.147 billion for the third quarter of 2018, an increase of $28 million, or 2%. Excluding the unfavorable impact of foreign exchange of $15 million and the impact of divestitures and discontinuations of $9 million, the Bausch + Lomb/International segment grew organically1,2 by approximately 5% compared to the third quarter of 2018. The increase was primarily driven by growth in the Global Consumer, International Rx and Global Vision Care business units.

Salix Segment
Salix segment revenues were $551 million for the third quarter of 2019, as compared to $460 million for the third quarter of 2018, an increase of $91 million, or 20%. The increase was primarily driven by XIFAXAN, which grew 24% as compared to the third quarter of 2018.

Ortho Dermatologics Segment
Ortho Dermatologics segment revenues were $147 million for the third quarter of 2019, as compared to $176 million for the third quarter of 2018, a decrease of $29 million, or 16%, due to lower volumes primarily driven by the loss of exclusivity of ZOVIRAX, SOLODYN and ELIDEL, partially offset by organic revenue growth2 in the Global Solta business unit and from new product launches in the Ortho Dermatologics business unit.

Diversified Products Segment
Diversified Products segment revenues were $336 million for the third quarter of 2019, as compared to $353 million for the third quarter of 2018, a decrease of $17 million, or 5%. The decrease was primarily attributable to the previously reported loss of exclusivity for a basket of products.

Operating Income
Operating income was $329 million for the third quarter of 2019, as compared to an operating income of $117 million for the third quarter of 2018, an increase of $212 million. The increase in operating results for the third quarter of 2019 was primarily driven by a decrease in amortization and impairments and the increase in reported revenues and higher gross margins in 2019 as compared to 2018, offset by increased Selling, general and administrative (SG&A) expenses and R&D expenses.

Net Loss
Net loss for the three months ended Sept. 30, 2019 was $49 million, as compared to net loss of $350 million for the same period in 2018, a favorable impact of $301 million. The change is primarily due to the increased operating results noted above and the favorable change in income tax provision.

Adjusted net income (non-GAAP)1 for the third quarter of 2019 was $425 million, as compared to $403 million for the third quarter of 2018, an increase of $22 million, or 5%.

Cash Generated from Operations
The Company generated $515 million of cash from operations in the third quarter of 2019, as compared to $522 million in the third quarter of 2018.

EPS
GAAP Earnings Per Share (EPS) Diluted for the third quarter of 2019 was ($0.14), as compared to ($1.00) for the third quarter of 2018.

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Adjusted EBITDA (non-GAAP)1
Adjusted EBITDA (non-GAAP)1 was $942 million for the third quarter of 2019, as compared to $916 million for the third quarter of 2018, an increase of $26 million, or 3%.

2019 Financial Outlook
Bausch Health raised its revenue and Adjusted EBITDA (non-GAAP) guidance ranges for the full year of 2019:

Raised full-year revenue range from $8.40 – $8.60 billion to $8.475 – $8.625 billion

Raised full-year Adjusted EBITDA (non-GAAP) range from $3.425 – $3.575 billion to $3.50 – $3.60 billion

Mid-point of the November guidance ranges is up by $50 million versus the mid-point of the August 2019 guidance ranges

Other than with respect to GAAP Revenues, the Company only provides guidance on a non-GAAP basis. The Company does not provide a reconciliation of forward-looking Adjusted EBITDA (non-GAAP) to GAAP net income (loss), due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation. In periods where significant acquisitions or divestitures are not expected, the Company believes it might have a basis for forecasting the GAAP equivalent for certain costs, such as amortization, which would otherwise be treated as non-GAAP to calculate projected GAAP net income (loss). However, because other deductions (such as restructuring, gain or loss on extinguishment of debt and litigation and other matters) used to calculate projected net income (loss) vary dramatically based on actual events, the Company is not able to forecast on a GAAP basis with reasonable certainty all deductions needed in order to provide a GAAP calculation of projected net income (loss) at this time. The amount of these deductions may be material and, therefore, could result in projected GAAP net income (loss) being materially less than projected Adjusted EBITDA (non-GAAP). The guidance provided in this section represents forward-looking information, and actual results may vary. Please see the risks and assumptions referred to in the Forward-looking Statements section of this news release. The primary reasons for our change in our 2019 full-year guidance ranges are higher expected revenues from certain of our products with loss of exclusivity, better than expected base performance and improvements in our gross margins, partially offset by higher than expected R&D expenses.

Additional Highlights

Bausch Health’s cash, cash equivalents and restricted cash were $827 million at Sept. 30, 2019

The Company’s availability under the Revolving Credit Facility was approximately $1.055 billion at Sept. 30, 2019

Basic weighted average shares outstanding for the quarter were 352.4 million shares. Diluted weighted average shares outstanding for the quarter were 356.8 million shares5

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5 Diluted weighted average shares includes the dilutive impact of options and restricted stock units, which are 4,453,000 common shares for the 3 months ended Sept. 30, 2019, and which are excluded when calculating GAAP diluted loss per share because the effect of including the impact would be anti-dilutive.

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Conference Call Details
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