Q2 2020 Cooper Companies Inc Earnings Call
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Ladies and gentlemen, thank you for standing by welcome to the Q2 2020, the Cooper companies.
Earnings Conference call at this time, all participants are in listen only mode. After the speaker presentation. There will be a question answer session asking questions. During this session you'll need to press star one on your telephone. Please be advised to today's conference is being recorded you require further assistance. Please press star Zero I would now like Dan The conference over to your speaker today.
Duncan Vice President Investor Relations and risk management, you still have met.
Good afternoon, and welcome to the Cooper companies' second quarter 2020 earnings Conference call.
During today's call will discuss the results included in the earnings release, and then use the remaining time for tuning our presenters on today's call or our white, President and Chief Executive Officer, and brain Andrews, Chief Financial Officer and Treasurer.
Before we begin I'd like to remind you that this conference call contains forward looking statements, including all guidance and other statements regarding anticipated results of operations market or regulatory conditions and integration of any acquisitions, whether failure to achieve anticipated benefits forward looking statements depend on assumptions data or methods that may be incorrect.
Are you precise and are subject to risks and uncertainties events that could cause our actual results and future actions.
Oh the company to differ materially from those described in forward looking statements are set forth under the caption forward looking statements in today's earnings release and are described in our FCC filings, including Cooper's form 10-K, and subsequent form 10-Q filings all of which are available on our website at Cooper coast Dot com.
This conference call also contains non-GAAP financial measures.
Please refer to todays earnings release for a reconciliation of those measures to the most directly comparable GAAP measures.
Sure do you have any additional questions. Following the call. Please call our investor line at nine to 546, 036, sixthree or email IR at Cooper go Dot com.
And now I'll turn the call over to al for his opening remarks.
Thank you can't and good afternoon, everyone I Hope you and your families are healthy and staying safe during these challenging times before getting into our results I want a recognized and say thank you to our employees, whose hard work dedication and resiliency have allowed us to continue moving forward through the global covert 19 pandemic.
Coming out of this a stronger company so amazing job to all Cooper employees around the world and again. Thank you.
From the outset, we made the health and well being of our 12000 plus employees and their families. A top priority, we instituted robust health and safety programs at all of our facilities, including staggering shifts reorganizing workflows and implementing work from home protocols to ensure a social distancing.
And the spirit of our strong company culture, and our commitment to our people. We continue paying employees are normal compensation, including supporting our commission sales reps.
Avoided layoffs furloughed employees only upon request maintained all benefits programs and expanded our employee assistance programs. We've also been they're supporting customers by offering new and innovative online training and virtual meetings, expanding our world class customer service efforts accelerating our director pace.
In shipping activity and providing extended terms to our small business partners.
Throughout everything that's happened we stayed focused on our long term business objectives, and we believe this will serve us well moving forward. This includes developing and launching new products, increasing manufacturing output of high demand products, such as myday enhancing distribution capabilities and expanding facilities in key strategic locations such as.
Costa Rica.
Looking ahead, our performance will be driven by the reopening of optometry offices for coopervision and the reopening of Ob Gee, why and offices and for two fertility clinics for Coopersurgical.
We cannot control the speed of the Reopenings, but we can be ready and we are.
It's very difficult to forecast the future, but we're definitely seeing positive signs with trends moving in our favor.
As we move into the numbers no I'll be reporting percentages on a constant currency basis for Q2, we reported consolidated revenues of 525 million, we coopervision posting revenues of 402 million down, 15% and Coopersurgical posting revenues of 123 million down 27%.
Non-GAAP earnings per share were $1.51.
For Coopervision regional revenue declined around the world with the Americans down, 22% EMEA, 11% in Asia Pac 10% all product areas were also negatively impacted with silicone hydrogel dailies down, 8% Biofinity and Avaira, 16% Torques 13.
Lisa and Multifocals, 7%.
I'll get to the fiscal quarter in a minute, but for calendar Q1, we grew 2.5% continuing to take share against the market, which grew roughly 1%.
This improved our global market share to a very strong, 24% and I'm optimistic we'll move to 25% during the year.
Calendar Q1 included March when the industry began experiencing the negative impact to covert 19, but our numbers held up better than others due to market share gains from our daily silicone hydrogel portfolio.
Regarding our fiscal quarter.
The negative impact of economies closing around the world was felt throughout the quarter, but was most significant in April with sales down roughly 45% for the month.
To provide color on the quarter, let me highlight the dollar impact and where we saw.
At one point during the quarter I had a tight at 510 million in fiscal two revenues fiscal Q2 revenues and we ultimately reported roughly 110 million worse than that.
Three primary areas impacted us first was the effective office closures on new sets.
In a normal environment, new fits including trade ups account for roughly 15% of our revenues and these essentially disappear.
We estimate this negatively impacted us around 40 million for the quarter.
Second we experienced a reduction in channel inventory as retailers distributors at independent optometrists close stores in offices and focused on liquidity. This was modestly offset by sales to pure internet sellers, but that's not a big part of our business.
We estimate the negative impact of this activity was around $35 million.
Lastly, we saw a reduction in consumer consumption, meaning people use our lenses less less often as they extended the where their products are chose to wear glasses more often.
This my customers, who would normally have ordered lenses in late March and April either didn't reorder were ordered smaller quantities than normal and this made up the remaining roughly 35%.
We certainly expect to recoup some of these loss sales, but it's difficult to forecast when our market research clearly indicates consumers expect to return to normal worrying habits as economies reopened. So we're optimistic we did see an improvement in may but revenues were still down roughly 30%.
On the encouraging side there were clear positive sciences, the month progressed and Thats continued into June as a matter of fact in parts of the world where economy started reopening sooner we see in a pretty quick rebound what countries like China showing growth in may.
For Q3, it's difficult to forecast revenues as a three items I just mentioned, we'll have a major impact on our results, but we're currently expecting fiscal Q3 sales for coopervision to be down 15% to 20% year over year.
This assumes a minimal rebound and channel inventory at a slow returning patient traffic at DCP slowly reopened stores.
Hopefully this is conservative, but it's prudent to be conservative right now even with the positive trends we're seeing.
Regarding products I'm happy to report, we recently launched two new ones are Biofinity toric multi focal is now available in the U.S. and rolling out around the rest of the world and our extended toric range for clarity has been released giving it the widest parameter range available in the market today for daily Silicone Torques I'm also happy to report we.
Significant progress on my day manufacturing and we're now able to supply product in markets, where we'd previously pulled it.
We're also starting to resume placing sphere and toward fitting sets as stores reopen around the world.
As we discussed on our last earnings call, we realized significant resources earlier this year to accelerate startup efforts on new Myday line and this activity continued essentially unhampered through Q2. We're now several months ahead of of our prior plans so fantastic job to the manufacturing teams and our distribution in commercial teams moving quickly.
To put us in a position to capitalize on this opportunity.
We saw similar improvements in our clarity manufacturing. So we're in great shape in the daily silicone hydrogel market, especially where respected toric lenses and this is critical as our survey data indicates usage and purchase frequency reductions are expected to be temporary would practitioners aggressively fitting patients into daily silicones is offices.
Reopened.
Moving to my site. This was a bright spot for the quarter growing 52% to 1.4 million in revenue and I'm happy to report Weve seen a significant increase in interest from optometrists as they look for value added ways to increase patient flow as their practices reopened.
My side is a perfect fit as optometrists truly want to treat their patients where the best products available and this is the only FDA approved myopia management offering on the market.
Additionally, parent interest is very high when they're made aware my side the product can make a huge difference in a child's life in the doctors controlled the process and pricing as the product is not available online as a reminder, my side as our innovative FDA approved myopia management contact lens that has been clinically proven to slow the progress.
Into myopia in children, the lenses sold as part of our holistic Myopia management program called brilliant futures, where we provide the eye care practitioner the lands and a suite of resources to help them connect with parents and to market the product the doctor that incorporates us into their own customized myopia management program and charges and appropriate price where there are.
Right.
From a training and certification perspective, we pivoted to virtual training and the response has been fantastic and the U.S.. We now have over 200 certified centers with over 600 additional optometrists currently in the certification process.
This puts us ahead of our previous expectations.
Success is clearly dependent on alternatives reopening, but we expect solid growth with full fiscal year sales being in the $7 million to $8 million range and assuming markets return to normal we remain comfortable with our target of 25 million in sales next year and to be clear, we have not curtailed any investments in this product other than deferring certain marketing costs.
Due to recent events and frankly, if all continues to go as well as it has that we may actually accelerate investments in Q4.
Before concluding on vision, let me touch on the growth drivers for the $9 billion contact lens industry first and foremost it starts with myopia, where it's estimated that roughly one third of the world population as myopic and this is expected to increase to 50% by 2050, we've been seeing this play out in the market data with new where is up 2%.
Globally last year. Additionally, we continue to see positive sales mix as doctors are fitting new patients and daily silicone hydrogel lenses and then we have the trade up from legacy hydrogel dailies and fr piece to silicone hydrogel dailies geographic expansion and growth in Torics and Multifocals. It's also interesting working without Tom.
Chris as the shifted daily lenses has made it more apparent that contact lens wearers are higher value customers as they buy both contact lenses and glasses.
Moving to Coopersurgical, we reported revenues of 123 million down 27% for the quarter, we were feeling very bullish about our business in March but as elective surgery restrictions were enacted and Ob Gee why in offices and fertility clinic started closing we began experiencing a sequel significant decline in revenue.
In the month of April alone, we were down almost 70%.
May was still down roughly 60% at the beginning of the month was extremely weak, but we definitely saw improvement as the month progress and we expect continued improvement through the quarter.
For the full fiscal Q3, we forecast Coopersurgical is revenues being down 30% to 35%.
Within the segments fertility was down 15% for the quarter holding up reasonably well as in process patients were largely allowed to complete their treatment, having said that April was down roughly 50% as clinics around the world closed and May was also down roughly 50% as several markets remain partially are entirely close.
Clinics are now reopening and patient traffic is good but it's important to note that our sales will lag initial patient activity as those visits are focused on consultations and the stimulation or pharma side of idea.
We thus expect our business to continue rebounding, but for the full Q3, we expect Brazil fertility sales to decline around 30%.
For office in surgical sales were down 34% in Q2, and we expect a similar decline in Q3.
This is largely due to PARAGUARD, where we essentially shipped zero product in the month of April and May.
To be clear this is a channel inventory matter as placements for Paragon continued in those months, although down roughly 65% in April and 40% in may.
Our consumer research indicates we will see placements fully returned to normal as offices reopened and we saw positive size through may. So we expect a strong rebound in sales as offices reopened and as channel inventory returns to normal.
Outside of PARAGUARD, our other office and surgical products were down roughly 20% in Q2, and we expect a similar result in Q3 with our Reashure research showing the majority of procedures were deferred not cancelled and the procedures will happen as doctors offices reopened.
Within all this coopersurgical continue making product and many other areas of the business, including continuing the build out and transferring of Ivy up production into our global manufacturing facility in Costa Rica, completing numerous sales and marketing virtual training sessions, which had been incredibly popular and making meaningful advancements.
Product development, and R&D and importantly, our manufacturing and distribution teams kept our products available in shipping while several competitors struggled now providing us the opportunity for future share gains.
With that let me conclude by saying our teams are laser focused on executing as economies around the world open.
Our commercial teams are intensely focused on capitalizing on opportunities and momentum is building key products like myday earn a much better shape and our product launches such as my site are going well Cooper's culture remains rock solid with our commitment to our employees remaining steadfast our dedication to our SG efforts continuing and our.
Focus on our long term strategic objectives remaining intact and I am 100% confident our employees are fully engaged and ready to deliver results with that I'll turn the call over to Brian.
Thank you Hello, and good afternoon, everyone. Most of my commentary will be on a non-GAAP basis. So please refer to today's earnings release for a full reconciliation of GAAP to non-GAAP results.
Given the challenges that code 19 has brought upon our operations and the uncertainty regarding the future impacts.
We will not be issuing 2020 guidance at this time.
But I will try to provide as much transparency and disclosure as possible and my comments.
To start it's important to mentioned that our non-GAAP earnings our adjusted for the larger cobot 19 related items within cost of goods.
But we did not try to capture all costs, nor did we adjust any of our operating expenses for these items.
Moving to our results our second quarter consolidated revenue decreased 19.8% year over year to $524.9 million.
Consolidated gross margin for the quarter decreased year over year to 65.8% from 67.3%.
This was driven entirely by April as margins were up nicely through the first two months of the quarter.
Coopervisions gross margin decreased slightly to 66% from 66.5% driven by a shift in our regional sales mix as we experienced larger percentage declines in revenues in markets with higher margins.
Coopersurgical is gross margin decreased to 65.4% from 69.6%.
Largely due to PARAGUARD sales being zero in April.
Opex was down 3.2% year over year, resulting in consolidated operating margins of 17.4%.
Down from 27.1% last year.
Despite the topline pressures, we continued investing in our business, which meant no material changes to employee compensation continued support of our key products such as my site and continued R&D investing while incurring higher costs related to cope with 19.
Interest expense for the quarter reduced to 8.8 $8.8 million driven by lower interest rates.
The effective tax rate was 6.2% due to the overall reduction a pre tax income and the benefit of stock options exercised in the quarter.
Non-GAAP EPS was a dollar and 51 cents with roughly 49.6 million average shares outstanding.
Free cash flow was negative 63.5 million and was comprised of $25.8 million of operating cash flow offset by 89.3 million of Capex.
This reduction was primarily due to lower customer collections, a buildup of inventory and maintaining capex as planned.
Net debt increased by 118.6 million to 1.8 billion.
And our adjusted leverage ratio was 2.18 times.
A few other items to note on Q2.
We repurchased roughly 161000 shares for $47.8 million.
We also fix the interest rate and a portion of our floating rate debt given the historically low interest rate environment.
This included entering into multiple swaps locking in 1.5 billion in debt as far out of seven years.
And lastly from an FX perspective.
Year over year FX impact for Q2 revenue and EPS was a negative 8.9 million an eight cents respectively.
Before concluding I'd like to briefly briefly touch on a couple of additional points.
We entered the cobot 19 pandemic with a solid balance sheet and continue to maintain strong financial ratios with ample liquidity.
This allows us to continue supporting our employees and customers and it puts us in a position to capitalize on opportunities as they become available.
We continue to prioritize capital allocation and prudent expense control, while remaining intensely focused on current trends to ensure we remain in a strong position.
Al mentioned, a few items on fiscal Q3 revenues and to repeat them at this point, we're looking at coopervision being down 15% to 20%.
And coopersurgical down 30% to 35% both in constant currency.
Other than that.
We're not providing much additional information at this time.
We're going to continue closely monitoring expenses, but we want to be careful as controlling cost is important but at the same time, we're seeing many positive trends and don't want to restrict our ability to execute in any way.
We're taking a long term view as our product portfolios are extremely strong and we believe were an excellent competitive position to take share as the markets return to normal.
Finally, I'd like to Echo Al's comments about our employees by issuing my own hard heartfelt. Thank you to all of our operations commercial and support staff for doing an incredible job in the face of Unpredicted unprecedented circumstances.
I couldn't be prouder of the efforts we saw in Q2 and they can and continue to see from everyone globally.
With that I'll hand, it back to the operator for questions.
Thank you as a reminder is asking question you will need to press star one on your telephone to answer your question principal Keith Please limit yourself to one question and one follow up question. Please standby we've compiled accuen a roster.
Our first question comes from.
With Raymond James You May proceed with your question.
Thanks, Good afternoon, everyone.
I guess al just to start out.
Coming back to CVI.
Can you talk a little bit about.
I guess, how are you thinking when you when you think about the various modalities.
Where do you see the most pressure.
In the month of April and where do you expect to see that come out the other side in other words, what do you think is going be stronger.
Post cobot versus versus pre in terms of your product mix.
Yes, Thanks, Larry.
Well.
When you look at April I mean, obviously, we took a hit kind of throughout the portfolio. The numbers I gave show you that our daily silicone hydrogel portfolio stood up better than certainly the rest of our portfolio and Myday in particular was was still strong.
But some of our legacy products and especially if you wanted to parcel. It out you know if you looked at our legacy.
Our piece the hydro gel fr fees. The monthly as an example, those took a pretty solid hit in the month of April. So those have been declining anyways, but took a bigger bigger hit than most I think as we look at where we are today and as we do our consumer research and we talked to optometrists and so forth in a market starts to recover.
It seems very very clear that the market is going to recover with a focus on daily silicone Hydrogels. That's that's going to be the focus area and thats going to be because of the reasons that were in place beforehand, but it's also because of the focus on hygiene, if you're looking at good hygiene, you're talking about a daily let's put it in where at throw it out at the end of.
Today. So that's clearly what people are talking about that clearly is the focus.
I think we're in a good position from that perspective, because if we go into kind of more of a recessionary environment, where the only one to have a strong mass market daily silicone, there with clarity and a sphere toric animal bifocal and if we have somebody who's looking for a more premium wearing experience. Obviously, we have myday, which is which is hugely successful so.
I think thats, that's what we're going to see as we come out in the coming months than 10 quarters. Okay. Perfect and then I guess the second question is and you alluded to that.
In your comments relative to manufacturing from Myday in your ability now to.
And in particular toric and your ability to now start to supply countries regions that you had pulled back supply on previously as well as getting fits that's out there what were you able to do.
During this period that allowed you to in essence it sounds like get ahead of your get ahead of your plan.
Yeah. So we had the obvious happened right, which was like a pullback in demand in general because you obviously had debt stores and so forth shut down around the world. While that was happening we were continuing production of the product building up our own inventory, but importantly during that quarter, we were able to continue to work putting lines together and getting.
Lines up and running and that was a key point, you'll remember I talked about as in prior quarters, how we accelerated some of our efforts.
And we took a step back in some areas on cost control efforts and so forth, but we brought those lines in faster thankfully, we did that because with those lines in our facility. We were able to continue working and putting them together, we didnt have equipment in Europe, and we weren't relying on people from Europe or other places flying in to help us our manufacturing folks.
We're able to do that work themselves and then the other success that we have was not only did we hit our timeline. When we started up a couple other lines. We have several lines. We have two of them that have recently started when we started them off the production on those lines was a decent amount ahead of where we expected so taking that out to the manufacturing.
This is an amazing job there of getting those lines up started running and having them be quite a bit more successful earlier than we thought so I mean, we're still in a situation where we have other lines coming on and we're certainly going to need those lines based on demand and that includes updated demand metrics right now, where we set and the demand that we're seeing as retailers and.
I will start opening stores backup.
Okay, great. Thanks very much.
Thank you. Our next question comes from Brian Weinstein with William Blair. You May proceed with your question.
Hi, guys. Thanks for taking the questions.
Well as we come back here soon start to improve a bit.
That.
Does it matter for you, it's kind of more new guys come in the 15% versus the existing ones.
So we think about one versus the others. There one that's more important for particular driving silicone hydrogels setting.
Yes, if the new I mean, so if you look at the data as we went into Cove Ed.
We were winning more than our fair share of new fit so the Americas market already use market here is probably the biggest at that right is that that's where we were winning share we had myday way clarity as new patients were coming in and getting fit they were being fit more and more and daily silicone than we were winning our lion share of that so that new.
[music] fit was what that hurt us.
If you look at new fit data, we kinda talk about 15% or kind of in that range of revenues coming from new fit that that's an important part of our business and that's even larger here in the U.S.. So I'd say the 15 percentage a global number you know if you look at the U.S. you could argue that thats, 20% of our revenue here in the us give a lot.
Got it new daily fits you have people buy an annual supplies and so forth. So that was one of the reasons frankly that our Americas number was softer I think than probably people thought over over index in terms of new fits in the hit that we took because of that.
Okay, Great and then as we think longer term here about the industry, how do you Cook industry.
Longer term because of covered in Howard.
And in the industry now.
Think about things like on the line.
I am line ordering congrats shipping direct.
Prescription moving our line how how resolve this kind of play into kind of how the industry develops and then how youre positioned for all.
Yes, I definitely think you're seeing some changes Wright direct to consumer shipments as an example, definitely increased significantly whether that holds or not we'll see that was a trend that was occurring and we probably accelerated some of that trend you remember I've talked for a couple of years here about how much time and money, we put into our distribution centers to improve our destroy.
In addition capabilities I mean, thank God, we did all that stuff because we're in a great spot to be able to support the market as as we move in that direction. So if you're in optometrists selling product you no longer have to have a ship that to your office, we can ship that directly to your patients home, but the other thing I think when you look at the industry right now I think you're actually going to see even more.
Or greater move to daily silicone I think that's the direction Youre going to go as I was talking about hygiene.
We talk to consumers when we talked to optometrist. That's what people are leaning towards the other thing that youre seeing about the industry as people looking and saying, okay. How can I do a better job as that optometrists office moving forward here in terms of the products that I offer and I think thats one of the reasons that we've had kind of the acceleration in demand in my site.
So some of its like docs don't want to Miss out, but theres definitely a component where doctors are saying Hey. This is a unique special product here now that I understand it works and so forth. This is something I want to get behind so I think youre going to see that and then the one other area I would say that I think to changes a little bit in the industry is I think around toric lenses, because that's one of those things.
That.
The patient has to go see the dock gets fitted by the dock, you're not going to use tele medicine to fit a patient in at toric lens. So I think youre going to continue to see towards grow faster than the overall market.
Great. Thanks, so much.
Thank you. Our next question comes from Jeff Johnson with Baird. You May proceed with your question.
Thank you good evening guys.
I wanted to start maybe from a geographic perspective, you mentioned kind of the over reliance on new patient fits in the US obviously in Europe, you've got some just automatic drop ship that happen or patients who are more on a subscription plan. There. So I think it'd be helpful. If you could provide any color on hand to how you saw the April may trends breakdown between us you're up.
Asia Pac or at least maybe kind of how you're thinking about the recovery by geographic region that would be wonderful if you could help us out with that.
Sure absolutely, Jeff I kind of put Europe in the middle to some degree.
Because we're starting to see things come back and Asia Pac and I mentioned in that we actually saw growth and in China in May I mean, it's not going to surprise me if Asia Pac is grows in Q3 Arafat I think there's a decent chance, we'll get that I don't want to get ahead of myself, but when I look at at how things are going I think we could get some growth in Asia Pac in Q3.
EMEA still still isn't a situation similar to the Americas.
Stores are starting to reopen optometrist houses are reopening you can see that in the news like I can't so we're making progress there certainly.
Americas lagging that right. So I think we're still going to have tough quarter in the Americas.
For Q3, because we had we had struggled certainly at the beginning of May we're seeing positive signs. There's no question about that no question about that but I think when you look at the impact of May Andy America is you're going to continue to see that be another kind to similar quarter to where it was.
Europe kind of be and probably a little bit worse than where it was on as it comes out a little bit slower. So I was kind of thinking in my head February March April versus May June July for us.
End up with a similar to maybe a little bit worst quarter.
That assumes by the way that we don't get like a rebound in some of the stuff by channel inventory and so forth that makes sense.
Yes that does it and then.
Hold on a lost my train of thought for a second just as I was thinking what youre seeing there.
In these office visits were all doing our surveys and theres other ways of trying to track desks.
As those offices start to open up my guess is that helped on the new patient fits more than anything on the consumption by current wearers.
I think we need to start watching for Windows people go back into the office when do they go to the gems in restaurants and things like that it I know with on the margin, but some of these people that on the where contact lenses for social reason things like that.
And almost feels like there could be a slower.
Recovery in the current wearers more so even than the new wears just because there is kind of that reliance on where we all going to go back into the office every single day things like that.
Yeah, you're spot on on that because that's what a lot of those where is our right. I mean, a lot of those wears are wearing lenses are can be teenagers or enter twentys are going back to the office, they're playing sports right. There that kind of activity I mean Carter soccer is much soccer is going to start up next week right. So you're starting to see that stuff moving the write down.
Direction right I mean, we're making progress there, but until people are starting to go out to restaurants for dinners and people are starting to go back to work and you're seeing more of that activity, you're going to see a little bit of a slower trend. There because we did see kind of two pieces that I think one is people wearing glasses, because they were home a little bit more and then the other one is.
As I mentioned, the softness on our like legacy Hydrogenics, Rps and Thats, what kind of a portion of the market where people stress or lenses and that's the kind of activity. We're seeing so I think you're right I think the channel inventory work itself back.
Over the coming quarters, you know I think the new fit data you're right starts coming back and we start seeing that better certainly as the months come here with back to school and so forth assuming that we're going back to school everything's moving into right direction, maybe a little bit more of a lag on the other stuff.
Yes that makes sense. Thank you.
Yes.
Thank you. Our next question comes from Larry Biegelsen with Wells Fargo. You May proceed with your question.
Hey, good afternoon. Thanks for taking the question Al I guess do you expect.
Still be down year over year in fiscal Q4, and I guess, what would need to happen to grow in fiscal Q4, which of these deep could there be some catch up from deferred sales in procedures from.
So from from April May.
You know any any color on that.
Yeah I think.
For the two separate businesses may be answered a little differently.
For Coopervision I do think we can get back to a situation you know where were flat for Q4, maybe we can even be up a little bit I think it will depend some on the channel inventory coming back and it will be highly dependent on stores reopening and then obviously for us not to have kind of a second rusty rush of.
Uh-huh covert 19, but I do think we can move in that direction based on the progress that we're seeing in some markets like Asia Pac already if if if if we use that and we look at that is what's going to happen in Europe, and then into the us in that those positive trends continue I think it puts us in a decent decent spot we're going to fight like Hell certainly to at least.
Flat in Q4.
If I look at Coopersurgical some of that's going to be dependent on paradigm I mean, paragon continued to be fit but because of liquidity concerns and so forth. We ended up not shipping product for a couple of months that will come back I'm highly confident that we'll get that inventory and so forth back. So it will depend does that come back end at the end of Q3 or into Q4.
The survey work, we've done has showed cancellation rates going down and so forth. The surgeries that were involved with at least all appear to be deferred rather than cancel so if.
Gee why and offices are reopening then that's a really good sign I think we'll be we could return to positive growth in Q4. There fertility clinics are definitely opened were definitely moving into right direction there.
We do lag as I mentioned sales there that's going to be a little bit of a hurt right now because that clinics reopened.
Yes people are going in are having consultations are getting they're starting to stimulation process and so forth. So we lag a little bit behind there, but if that go if that those trends continue.
Yes, we can be in a decent shape. So I would kind of say consolidated yes, we're going to fight like hell to get back to at least be flat in Q4.
And now just as a follow up can you talk about what you're seeing it optometrists offices, you know the percent that you think you've opened so far in any any issues with throughput how they're dealing with patients come again, thanks for taking the questions.
Sure, Yes, yes, if we go around the world. There is a very large number of optometrists offices that are kind of quote unquote open.
But a lot of on the Ben open up a lot right. They were just open for kind of emergency cases, rather than everyday patients. So we're definitely seeing more and more of them open but they are in different degrees of opening I had some of them are opening up with.
A lot of restrictions right patient has to set out in the parking lot and they come in one by one and a clean the entire area down before that patient comes in so your patient traffic is significantly slower we.
We certainly see that like where we're at here in California, you go to other spots in the us another spots around the world. There is not nearly as many restriction. So we're in varying different varying degrees kind of around the world. So it's kind of hard to answer that the one thing I would say that seems to be pretty clear is that offices are definitely opening.
More patients are more patient flow is definitely occurring so the trends are clearly positive, but we still have a little ways to go.
Exactly.
Yes.
Thank you. Our next question comes from Matthew Mission with Keybanc. You May proceed with your question.
Great. Thank you for taking the questions.
Right.
Brian actually.
Detrimental gross margin.
Coopervision for the quarter was much lighter.
Perspective, given the sales decline.
There are potentially delaying margin impact because you're selling inventory that was that was.
Better manufacturing absorption.
Yes, good question Matt.
So you're right. So I talked about in my prepared remarks that CVI was impacted by regional mix. So we had a higher percentage of declines revenues in markets, where we had higher margins like like in the Americas down 22%.
Now as it relates to.
Capitalized costs, and I will get into a whole cost accounting discussion on this call here, but.
Suffice to say, what we what we really did as we adjusted.
The large sort of coated 19.
Related costs and other manufacturing costs those period costs.
That and we called those out we adjusted earnings for those so Thats 22.1 million. If you look at our GAAP to non-GAAP results reflect sort of those unabsorbed costs.
The excess capacity.
And those types of cost that that were above and beyond our normal operations and the incremental from prior to the Pandemics. So you won't see those really bleed into future quarters were not capping and releasing those.
Down the road and Thats why you saw gross margins where they were.
Okay.
Understood.
And then.
Think about the industry.
So rebating based upon.
Apply DC any changes in.
[music].
The way.
Consumers are going to purchase contract one.
We're doing purging unbreakable supplies, rather than the angle supplies and kind of how do you. How do you kind of see the industry truck into that as motion we bidding.
Yes, that's more of a U.S. question than probably outside of the world, but when we look at that activity. We definitely saw some of that in in Q in Q2, and even the beginning of this quarter or not I give you. Some examples you know if you're a patient who had a year supply and you were ready to order another year supply, but you had to go see your optometrists.
And you weren't able to get into your optometrists.
I've heard many cases, where the optometrists that hail extend your script so to speak three months and you can go get a quarter's worth of supply, but you don't want to buy year supply until I have a chance to check your eyes out and make sure that you're buying a REIT script. So we've seen a lot of that activity where patients were like hey, a kind of want to get this does not just by another year supply ill take advantage that.
Rebate or discount, but they're not able to so thats a three month delay in that kind of activity.
I think the question longer term on that because we'll get that back we'll get those patients back and bye.
Ends up being is there kind of a fundamental shift in the market because of that I think I would tie that answered more to a recession.
If you if you get a recessionary environment, you'll probably get people trending to more three month purchases that kind of stuff that they watch their money a little bit closer where we're not seeing that based on the research that we've done so far we're not anticipating that we're expecting the market to kind of moved back to normal.
Thank you.
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Thank you. Our next question comes from Matthew O'brien with Piper Salmon you May proceed with your question.
Thanks for taking my questions.
You've been touched on this a little bit but I was just hoping you can reconcile the shortfall you saw in the quarter on the trade upside, which I think you said was 40 million for the most of the shortfall was associated with the lack of the trade up with the comment that Hey, you know the daily size, which are more expensive are going to lead us out of that with such such a high end.
Climate rate in the U.S., such a high unemployment rate around the world.
What gives you that confidence what are you hearing from from patient specific layer consumer specifically that gives you confidence in that in our you are you putting any kind of programs in place and he is the burden so that people can do that trading up.
Yes, and just to be clear on that.
That trade up because that is included within new fits so the biggest component of that would clearly new fetch when you shut down the Doctor's office and you don't have the new patient able to come in and get a script and by lenses. That's the thing that hurts you. The most now you also missed out on the trade up which is.
Somebody who is wearing a monthly or two week or a traditional to older Hydrogels trading up to the new one but the big part of that $40 million I was talking about as new fit patients thinking about new patients coming in.
With respect to us kind of coming out of this with daily silicone. If we come out of this in a decent way in the economy is doing well and so forth I think I think you're not going to see much of a change at all if we come out of this with a weaker economy in my mind, you're definitely going to see a greater focus on clarity right. That's the product that's going to do better.
Accelerate more because that's where people are going to be focused if you're more budget conscious or cost conscious you're going to still want a daily silicone hydrogel lenses thats, what your doctor still going to want to prescribed for you. That's the that's the market leading product right as the only real product there for mass market daily silicone hydrogel products. So it will depend what different what direction. We go.
I will say based on where we are today and based on the feedback we're getting from people there's enough demand out there we're going to be selling.
A very significant amount of Myday no matter what.
Even if its premium even if we went into more of a recessionary kind of environment. The demand there didn't disappear at remains very very strong from our consumer research.
Okay, that's that's interesting and helpful.
Then the second question was just on my sites.
Yes, you're backing up a little bit on to spend this are totally understandable and and the revenue contribution this year, but next year, you're still confident in that $25 million are going to ramp up.
Some of the spending dollars. That's we're saving this year next year or what I'm also trying to kind of get as was the 25 million Conservative there is upside of maybe some of that upside as is now removed for the time being and hopefully that gets pushed into next fiscal year.
Yes, I kind of look at it and I'd say that 25 million was probably a little conservative.
Beforehand, but I would say that it's probably still a little conservative right now.
The difference that we're seeing is a greater interest by optometrists with respect to my site now some of that was because people were home right. They had the time to be able to to go through the training to look at the information the clinical data and so forth get comfortable with the fact that well this product really works this should be standard.
Care, how am I not going to treat my my myopic children in this in Atlanta, how can I would not have a conversation with the parents about it. So the interest is definitely increase in that product in the number of people were training inside the U.S. and outside the U.S. is definitely higher than what we were anticipating it was going to be pre cobot now.
You can only fit if your your office is open and kids are coming in and so for US. So you got to get back to normal, but I think that that we might arguably be in better shape with my site.
Oddly enough now we did to first and marketing expenses on that but we're still going to spend a very healthy amount of money this year and depending upon what we do in Q4, because where we are seeing that acceleration in interest and.
That's not only use thats around the world, we might spend a little bit more so I'm not going to hold back on investing in my side.
Got it thank you.
Yes.
Thank you. Your next question comes from Chris Krueger with Stephens You May proceed in question.
Good afternoon, and thanks for taking the questions. Let me just first follow up on that's question on my side would appreciate it if you could.
A couple of skewed a little bit better understanding of where you're seeing the demand between us and international.
Flavor, there as well in terms of the training.
And your thoughts as they pertain to some of the new spectacle.
Alternatives that have been publishing data here recently with some pretty impressive results. So just wanted to get your view maybe since that's near term obviously, how how much side is ramping and maybe longer term you just reiterated the 25 million next year, but how you see the size of that opportunity had a quick follow up on Paragon.
Sure, Yes, absolutely thanks, Chris Yes, the in the US we're seeing the significant interest certainly in the training that numbers and so forth that I mentioned now that has to translate itself into fittings.
We were definitely seeing fittings no question about that earlier in the year and we have more and more kids, who have been fit in the lens and as stores reopened I'm confident we'll we'll see that number increase it'll just be a question of how much it increases and how fast it increases.
Outside of the U.S.
We are doing some work with some some fairly decent sized organizations talking to him about this product and.
And we'll see how that plays out because that'll that could move the needle. So I would say interest as high again from a demand perspective, when you look at actual sales of the product obviously those have been a little bit muted because offices have been shot but whether it's in the U.S. Our outside of you at the interest is certainly high.
I have not step back from kind of my position in my excitement about this entire industry I mean, I think at the end of the day.
The ability to treat kids, who are myopic and they're only going to get worse. There myopia is going to get worse and being able to minimize that progression of myopia is an amazing thing and to me. It's Europe physician how are you not evaluating that in treating your patience right. So I think as as more people.
We'll look at getting into the space and you talk about people with spectacle right spectacle companies continue to research I think it's fantastic I'm excited about that data we've seen that data I know some of those companies I've read their information on mix I'm excited about the opportunities and so forth with those with those guys. We're still early stage. There's no question about that in terms of the data that is.
Out there and the potential to put product into the marketplace. We're well ahead of others with our with our mine site product that's out there, but this is going to be a large market. It's just a matter of how long does it take to get there.
Understood and then could just quickly on technical this month follow up.
Just may be premature at this time, but help us think are you seeing any shifts in the broader birth control market I realize again, when we think about pharmacies remaining open but.
Any bias to maybe ship.
Shifting to a more permanent methodology of birth control or again, a greater emphasis on the lowest region alternatives are no hormone or non hormonal options. Thank you.
Yeah.
Lastly, with PARAGUARD I'd love to say, yes to that we're probably a little too early to see whether that's happening or not yet when you look at what's happening in the world today would covert 19, new people look at it and say Hey, I want to non hormonal option I want to what I would describe as a healthier option.
We'll see how that plays out I mean, I would say that new placements apparel guar were down pretty solid in April they were down about 65% in may they were down only about 40% June we saw nice rebound or I'm sorry June. We're currently seeing a nice rebound right now to start the quarter and based on our.
Survey work and so forth I mean, we might only be down 20% year over year for June. So we're seeing a pretty impressive kinda uptick on that now does that continue or does that accelerate we'll see I'm I'm certainly happy with the numbers I'm seeing what part regard.
I don't have that kind of visibility obviously within the hormone why you de market, but a fair guard certainly taken steps into right direction Thats for sure. We'll just see how it plays out I I hope that's true that's for sure.
Thank you.
Okay.
Thank you. Our next question comes from drilling and once with Citibank you May proceed with your question.
Thank you very much good question the question and good afternoon.
A boring question, then maybe something more interesting on the boring side, what are you seeing answer FX headwind this year.
Well, what you've seen rates move pretty aggressively here recently I think the euro at over 113, So I'm going to look at Brian I'm not sure there is a headwind.
Yeah, I mean from from a revenue perspective, I mean, it's going to be.
Revenue revenues are still down for us for the year, we haven't obviously given.
FX rates, so we're not giving guidance for for the latter part of the year, but for Q2, I mean, it was $3 million worse on the revenue line in that 10 cents worse.
EPS for Q2.
Okay. That's good Sir.
And then I want to go back a comment.
Revenue in the fourth quarter. So for you guys that would be.
At September and October.
We think about.
Getting to flat revenue.
Turning to get out as a combination of what is the build to get there and then also holidays.
Upon the trust ophthalmologist office.
Change and I, social distancing six feet apart environment. Thank you.
Yeah, Great question, because in order to get there in order to be as successful as we want to be in fiscal 2001, we need optometrists offices reopening reopened and operating to some decent degree we're not going to be in a situation, where you're going to return to normal you're not snapping your fish.
There isn't seeing August volume being the same as it was last year, because you are going to have social dispensing and the other requirements that are going to continue out there.
But we need to continue to move in that direction right. It's almost like you go to a coal pool right you put your your toes in and then you put your foot in and when it's not that bad right, maybe a step in and that is not that bad and ultimately you jump in I mean, we're still in those early stages of kind of sticking your toe in the water and a lot of places we need to continue to make that progress for us to be.
Flat in Q4, we.
And to do what we want to do going forward, we obviously need that to come back because we need new fits.
I think the volumes going to be there ultimately I think as long as doors are opening patients are going to go in there that demand for contact lenses is going to be there.
We're not seeing anything in our research indicates otherwise so it's really going to be tied to optometrists opening up there their stores.
Thank you.
No.
Thank you. Our next question comes from Jon Block with Stifel. You May proceed with your question.
Great. Thanks, guys. Good afternoon first one just on inventory in the channel that compressed in the quarter I guess, how you know where was it prior.
Where is it now and then I believe you said you expected to remain.
Part of this new lower level for the foreseeable future. So if thats. The case is this the new normal and why would it stay down here and not eventually sort of recapture work where it was in that I'm just kind of follow.
Yeah with respect to inventory, we saw that kind of around the world. It was probably more focused here in the U.S. because you have a bigger distributor market.
Having said that I do think the majority of that or it's going to come back for a large portion will come out now not all of that because you had inventory for instance in optometrists offices, who ultimately as part of their buying group are individually are going to not want to carry that inventory anymore, which means we'll end up carrying an AR facility and then we'll show.
But direct to patient so it'll be a little different structure of how that works. So I don't think all that inventory comes back but I do think we see that inventory coming back it's just going to be directly tied to store openings. The more they opened the more they start.
Selling lenses fulfilling product a more distributors and the larger retails retailers, a byproduct back to be properly properly staffed.
Okay.
Suffocation, though the fiscal Threeq two numbers that you gave out on the CVI that does not assume much of a rebuild on the inventory side is that correct.
That is correct.
Okay got it and then just the second question some of our checks we heard about hey, Tom to practices were closing and consumers were worried about securing lenses. Some of those guys are used to get their lenses for many CP. Just went ahead and said.
Im going to turn of wanting to contact for another on pure online provider. So.
It doesn't mean that shift of lenses goes away from the CP to a pure online can you just talk about out what does that mean of anything for you guys from a margin perspective, if that remains in place. Thanks.
Yes, you did see some of that activity right and for us it kind of neutralized out because we saw some buying activity in March at neutralized itself out in April from a reporting perspective, and if you look at the shift to online you definitely saw greater shift to online and also direct to patient activity that we were just talking about so it'll be interesting to see how that goes.
If it goes back right some of that online activity is actually people buying through a walmart dot com or through specsavers or grand vision or someone else's national visions websites.
At the end of the day does that shift.
Stay where it's at I don't know I mean to us it doesnt make that big of a difference at the end of the day, how that how thats sold through I mean, it's not that big of a difference darpino.
Okay fair enough. Thanks.
Thank you. Our next question comes from Anthony control.
Jefferies. You May proceed with your question.
Hi, and good afternoon, everyone. Thanks for taking the questions here.
Maybe one on CVI one on on Para guard.
I guess now and Brian just as you look at the shape of the recovery in new fits.
Some of your competitors, maybe commented that it could take a little bit at a time here and it's not necessarily.
The shape, but I guess, maybe you are counter to that how do you see the recovery shaping out and in particular, how do you see see the school seizing playing a role here do you get a fair amount of those new thats back with the back to school season in September.
And then on Paragon or just a clarification on on the channel hit I mean.
Should we expect that a fair amount of that inventory in the channel.
Flows as LPG why in offices opened in the coming months. Thank you.
Yeah. They quickly on PARAGUARD, yes that inventorial start to flow back end because at the frankly at the end of the day you had placements continuing this entire time and they started accelerate back as I was saying, we didnt ship anything tied to some liquidity concerns and so forth that's all fine.
That will start making its way back into the channel. My guess is you see it making its way back in July which would still be our fiscal Q3, certainly in Q4, so from our reporting perspective, it will depend when that happens, we'll just be transparent with you guys give that information as it as it comes back.
If I look at the new fits.
Again that will depend so largely on optometrists offices reopening I have it.
Tendency to agree I guess with others, who said hey, that's not necessarily a vishay because you'd have to have optometrists offices opened in immediately have a lot of traffic coming back in there. So I do think it'll be a little bit slower of a come back.
Yes, it's going to happen stores are opening traffic is happening and so for us. So I guess it would just be a matter. How you define your view, but I would not assume you're going to see like a mad rush backend. That's one of the reasons I think that.
The Americas is going to have a softer fiscal Q3 for us and that's one of the thinks it's going to kind of keep coopervisions numbers, a little bit softer in Q3 is that timing around the Americas coming back I do think that unless something kind of goes off the rails that as we move back into school season, right Kids going back to school in August September.
And that kind of timeframe and then getting back to school and realizing they have a vision problem and then needing to go to the Optometrists September October.
I think we're gonna have a much more active fiscal Q4 in terms of new fits.
That's very helpful helpful. Thanks.
Thank you. Our next question comes from Chris Chris Farley with Guggenheim You May proceed with your question.
Thanks Al just wanted to piggyback on that last point it seems like a lot of the discussions around the demand.
The supply side around and optometry offices opening backup.
Little assumed impact on the demand side from the macroeconomic fallout that we'd experience here. So I look to just know how you're thinking about that and lens utilization given this higher deployment environment.
Maybe any lessons, we could take from 2009, where market growth got cut in half and it took a year more for things to really rebound.
Yeah, Chris your years, you're spot on there I mean, when you go back to 2009, and when we've seen kind of.
Economic struggles out there the contact lenses industry, if I'm remembering right off the top of my head was down three per start was up 3% in 2009, I think we were up five.
So we still put up pretty decent numbers because of all the under other underlying factors that are out there you know the geographic expansion and so on and so forth that occurs but if we are in a more of a recessionary environment I would anticipate that that would reduce the overall growth of the market and our numbers also.
Okay, but that's.
You guys are are seeing or expecting at this point.
It's a little thought when you look at the numbers that I'm talking about right now it's much more tied to store openings than it is anything else I'm assuming.
We get what kind of people are thinking right like a slow progress of improvement in terms of unemployment and so forth because we're only talking really about the next five months something might that right. Now. This guy I think the question you're you're talking about would hit is probably more in fiscal 21.
Okay.
And then you just clarify what that Paragon revenue number was for the quarter overall.
Okay.
That's a.
When the 3 million images here.
23 million.
Great. Thanks.
Thank you. Our next question comes from Steven Lichtman with Oppenheimer. Sir you May proceed with your question.
Thanks Al just wanted to follow up on Chris is question on unemployment you mentioned, if we see elevated unemployment clarity.
We would be a key focus within daily Sai high, but I just want to put a finer point on do you see any risk to a slower shifted dailies overall for the market and elevated unemployment environment.
No I don't know takes that you can go back away through 10 context on that as well.
Yes, not really because your price differential isn't that great. So optometrists are still looking at it saying hey, what's the best product to fit my patient in the best product is a daily lens when I look at it from a hygiene perspective, or a comfort perspective or any kind of all the different angles that you would look at it you are saying a daily makes the most.
Sense.
Somebody who's cost conscious moves more towards the clarity daily which gets a lot closer by the way to like a monthly lands because with the monthly lens. You also have to add solution side. So keep in mind, yet it's not you have to compare any of your fr piece plus your solutions cost to the cost of your daily So that delta and cost is now.
Not that great and you're not going to want to have optometry, and you're not going to see optometrists wanting to push some of those products over daily.
Great. That's helpful. And then just on some of the investments you've targeted this year and any impact from cobot.
Should we assume the same capex levels you previously talked about given your comments during this call about myday and Clariti manufacturing or is that getting cut at all in and what about DTC around power guard.
Thanks.
Yes, the DTC impaired guard, we deferred some of that so we had some TV advertising and so forth that was occurring in Q2, we were able to defer that here are some of that activity is actually going on now.
And then we're just continuing to evaluate that right now whether it makes sense, yes, we kind of touched on that earlier is there a shift in the marketplace more toward normal non hormonal product like paragraph such a great product right does does this help kind of push it in that direction I hope So we'll see.
The sales team as our sales team has just samy. Good that is handling that product right now so I listen to them I kind of take direction from them on that so we'll see we'll see how that plays out of them, we'll adjust accordingly.
On the kind of Capex side of the capital side a lot of the cost that we have right now are already built in that's why you saw big Capex number this year this quarter and you'll see one next quarter.
And even kind of finishing the year out because those those lines our order.
18 months in advance and so forth I do think because of.
The environment, we're in and the progress that we made especially with my day, you're going to see kind of one of these classic Cooper things that if you go back in time and look at us over the years. When we do these investment cycle and we get a situation, where we start getting into goods position like we're in today and where we've accelerated some of that success, we do run into us.
Aereo at some point, where our Capex declined pretty decently in our cash flow shoots up pretty solidly. So I think that that event, which is going to happen is probably going to happen a little bit sooner than we were thinking.
It's just a matter when that's going to happen but.
I think cash flow continues to be tight because the capex for little while and then that it will increase materially.
Got it thanks al.
Yes.
Thank you. Our next question comes from Steve will be with Cleveland Research. You May proceed with your question.
Hi, good evening two questions for you.
First maybe for Brian.
The I guess, you talked a little bit about the call out as it relates to gross margins earlier.
I guess I was a little bit surprised at how large of a call out you're baking here in the quarter its accounts for more than 10% of your Cogs in the quarter. So.
Maybe if you could help us understand what I know, you're not giving guidance, but we like what margins could look like going forward given this sort of call out related to covert during the quarter and then what sort of Decrementals look like with the revenue expected revenue declines in the third quarter and that I have.
One quick follow up on inventory.
Yes, so just.
To elaborate I mean really in Q2, we proactively shutdown lines either purposely for demand reasons.
Or to address social distancing protocols, so we incurred higher higher than usual costs from these actions so.
Given that the productions level levels have fallen.
What you saw where those additional costs that we incurred those period expenses that got flushed through the CNL and we captured those larger costs and.
And.
And that's what you saw the adjustment.
You know, obviously with a regional mix and product mix that has that moves the needle when you see.
Regions.
Wrapping, 22% or 11% and so forth.
It's going to it'll move the numbers, a little bit, but I would expect that as the business continues to to recover and you get towards Q4, especially Q1. If things are is are back on track you're going to start this year gross margins expand and get back to normal.
Okay.
We expect to see non-GAAP gross margins in the third and fourth quarter.
Look similar to what we saw in the second quarter or could that where would they be worse than the I. Just don't know what's your pointed out calling out if that makes sense.
Well I mean, I think really what you had for US is the is it impact from coded towards the very end of March and April.
So now that we're solidly in this number recovering you're still going to season. Some of those similar non-GAAP adjustments in Q3, whether they show up in Q4.
I don't want to comment on that now without seeing sort of how things improve.
But certainly I would expect you'll see something similar and again back to ALS comment earlier about.
The how markets are going to return in Asia Pac Pride.
Possibly showing some growth in Europe sort of in the middle and Americas still lagging a little bit.
You're going to still have some of that.
Some of that some of the similar regional mix issue that we had in Q2 impact us in Q3.
Gotcha, and then just real quickly I'll follow up it related to inventory into over the years, both you and Bob Bakken today, we would talk about inventory in working down of inventories where it what's your feel for right now I guess as it relates more particularly on the CVI side.
As where channel inventories add this compared to maybe what trough.
Inventory levels have been in the path.
Yes, it's always a little hard to sandy we have good visibility when it comes to the some of the guys right like our distributors and so forth and then we have less visibility when it comes to some of the retailers, especially the retailers who have a lot of stores out there that that might not be corporate owned right that would be franchise stores and so.
And then.
The Optometrists office makes it even a little bit more challenging right. So I was trying to piece that out when I was looking at the month of April and that's I kind of got to that 35 million dollar number right. It's all those are a little bit squishy, but I can't think that that was the number right maybe it's not as massive as as it could event, but.
I didn't see like a huge change and one of the things it's kind of interesting as we've seen in some of these retailers are already kind of building up and they're anticipating that things are going to be okay. So I shouldn't said build up right, but they didn't go quite down as far as much as I thought they would have gone from an inventory perspective, and they seem to be kind of start maybe to come back a little.
So it's a hard one Steve you know we've talked about that over the years is always a struggle.
Okay. Thanks very much.
Yes.
Thank you and as a reminder, taski question, you'll need to press Star 100 telephone. Our next question comes from Robbie Marcus with JP. Morgan You May proceed with your question.
Great. Thanks for taking the question.
Oh I know over the years, you've always talked about maybe a.
Three to five time net income dollar benefit from the trade out from a non compliant two week to compliant daily is there any risks that as we move forward in a tough economic time that you might see the reverse happen as people trade down and how do we think about any potential for Pete.
Well spacing out purchasing or trading down down the piano.
Yes, we don't really see that so it's pretty rare that we see someone trade down once someone moves to a daily.
It would be.
Even I'd probably be stronger like incredibly rare to see that person go back to like a two week or a monthly lands I think youre going to continue to see that maybe some of that shifting decreases a little bit.
We will kind of see how that plays out right because that would be your more cost conscious we move into next year and you're not seeing people want to switch, they're happy with their two week or their monthly lands and their doctor, saying, Hey, This is a better product for you. This daily side, you should think about the shift and it's a little bit more expensive somebody thick and happy where I'm, Matt I'll. Just go ahead stick with.
What I have.
I would think that's possible and it's definitely more likely than in the more of a recessionary environment, where people are more cost conscious so it'll be interesting to see how that plays out.
And then just a quick follow up on my side, you said the launch was going well I just want to maybe you could put them perspective, I don't know if you can put numbers on it is that.
The you talked about some of the virtual training is that what you're referring to are where the sales numbers tracking at or above the 2 million in the us that you'd laid out earlier in the year. Thanks.
Yes, so I was talking more about the training so people getting certified people being ready to to sell the product, we've probably done around $3 million through the first six months I was still talking about $7 million to $8 million for this year.
So looking for some improvement here as we exit the year and certainly some improvement in Q4 as as offices are opening backup that's.
Basing that off the commentary that we've received from from Docs out there who have gone through this who are now certified fitters and able to fit.
Our commentary that they are going to be.
Talk into parents about that and having discussions and so far so.
I was referring to was we're getting more trainings, where we have more dock certified and more docked in the process of being certified than we would've had it if we wouldn't have done it online.
Thanks, so much.
Yep.
Thank you and I'm not showing any further questions. At this time I would now like to turn the call back over to outline president and CEO for any further remarks.
Great. Thank you. Thank you everyone. Our I appreciate your time today, we had a lot to go through so I think we hit on the high points and.
I look forward to catching up with everyone again in three months. So thank you.
Thank you ladies and gentlemen, this concludes todays conference call. Thank you for participating you may now disconnect.
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