Q1 2021 Cooper Companies Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to go for.
First quarter 'twenty 'twenty, one Cooper companies earnings conference call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session cash.
The question give me the session you will need to press star one on your telephone if you require any further assistance. Please press star zero and we used to be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Ms. Kim Duncan VP Investor Relations and risk management. Thank you for still hadn't.
GAAP.
Good afternoon, and welcome to the Cooper companies first quarter 2021 and earnings conference call. During today's call. We will discuss the results included and the earnings release, and then use the remaining time for Q&A.
Our presenters on today's call are al White, President and Chief Executive Officer, and Brian 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 revenue and earnings per share guidance and other statements regarding anticipated results of operations market and regulatory conditions and integration of any acquisitions or their failure to achieve anticipated benefits.
Forward looking statements depend on assumptions data or methods that maybe incorrect or imprecise and ours.
And how does your risks and uncertainties and risks that could cause our actual results and future actions of the company to differ materially from those described and the forward looking statements are set forth under the caption forward looking statements in today's earnings release and are described in our SEC filings, including Cooper's form 10-K, and form 10-Q filings all of which are available on our website and.
And as dotcom.
Should you have any additional questions. Following the call. Please call our Investor line at 95 for 6036, 63, or email <unk> and Cooper Cooper co Dot com.
And now I'll turn the call over to al for his opening remarks.
Thank you Kim and welcome everyone to Cooper fiscal first quarter Conference call. We started this year off on a positive note and we're excited about our momentum we took share and the contact lens market with strength and our silicone hydrogel portfolio led by my day and bio affinity and.
And I Hope your management portfolio continued to strength, including my side growing 82% to $3 million and Cooper surgical posted a very strong quarter with PARAGARD growing 16% and fertility, 10% with both businesses outperforming we delivered robust earnings and cash flow and expect continued strength.
Performance moving forward.
Regarding the quarter and reporting all percentages on a constant currency basis, even with continuing COVID-19 challenges. We posted consolidated revenues of 681 billion with coopervision revenues of $507 million up 1% and Cooper surgical revenues of $174 million up 7% non-GAAP earnings per <unk>.
Share were $3 17.
For Coopervision, we saw strength and our daily silicone hydrogel portfolio, and and and our bio affinity franchise, along with general strength and toric and multifocal by geography. The Americas grew 6% led by strength and bio <unk> and daily silicones, including nice growth from both clarity and my day.
EMEA was down 4% as several countries continued managing through stringent COVID-19 related restrictions, we did see growth and our daily silicones about entity, though so that bodes well for the future.
Asia Pac was up 3% led by strength and my day, especially in Japan overall sales exceeded expectations, and we're well positioned to continue growing and taking share with current and future product launches driving momentum.
Moving to some additional quarterly numbers, our silicone hydrogel dailies grew 8% with both my day and clarity growing particular strength was noted in my day, and especially my day Toric as we continue rolling that product out around the world.
Overall daily Silicones are leading the market right now is health and wellness trends drive adoption and we believe that will continue as there is still $2 4 billion and annual global sales of older hydrogel hydrogel that need to be traded up.
Moving to our FRP portfolio Donaldson and grew 6% with strength noted and barrel affinity and are just and vital affinity toric multifocal I've mentioned these products before but as a reminder, <unk> is a truly unique and innovative lens. They use digital zone optics to help alleviate eye fatigue from excessive screen time and todays.
For all of this product has the ability to perform well and we're seeing that.
And our <unk> Toric Multifocal was launched last year and is doing extremely well. This is a made to order product and part of our extensive offering of unique products that differentiate our business.
Regarding product launches and we remain incredibly active we now have regulatory approval to launch and clarity in Japan, and we'll be doing that shortly and Thats. In addition to our ongoing successful launch of a second base curve for my day sphere and that market. We're also continuing to launch and relaunched <unk> sphere, and toric and many other markets around the world.
We're continuing the rollout of <unk> toric multifocal, including launching in Europe, shortly and we're rolling out extended torque ranges for clarity and <unk>. Additionally, our pipeline is strong and we expect to remain very active going forward and lastly, we're incredibly busy with our myopia management portfolio of my site and order.
Okay lenses, which grew 46 per cent for the quarter to $12 million.
Within this my site grew 82% to $3 million and ortho K grew 37%, including $1 million of revenue from our acquisition of G. G. P specialists from August of last year.
With respect to my site, we now have over 30000 kids around the world wherever lens, including over 2000, and the U S and our momentum is accelerating our launch activity continues to go extremely well and we expect similar success in new markets, such as South Korea, where we'll be launching and the next few months.
We've also made advancements and discussions with several large retailers and buying groups regarding my site and even moved into a test phase with one large retailer for roughly 70 stores. We have also received several awards recently, including from contact lenses spectrum and popular science, and we're making advancements with multiple professional associations.
Hoping to get myopia management and recognize the standard of care and.
And we've made great progress with several universities supporting the training and education of their optometry students as many schools are now, adding myopia management training courses to their curriculums.
From a bidding perspective, if we look at use of data the average age for our new my site, where remains 11 years old and and a positive sign it's trending younger.
Comparing this to the average age of a regular new contact lenses, where 17 shows were bringing kids and the contacts and a much younger age which is fantastic and.
This is all extremely exciting and supports our goal of reaching or exceeding $25 million of <unk> sales this fiscal year and over $50 million next year.
Moving to myopia management, and spectacles I want to touch on our recent acquisition of site glass vision, and our partnership with Us and Laura Luxottica, <unk> vision and developed innovative spectacles to reduce the progression of myopia in children and our joint venture with Essilor Luxottica will leverage our shared expertise and global leadership and myopia management two acts.
Celebrate the commercialization of these spectacles around the world.
We're now working through the typical regulatory requirements to form the JV and we started developing and launch plans and certain markets as we await the two year clinical data, which will be out and the next couple of months.
The <unk> technology is a great complement to our existing myopia management portfolio of contact lenses and working with a great partner like Essilor Luxottica will accelerate growth of the entire pediatric vision marketplace more to for.
Follow on this exciting opportunity as we continue making progress.
To wrap up on myopia management, we're at the forefront of and extremely exciting global pediatric opportunity. This market is in its infancy, but the growth is exciting and having the only FDA approved product and my site has been a game changer, we're continuing to invest.
And sales and marketing programs, and new launches and regulatory approvals and R&D to keep driving adoption on a global basis.
Proactively addressing the progression and myopia and pediatric patients offers immediate visual correction along with many long term health benefits such as reducing the risk of serious eye disease later in life, such as retinal detachment cataracts and glaucoma. So this effort is important and it's why so many eyecare professionals are getting involved and strongly some.
<unk> and this activity.
To conclude our vision, let me add that the continuing rollout of vaccines will definitely benefit us given the consumer nature of our business and the near term, we expect book better foot traffic and retail outlets, especially malls, along with increasing service capacity and better staffing attendance and optometry offices. We also expect a strong.
And back to school season is in person and learning returns around the world.
And a longer term basis, our growth drivers remain strong and are likely improving with the macro trend of people spending more time and electronic devices.
Estimated that roughly one third of the World is currently my Opex and that's expected to increase to 50% by 2050, combining this trend with the continuing shift to daily silicones geographic expansion and growth and towards a multifocal our industry has a very bright future for coopervision, our robust product portfolio active.
Product launch activity momentum with myopia management, and strong new fit data puts us and a great position for long term sustainable growth.
Moving to Cooper surgical and we had a very strong quarter led by PARAGARD and fertility overall revenues were $174 million up a healthy 7% as markets rebounded and we took share and really excited about the state of Cooper surgical right now under the fantastic leadership of Holly and her team and the future looks extremely bright.
Starting with fertility revenue grew 10% year over year to $70 million with strike seen around the world and throughout our product portfolio, we're taking share and we're well positioned for future gains with improving traction and our key accounts.
One of the strength of our fertility business is our broad product portfolio. What's essentially covers the full spectrum of fertility clinics needs outside of pharma products, we've done a great job cross selling and building relationships with a larger clinics around the world and this has resulted in solid growth in areas ranging from consumable products like for pets media and.
And our eye witness, our our RFID lab based management system that I discussed last quarter.
Two equipments, such as incubators and workstations to genetic testing for.
From a market perspective, COVID-19 is still negatively impacting patient flow and some important countries like India are still significantly hampered, but we're definitely seeing a pickup and activity in the meantime, we're taking market share and we expect that to continue.
Overall, the fertility market has extremely positive long term macro growth trends and we're well positioned to capitalize on these trends to drive growth.
Growth.
Sure.
Within our office and surgical unit, we were up 5% led by PARAGARD growth of 16% PARAGARD performed better than expected as patient activity remains strong driven by the positive health and wellness trends, we're seeing and the U S. As the only 100% hormone free IUD and the U S market the product offers a fantastic.
Long lasting birth control option that addresses the needs and interest and women looking for a healthy alternatives were.
We're very bullish on PARAGARD right now and believe we will continue posting solid growth this year.
Elsewhere, we've seen deferred elective procedures steadily rescheduled and our medical device sales have improved.
For all of our focused products grew in the quarter, including Endo <unk> advanced our direct visualization system for evaluation of the endometrium and sore patented surgical skin closure device and our portfolio of uterine manipulators.
Before I turn it over to Brian Let me close by mentioning our efforts to further enhance our strong focus on environmental matters corporate responsibility and good governance, we made great progress over the past several years and we have a lot of exciting things happening today, we just completed and ESG materiality assessment to ensure we stay focused on the right areas.
And my passion and commitment to this type of work remains very strong.
If anyone has any questions or interest and our ESG efforts, please reach out and let's connect and with that I'll turn the call over to Brian.
Thank you al and good afternoon, everyone. Most of my commentary will be and a non-GAAP basis. So please refer to our earnings release for a reconciliation of GAAP to non-GAAP results.
Our fourth quarter consolidated revenues increased 5% year over year for 3% and constant currency to $681 million Consol.
Consolidated gross margin increased 50 basis points year over year to 67, 8%.
This improvement was driven by strength and Cooper surgical with higher margin PARAGARD and fertility consumable products performing extremely well along with favorable currency.
Moving forward, we're in excellent shape to continue delivering solid gross margins.
We completed our manufacturing restructuring activity in Q1, so we're well positioned for the current environment, along with being ready to efficiently ramp up quickly as demand continues to rebound.
We still have absorption related inefficiencies, but we expect those to go away with sales growth.
Opex was up only two 1% year over year as we kept expenses under control.
This resulted in consolidated operating margins of 26, 9% up nicely from 25% last year.
This performance exceeded expectations and we expect to continue posting strong results balancing and expense control against investment opportunities that we see within our business, particularly within myopia management.
Interest expense for the quarter was $6 $4 million, driven by lower lower rates and lower average debt and the effective tax rate was 11, 3%.
Non-GAAP EPS was $3 17, with roughly $49 7 million average shares outstanding.
Free cash flow was solid at $92 million comprised of $148 million of operating cash flow offset by $56 million of Capex.
Net debt increased slightly to $1 7 billion.
Our adjusted leverage ratio decreased to $2, one times with improving EBITDA.
And finally, we repurchased $25 million worth of stock this past quarter at an average price of $357 per share.
In addition to our strong operational performance, we completed several tuck in acquisitions recently.
During the quarter, we acquired embryo options to add a cryo storage software solution to our fertility portfolio, allowing clinics to automate the management of cryo preserved embryos eggs and sperm.
The business did for $7 million and sales last year and added 500000 and revenue and our Q1.
Within Coopervision as Al mentioned, we acquired the remaining 80% stake of site glass vision and January.
For $41 million and cash plus aggregate potential earn out of up to $139 million.
Based on revenue milestones and regulatory approvals.
After the close of the quarter, we entered into an agreement to form a 50 50 joint venture with Essilor Luxottica that we hope to close soon.
Also subsequent to quarter and we closed two more tuck in deals that Cooper surgical.
The first was the G and medical are pre revenue manufacturer of and in office water vapor ablation system that will launch shortly.
And safe obstetrics systems owner of fetal pillow, a balloon device use during C sections to make the delivery less traumatic for the mother and baby.
The business did for $4 million and sales last year, and we repurchased I'm sorry, we purchased it for $52 million and cash plus a potential earn out of up to $14 million.
Before moving to guidance, you'll note in our earnings release that our GAAP earnings were much higher and our non-GAAP. This.
This is directly tied to the tax item I discussed last quarter for coopervision, and <unk> intellectual property and related assets were transferred to the U K and November 2020.
For non-GAAP purposes, we adjusted for this activity and we will continue doing so moving forward.
Moving to guidance, we continue to monitor and evaluate the scope duration and impact of the ongoing COVID-19 pandemic on our operations and financial results.
While we still view resurgence as a significant risk factor our visibility has improved so we are now providing full year 2021 guidance to provide a better feel for our expected upcoming performance, including our anticipated myopia management investments.
The guidance includes consolidated revenues of $2 eight to two eight for a $5 billion of 15% to 17% or up 12% to 14% in constant currency.
With coopervision revenues.
Two point <unk> nine.
And I know a $1 billion to $2, one 2 billion.
13% to 15% or up 9% to 11% and constant currency.
And Cooper surgical revenues of $710 million to $725 million up 21% to 23% or.
For 19% to 22% and constant currency.
Non-GAAP EPS is expected to be and a range of $12 and 90.
And to $13.10.
Lastly on free cash flow, we now expect to approach $500 million this year and.
Operating cash flow improves and capex reduces.
And with that I'll hand, it back to the operator for questions.
As a reminder.
Question for you will need to press star one on your telephone Covid Tiger.
Question Gloucester County, and.
Please limit yourself to ask one question and one follow up please standby and other compile the Q&A last day.
We have our net we have our first question from Larry cash from Raymond James Your line is now open.
Thanks, very much and good afternoon, everyone.
So al looks like single use fear was nicely ahead of the consensus and.
It looks like and doubled sequentially on a two year stack. So.
Whats driving that I mean, obviously I assume it's all silicone hydrogel, but.
And could give some thoughts on what's going on there.
Yes, Larry It is silicone hydrogel driven it goes back to my day, and maybe more than anything I mean clarity is certainly doing fine.
But we were capacity constrained as you know on my day for quite a while and the demand on that product has been really strong now that we're finally no longer capacity constrained.
We're able to launch it around the world the sphere, where getting a toric out around the world.
And just being able to provide the products and high demand product that's out there. So so theres no question My day sphere, and toric and is driving a lot of that strength and.
And if it is it and any specific geographies or again, how you think about that globally.
It is it is global and so we're seeing strength.
And all three regions when it comes to my day.
Okay, Perfect and then I guess the second question is.
Just on on my site I think if I caught this correctly use.
Said relative to this year that you expect to reach or exceed $25 million and over $50 million in 2022, so those seem to be at the margin changes and the guidance.
Certainly now.
More and more bullish on that so I guess the question there is what what what king that into to give you greater confidence and in those numbers and look you did $3 million of of MISO revenue this quarter.
And a lot has to happen to get to 25 or more and the next three quarters. So again what drives that.
Yes, that's a good question I mean, I think part of that is just we're continuing to see an acceleration and interest and activity around the world, including here in the U S. I mean, if you look at $3 million as an example, because of the way.
And again accounted for right I mean, the U S was only about 100000 of that so you can imagine what's coming and the U S market now that we're no longer giving product away for free I mean within.
We're somewhere around 3000, maybe a little bit over 3000 certified centers right now.
And as a activity with the organizations with the colleges with sitters.
Ramping up volumes, we're seeing and having great success with our launches right now and Russia and in Taiwan.
Other activity going on including discussions with retailers and buying groups right now we're looking at figuring out ways to get my site into their organizations to do and more of that.
All manner. If you will so just a lot of momentum and a lot of different areas makes us optimistic and we see that every single month, we saw more of that in February so.
Continuing to move in the right direction with my site.
Okay perfect. Thank you.
Yep.
Next is Larry <unk> from Wells Fargo. Your line is now open.
Hey, good afternoon, and thanks for taking the question and congratulations on a nice quarter here or one on coopervision.
And I'm on my site. So obviously, it's an unusual time out I'd love to hear any color on recent trends and new fits underlying demand and if youre willing to kind of tell us if February.
And to see and improvement through February and if we should if the guidance implies kind of normal seasonality. Your business typically sees coopervision and you know where Q2 tends to step up over Q1 et cetera, and I had one follow up.
Yeah. So.
Typical stuff right I mean, usually Q1 is our lowest in Q2s, a little better and then we kind of accelerate up and Q3 and Q4 I think we have the opportunity we don't have it in our guidance really but we have the opportunity I think for a stronger back half of the year. When you look at back to school activity.
And here in California, as an example kids havent been to school in person and a year. So when you have back to school activity Youre going to have kids not only the kids who would normally be come again.
Having problems and the blackboard so to speak but youre going to have all the kids that should've had it address last year because kids are working on video screens and things that are right in front of their faces now. So I do think that there is a potential certainly for pent up demand, if you will or kind of a boom or something like that with back to school activity being in person.
Right.
And that's on the come and I hope that happens, we're not really counting on that.
And we're trying to build that into our guidance, but we are seeing new fits continue improve demand is there we're seeing that on a global basis, I don't want to get into quarters, but.
For a month, but I mean, I will say February group so.
Coopervision grew in February which was another good positive step and the right direction.
That's super helpful and Al and my site.
And.
Any color on China are the likelihood of China getting approval in 2021 and on <unk>. How do you see this playing out long term.
You guys. Both have other myopia management products can you I know, it's early but can you envision hey.
This JV, you know building, becoming broader over time and with it and in addition to <unk> class. Thanks for taking the question.
Sure.
With respect to China, we're continuing to have conversations and the regulatory front there.
We will see not too much to update on that I mean, still and what kind of say cautious optimism that we get approval at some point here this year, but.
Still some decent work to do on that.
With respect to <unk> and the JV, yes, I mean as far as a great company, we have a great relationship with those guys were starting that and myopia management journey together, if you will they have a spectacle and the market. We obviously have a lot of products and the market between ortho K and my site.
Coming together on site glass vision should be a home run.
Other like mindset of wanting to be really successful there ultimately does that JV expand and include other things potentially we'll see how that plays out I mean right now there's so much activity and we're having so much success that we have our hands full certainly, but if it makes sense if it makes strategic sense and something we would evaluate certainly.
Thanks Al.
Yes.
Next day from Matthew O'brien from Piper Sandler Your line is now open.
Oh, Thanks, good afternoon, and thanks for taking my questions.
I hate to talk about a product that's half of 1% of sales this quarter, but my site gets a ton of attention.
So can you can you bridge us from this three to 25. This year just because you know, it's all going to be domestic right. I mean international is probably not going to contribute a ton I don't think I'm sure Russell will be nice, but can primarily be domestic you've got 3000 people here that are trained and if you do the math, it's like they need to basically put a patient on per month.
And for the last nine months of this year. So can you just give us some more some more color really bridges to the from three up to 25 for the full year and can make us comfortable that you can get there.
Sure I mean, and first of all I would say that.
You know our growth outside of the U S was 80% or so so I mean, you're talking about the vast majority of that $3 million and sales was outside of the U S growing.
And somewhere in the 80 plus percent kind of range.
We're getting good growth here in the Americas, when you look at somewhere like Canada. We're just at the very early stages here and the U S have a lot of the revenue recognition. So we have thousands of kids couple thousand or more aware and the lens right now.
So I think if we continue to be successful here and the U S. That's great and and we will continue to be successful I mean, I see the numbers I see the ramps coming and I see the fittings all the way through February here.
See the revenues moving up nicely, all that kind of stuff, but but I would not diminish outside of the U S. I mean.
Whatever it was $2 9 million and growing 80% and.
And accelerating so that's that's going to drive a lot of the growth.
I'm, sorry, just to be more and more clear I think last quarter. It was $2 5 million and then this quarter. It was $3 million and then I think you said you just did 100 grand and the U S. So sequentially it didnt grow a ton and Thats why im saying.
Domestically is probably going to pick up a ton of the slack. So so again the domestic piece.
And what really pushes that I mean, some of these bulk purchases I don't know what it what it is but really what bridges that.
Oh gosh, yeah, Yeah, I mean, some of that goes to like if you would have just an annual purchases are have sold those products and the U S. It would've been like 600000 and sales or something like that for the quarter. It would've been much much higher. So if you kind of go back and time and you look over it right Youre talking about like for this quarter as an example for us because of the fiscal quarter was <unk>.
November December January and so you can imagine and thats a little bit of a struggle anyway. So that's why our sales are lower are you of optometry offices closed do you have the holidays you have everything going on and you are trying to fit.
And new thing here, So we were pretty happy that the $3 million exceeded our expectations.
That rollout continuing to happen, you're getting docs fit their outfitting patients theyre getting more comfortable about it they're learning about it people around the world are hearing more about it so youre going to continue to progress on that and the 25 is not requiring something crazy right like let's just say it goes to $4 5 million as an example, and Q2 and then it.
[noise] moves up towards 657 million something like that and then.
10, 11, and 12 million and something like that I mean, it's a pretty decent just normal kind of progression as we move through and and we have pretty decent visibility on that to be comfortable around that.
And then.
The next year right the $50 million.
And if we're doing $25 million plus this year, you're definitely become more comparable with a 50, especially when you're comping against haven't given a lot of product away for free.
Okay Super helpful and then.
And is talking about the Halo effect of this are you starting to see any of that I know.
And then my site side, yet, but elsewhere throughout the portfolio I mean, multifocal and were really strong this quarter, just anything that youre seeing so far I mean, the benefit and multifocal anything to call out there.
Yeah, I would say, we're starting to see the early signs of that but but not very much yet.
Yes, and figured out the top of my head, we had like by 20% of Docs, who are fitting my site.
Basically don't fit any coopervision products, yeah. So we're definitely making progress getting in getting to know a lot of these doctors better.
Building relationships and so forth all of that kind of stuff. So I would be really hard pressed to think that we're not going to.
To get synergies so to speak from from my side I wouldn't say, we're getting too much yet because we're really really focused on my site rather than cross selling a lot of other products into those offices right now, but what we will do that.
Got it thank you.
Yep.
Next day from Jon Block from Stifel. Your line is now open.
Great. Thanks, guys.
Good evening, Bryan I'll start with you if I look at Opex I believe the spend the past two quarters, the opex year over year.
Seems somewhat flattish if you actually strip out what's the assumed by my side and spending initiatives. So is that right number one is it sustainable or actually is there so I'm trying to call a temporary benefits due.
Due to suppressed <unk> from Covid that eventually comes back into the Opex structure.
Yeah. Good question, John Yeah, we're happy with the way up ex played out obviously, we're doing a good job controlling expenses.
When we guided last quarter, and we talked about sort of what was going to be driving the guide and I was sort of FX favorability.
Net interest and taxes offsetting one another and so.
The operational beat was strong and when you look at our Opex.
Going forward with respect to the new guidance Theres, certainly obviously going to be my.
And my side spend or myopia management spend and I should say.
And then we're also going to be investing throughout opex as we see opportunities, we're going to be launching products, we're going to be expanding.
Throat throughout the world and and we want to make sure that we're we're we're doing the right things within sales and marketing and promotions and so forth to two to fuel the growth that we see coming so you'll see that kind of tick up a little bit but.
And.
But we're still going to be mindful about controlling costs.
Got it Okay, and then I'll pivot to you on myopia management.
Management.
And even if you're just talking about some other markets internationally outside of the U S and Canada for example, where my side its been out there for at least some time once the year one year two utilization at a practice that you see for my site.
Take the churn and limited on the kids are you experiencing any drops and maybe a sort of a tack on there for <unk> do we think about that ideally is hey, I've got six year old myopic here that might be better for site class and eventually transitions into my sidecar pages, nine and 10 or 11, when they become more self aware. Thanks.
Yeah, Youre right onsite glass right and you get young kids, who are going to want to wear glasses and their parents are going to want them to wear glasses, and they're going to be more comfortable with that or think that hey, my child can't handle contact lenses at this age so I wanted to get them and treatment I need to get them and treatment.
Got more comfortable with glasses, so you're spot on there and then you'll get some of that young.
Young ages 567 years old and you'll probably get a little better that also as you even get into maybe eight 910 year olds and so forth and then kids will want.
<unk> lenses at least that's been our experience so far.
So that's why I keep saying, Hey, I think the combination of those two together is really a powerful tool.
When you look at outside of the use kind of Canada. Some other markets, where we've been selling my site for awhile.
And yes, we're not seeing a lot of dropouts, we're seeing the kids come in and a very significant portion of those kids stay in and continue to purchase supplies after a year.
The one kind of neat thing, we're starting to see and some of those more developed markets, where we've had the product right now for a little while is quite a bit more interest from some of the retailers about looking at it and saying Hey, we want to take some of our retail operations and open up myopia management segments to the stores and so forth. So we want and we want to trial and we want to see if we can.
Really make this work we see these independents have and a lot of success and really grow and you know is there some way we could bring that into our operations. So we're having a lot of those discussions as I mentioned, where we've just entered into a 70 store trial.
To kick some of that activity off and we have a number of other discussions that are going on right now.
Perfect. Thanks, guys.
Yes.
Next is Matthew and mission from Keybanc. Your line is now open.
Hey, good afternoon, everyone and thanks for taking the questions and very nice quarter.
Yeah.
So let's start with with surgical because it seems like that might be one of the bigger changes occurring.
And your business and there seems to be a lot more momentum there.
Just like fits and starts so for.
Five years or so.
Is there an opportunity now or do you see yourself as a.
<unk> above market grower and surgical from here.
Yes.
So short answer and that is yes, we've we've done a lot of work and that business. As you know you know our back office manufacturing distribution.
And we just made a couple of moves.
<unk>, probably got there what 678 months ago or something and it has made some great moves mark Valentine's taken overrun and commercial there.
Some of the other folks who have moved up recently and I'm really excited about where we're at we're taking market share. We're really well positioned I think youre going to continue to hear me talk about taking market share and and better growth I know, we don't spend a lot of time talking about surgical but.
Posted 7% growth for this kind of quarter and doesn't that does without channel fill or anything that's demand on those products and patient flow and so forth and market share gains and that's a pretty damn good quarter that we just had and I would envision more of that coming.
Okay excellent and then.
Another area, which is which is a little bit surprising to me.
You have the Americas book.
Covering outgrowing the Asia recovery in Asia and used to be a consistent double digit grower for you kind of what are you seeing and that market and and and when do you see that getting back to double digit growth.
So could support.
Yeah, it's interesting and Asia.
And that market is going to come back and it's going to come back really strong I really believe that and we're trying to position ourself perfectly for that right. We're getting my we have my day and our Japan, we get the toric Rolling and we got a clarity right that's going to be a great market for clarity rolling out into Japan.
And some of the other countries, we have stuff going on but but.
Still have COVID-19 and and that's one other things right like everybody is kind of like tired of it and I get it I am too like everyone else is but you still have the challenges out there theres a lot of areas within Asia Pac where the optometry offices are and malls right and mall traffic is still really low and that's what I was talking about is vaccine start coming out.
Youre going to see increased foot traffic and places like malls and so forth that's going to help a lot. So I do think we're going to continue to see consistent improvement and Asia Pac because we're starting to see things open up there and we're starting to get a little bit better. So I envision consistent improvement and at some point that market going back to what it was.
Kind of pre Covid, if you will and leading the world in terms of growth.
Thank you.
Yeah.
Uh huh.
Next and.
Tony Petrello and from Jefferies. Your line is now open.
Great. Thanks, and congrats on a strong quarter here, maybe al just to level set us once again on the latest views on the totality of the market opportunity around myopia control I think we and the past spoke about a 5 billion Tam and and now that you have site class vision can you maybe segue.
Meant that between soft contact lens and eyewear and.
And then I'll have one quick follow up.
Yeah, it's a little tough because we're early stage on that kind of stuff I mean, the myopia management market right now and when you start looking at glasses being added into it.
And as well north of $5 billion.
It's going to be a big box and I really believe that I know people go back and forth on the ultimate size, but.
Right now, it's a little a little hard to fine tune, but ultimately it's going to be well north of $5 billion.
That's helpful and then when you sort of think about.
I guess the press you a little bit there eyewear versus a contact lens and the pediatric space. So just.
Some checks we've done suggest certainly Iowa, it could be a little bit easier, but certainly there is a market for both and so do you see one kind of leading the other or do they think growth simultaneously and and then a quick one.
And for surgical would just be we noticed.
And the PARAGARD commercial on again, the other night and then it looks like that may be a new campaign or revived campaign is that now national or is it regional and if it's new what should we expect I guess from a near term bump.
From the <unk>, so sure I think on the contact lens one.
What we're seeing right now and what our surveys are showing is that contact lenses will play a bigger part of the myopia management market than they do in general for vision correction and part of that is certainly tied to the efficacy that we see right you put a contact lens and you're getting the full treatment, 100% of the time right kids can take.
And last is off they can do a variety of things with glasses right. So when you are talking about a treatment you want that full treatment at all times, so our work and our interaction with Optometrists and survey work and so forth shows that.
Youre going to see contact lenses being a greater percent usage and what we're used to seeing.
Having said that I happen to still believe that there is a big part of the market and its going to want to wear glasses and parents are going to be more comfortable putting their kids into glasses.
So that's.
That'll be bigger and Thats, maybe that 60% of the market or something like that ultimately.
And PARAGARD, yes, we're doing some advertising there and there are some new advertising that's coming out nothing I would go.
Go Crazy about for antibody I mean, we've been spending kind of a similar amount of money. The last couple of years and I would expect that again.
In terms of spend which means more dollars flow into the bottom line.
One thing I would say about PARAGARD as we grew.
And we grew about 16% it was a strong quarter I would expect us to continue to have strong growth and we're going to have really strong growth for next couple of quarters, because we really didn't have sales and.
In April and May the.
And the health and wellness kind of trends that we're seeing out there that are helping to drive like daily Si Hy as they're helping to drive PARAGARD also.
So theres more interest out there right now tied to that so we'll see how some of that plays out but at this time I kind of wouldn't lead you to believe anything different from a spending perspective, but but I am optimistic from a revenue perspective, that's for sure.
Thanks helpful.
Next is Chris Cooley from Stephens. Your line is now open.
Good afternoon, and thanks for taking the questions and congratulations on a great start for the year.
Maybe just one for me it looks like crude on from them.
<unk> acquisition.
And I'm just curious there realize youre getting rollin with my site now but.
With I'm, sorry, I said.
The wrong thing there with the side glass acquisition, but with.
That technology, there is the potential to overlay that pattern and all the contact lens just like Youre doing on the lenses blind now are I would assume you will soon be doing all the lenses flying with us or just.
Just thoughts on when we should start to expect to see that from a clinical trial perspective moving forward.
And I've got a follow up for some quotes for Cooper surgical.
Yeah, I won't get too much and the particulars I will say that we are doing a lot of R&D work right now and the myopia management space in terms of <unk>.
Different kinds of contacts and different technology around those contact lenses.
And we're going to have some exciting stuff that we're going to keep rolling out I mean, we're not just by site and done and there's more coming certainly and more technology more intellectual property that we're filing.
Two.
And do our best obviously to put ourselves and the best position possible within myopia management and total and that includes.
Within the spectacle space so.
And that's it more to come on that but we're definitely doing clinical work behind the scenes if you will.
We look forward agreement and then.
And that's just on the Cooper political guidance for the full year range. It's a really strong step up and you do have some acquisitions there.
And the flow and could you just kind of help us bridge.
Kind of from baseline at year end to the that guide when we look at the growth and Cooper surgical how much is.
Shall we say you know PARAGARD versus or base business versus.
The addition through from this most recent tuck ins just want to make sure I'm getting the growth rates correctly. Thank you.
Yeah. So you've got the Q1 beat obviously to ROE and you've got about something like $9 million that will roll in because of the acquisitions.
And then you've got the remaining part is operational upside a little bit more and the fertility side probably than the base business I think base business kind of a lot of net core medical device products, probably low single digits. You got PARAGARD is going to remain strong.
And then fertility is continuing to outperform theres a lot of pent up demand and fertility.
So that's being addressed and when you combine the addressing of that pent up demand thats currently occurring and some of them and some markets and you layer and markets like India and others that are still not open and youre going to continue to get outsized gains and fertility. So that's kind of a combination of things to get there.
Thank you.
Next is John <unk> from Citibank. Your line is now open.
Good afternoon, and thanks for taking the question.
And just a little bit of time that's for sure.
Thank you for a quarter, but how you see the.
Outwear and what I mean by that is over time.
Time, and every year as you've talked about operating margins expanding.
Hi, all.
For a revenue CAGR.
And whenever it might be.
If you were giving on plan and our.
And our appeal.
For which call even.
And the ongoing rate looks like.
That's a good question and I think for the next couple years.
You know as my side kind of moves to that 25% to 50 to 100 to 200 plus.
You're looking at investment dollars associated with that and we will start to get some leverage from that certainly as we start as we move into next year and the following year, but.
That's a high margin product high gross margin that will have high operating margins.
So once that stops being a drag if you will and starts turning to be a positive. The rest of the business is pretty good I mean, you see what's going on with surgical right now that that part of business, becoming a little bigger and it has higher gross margin as a great operating margins that core Cooper vision business.
Has good margins and should continue.
To be solid if you will with and add on from my side. So I think if I was looking out say hey, we're going to the contact lens market is going to come back and go back to its normal 5% to 6% growth I think youre going to see us continuing to take share of that plus myopia management on top of that.
So I would expect some pretty good numbers, if youre doing and now RFP going out for five years.
That's helpful.
And then my next question has to do with mine site.
A lot of questions on this call and that I mean, how would you think about a global launch and how do you think about training and ramping and now.
And we've heard questions already from China, and I'll be it for here in the United States I'm trying to get my head around how you go from you know.
Through that 25 to 50 and so for us yes.
Yep, Yeah, and it's a good question and I mean, when we look at it we almost do it by market. If you will right. So you can see okay, what we're doing and Russia, Russia should be a very large market for myopia management.
Just launched there were and that ramp phase there, we see how well things are going we see how well that fits are going and we can calibrate that back to a place like Canada, where we're having a lot of success and Canada back to Spain, where we're having a lot of success. So we kind of take the numbers that we've already seen in some markets and we say, okay and these new markets.
And they growth similar to what we've seen and other markets. This is kind of what we're looking at and Thats. How we build those those numbers that you are referencing right. The 25% to 50 to 100 is hey, we're just going to continue to perform like we've been performing and spots, where we've launched the product where I think we have some additional upside to that ends up being with these other.
Our retailers and the buying groups because right now youre talking largely independent optometrists, who are really grabbing a hold of this product and really excited about it.
If you start rolling that into some of these bigger retailers are these bigger buying groups and grab a hold of it and want to push it.
And then I think you have upside to those numbers, but but basically to go back to answer a little simply we're just taken our historical success rates and rolling those out.
And that's what we're seeing right, we see that on a monthly basis, and Taiwan in Russia, and here and the U S and and the Nordic region and so forth.
Thank you.
Hmm.
Next Jeff Johnson from Baird. Your line is now open.
Thank you. Good afternoon, guys I think most of the questions I think topics have been covered now, but Brian and then you can just help us does interest expense and tax rate still kind of offset this year is that still the right way to think.
Think about it and what was the currency benefits and the bottom line and the quarter and expected now and the full year guide.
Sure, Yes sure Jeff.
Yeah for the full year I would expect interest expense is going to be down from last year, probably in the neighborhood of 23 million Bucks.
Your tax rate tax rate's going to bounce around a little bit, but I'd say, it's probably going to be somewhere in the neighborhood of 12.5%.
As it relates to <unk>.
FX for the quarter.
Ex to revenues was $15 $9 million and was 20 favorable C. B S.
For the yes and for the year, Brian I'm, sorry, what about 60 cents are still favorable for the year is that about a ballpark range.
That's about right and I'd say, it's kind of a net eight 8% ish tailwind.
And the kind of range.
Okay. Thanks, and then and I guess, one bigger picture question for you, obviously, a lot of positive updates Tonight.
I've got the math right I think you're up relative to <unk> 19, non <unk> 'twenty, but once and 19 you are up about <unk> and CVI up about 5% constant currency when I look at your full year guide.
The next three quarters really youre closer to kind of 2% to 3% is that just relative to 2019.
Is that just conservatism I'm just trying to understand.
We don't flow through at the same kind of for a 5% over 2019 growth rate for the next few quarters or.
Is that kind of the goal but.
You're being a little conservative and the guide thanks.
Yes, good question, Jeff, Yes, Youre right.
We kind of went back and forth a little bit here should we give annual guidance I know a lot of people are now and should we gave a quarter what should we do.
At the end of the day, we feel like we have decent visibility on our business right now and the direction. We're going so we decided to give the annual guidance.
I think that maybe I'll answer it this way when youre, giving annual guidance and Youre still and a pandemic, it's probably prudent to be a little conservative.
Yes.
Alright, thanks, guys.
Yes.
Yeah.
Next is from Robbie Marcus from JP Morgan Your line is now open.
Oh, great. Thanks for taking the question Al I was.
And I feel like I know the answer of this team the results today, but.
And I was hoping you could talk about what youre seeing and a competitive environment.
Across a lot of different med tech sectors, we're hearing that new products switches are trialing isn't really happening at historical rates. So what are you seeing in terms of.
Any impacts from competition.
And then part two of the question just wanted to confirm that.
There is no more manufacturing constraints and how.
How are those products did relative versus your expectations and the quarter on the silicon daily hydrogel.
Sure Yeah, I'll take that second one Robert.
There are no more constrained. So we are out of the woods. If you speak so to speak on that Brian had mentioned and kind of we finished the restructuring activity that we needed to do we've we've ramped up product manufacturing and so for us. So we're in good shape on that and do not have constraints anymore.
Happy to say that.
And the competitive environment, Yeah, you know I mean, you know our space, we have good competitors out there and big guys out there who we go against two are launching products and.
And you all have talked about this and the past we're doing the same I think we're more active than our competitors in terms of our product launch activity and it's interesting because you know you guys have heard about my day for a long time, but but we havent been in a position where we've been able to to put it out there really right we've been capacity constrained and like a my day tour so to us at times.
It feels like its a brand new launch even though it's been around for a little while so yeah. I mean, good competitors with good products and they are doing some good things out there I think we are too and I think for probably a little bit more active and then they are and a global basis, so not too much to add other than that I mean, you go back to pre COVID-19 and the industry.
Grow and the five to six and we were taken a little bit of share and I think that's ultimately where we're where we're gonna go the growth rates are obviously going be a lot higher than that because of the cost, but you know what I mean, the core growth rate is that's kind of what we're looking at.
Great. Thank you.
Yes.
Next from Steven Lichtman from Oppenheimer <unk> co. Your line is now open.
Thank you Hi, guys just a couple quick ones here at the end.
Brian on gross margin and you'd mentioned a number of moving parts looking forward I guess in both and <unk> and for the full year any direction you can provide us in terms of.
Yes.
Where gross margin can go yes.
Sure Steven.
Not too different from from Q1 really.
Youre going to have obviously, FX and product mix it might move around a little bit of manufacturing related absorption.
That's volume driven and so as sales pick up that stuff starts to go away, but I'd say, we'd probably bounce around pretty close to where we landed on Q1.
Throughout the year, probably landing somewhere even in that neighborhood between sort of 67.5% to 68% gross margins.
And once we get through the year.
Got it.
And then al on the daily silicone hydrogel.
My day.
Good day and.
And with Toric and the supply improvement certainly that that's the driver versus say your clarity business, but looking forward. How are you thinking about sort of my day versus clarity do you think.
And they'll sort of be equal contributors looking forward or are you starting to see my day.
Pull ahead, even beyond some of the <unk>.
<unk> catch up.
Yes. Good question you know right now my day has pulled ahead and might a toric is certainly doing very well.
Clarity still growing but but my day is and high demand around the world and especially the toric.
The only thing I would add is Japan's a big daily market.
And the clarity is going to go in there now and that's our usual kind of two tiered strategy, where my day is kind of a more premium product and and clarity will be the mass market daily silicone option, there and and that should do fairly well there. So I would expect that to be kind of quote unquote free growth. If you will for us.
And that marketplace, so clarity growing and it'll continue to grow and I think that'll juice that up a little bit more.
And I don't know if it ends up cash I mean, my take towards doing really well and.
The demand for that is really really strong I don't see that change and so regardless, it's good right I mean at the end of the day, it's kind of a high low strategy with both of them doing well and so.
That's helpful. Thanks, guys.
Yes.
Next is Steve Willoughby from Cleveland Research. Your line is now open.
Yes, hi, there thanks for taking my question.
Al I apologize I think you guys commented on this at all but just wondering I believe last part of you guys talked about that.
And down 10% year over year was wondering how you guys see.
And the strength and quarter and.
What's the potential impact if any that could have as we look out over the next year or two and you think there could be any sort of residual impact from 15 down over a prolonged period of time.
Yes, it's a tough one I think fits up and down and what are your kind of people talk about consumption and so forth.
And in each period is a little unique right now because of what's happened with Covid.
And you could see fit fittings, improving right now so it's a little tough to go back and say look and like calendar Q4, because October November December was so different than the world that we're in today.
We're clearly seeing improvement across the board and that stuff. So.
To me, it's a little hard to answer I think that.
Consumption has been strong I look at it more and a global basis than anything so I don't see too much going on because of that kind of activity I mean, I'm, probably a little bit more optimistic if anything that we're going to see.
And increase in FID activity as kids start the back to school activity all of that kind of stuff that I am concerned about any FID activity over the last three or six months.
Okay, and just one quick one for Brian If you don't mind.
I know, you're giving full year guidance I realize you're not giving quarterly guidance, but why and I was just wondering if you could help us.
With our modeling a little bit given the wild swings and comps.
And how we should think about what.
Absent currency growth could look like over the next couple of quarters here.
Yes, I mean al talked about.
Just the top line, obviously, we expect to see sequential revenue growth I mentioned.
Gross margin is already.
Not going to get into too much detail about about the quarters beyond that.
We gave full year guidance and we'd be it bounce around a little bit, but we'll have strong results, but I'm just going to stick with your guidance.
Thanks, guys.
Yep.
No further questions at this time items I'll call back over to Mr. Al Light.
Great. Thank you operator, and thank you everyone and appreciate the time.
As we've talked about we started the year off really well, where we're optimistic about the future and so forth. So thanks for the time and look forward to talking to you again in three months.
Thanks.
Thank you presenters, ladies and gentlemen. This concludes today's conference call. Thank you all for participating you may now disconnect have a great day.
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