Q3 2021 Cooper Companies Inc Earnings Call

September 2, 2021

[music].

Thank you for standing by and welcome to the third quarter 2021 Cooper companies earnings Conference call. At this time all participants are in listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone as a reminder, today's program is being recorded I would now.

Like to introduce your host for today's program, Kim Duncan Vice President Investor Relations and risk management. Please go ahead.

Good afternoon, and welcome to Cooper Companies' third quarter 2021 earnings Conference call.

On today's call, we will discuss the results and guidance included in the earnings release, and then use the remaining time for Q&A.

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 or regulatory conditions and integration of any acquisitions or their failure to achieve anticipated benefits forward looking statements depend on assumptions data or methods that may be it.

Correct or imprecise and are subject to risks and uncertainties.

That could cause our actual results and future actions of 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 SEC filings, including Coopers 10-K, and Form 10-Q filings all of which are available on our website at Cooper codes Dotcom should you.

Any additional questions. Following the call. Please call our Investor line at 90, 546036, 63 or email <unk> at 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 companies' fiscal third quarter Conference call I'm pleased to report another very strong quarter with record revenues at Coopervision, and Coopers surgical driving record earnings and robust free cash flow Coopervision growth was broad based and led by our daily silicone hydrogel portfolio of lenses and a solid re.

Bound in EMEA.

While our myopia management products also performed really well and of course, we received the exciting news about.

Regulatory approvals for <unk> in China.

Coopers surgical continued posting great results led by fertility and a nice bump in PARAGARD helped by buying activity from a price increase moving forward. We expect core operational strength to continue driving strong performance, even with challenges from Covid and currency with this expectation and the opportunities we're seeing in myopia managed.

Daily Silicones and fertility, we've increased our constant currency revenue guidance for both coopervision and coopers surgical and will maintain our investment activity to capitalize on the potential for incremental share gains as we move towards fiscal 2022.

Moving to third quarter results and reporting all percentages on a constant currency basis consolidated revenues were $763 million with coopervision at $558 million up 20% and coopers surgical at $206 million up 58% non-GAAP earnings per share were $3.41.

For Coopervision, our daily silicone hydrogel portfolio led the way with all three regions posting strong growth.

Strike was noted in our daily Toric franchises, but daily sphere, and multifocal is also performed well.

And in a great sign we've seen a nice uptick in fit data for my day, and clarity, which bodes well for share gains and future growth.

Within the regions. The Americas grew 16% led by my day, and clarity and continued improvement in patient flow EMEA grew a healthy 24% as consumer activity returned in the region and we took share.

We're number one in EMEA and we're seeing the benefits of increasing patient flow. So we will continue investing to support the reopening activity happening in many of the European markets.

Asia Pac grew 18% led by a slow but steady improvement in consumer activity.

For also a significant portion of Asia Pac is driven by Japan, and although consumer activity remained somewhat muted, we're performing well and taking share and we're well positioned to capitalize on future opportunities given our recent product launches.

Moving to category details silicone hydrogel dailies grew 31% with my day and clarity both performing well.

<unk> in particular continues taking share led by strength in my day Toric in all regions.

For our FRP portfolio <unk> continued its solid performance led by bio affinity energetic and bio affinity toward multifocal.

Regarding product expansions in launches we remained very active we're finishing the launch of clarity sphere, and then my days second base curve fear in Japan, we're rolling out by all affinity toric multifocal in additional markets.

We're rolling out an expanded toric range for my day, giving it the broadest range of any daily toric in the World and we're also completing the rollout of extended toric ranges for clarity and bio affinity we've.

We've also started prelaunch activity for <unk> multifocal with the launch with a full launch on target for the U S and other select markets in November.

Feedback on this lens remains extremely positive including from Fitters, commenting that our appetite expert fitting app has the highest success rate of any multifocal onto market.

Recent data shows that over 90% of contact lens wearers over the age of 40 expect to continue wearing lenses with the biggest challenge being finding a good multifocal given the feedback we've been receiving we believe my Dave will be the best multifocal in the market and combined with the fact, its joining an already highly successful <unk> sphere and toric.

We're very optimistic about its success.

Moving to myopia management, our portfolio grew a robust 90% this quarter to $18 million with my side up a 187% to $5 million and ortho K products up 68%.

As the global leader in the Myopia management space our portfolio is the broadest in the industry comprised of my site. The only FDA approved myopia control product, our broad range of market, leading ortho K lenses and our innovative Cyclops vision glasses, we continue targeting $65 million in myopia management sales this year, including my site.

Reaching $20 million.

Regarding my site there was a lot of positive activity. This quarter as we continue capitalizing on our first mover advantage, we received regulatory approval in China, and we're extremely excited about that opportunity. The approval requires the lenses to be manufactured post approval. So we quickly initiated production and packaging implanted.

Seed the market starting in early fiscal Q1 with a full launch in fiscal Q2 of next year.

As part of this we're immediately ramping up marketing efforts and working quickly to ensure the product is positioned for success myopia rates are very high in China. So the market potential is significant as an example, it's estimated that over 80% of high School kids are myopic. So treating children at a younger age is of high importance in the country.

Outside of China, We continue making great progress with our large retailers and buying groups or pilot programs are alive, and expanding and we finally been able to resume in person training in many markets, including in the U S.

We now have over 40000 children wearing my site worldwide.

That number is growing quickly.

Additionally, the average age of a new mine site, where remains 11. So this treatment is bringing children into contact lenses that are much younger age.

Lastly on my site, we did see momentum pick up even more in August including here in the U S. So we're bullish for a strong Q4.

Regarding our other myopia management products, we had a solid quarter for ortho K driven by our broad product portfolio and from the Halo effect, we're seeing with buy side and we continue making progress with our site glass myopia management glasses preparing for several upcoming launches later this calendar year.

We've also submitted our application to the FDA for approval for my site as the myopia management treatment and expect to receive initial feedback within a couple of months and.

In the meantime, as the myopia management market continues developing we're definitely seeing the value of offering multiple options to eyecare professionals. So we look forward to expanding our offerings and availability.

To wrap up on Myopia management, our innovation pipeline is very healthy with eight focused pipeline products, our sales and marketing efforts are proving successful and our focus on leading with clinical data and providing the best and broadest portfolio in the market has us in an excellent position for continued success.

To conclude on vision, our business is doing really well the back to school season as healthy new fits are doing well and we're excited about our existing products and upcoming launches on a longer term basis. The macro growth trends remained solid with roughly 33% of the world being myopic today and that number expected to increase to 50% by 2050.

Given our robust product portfolio, new product launches myopia management momentum and strong fit data we're in great shape for long term sustainable growth.

Moving to Coopers surgical this was an outstanding quarter with record revenues of $206 million.

Fertility in particular continued to perform exceptionally well growing 72% year over year to $83 million.

The strike was seen around the world and throughout the product portfolio, including from consumables capital equipment and genetic testing.

Some areas of strength included growth in media Pipettes needles, incubators and embryo transfer catheters, along with another very strong quarter from our eye witness our proprietary automated lab based lab based management system that clinics implement to maximize safety and security by optime optimizing their lab Pratt.

Mrs.

We're also benefiting from increased utilization of our artificial intelligence based genetic testing platform, which increases the doctor's ability to select the best embryos for churn for transfer.

Similar to last quarter, we're continuing to see COVID-19 impact the market, but share gains and improving patient flow in most countries are driving our results.

Regarding the broader fertility market the global landscape remains fragmented with significant geographic diversity and within addressable market opportunity of well over $1 billion and mid to upper single digit growth. This is a great market for us.

Given the improving access to fertility treatments, increasing patient awareness greater comfort discussing IVF and increasing global disposable income this industry should grow nicely for many years to come.

So overall in fertility our portfolio of market positioning are excellent we remain in a great spot for future share gains with improving traction in key accounts. We're seeing continued reopening activity around the world and the industry has great long term macro growth drivers for all these reasons, we remain very bullish on this part of our business.

Within our office and surgical unit, we grew 50% with PARAGARD up 51% in office and surgical medical devices up 49% for.

For PARAGARD, we implemented a roughly 6% price increase towards the end of the quarter, which resulted in a buy in of roughly $4 million.

This will impact our Q4 performance, but the price increases are long term positive, noting with contracts and reimbursement timing the price increase rolls in over the next couple of years.

Within medical devices, several products performed well, including Endo see advance our direct visualization system for evaluation of the endometrium and our portfolio of uterine manipulators.

To wrap up on Coopers surgical this was another excellent quarter and it was great to exceed $200 million in sales for the first time ever similar to coopervision, we have powerful macro trends supporting our underlying growth and remain confident in our ability to continue delivering strong results.

And with that I'll turn the call over to Brian.

Thank you al and good afternoon, everyone. Most of my commentary will be on a non-GAAP basis. So please refer to our earnings release for a reconciliation of GAAP to non-GAAP results.

Third quarter consolidated revenues increased 32% year over year or 28% in constant currency.

$763 million.

Consolidated gross margin increased year over year to 68, 3% up from 66, 3% with coopervision, posting higher margins driven by product mix and currency and coopers surgical posting higher margins from product mix tied to the significant year over year growth in fertility and PARAGARD.

Opex grew 28% as sales increased with a rebound in revenues along with higher sales and marketing expenses associated with investments in areas such as myopia management.

Consolidated operating margins were strong at 26, 6%.

Up from 23, 2% last year.

Interest expense was $11.0 million and the effective tax rate was 13, 5%.

Non-GAAP EPS was $44.0

With roughly $49 eight average 1 million average shares outstanding.

Free cash flow was very strong at $180 million comprised of $224 million of operating cash flow offset by $44 million of Capex.

Net debt decreased to $6.0 billion.

Our adjusted leverage ratio improved to one five times.

Overall this was a very strong quarter, and we exceeded our financial performance expectations.

Moving to guidance, we continue monitoring and evaluating the scope duration and impact of COVID-19, and its variance.

And while this remains a risk factor our visibility is sufficient to provide the following update to our guidance.

For the full fiscal year, we're increasing our constant currency guidance for both coopervision and coopers surgical and maintaining our non-GAAP EPS guidance.

Specific to Q4 consolidated revenues are expected to range from $730 million to $760 million up 7% to 11% in constant currency with coopervision revenues between 540, and $560 million up 6% to 10% in constant currency.

And coopers surgical revenues between $390 million up eight 5% to 14% in constant currency.

Non-GAAP EPS is expected to range from $27.0 to $47.0

To provide color on this guidance currency moves since last quarter have reduced the benefit of the full year FX tailwind from 3% to two 5% for revenues and.

7% to 5% for EPS.

With respect to Q4, this equates to reducing revenues by $10 million in coopervision and.

$2 million at Cooper, surgical and reducing EPS by <unk> 14.

Coopervision is offsetting some of the impact with expected strength in daily silicone and myopia management sales.

While coopers surgical is expecting continued strength, although incorporating the Q3, PARAGARD buy and a $4 million and hopefully some conservatism regarding COVID-19 <unk> impact on elective procedures.

Consolidated gross margins for the fiscal year are expected to be around 68% with fiscal Q4 gross margin is expected to be around 67, 5% driven primarily by currency.

Operating expenses are expected to be slightly lower sequentially, but similar to fiscal Q3 on a percentage of sales basis as we continue investing in multiple areas such as myopia management and fertility.

Our Q4 tax rate is expected to be around 11%.

And lastly, our free cash flow continues to improve and we're now expecting roughly $550 million for the full year.

And with that I'll hand, it back to the operator for questions.

Ladies and gentlemen, if you'd like to ask a question at this time. Please press Star then one you touched on telephone we'd also like to ask you to please limit yourself to one question and one follow up.

Our first question comes from the line.

Keybanc your question please.

Hey, good morning, good afternoon, guys and thanks for taking the questions.

Our prior to Covid I think you used to give early thoughts on that.

Forward year on this conference call and I'm, just wondering if you would give any kind of any kind of thoughts around how we should think about FY 'twenty two at this at this point given these really strong quarters, you're putting up.

Hey, Matt Good question.

Thought about that.

I have certainly done that in the past.

And I'd love to be able to do that but I'm going to refrain from it just because of what's going on with Covid and the delta variant and so forth.

Still kind of in that.

Quarter by quarter phase to some degree so once we hit December we will give full year guidance and give as much detail as we can at that point, but for now I'll kind of stay away from fiscal 2022.

And then it also looks as if.

Either.

FX is impacting the fourth quarter versus your original guidance, but it also seems like your SG&A is running is running hotter and you are investing.

You know a lot more in your growth driver behind your growth drivers.

Which I think is a positive in <unk>.

But I guess my question is when do we get to a point, where we see more more leverage on the.

The operating line and then.

How do you make sure in this environment, you're hiring the right people given how tight the labor environment.

And how difficult it is to find people.

Yeah, some good questions in there.

The labor market is tight.

Seeing that around right, we are pretty actively hiring right now.

When I look at the areas of opportunity for us.

Obviously investing in myopia management, we're hiring around the world Myopia management specialist and so forth and putting dollars behind product launches, which we have going on and a lot of markets around the world.

It's a struggle in a few markets because of COVID-19 restrictions and so forth, but we're still establishing a presence in a lot of new markets and grow on myopia management and I look at.

Areas like fertility is another good example, where we're investing around the world.

We're doing our best to go out there and recruit top talent who's going to support the business for long term growth and I feel good about our ability to continue to put up gains the.

The other area I mentioned is single use silicones, we're doing well there we're gaining share there we've got products in the marketplace and new products coming so we're excited to invest kind of in that area. When you look at operating leverage.

Look at the two businesses, a little bit differently, and maybe even you would have to dig down operating leverage for something like myopia management next year is when we start getting big enough, we should be in that $100 million range or so for our myopia management portfolio, you start getting to a point, where you're starting to be able to leverage some of those investments and then you do a better job of that.

And the next couple of years.

If you look at something like a fertility as an example, I mean, great global business nice growth big opportunities, but still somewhat small so it's hard to leverage that infrastructure youre going to see the leverage from that come over the years as we continue to get bigger, but suffice. It to say you are summarizing that correctly, we are continuing to vest.

Invest in the business we are seeing.

Share gains and opportunities for incremental share gains so.

We're continuing to invest.

Alright, thank you.

Yep.

Thank you. Our next question comes from line of Jason Bednar from Piper Sandler Your question. Please.

Hey, good afternoon, thanks for taking the questions here al if I could start just first on site in China.

I appreciate the color there, but I'm wondering if you could expand maybe on what the launch in this market looks like beyond just some of the limited and full launch details maybe how many doctors you're expecting to.

We're planning to train.

And really how you are thinking about servicing them this market.

On that note you already use SLR for your ortho K distribution in China. It would seem like might sites just a good natural extension for that relationship is that the right way to think about how you plan to tackle that market at least in the near term and then just relatedly sorry for that series of questions, but you.

New address my site and myopia management revenue targets for fiscal 'twenty, two and maybe how China fits into that thanks sure.

Sure.

When you look at China, it's a little different market than a lot of people probably think when they think about commentary here in the U S and Europe, you've got a lot of markets, where there's independent optometrists are it's heavily driven by chain you certainly get that in China. When it comes to what we would call regular contact lenses. When you were talking about a product like <unk>.

My site treatment products third largely sold through hospitals. So that's what we're going to see from my side is sold through some major major hospital there whether it's a public owned hospital government owned hospital, if you will or a private hospital.

So it's a different call point largely than what you would have for your traditional contact lens business.

You are correct Essilor has a very strong distribution network. There we received the approval on my side, a little bit faster than we were anticipating it. So I would just say we are in.

But it does it just active negotiations right now you should hear something shortly on how we will distribute that product through that marketplace.

To.

To step back a little bit on that as I mentioned on the call. We received the approval the approval does require us to manufacture in.

Package those products everything post approval. So we're very actively doing that right now ramping everything up we will get that product into the market.

Probably kind of in the November December timeframe is when you'll see it really coming in we're supporting that with kind of prelaunch activity right now.

And then we'll have that in the market much more aggressively kind of in the January February time frame. If we look at the 'twenty 'twenty two targets, we've talked about those a decent amount in the past.

I'm more comfortable with the discussions we've had we've talked about that kind of $50 million number for my side next year, we're talking about $100 million Myopia management number we'll firm that up in December when we give the guidance.

Only negative that I've seen on that frankly has been currency a lot of our sales for ortho K my side, our international sales, but outside of that not be more optimistic on our 2022 myopia management growth opportunities.

Okay, Great. That's super helpful and just some sounds like pretty similar to what we talked about in the past there then.

Yes.

On the just real quick as a follow up and related to the myopia management discussion you mentioned eight products. There in the pipeline could you help us understand maybe the cadence of launches not to get too far ahead of ourselves, but just any additional detail on maybe how impactful any of those individual launches could be or.

Any other color there would be great. Thanks, so much.

Yeah, I won't I guess just for competitive reasons at this point get into details on what those products are but there is some exciting stuff that we have and I.

Thought it was worth mentioning eight individual targeted opportunities that we have in there you'll be seeing those over the coming years. So the point is that we have an excellent myopia management.

Portfolio today, right, we're making advancements in each of the areas within their right, we're going to be launching <unk>, we're doing improvements on some ortho K products and launching those and we have a number of things within the soft contact lens side tied to my site.

Rollouts that youre going to be seeing in the coming year.

As a products probably in the coming three years or something like that.

Alright, thank you.

Thank you. Our next question will come from the line of Larry <unk> from Wells Fargo. Your question. Please.

Good afternoon. Thanks for taking the question just one follow up on China, one on the recovery.

So maybe thinking further ahead now on China, I mean, if we look at kind of what <unk> is doing with Astellas to 1000 pairs of day.

<unk> ASP.

Roughly $500 for four for my site in China, I mean it is.

See you know a $100 million in sales for this product I guess my question is could you see this peaking peak sales at over $100 million in say five years, just trying to understand what you think the long term potential is and I had one follow up.

Yes, so we need to let a little bit of that play out.

If we go with Essilor that'll end up being a distributor relationship and then we need to see how that the sales actually work their way through the environment in China for a product like <unk> is very positive and there is very high levels of myopia, because so many children go through hospitals and youre not selling two tons.

Different optometrists, it's a more focused sale.

Because of the clinical attributes of a product like that it can be very successful and what we've seen in a lot of spots is is optometry is due like glasses and they do want to push glasses. This back.

Actually for kids kind of younger than 10 years old, but you also hear pretty frequently from optometrists that I want to get kids into this treatment in contact lenses as soon as I can because their belief is it's more efficacious right you want to have the treatment going all day long kids can take their glasses off do a variety of things whether glasses or contact lenses put emmanuel.

So it's going to be interesting, but I could certainly see.

Our market for my side that would be well north of $100 million Thats for sure.

That's helpful and just one question on how you approached the Q4 guidance and what Youre seeing from the Delta variant.

It does seem like you know when you look at growth for CVI and CSI over the same period in 2019. It does look like the midpoint of the guidance assumes some deceleration so what how much of that is just some conservatism versus what youre seeing.

In different geographies and if you could talk a little bit of color to give you a little bit of color on what you are seeing that.

Helpful. Thanks for taking the questions.

Sure.

I kind of say that we're not seeing too much right now.

Having said that right. If you look at the Delta vary and we all read the same thing right you talk about deferrals of elective procedures that kind of activity has hurt us a little bit when it comes to some of the coopers surgical products as an example in the past.

I don't know if it'll hurt us this time or not.

I think Brian kind of set and are hopefully conservative.

Certainly agree with that commentary.

Coopers surgery on Coopervision, it's somewhat similar you know we've been seeing things continue to approve weather.

Whether you're in Europe, whether youre in Asia Pac Youre seeing things continue to prove the U S kind of came back relatively quickly, but we're still seeing fits improve a little bit in the U S. So we're not seeing a lot of negative news coming out of the Covid Delta variant, yet, but I certainly think it is prudent to be a little careful when youre guiding the number.

And what's going on in the marketplace today.

Fair enough thanks for taking the questions.

Yep.

Thank you. Our next question comes from the line of Andrew <unk> from William Blair. Your question. Please.

Hey, guys. Good afternoon. Thanks for taking the question, maybe just to pivot to fertility for a second and then another strong quarter there.

Really appreciate your comments sort of on the macro tailwind there, but maybe specifically to your business can you just sort of talk about maybe some of the initiatives that you're putting that play there to drive that growth. Thanks.

Yeah, absolutely. So one of the things that I love about our fertility business is over the years, we've built kind of.

The full spectrum of products out of fertility clinic needs. So when we walk into a clinic, we're able to say hey suits that nuts, so to speak from the beginning of the process to the end of the process.

Cooper fertility is here for you and we're able to provide products for you. We don't have pharma so exclude pharma from that but when you think about everything else we have that.

So when a new clinic is opening or when a clinic is getting larger and they're looking at it from a financial perspective of hey, how can we maximize our own profit.

When youre looking at key accounts, we've been very successful in vision when Youre looking at key accounts within the fertility space and the bigger clinics that are out there standardizing things taken advantage of their volume purchases and so forth. It puts us in an excellent position to be able to offer everything. So there is a focus on a variety of things that are geographic expansion because theres no.

New areas out there, we're going into those areas around the world, where youre seeing additional clinics being build out our focus on key accounts trying to expand our relationships with those key accounts.

And then being a top service customer service provider. If you will ensuring that clinics are getting products right. I mean, thats one of the things that's tough and a lot of industries right now as demand for products and supply constraints. We've done a fantastic job that the team is really really killed it in terms of main maintaining our manufacturing and distribution network. So.

There's a there's kind of all kinds of areas I'd love to be able to narrow that down to one but the answer is a little bit more complex there.

But it's kind of a full scale sale into fertility clinics.

Yes, I got it and then maybe just as a follow up there you know obviously I appreciate your comments on sort of the infrastructure that you're building here, but as we think about sort of capital deployment in that free cash flow that you're generating how should we be thinking about M&A and that sort of area moving forward. Thanks.

Yes.

We still have some debt, we're paying down a little bit of debt our leverage is in much better shape than it's been in a long time now and in cash flow is pretty strong.

When it comes to M&A, we will look for opportunities and if we find something we're happy to do it again I'd still say.

The stuff that we're going to look for is it going to be strategic right and I don't mean made ups strategic stuff I mean stuff that if we happen to find deals like the deals we've done you're going to be like I get that that fits in that ortho K company, that's an obgyn medical device company that kind of stuff.

So we will continue to look at those opportunities, but we're also going to the.

Our model those out right and we're careful about that we're not going to run around and overpay for stuff. We are a long term business model here and financial metrics that we need to hit in order to do deals.

Otherwise you get to doing what we're doing and paying down debt and we will look at buying back stock and so forth if the opportunities arise.

Great. Thanks, guys.

Yep.

Thank you. Our next question comes from the line of Jon Block from Stifel. Your question. Please.

Great. Thanks, guys. Good afternoon, hopefully you can hear me I guess, the first one I thought I heard you correctly, saying.

Youre going to pursue our submitted my site as a treatment to the FDA with love a little bit more color in other words, what does that do for you guys is it sort of strengthen the marketing message to the parent or is that also possibly the first step down the road for reimbursement. If you are able to go that route as we think about it more in the out year.

And then I've got a follow up.

Yes.

<unk> already approved basically as a treatment so where their site glasses. The one that were going for right now right to get to get FDA approval for site class and I think that's really powerful to me we get the questions on glasses rightfully. So when it comes to myopia control if.

If we can get approval for site glass then it becomes the only FDA approved.

Myopia control glass option on the market.

It's pretty exciting to me.

We submitted that right now now to be fair right. It took three year clinical data for the FDA approved my side right. We have two year data on <unk>.

Second half is clinical was specifically developed to meet the Fda's clinical requirements.

So the question will end up being that I'm looking at that data, which is good data right do they need three year data or would they be willing to potentially approve that off two year data. So it'll be interesting to see how that plays out but.

It's really a cycle asset I was referring to when I was talking about new approvals.

My Bad I Misheard, you said alternative credit gentlemen, two questions into one so the first one now when I think about your numbers on your myopia management portfolio.

Next year might be going from $20 million of 50. It implies if the overall portfolio go 65 to 100 that you know really the ortho K sort of goes from 45 to 50.

And so maybe just talk through why Wouldnt you sound like that it's growing so rapidly right now the markets. Early do you think there is some cannibalization there. So that's my sort of one big question for screwing up allow US one and then the other one is just the Americas I mean, it was really strong results in CVI, but I was a little bit surprised to see the two year.

Stack stepped down a good amount of America seems to be sort of the best backdrop, when we think about Americas EMEA and APAC. So maybe just some color why the DSL and the two year stack.

Market share is at Delta or is it just lumpy and thanks for your time guys.

Yeah on a two year stack.

I'd say, well, maybe I look at it a little differently, because everybody seems to calculate that a little differently. If you look at kind of the growth over 2019 constant currency growth over 2019 for the calendar quarter tried to do apples to apples, we were up 8%.

So a pretty good number there to try to get down to what's going into the U S. In particular like that's a little harder to get to.

There's a lot of channel inventory and stuff moving around I hear people commented about that we haven't really seen too much of that but I know theres some of that activity around there. So I might just pull that up just to the to the highest level and just say hey on a total basis for calendar Q2 against two calendar Q2 of 2019.

We grew 8%.

You remember, Ken what was the market at four 4% so.

Twice, what the market growth so.

Not quite sure how to answer the U S. Because I don't have all of that data, but we're obviously doing really well against the overall market.

If you look at step back to your Myopia management question.

Youre right in those numbers you look at my side going 20% to 50, you look at kind of what's embedded in there from ortho K, 45% to 50 that would be at a 100 million. So.

Just to be clear.

I continue to say kind of north of $100 million.

Haven't given any more color to that or any granularity on that in terms of the numbers. So I'll wait till December but our ortho K franchise is doing well right. It's growing nicely. It has good momentum we have a really strong team. There are some really smart folks that are driving that business forward. So I continue to remain pretty optimistic on ortho K and no one should read.

Anything into that as as there's cannibalization or anything else because we're actually seeing some of the opposite we're seeing my site, helping our ortho K business. So all good there yeah don't read anything into that.

$100 million right now and make sure you noted as $100 million plus.

Fair enough perfect. Thanks al.

Thank you. Our next question comes from the line of Jeff Johnson from Baird. Your question. Please.

Thank you good afternoon, maybe just following up on John's question. There. So you were calling for some of the calendar versus fiscal numbers.

If I look next fiscal.

Sure.

Full year growth.

I think John was pointing to as well I'm at about five 6% or so if my math anyway for that two year growth in the Americas, New talk about 8% for the calendar quarter one.

It seemed like a pretty.

Pretty big.

D cell in July for that those two numbers to sync up and I can't imagine that happened. So maybe help me with that but then more importantly, when you talked about a 4% market number we know bausch put up 17% Alcon, 16% J&J was at 6% in the calendar to calendar Q2.

Your growth rate in the U S. So im having hard time reconciling to your 4% market growth too. So maybe I know theres. So many numbers floating around but just help us kind of understand kind of how youre getting with some of your numbers.

Yeah, Joe So I'm, just doing calendar Q2 growth against 2019.

So I'm not quite sure right on a constant currency basis, So I'm not sure. All the numbers you are quoting there, but if you go to calendar Q2 again of this year against calendar Q2 of 2019 and look at those numbers on a constant currency basis, that's what I'm talking about when you get down.

To sum of the individual markets.

It can get pretty lumpy and get a little bit more difficult to dig into those details because you do get how are you going to adjust those numbers right. How are you going to adjust for commentary that you hear from some of the competitors about $10 million of channel inventory or this that or the other thing. So I'm just kind of try to pull it up.

John you're asking about kind of market share when I look at it I would say, okay, well what did you grow against.

2019, Q2 at <unk>.

Grew eight and I've got the market growing four.

Okay, just one last one.

Yeah, and just to be clear like we didn't see anything strange happened like going into the one month of July right July was a five month for us.

Yeah, Okay, well, maybe we'll follow up offline with some of those numbers.

And then just on the on the.

<unk> side, we're not going to comment too.

$2 million or $3 million or something like that and the one thing I don't remember honestly 4 million $5 million.

Yes, it's a pretty big sequential step to get the approaching 20 million or close to $20 million, you're now talking about.

And then the run rate you have to kind of continue to accelerate to get to that.

<unk> million next year, so again.

One is China and of that 50 million I was trying to understand your commentary that just gives you increased confidence in the $50 million and two how do we connect the dots just here in the near term on kind of that sequential improvement that's kind of implied over the next few quarters.

Yes. So if we look you are right. So so we do need a solid Q4, so if I look at it we did it we did a touch over three we did a little over four we did a little over 5%.

When I look at August, which was which was a great month for us we've seen that momentum pick up on that.

I'm feeling pretty optimistic about a good Q4, a couple of things maybe to remember if you look at it as an example, Q4 of last year and let's go with the U S market Q4 of last year Youll remember, we gave a lot of fittings away for free remember we weren't we were with a lot of optometrist and said Hey, the first two fittings are free to get you in and then we stopped doing that.

So youre getting.

You are now getting those kids a lot of those kids coming back making purchases. If you will for a quote unquote. The first time the dropout rates are really really low on my side. So all of those children, who went in and fiscal Q4 of last year that quote unquote didn't pay or.

At least we didn't receive money are now pay so not only you're getting the new fit but youre getting all those other kids coming in on top of that and then we've seen a little bit of a momentum pick up in some of the markets outside of the U S. So.

I sit here today, and I kind of look at it and I don't want to get ahead of ourselves on that but Q4 should be a pretty good quarter for my side.

And then China is included for fiscal 'twenty 'twenty two it will be interesting to see how that plays out in terms of stocking in order patterns and everything else that happens but that.

<unk>.

A market like that and the growth opportunities there and so forth make me more comfortable of our ability to hit $50 million from my side.

Okay alright, thank you.

Yes.

Thank you. Our next question comes from the line of Anthony Petrone from Jefferies. Your question. Please.

Great. Thanks, and maybe one just on CVI in terms of back to school.

Obviously that that historically is a little bit of a bump for new fits but the guidance sort of suggests maybe a muted back to school season, So just kind of high level thoughts there.

Follow ups on my side would be one.

An update on trained.

Optometrists, where that number sits in.

And what percent of those are actually actively fitting.

Lenses.

So those would be the two questions. Thanks.

Sure.

And back to school.

It's solid.

The Delta variant is hurting us a little bit there because you are still seeing some activity, where it's hard for optometry offices to staff up enough.

And you're just seeing a little bit of a struggle there thats kind of making it not quite as strong as it could be having said that it's still it's still solid.

When I look at the fit data that's come out I do see the shift moving to daily silicone hydrogel is picking back up you kind of saw that our numbers were a little bit better this quarter when it came to daily Si Hy.

They fit data in particular for clarity.

Clarity in my day was stronger so that was that was cool to see because that's a really good sign.

All of that will bode well as we kind of continue to move forward here. The other thing is when you think about back to school here in the U S. Certainly.

It does run into our fiscal fourth quarter. So we need to see how some of that is going to play out again, hopefully being a little conservative with the Delta variant well, we'll see how that plays out I will say that optometry offices are pretty booked.

You can go to a lot of areas, where you can go right into Manhattan and start asking questions, but there's many other spots around the U S, where youre seeing optometry offices fully booked with appointments out going out several months.

So patient kind of flow through and so forth is really important right now.

If you look at the number of trained optometrists.

I don't have the exact number off the top of my head. It continues to grow more probably on the U S market and we've talked about that in the past you know somewhere around 5000, and well well north of that around the world.

The breakdown gets.

It gets pretty detailed pretty fast in terms of who's fitting in how much they're fitting and what the characteristics are of all the different practices out there.

And then it gets a little bit more kind of alluded when you dig into some of the buying groups and some of the big retailers, where we're doing a lot of activity right now.

They are starting to expand all of their pilot programs and roll out to more stores and so forth. So that's a hard one for me to answer.

Just fall back to the revenues at this point and say hey, the proof in the putting right like if we're going to move to an $8 million quarter. Then we have a lot of people doing a lot of fitting.

Alright, Thanks again, yes.

Yes.

Thank you. Our next question comes from the line of Chris Cooley from Stephens. Your question. Please.

Hey, good afternoon, everyone and congratulations on the record quarter.

Two for me one on the CVI, how it would be helpful. I realize youre not going to give an early look into FY 'twenty, two but help us just to make sure. We're level set correctly in terms of what your expectations are in terms of a return to kind of normality.

In Japan, and how to think about these investments spend as your support all these product launches around the world is this more of a <unk> type phenomenon or is on the investment side is this something that we should maybe think about carrying through.

Majority of physical 'twenty two.

And then just quickly for my follow up on PARAGARD.

In the prior period, there really wasn't much of a channel inventory.

I'm kind of curious one if you're.

Obviously, you had a little bit of a filter with the step up in the U S. P.

Help us think about kind of what the channel looks like right now and overall end market demand I'm, assuming is trending pretty favorably here that gave you the confidence for the 6% step up in the AFP, but any color you can provide around that would also be appreciated. Thanks. So much.

Sure Yeah, Chris Let me, let me just tackle that one first on PARAGARD, Yes, we did do the price increase so we allow a buy in before the price increase so we saw that and we probably pulled in around $4 million into Q3.

So you can expect the Q4 PARAGARD number to be down some because of that.

If I, if I step back and look at PARAGARD, where we're at today and where we're going moving forward are kind of still in that pretty same place that I was.

Pre COVID-19.

Maybe a little bit more optimistic, but I've kind of said, hey, we're going to get somewhere around 4% to 6% growth in that product half coming from price half coming from unit growth.

I would continue to say that right when I look in the outer years I'd say, that's what we're going to see it and then it will move around a little bit but at the end of the day, if we can get that growth and so they put it at 5% in the middle of that if we can get that growth on that high margin of a product.

I'd be pretty happy with that so that's kind of where we're sitting right now with that product. So to me I'll go with respect to PARAGARD.

On AD investments within Coopervision, Yes, we are.

We're hiring some salespeople in different spots around the world I think you mentioned, Japan, we're doing it in Japan, we've got some exciting product launches and things going there.

One of the things that you see you saw this quarter as a matter of fact, right as Europe started to come back and strengthen.

You saw positive results from us because of that.

I believe you'll see the same in a place like Japan, it's been pretty muted, but were strong there were higher and there we're investing there we've launched products there.

If that market, if Japan can start coming back like we've seen in the U S. Like Europe is doing more so right now that's going to be the next positive for US I think that's kind of as that happens thats a next kick for us because it's one of those markets were strong and I know a lot of people like to focus on the U S market.

B in this business, we focus on everything around the world. So we have a lot of strong different markets. When you look at investment activity.

A lot of that ball bets in investment activity frankly is tied to myopia management more than it is everything else I mean, we're hiring salespeople in expanding for our core business, but we would expect to get a return on those investments relatively quickly.

Thank you.

Yep.

Thank you. Our next question comes from the line of Joanne Wuensch from Citibank. Your question. Please.

Thank you for taking my question.

Good evening.

Just a minute or two on coopers surgical I mean, I was looking at the numbers and I was like you've now crossed over the $200 million per quarter, Mark which is pretty impressive could you remind us of the operating margins for this business. How do you think about building it out and does it still fit within the seat Coopers surgical market research for Cooper framework.

Okay.

Yes, we stopped providing operating margins on the business units because of allocation of corporate and everything else, but but there are high that business has strong operating margins and very strong cash flow.

If nothing else you have PARAGARD in there pulling everything up but the fertility business is also a strong margin business, so pretty happy with where that business is in and to me, yes. It fits within Cooper wonderfully.

A lot of medical device businesses that are large that have different.

Products underneath them and different kind of business units and so forth. If you will I think it's just a great fit for us to work together I mean vision runs his business surgical runs their business and from a corporate perspective, when we look at capital allocation and so forth. We try to ensure that we're maximizing returns to our shareholders at the end of the day, we're kind of stewards of.

Investor Capital, if you will and that's.

How we look at it in terms of investing in those businesses right now we're in a great position to be able to invest aggressively in both businesses and pay down debt. So we will continue to do that yet, but I think everything fits together wonderfully under Cooper right now.

Okay.

Lynn.

Operating margin for Cooper.

Try a different question, which is how do you think about overall operating margins and the potential for expansion over the next couple of years, you have to give sort of a three or four or five year goal is there a way to sort of hit refresh on that.

Yeah, I'm still pretty bullish on where operating margins are going to go there. The reason that we haven't talked about that recently is is because of myopia management. That's thrown if you will kind of a wrinkle into things and that that there is such a great long term opportunity there for growth.

We're investing pretty heavily right now so thats, obviously fairly dilutive to our operating margins but.

But I do believe that as we move forward in the coming years and the myopia management business continues to grow youre going to see the op margins on that part of our business really ramp themselves up so at some point, probably I don't know maybe the end of next year at some point.

Ken asked me about that operating margin and putting it back in the presentations and stuff will probably get there.

It's just a matter of getting more comfortable where the myopia management is because right now it's really growth growth growth.

Terrific. Thank you.

Yes.

Thank you next question comes from the line of property Marcus from Jpmorgan. Your question. Please.

Oh, great. Thanks for taking the question.

Two from me out one is when we talked to a lot of.

Doctors.

Bolus of patients.

Fitted for contact lenses, who don't like wearing glasses with Matt is there any way to quantify the benefit of that.

How sustainable you think that is.

Yeah, that's a really interesting one because we have heard the same thing and it's actually come up interestingly now with kids because it was a big deal with adults for a long time for obvious reasons now you have kids like here, everyone in California has to wear masks all the kids do so you have obviously kids with glasses.

I had a coach my daughter's soccer team last night at two girls on the team are like Hey, I didn't know you did contact lenses can we get lenses, because we hate wearing glasses in school so.

I can't quantify that I don't know how big that is but it's definitely that's something that's not only happening here in the U S. But it is happening around the world, where mass are becoming more the norm and frustration around wearing glasses with mass definitely exists I don't know what it is but it's certainly a positive for us.

Alright, and then you had a really good cash flow quarter, and you just talked about and healthy.

Margins within our surgical and good cash flow can you remind us what your priorities are.

The first time in a while where you're a little bit.

Cash how are you planning to spend it.

Thanks.

Yeah, I would kind of go with the same answer probably we've given for awhile.

Default position being paying down debt.

Looking at.

M&A opportunities if they are available and we can find them and they fit strategically it makes sense.

And then share buybacks if.

If the opportunity presents itself and those makes sense, we would we would certainly do that.

Great. Thanks.

Yep.

Thank you. Our next question comes from the line of Rob could tell from Cleveland Research. Your question. Please.

Hi, Good evening I'll start on just August and in the fourth quarter commentary.

It sounds like all your comments your comments are pretty positive myopia is still strong in August not seeing too much impact from delta yet so in terms of the maintained full year guidance is it just the.

FX headwinds.

We should be thinking about it and then there's some conservatism around out there is there anything else that we should be thinking about in terms of.

Potential pressures on <unk>.

No that's really it Bryan had mentioned some of the numbers there with respect to FX.

<unk> taken $10 million away from vision in Q4, and $2 million away from surgical on revenues and a 14 EPS impact.

To me looking at our business and where we are today and the opportunities for share gains and growth and so forth.

Sure.

It didn't really crossed my mind to be honest with you to say Oh I want to cut back on all of the investments and all the good stuff we have to hurdle that 14th FX. Just did now we've been putting up good numbers for a number of quarters here and I envision will continue to put up good numbers.

So there's nothing else to read into that other than FX was a negative for us and we're going to continue to invest and look to take advantage of opportunities right I want to put up pretty good sales growth for fiscal 2022.

Okay got it. Thanks, and then lastly can you quantify where new pits are now across the industry relative to pre COVID-19 levels.

New fits still down in the U S. They've come back quite a bit, but they're still down compared to pre COVID-19 levels.

In all it would be very heavy on a regional basis Europe getting better.

Asia Pac still haven't fits quite a bit lower and excluding.

Excluding China, probably still haven't fits quite a bit lower you still have a lot of restrictions in place and a lot of the markets in Asia Pac.

Causing challenges so yeah pretty heavily dependent on the region you are in the U S probably arguably be in the best.

Got it thanks, so much.

Yes.

Thank you. Our final question comes from the line of Steve Lichtman from Oppenheimer.

Thank you hi, guys al you.

Mentioned your estimated market growth in Q2.19 at about 4%.

Think that hold on a unit basis as well as net price holding flat.

Your view.

It's always hard to look at for units because of it.

Because of the difference between like dailies versus monthly lenses, and so forth, but but I think the core of your question really goes back to price and that's a really good question and that we've seen.

Reising trending higher we had.

Earlier this year some reduction in rebates, you've seen ourselves and competitors take list price up a little bit as we moved into the back to school season here, where traditionally you would probably see a little bit more aggressiveness in terms of some push on back to school pricing you haven't really seen that.

So I would say if youre looking at where pricing is today it's.

Yes.

It's a positive probably kind of a modest modest positive but positive right now.

We will see we'll see where it goes right with inflation with everything else going on in future price increases and so forth, but I would say, it's at least a positive right now.

Got it thanks, and then just.

A couple of quick last one would you be willing to provide us with.

Approximately discrete investment for you.

Management here in FY 'twenty one.

How much of the $5 million.

This quarter. Thanks.

Yes, we're not going to get into that number we were given that for a little while but now we just embedded into our guidance.

The U S was certainly over a million.

In this quarter of $5 million.

Okay got it thanks guys.

Yes.

Thank you. This does conclude the question and answer session of today's program I'd now like to hand, the program back to President and CEO al White.

Yeah.

Great. Thank you. Thank you everyone.

I kind of mentioned this as we went through the call business is looking pretty good and we're pretty excited about where we are and what the future holds for us.

A lot more stuff going on and hopefully we'll have some good news as we move through this quarter and look forward to giving you that update and present 'twenty two guidance on our December call. So thank you everyone for your time and we'll talk soon thanks.

Yeah.

Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.

Okay.

[music].

Yeah.

Thank you for standing by and welcome to the third quarter 2021 Cooper Company's earnings Conference call. At this time all participants are in listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone as a reminder, today's program is being recorded.

I would now like to introduce your host for today's program, Kim Duncan Vice President Investor Relations and risk management. Please go ahead.

Good afternoon, and welcome to Cooper Companies' third quarter 2021 earnings conference call. During today's call. We will discuss the results and guidance included in 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.

Forward looking statements depend on assumptions data or methods that maybe incorrect or imprecise and are subject to risks and uncertainties that could cause our actual results and future actions of 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 SEC filings.

<unk> Coopers 10-K, and Form 10-Q filings all of which are available on our website at Cooper codes Dotcom should you have any additional questions. Following the call. Please call our Investor line at 90, 546036, 63 or email <unk> at <unk> Dot Com and now I'll turn the call over to al for his opening remarks.

Thank you Kim and welcome everyone to Cooper companies' fiscal third quarter Conference call I am pleased to report another very strong quarter with record revenues at Coopervision, and Coopers surgical driving record earnings and robust free cash flow Coopervision growth was broad based and led by our daily silicone hydrogel portfolio of lenses and a solid.

Rebound in EMEA.

While our myopia management products also performed really well and of course, we received the exciting news about <unk>.

Regulatory approvals from my side in China.

Surgical continued posting great results led by fertility and a nice bump in PARAGARD helped by buying activity from a price increase moving forward. We expect core operational strike to continue driving strong performance, even with challenges from Covid and currency with this expectation and the opportunities we're seeing in myopia management.

Yes.

For Coopervision, our daily silicone hydrogel portfolio led the way with all three regions posting strong growth particular strength was noted in our daily toric franchises, but daily sphere and multifocal is also performed well.

And in a great sign we've seen a nice uptick in fit data for my day, and clarity, which bodes well for share gains and future growth.

Within the regions. The Americas grew 16% led by my day, and clarity and continued improvement in patient flow.

<unk> grew a healthy 24% as consumer activity returned in the region and we took share.

We're number one in EMEA and we're seeing the benefits of increasing patient flow. So we will continue investing to support the reopening activity happening in many of the European markets.

Asia Pac grew 18% led by a slow but steady improvement in consumer activity.

For us a significant portion of Asia Pac is driven by Japan, and although consumer activity remained somewhat muted, we're performing well and taking share and we're well positioned to capitalize on future opportunities given our recent product launches moving.

Moving to category details silicone hydrogel dailies grew 31% with my day and clarity both performing well.

<unk> in particular continues taking share led by strength in my day Toric in all regions.

For our FRP portfolio of <unk> continued its solid performance led by bio affinity energize and bio affinity toward multifocal.

Regarding product expansions in launches we remain very active we're finishing the launch of clarity sphere, and then my second base curve fear in Japan, We're rolling out <unk> Toric multifocal in additional markets. We're rolling out an expanded toric range for my day, giving it the broadest range of any daily toric in the world.

And we're also completing the rollout of extended toric ranges for clarity and bio affinity.

We've also started prelaunch activity from <unk> multifocal with the launch with a full launch on target for the U S and other select markets in November <unk>.

Feedback on this lens remains extremely positive including from Fitters, commenting that in our update expert fitting app has the highest success rate of any multifocal in the market.

Recent data shows that over 90% of contact lens wearers over the age of 40 expect to continue wearing lenses with the biggest challenge being finding a good multifocal given the feedback we've been receiving we believe <unk> will be the best multifocal in the market and combined with the fact, its joining an already highly successful <unk> sphere and toric.

We're very optimistic about its success.

Moving to myopia management, our portfolio grew a robust 90% this quarter to $18 million with my side up 187% to $5 million and ortho K products up 68%.

As a global leader in the Myopia management space our portfolio is the broadest in the industry comprised of my site. The only FDA approved myopia control product, our broad range of market, leading ortho K lenses and our innovative site class vision glasses.

We continue targeting $65 million of myopia management sales this year, including my site, reaching $20 million.

Regarding my side, there was a lot of positive activity. This quarter as we continue capitalizing on our first mover advantage, we received regulatory approval in China, and we're extremely excited about that opportunity.

Approval requires and lenses to be manufactured post approval. So we quickly initiated production in packaging and plan to seed the market starting in early fiscal Q1 with a full launch in fiscal Q2 of next year.

As part of this we're immediately ramping up marketing efforts and working quickly to ensure the product is positioned for success myopia rates are very high in China. So the market potential is significant as an example, it's estimated that over 80% of high School Kids are my Opex. So treating children at a younger age is of high importance in the country.

We now have over 40000 children wearing my site worldwide.

That number is growing quickly.

Additionally, the average age of a new mine site, where remains 11. So this treatment is bringing children into contact lenses that are much younger age.

Lastly on my side, we did see momentum pick up even more in August including here in the U S. So we're bullish for a strong Q4.

Regarding our other myopia management products, we had a solid quarter for ortho K driven by our broad product portfolio and from the Halo effect, we are seeing with buy side and we continue making progress with our site glass myopia management glasses preparing for several upcoming launches later this calendar year. We've also submitted our application to the FDA.

For approval for my site as the myopia management treatment and expect to receive initial feedback within a couple of months in the meantime, as the myopia management market continues developing we're definitely seeing the value of offering multiple options to eyecare professionals. So we look forward to expanding our offerings and availability.

To conclude on vision, our business is doing really well.

Back to school season, as healthy new fits are doing well and we're excited about our existing products and upcoming launches on a longer term basis. The macro growth trends remained solid with roughly 33% of the world being myopic today and that number expected to increase to 50% by 2050.

Given our robust product portfolio, new product launches myopia management momentum and strong fit data we're in great shape for long term sustainable growth.

Moving to Coopers surgical this was an outstanding quarter with record revenues of $206 million.

Fertility in particular continued to perform exceptionally well growing 72% year over year to $83 million.

Strength was seen around the world and throughout the product portfolio, including from consumables capital equipment and genetic testing.

Mrs.

Also benefiting from increased utilization of our artificial intelligence base genetic testing platform, which increases the doctor's ability to select the best embryos for sure for transfer.

Similar to last quarter, we're continuing to see COVID-19 impact the market, but share gains and improving patient flow in most countries are driving our results.

Regarding the broader fertility market the global landscape remains fragmented with significant geographic diversity and with an addressable market opportunity of well over $1 billion.

And mid to upper single digit growth. This is a great market for us it's.

It's estimated that one in eight couples in the U S has trouble getting pregnant due to a variety of factors, including increasing maternal age and that more than 100 million individuals worldwide suffer from in fertility given the improving access to fertility treatments, increasing patient awareness greater comfort discussing IVF and <unk>.

<unk> global disposable income this industry should grow nicely for many years to come.

Within our office and surgical unit, we grew 50% with PARAGARD up 51% in office and surgical medical devices up 49%.

For PARAGARD, we implemented a roughly 6% price increase towards the end of the quarter, which resulted in a buy in of roughly $4 million.

This will impact our Q4 performance, but the price increases are long term positive, noting with contracts and reimbursement timing the price increase rolls in over the next couple of years.

Within medical devices, several products performed well, including Endo see advance our direct visualization system for evaluation of the endometrium and our portfolio of uterine manipulators.

And with that I'll turn the call over to Brian.

Thank you al and good afternoon, everyone. Most of my commentary will be on a non-GAAP basis. So please refer to our earnings release for a reconciliation of GAAP to non-GAAP results.

Third quarter consolidated revenues increased 32% year over year or 28% in constant currency.

To $763 million Consol.

Opex grew 28% as sales increased with a rebound in revenues along with higher sales and marketing expenses associated with investments in areas such as myopia management.

Consolidated operating margins were strong at 26, 6% up from 23, 2% last year.

Interest expense was $11.0 million and the effective tax rate was 13, 5%.

Non-GAAP EPS was $44.0

With roughly $49 eight average 1 million average shares outstanding.

Free cash flow was very strong at $180 million comprised of $224 million of operating cash flow offset by $44 million of Capex.

Net debt decreased to $6.0 billion.

And our adjusted leverage ratio improved to one five times.

Overall this was a very strong quarter, and we exceeded our financial performance expectations.

Moving to guidance, we continue monitoring and evaluating the scope duration and impact of COVID-19, and its variance and while this remains a risk factor our visibility is sufficient to provide the following update to our guidance.

For the full fiscal year, we're increasing our constant currency guidance for both coopervision and coopers surgical and maintaining our non-GAAP EPS guidance.

<unk> Coopers surgical revenues between $390 million up eight 5% to 14% in constant currency.

Non-GAAP EPS is expected to range from $27.0 to $47.0

To provide color on this guidance currency moves since last quarter have reduced the benefit of the full year FX tailwind from 3% to two 5% for revenues and.

And 7% to 5% for EPS.

With respect to Q4, this equates to reducing revenues by $10 million in coopervision.

And $2 million at Cooper, surgical and reducing EPS by <unk> 14.

Coopervision is offsetting some of the impact with expected strength in daily silicone and myopia management sales.

Consolidated gross margins for the fiscal year are expected to be around 68% with fiscal Q4 gross margin is expected to be around 67, 5% driven primarily by currency.

Our.

Q4 tax rate is expected to be around 11%.

And lastly, our free cash flow continues to improve and we're now expecting roughly $550 million for the full year.

And with that I'll hand, it back to the operator for questions.

Our first question comes from the line of Matt.

Keybanc your question please.

Hey, good morning, good afternoon, guys and thanks for taking the questions.

Our prior to Covid I think you used to give early thoughts on that.

Forward year on this conference call and I'm, just wondering if you would give any got any kind of thoughts around how we should think about FY 'twenty two at this at this point given these really strong quarters, you're putting up.

Hey, Matt Good question.

Thought about that.

I have certainly done that in the past.

And I'd love to be able to do that but I'm going to refrain from it just because of what's going on with Covid and the Delta variant and so forth, we're still kind of in that.

Quarter by quarter phase to some degree so once we hit December we'll give full year guidance and give as much detail as we can at that point, but for now I'll kind of stay away from fiscal 'twenty to 'twenty two.

And then it also looks as if.

Either.

FX is impacting the fourth quarter versus your original guidance, but it also seems like your SG&A is running is running hotter and you are investing.

You know a lot more in your growth behind your growth drivers.

Which I think is a positive.

But I guess my question is when do we get to a point, where we see more and more leverage on the.

The operating line and then.

How do you make sure in this environment, you're hiring the right people given how tight the labor environment.

And how difficult it is to find people.

Yes, some good questions in there.

The labor market is tight.

Seeing that around right, we are pretty actively hiring right now.

When I look at the areas of opportunity for us.

Obviously investing in myopia management, we're hiring around the world Myopia management specialists, and so forth and putting dollars behind product launches, which we have going on and a lot of markets around the world. It's.

It's a struggle in a few markets because of the COVID-19 restrictions and so forth, but we're still establishing a presence in a lot of new markets and grow on myopia management and I look at.

Areas like fertility is another good example, where we're investing around the world.

We're doing our best to go out there and recruit top talent who's going to support the business for long term growth and I feel good about our ability to continue to put up gains.

I look at the two businesses, a little bit differently, and maybe even you'd have to dig down operating leverage for something like myopia management next year is when we start getting big enough, we should be in that $100 million range or so for our myopia management portfolio you start getting to a point, where you are starting to be able to leverage some of those investments and then you do a better job of that.

And the next couple of years.

If you look at something like fertility as an example, I mean, great global business nice growth big opportunities, but still somewhat small so it's hard to leverage that infrastructure youre going to see the leverage from that come over the years as we continue to get bigger, but suffice. It to say you are summarizing that correctly, we are continuing to vest.

Invest in the business we are seeing.

Share gains and opportunities for incremental share gains so.

We're continuing to invest.

Thank you.

Sure.

Thank you. Our next question comes from line of Jason Bednar from Piper Sandler Your question. Please.

Hey, good afternoon, thanks for taking the questions here.

I can start just first on my site in China.

I appreciate the color there, but I was wondering if you could expand maybe on what the launch in this market looks like beyond just some of the limited and full launch detail, maybe how many doctors you're expecting to.

Or planning to train.

Really how youre thinking about servicing them in this market.

On that note are you already use SLR for your ortho K distribution in China. It would seem like might sites just a good natural extension for that relationship is that the right way to think about how you plan to tackle that market at least in the near term and then just relatedly sorry for the series of questions, but can.

Can you address my site and myopia management revenue targets for fiscal 'twenty, two and maybe how China fits into that thanks sure.

Sure.

When you look at China, it's a little different market than a lot of people probably think when they think about commentary here in the U S and Europe, you've got a lot of markets, where there's independent optometrists are it's heavily driven by change you certainly get that in China. When it comes to what we'll call regular contact lenses when youre talking about a product like <unk>.

<unk> site treatment products third largely sold through hospitals. So that's what we're going to see from my side is sold through some major major hospital there whether it's a public owned hospital government owned hospital, if you will or a private hospital.

So it's a different call point largely than what you would have for your traditional contact lens business.

You are correct Essilor has a very strong distribution network there we received the.

Approve on my side, a little bit faster than we were anticipating it. So I would just say we're in.

But it does it just active negotiations right now you should hear something shortly on how we will distribute that product through that marketplace.

But to.

To step back a little bit on that as I mentioned on the call. We received the approval the approval does require us to manufacture and.

Package those products everything post approval. So we're very actively doing that right now ramping everything up we will get that product into the market.

Probably kind of in the November December timeframe is when you'll see it really coming in we're supporting that with kind of prelaunch activity right now.

And then we'll have that in the market much more aggressively kind of in the January February timeframe. If we look at the 2022 targets, we've talked about those a decent amount in the past.

Only negative that I've seen out of that frankly has been currency a lot of our sales for ortho K my side, our international sales, but outside of that and.

More optimistic on our 2022 myopia management growth opportunities.

Okay, Great. That's super helpful and just some sounds like pretty similar to what we've talked about in the past there then.

On the just real quick as a follow up unrelated to the myopia management discussion.

You mentioned eight products there in the pipeline could you help us understand maybe the cadence of launches not to get too far ahead of ourselves, but just any additional detail on maybe how impactful any of those individual launches could be or any.

Any other color there would be great. Thanks, so much.

Yeah, I won't I guess just for competitive reasons at this point get into details on what those products are but there is some exciting stuff that we have.

I thought it was worth mentioning eight individual targeted opportunities that we have in there youll be seeing those over the coming years. So the point is that we have an excellent myopia management.

Product portfolio today, right, we're making advancements in each of the areas within their right, where we're going to be launching site glass, we're doing improvements on some ortho K products and launching those and we have a number of things within the soft contact lens side tied to my site of Rollouts that youre going to be seeing in the coming.

As a products probably in the coming three years something like that.

Alright, thank you.

Thank you. Our next question will come from the line of Larry <unk> from Wells Fargo. Your question. Please.

Good afternoon. Thanks for taking the question just one follow up on China, one on the recovery.

So maybe thinking further ahead al on China, I mean, if we look at kind of what as far as doing with Astellas to 1000 pairs of day.

<unk> ASP.

Roughly $500 for four for my site in China, I mean it is.

Easy to see you know a $100 million in sales for this product I guess my question is could you see this peaking peak sales at over $100 million in say five years, just trying to understand what you think the long term potential is and I had one follow up.

Yes, so we need to let a little bit of that play out.

That's kind of if we go with Essilor that'll end up being a distributor relationship and then we need to see how that sales actually work their way through the environment in China for a product like <unk> is very positive and there is very high levels of myopia, because so many children go through hospitals and youre not selling two tons.

A different optometrists, it's a more focused sale.

Because of the clinical attributes of a product like that it can be very successful and what we've seen in a lot of spots is is optometry is due like glasses and they do want to push glasses.

Really for kids kind of younger than 10 years old, but you also hear pretty frequently from optometrists that I want to get kids into this treatment in contact lenses as soon as I can because their belief is it's more efficacious right you want to have the treatment going all day long kids can take their glasses off through a variety of things whether glasses or contact lenses put them anywhere.

So it's going to be interesting, but I could certainly see.

Our market from my side that would be well north of $100 million Thats for sure.

That's helpful and just.

One question on how you approached the Q4 guidance and what Youre seeing from the Delta variant.

It does seem like you know when you look at growth for CVI and CSI over the same period in 2019. It does look like the midpoint of the guidance assumes.

Some deceleration so what how much of that is just some conservatism versus what youre seeing.

In different geographies, and if you could talk a little bit or give a little bit of color on what you are seeing that'd be helpful. Thanks for taking the questions.

Sure.

I kind of say that we're not seeing too much right now.

Having said that right. If you look at the Delta vary and we all read the same thing right you talk about deferrals of elective procedures that kind of.

Activity has hurt us a little bit when it comes to some of the Coopers surgical product as an example in the past.

I don't know if it'll hurt us this time or not.

I think Brian kind of set and are hopefully conservative.

Certainly agree with that commentary.

Cooper surgical or in Coopervision, it's somewhat similar you know we've been seeing things continue to improve weather.

On in the marketplace today.

Fair enough thanks for taking the questions.

Thank you. Our next question comes from the line of Andrew <unk> from William Blair. Your question. Please.

Hey, guys. Good afternoon. Thanks for taking the question, maybe just to pivot to fertility for a second and then another strong quarter there. So.

Al really appreciate your comments sort of on the macro tailwind there, but maybe specifically to your business can you just sort of talk about maybe some of the initiatives that you are.

Putting that play there to drive that growth. Thanks.

Yeah, absolutely. So one of the things that I love about our fertility business is over the years, we've built kind of.

The full spectrum of products out of fertility clinic needs. So when we walk into a clinic, we're able to say hey soup to nuts, so to speak from the beginning of the process to the end of the process.

Cooper fertility is here for you and we're able to provide products for you. We don't have pharma so exclude pharma from that but when you think about everything else we have that.

So when a new clinic is opening or when a clinic is getting larger and they're looking at it from a financial perspective of hey, how can we maximize our own profits.

When youre looking at key accounts, we've been very successful envision when youre looking at key accounts within the fertility space and the bigger clinics that are out there standardizing things taken advantage of their volume purchases and so forth. It puts us in an excellent position to be able to offer everything. So there is a focus on a variety of things that are geographic expansion because there is new.

And then being a top service customer service provider. If you will ensuring that clinics are getting products right. I mean, that's one of the things is tough and a lot of industries right now as demand for products and supply constraints. We've done a fantastic job that the team is really really killed it in terms of main maintaining our manufacturing and distribution network. So.

There's a there's kind of all kinds of areas I'd love to be able to narrow that down to one but the answer is a little bit more complex there.

But it is kind of a full scale sale into fertility clinics.

Yes, I got it and then maybe just as a follow up there you know obviously I appreciate your comments on sort of the infrastructure that you're building here, but as you think about sort of capital deployment in that free cash flow that you're generating how should we be thinking about M&A and that sort of area moving forward. Thanks.

Yes.

We still have some debt, we're paying down a little bit of debt our leverage is in much better shape than it's been in a long time now and cash flow is pretty strong.

When it comes to M&A, we will look for opportunities and if we find something we're happy to do it again I'd still say.

The stuff that we're going to look for is it going to be strategic right and I don't mean made ups strategic stuff I mean stuff that if we happen to find deals like the deals we've done you're going to be like I get that that fits in that ortho K company Thats, an obgyn medical device company that kind of stuff.

So we'll continue to look at those opportunities, but we're also going to model those out right and we're careful about that we're not going to run around and overpay for stuff. We are a long term business model here and financial metrics that we need to hit in order to do deals.

Otherwise you get to doing what we're doing and paying down debt and we will look at buying back stock and so forth if the opportunities arise.

Alright, thanks, guys.

Yep.

Thank you. Our next question comes from the line of Jon Block from Stifel. Your question. Please.

Great. Thanks, guys. Good afternoon, hopefully you can hear me.

I guess the first one I thought I heard you correctly, saying.

Youre going to pursue or submit my site as a treatment for the FDA would love a little bit more color or in other words, what does that do for you guys is it sort of strengthen the marketing message to the parent or is that also possibly the first step down the road for reimbursement if youre able to go that route as we think about it more in the out years and then.

I've got a follow up.

Yes.

<unk> already approved basically as a treatment so were their site glasses. The one that were going for right now right to get to get FDA approval for <unk> and I think that's really powerful to me we get the questions on glasses rightfully. So when it comes to myopia control.

If we can get approval for site glass then it becomes the only FDA approved.

Opiate controlled glass option on the market I mean that is pretty exciting to me.

So we submitted that right now now to be fair right. It took three year clinical data for the FDA approve my side right. We have two year data on Psych last site glass sunglasses clinical was specifically developed to meet the fda's clinical requirements.

It's really cycle asset I was referring to when I was talking about new approvals.

My Bad I Misheard yourself alternative credit chairman two questions into one so the first one now when I think about your numbers on your myopia management portfolio next year might say going from $20 million of 50. It implies at the overall portfolio go 65 to 100.

So really the ortho K sort of goes from 45 to 50 or only and so maybe just talk through why Wouldnt you sound like that it's growing so rapidly right now the markets. Early do you think there is some cannibalization there. So that's my sort of one freebie question for screwing up allow us one and then the other one is just the Americas I mean, it was really strong result.

And CVI, but I was a little bit surprised to see the two year stack step down a good amount America's seems to be sort of the best backdrop, when we think about Americas EMEA and APAC. So maybe just some color why the DSL and the two year stack.

Market share is at Delta or is it just lumpy and thanks for your time guys.

Yeah on a two year stack.

We're up 8%.

So a pretty good number there to try to get down to what's going into the U S. In particular like that's a little harder to get to.

We grew 8%.

Do you remember what was the market at four 4% so twice.

Twice, what the market growth so.

Not quite sure how to answer the U S. Because I don't have all that data, but we're obviously doing really well against the overall market. If you look at step back to your myopia management question.

Youre right in those numbers you look at my side go in 2000 to 50, you look at kind of what's embedded in there from ortho K, 45% to 50 that would be at 100 million. So.

Just to be clear.

I continue to say kind of north of $100 million.

We haven't given any more color to that or any granularity on that in terms of the numbers. So I'll wait till December but our ortho K franchise is doing well right. It's growing nicely. It has good momentum we have a really strong team. There are some really smart folks that are driving that business forward. So I continue to remain pretty optimistic on ortho K and no one should read.

Anything into that as as Theres cannibalization or anything else because we're actually seeing some of the opposite we're seeing my site, helping our ortho K business. So all good there yeah don't read anything into that.

Million right now and make sure you noted is a 100 million plus.

Okay fair enough perfect. Thanks al.

Thank you. Our next question comes from the line of Jeff Johnson from Baird. Your question. Please.

Thank you good afternoon Raj maybe just following up on John's question. There. So you were going through some of the calendar fiscal numbers.

Fiscal two.

Full year growth and this was the.

A number I think John was pointing to as well I'm at about 5% or so if my math anyway for that two year growth in the Americas, you talked about 2% for the calendar quarter one.

It seemed like we were back then.

Pretty good.

<unk> in July for that those two numbers the sync up.

Imagine that happens so maybe help me with that but then more importantly, when you talked about a 4% market number we know bausch put up 17% Alcon, 16% J&J was at 6% in the calendar to calendar two year growth rate in the U S.

Over time reconciling to a 4% market growth too so maybe I know theres. So many numbers float around but just help us kind of understand kind of how you are.

Well some of your numbers.

Yes, yes, so I'm just doing calendar Q2 growth against 2019.

To sum of the individual markets.

John you're asking about kind of market share when I look at it I would say, okay, well what did you grow against.

2019 Q2, we.

We grew eight and I've got the market growing four.

Okay.

Got it.

Yeah, and just to be clear like we didn't see anything strange happened like going into the one month of July right July was a five month for us.

Yes, Okay, I think we will follow up offline with some of those numbers.

And final one.

Just on the on the.

<unk> side, we're not going to comment with regard to.

$2 million or $3 million or something like that and the one thing I don't remember honestly $4 million 5 million.

Yes, it's a pretty big sequential step to get the approaching $20 million or close to $20 million, you're now talking about.

And then the run rate you have to kind of continue to accelerate to get to that.

Million next year, so again.

One just China and of that $50 million I was trying to understand your commentary that just gives you increased confidence in the $50 million and two how do we connect the dots with German near term on kind of that sequential improvement is kind of implied over the next few quarters.

Yes. So if we look you are right. So so we do need a solid Q4, so if I look at it we did it we did a touch over three we did a little over four we did a little over 5%.

When I look at August, which was which was a great month for us we've seen that momentum pick up on that.

Feeling pretty optimistic about a good Q4, a couple of things maybe to remember if you look at as an example, Q4 of last year. It let's go with the U S market Q4 of last year Youll remember, we gave a lot of things away for free remember, we were and we were with a lot of optometrist and said Hey, the first two fittings are free to get you in and then we stopped doing that.

So youre getting youre.

You are now getting those kids a lot of kids coming back making purchases. If you will for a quote unquote. The first time that dropout rates are really really low on my side. So all of those children, who went in in fiscal Q4 of last year that quote unquote didn't pay or.

Or at least we didn't receive money are now paying so not only youre getting the new fits but youre getting all those other kids coming in on top of that and then we've seen a little bit of a momentum pickup in some of the markets outside of the U S. So.

I sit here today, and I kind of look at it and I don't want to get ahead of ourselves on that but Q4 should be a pretty good quarter for my side.

And then China is included for fiscal 2022, it'll be interesting to see how that plays out in terms of stocking in order patterns and everything else that happens but that.

<unk>.

A market like that and the growth opportunities there and so forth.

Me more comfortable of our ability to hit $50 million from my side.

Okay alright, thank you.

Yes.

Thank you. Our next question comes from the line of Anthony Petrone from Jefferies. Your question. Please.

Great. Thanks, and maybe one just on CVI in terms of back to school.

Obviously that that historically is a little bit of a bump for new fits but the guidance sort of suggests maybe a muted back to school season. So just kind of high level thoughts there and follow ups on my side would be one.

An update on trained.

Optometrists, where that number sits in and what percent of those are actually actively fitting.

Lenses.

So those would be the two questions. Thanks.

Sure.

And back to school.

It's solid.

The Delta Varian is hurting us a little bit there because you are still seeing some activity, where it's hard for optometry offices to staff up enough.

And you're just seeing a little bit of a struggle there thats kind of making it not quite as strong as it could be having said that it's still it's still solid.

Fit data in particular for.

Clarity in my day was stronger so that was that was cool to see because that's a really good sign.

All of that will bode well as we kind of continue to move forward here. The other thing is when you think about back to school here in the U S. Certainly.

It does run into our fiscal fourth quarter. So we need to see how some of that is going to play out again, hopefully being a little conservative with the Delta variant, we'll see how that plays out I will say that optometry offices are pretty booked.

So patient kind of flow through and so forth is really important right now.

If you look at the number of trained optometrist.

The breakdown gets.

It gets pretty detailed pretty fast in terms of who's fitting in how much they're fitting and what the characteristics are of all the different practices out there.

And then it gets a little bit more convoluted when you dig into some of the buying groups and some of the big retailers, where we're doing a lot of activity right now.

They are starting to expand all of their pilot programs and roll out to more stores and so forth. So that's a hard one for me to answer.

Just fall back to the revenues at this point and say hey, the proof in the putting right like if we're going to move to an $8 million quarter. Then we have a lot of people doing a lot of fitting.

Alright, Thanks again.

Yes.

Thank you. Our next question comes from the line of Chris Cooley from Stephens. Your question. Please.

Hey, good afternoon, everyone and congratulations on the record quarter.

In Japan, and how to think about these investments spend as you.

All of these product launches around the world as it is this.

It's more of a <unk> type phenomenon or is on the investment side. This is something that we should maybe think about carrying through.

The majority of fiscal 'twenty two.

And then just quickly for my follow up on PARAGARD.

In the prior period, there really wasn't much of a channel inventory. So I'm kind of curious one if you're you know.

Obviously, you had a little bit of a filter with the step up in the ASP.

Sure Yeah, Chris Let me just tackle that one first on PARAGARD, Yes, we did do the price increase so we allow a buy in before the price increase so we saw that and we probably pulled in around $4 million into Q3.

So you can expect the Q4 PARAGARD number to be down some because of that.

If I, if I step back and look at PARAGARD, where we're at today and where we're going moving forward are kind of still in that pretty same place that I was.

Pre COVID-19.

Maybe a little bit more optimistic, but I've kind of said, hey, we're going to get somewhere around 4% to 6% growth in that product half coming from price half coming from unit growth.

I would continue to say that right when I look in the outer years, I'd say, that's where we're going to see it move around a little bit but at the end of the day. If we can get that growth say put it at 5% in the middle of that if we can get that growth on that high margin of a product.

I'd be pretty happy with that so that's kind of where we're sitting right now with that product. So to me I'll go with respect to PARAGARD.

On at investments within Coopervision, Yes, we are.

Hiring some salespeople in different spots around the world I think you mentioned, Japan, we're doing it in Japan, we've got some exciting product launches and things going there.

One of the things that you've seen you saw this quarter as a matter of fact, right as Europe started to come back and strengthened.

You saw positive results from us because of that I believe you'll see the same in a place like Japan, it's been pretty muted, but were strong there were higher and there we're investing there we've launched products there.

If that market, if Japan can start coming back like we've seen in the U S. Like Europe is doing more so right now that's going to be the next positive for US I think thats kind of that as that happens thats a next kick for us because it's one of those markets were strong and I know a lot of people like to focus on the U S market.

B in this business, we focus on everything around the world. So we have a lot of strong different market. When you look at investment activity.

A lot of that ball Thats, an investment activity frankly is tied to myopia management more than it is everything else I mean, we're hiring salespeople in expanding for our core business, but we expect to get a return on those investments relatively quickly.

Thank you.

No.

Thank you. Our next question comes from the line of Joanne Wuensch from Citibank. Your question. Please.

Thank you for taking my question.

Good evening.

It's really just a minute or two on coopers surgical I mean, I was looking at the numbers and I was like you've now crossed over the $200 million per quarter, Mark which is pretty impressive could you remind us of the operating margins for this business. How do you think about building it out and does it still fit within the.

Coopers surgical market research for Cooper framework.

Yes, we stopped providing operating margins on the business units because of allocation of corporate and everything else, but but they are high that business has strong operating margins and very strong cash flow.

Nothing else, you add PARAGARD and they're pulling everything up but the fertility business is also a strong margin business, so pretty happy with where that business is in and to me, yes. It fits within Cooper wonderfully Theres a lot of medical device businesses that are large that have different <unk>.

Products underneath them and different kind of business units and so forth. If you will I think it's just a great fit for us to work together I mean vision runs its business surgical runs their business and from a corporate perspective, when we look at capital allocation and so forth. We try to ensure that we're maximizing returns to our shareholders at the end of the day, we're kind of stewards of it.

Investor Capital, if you will and that's.

How we look at it in terms of investing in those businesses right now we're in a great position to be able to invest aggressively in both businesses and pay down debt. So we'll continue to do that yet, but I think everything fits together wonderfully under Cooper right now.

Okay.

You bet.

Operating margin for Cooper.

We're investing pretty heavily right now so thats, obviously fairly dilutive to our operating margins but.

Ken asked me about that operating margin and putting it back in our presentations and stuff will probably get there.

It's just a matter of getting more comfortable where the myopia management is because right now it's really growth growth growth.

Terrific. Thank you.

Yes.

Thank you next question comes from the line of property Marcus from Jpmorgan. Your question. Please.

Oh, great. Thanks for taking the question.

Two from me out one is when we talked to a lot of.

Doctors.

Bolus of patients.

Fitted for a contact lenses to don't like wearing glasses with Matt is there any way to quantify the benefit of that.

How sustainable you think that is.

Now you have kids like here, everyone in California have to wear masks all the kids do so you have obviously kids wear glasses.

I had a coach my daughter's soccer team last night at two girls on the team. We're like Hey, I didn't know you did contact lenses can we get lenses, because we hate wearing our glasses in school. So I cant quantify that I don't know how big that is but it's definitely thats something that's not only happening here in the U S. But it is happening around the world where <unk>.

Mass are becoming more the norm and frustration around wearing glasses with mass definitely exists I don't know what it is but it's certainly a positive for us.

Alright, and then you had a really good cash flow quarter and you just talked about.

Margins with Coopers surgical and good cash flow can you remind us what your priorities are.

The first time in a while where your flush.

Flush with cash how are you planning to spend it.

Yeah, I would kind of go with the same answer probably we've given for awhile.

Default position being paying down debt.

Looking at.

M&A opportunities if they are available and we can find them and they fit strategically it makes sense.

And then share buybacks if.

If the opportunity presents itself and those makes sense, we would we would certainly do that.

Great. Thanks.

Yes.

Thank you. Our next question comes from the line of Rob can tell from Cleveland Research. Your question. Please.

Hi, Good evening I'll start on just August and in the fourth quarter commentary.

It sounds like all your comment your comments are pretty positive myopia is still strong in August not seeing too much impact from delta yet so in terms of the maintained full year guidance is it just the.

FX headwinds.

We should be thinking about it and then there's some conservatism around out there is there anything else that we should be thinking about in terms of.

Potential pressures on <unk>.

No that's really it Bryan had mentioned some of the numbers there with respect to FX.

Taken $10 million away from vision in Q4, and $2 million away from surgical on revenues and a 14th <unk> EPS impact.

To me looking at our business and where we are today and the opportunities for share gains and growth and so forth.

Sure.

So there is nothing else to read into that other than FX was a negative for us and we're going to continue to invest and look to take advantage of opportunities right I want to put up pretty good sales growth for fiscal 2022.

Okay got it. Thanks, and then just lastly can you quantify where new pits are now across the industry relative to pre COVID-19 levels.

New fits still down in the U S. They've come back quite a bit, but they're still down compared to pre COVID-19 levels.

And although it would be very heavy on a regional basis Europe getting better.

Asia Pac still haven't fits quite a bit lower.

Excluding China, probably still haven't fits quite a bit lower you still have a lot of restrictions in place and a lot of the markets in Asia Pac.

Better, causing challenges so yes pretty heavily dependent on the region you are in the U S probably arguably be in the best.

Got it thanks, so much.

Thank you. Our final question comes from the line of Steve Lichtman from Oppenheimer.

Thank you hi, guys.

Al You mentioned your estimate of market growth in Q2.19 at about 4% do you think that holds on a unit basis.

This.

With net price holding flat in.

In your view.

It's always hard to look at for units because of it because of the difference between like daily versus monthly lenses, and so forth, but but I think the core of your question really goes back to price and that's a really good question and we've seen pricing trending higher we had.

Earlier this year some reduction in rebates, you've seen ourselves and competitors take list price up a little bit as we've moved into the back to school season here, where traditionally you'd probably see a little bit more aggressiveness in terms of some push on back to school pricing you haven't really seen that.

So I would say if youre looking at where pricing is today it's.

<unk>.

It's a positive probably kind of a modest modest positive, but a positive right now.

We will see we will see where it goes right with inflation with everything else going on in future price increases and so forth, but I would say, it's at least a positive right now.

Got it thanks and then.

Just a couple of quick last one would you be willing to provide us with.

Approximately discrete investment for myopia management here in FY 'twenty one.

How much of the $5 billion U S.

This quarter okay.

Yes, we're not going to get into that number we were given that for a little while but now we just embedded into our guidance.

The U S was certainly over a $1 million.

In this quarter of the $5 million.

Okay got it thanks guys.

Yes.

Thank you. This does conclude the question and answer session of today's program I'd now like to hand, the program back to President and CEO al White.

Great. Thank you.

Thank you everyone.

So I kind of mentioned this as we went through the call business is looking pretty good and we're pretty excited about where we are and what the future holds for us a.

A lot more stuff going on and hopefully we'll have some good news as we move through this quarter and look forward to giving you that update and present in 'twenty two guidance on our December call. So thank you everyone for your time and we'll talk soon thanks.

Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.

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