Q1 2022 Cooper Companies Inc Earnings Call
Thank you for standing by and welcome to the Cooper Companies' first quarter 2022 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question during the session you'll need to press star one on your telephone.
As a reminder, today's program is being recorded and now I'd like to introduce your host for today's program, Kim Duncan Vice President Investor Relations and risk management.
Okay.
Good afternoon, and welcome to the Cooper Companies' first quarter 2022 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 questions. Our presenters on today's call are al White, President and Chief Executive Officer, and Brian Andrews, Chief Financial Officer.
Sure.
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 acquisitions integration of any acquisitions or their anticipated benefits.
Forward looking statements depend on assumptions data or methods that maybe incorrect or imprecise and are subject to risks and uncertainties.
And so 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 Cooper's Form 10-K , and Form 10-Q filings all of which are available on our website at <unk> Dot com.
Should you have any additional questions. Following the call. Please call our Investor line at 90, 546 year old 3663, or email IR at <unk> Dot Com and now I'll turn the call over to al for his opening remarks.
Great. Thank you Kim and welcome everyone to Cooper companies' fiscal first quarter conference call before I turn to our business. Let me say the escalation of the devastating crisis in Ukraine is top of mind. The events caused great concern for everyone in that region, including our employees partners and their families. Our thoughts are with everyone, who is being affected and we.
Certainly hope peace prevail soon.
Moving to our business I am pleased to report a strong start to the fiscal year led by a fantastic quarter Coopervision and another solid quarter at Cooper surgical with envision our daily silicone hydrogel and myopia management portfolios continued posting strong results leading to share gains around the world within surgical our fertility business posted.
Great numbers and the integration of generate life Sciences is going really well with that business off to a fast start as part of Cooper.
We also recently announced the pending acquisition of <unk> Medical's reproductive health business, which will be a great addition to our surgical franchise.
Regarding our first quarter financial results consolidated revenues were $787 million with coopervision at $561 million up 11% I think Cooper surgical reaching a new all time high of $226 million up 30% non-GAAP earnings per share were $3 24.
Moving to the details and reporting all percentages on an organic basis.
Our coopervision growth of 14% was strong and diversified we grew nicely in all product categories, <unk> Toric and multifocal and all three regions posted great results with the Americas up 8% EMEA up 17% in Asia Pac up 19%.
This resulted in nice share gains and we remain well positioned to capitalize on the reopening of economies around the world as Covid subsides.
All of this is driven by our multifaceted commercial strategy that we began deploying years ago, which has proven to be extremely successful. This includes a consistent cadence of launching new products and product extensions around the world, providing customers with market, leading flexibility through our customized solutions executing on our key account relationships and.
Delivering fantastic customer service.
We're continuing these efforts while also enhancing our business through sales force expansions and targeted marketing and infrastructure investments.
Regarding products, our daily silicone hydrogel lenses, my day, and clarity posted strong results growing 25% daily.
Daily Silicones continue to lead the market and we offer the broadest portfolio of products to meet customers' needs. This includes <unk>, our premium offering which is available.
In a sphere toric and most recently a multifocal and speaking of the multifocal. The launch is going incredibly well the feedback from eye care practitioners regarding use of our breakthrough binocular progressive fitting system that simplifies the fit process, while providing optimal visual acuity at all levels has been fantastic and we're continuing to risk.
The feedback from patients and my day provides the best multifocal they've ever worn for exceptional near intermediate and distance vision. This success is having a nice halo effect on our already successful <unk> towards and spheres. So we remain very optimistic about this brand.
The other brand in our daily silicone hydrogel portfolio clarity. This lens is also available as a sphere toric and multifocal and is sold as more of a mass market product. We've seen nice growth with this brand, especially in our Asia Pac region, where we just posted an extremely strong quarter.
For our Frp's, we reported another solid quarter of 10% growth for ovarian bio affinity our silicone hydrogel two week and monthly lenses. This was led by <unk>.
Improved product availability and our unique offerings, such as <unk> toric multifocal and energize the most innovative product in the monthly space <unk>.
Finish on products, we're continuing to see nice strength in toric and multifocal as we expand parameter ranges and increased availability around the world. When you combine this with the success, we're having in key accounts, it's resulting in nice share gains and we expect that to continue.
Moving to myopia management, we posted revenues of $20 million and within that <unk> grew 172%. This growth rate was an acceleration from Q4, which is impressive given the general market challenges around new fits overall as a global leader in the myopia management space our portfolio is the broadest in the industry.
<unk> the only FDA approved myopia control product, a broad range of market, leading ortho K lenses and our innovative site glass vision glasses for my site, we're continuing to make progress around the world, including in China, where we're preparing for a broader launch with our partner <unk>. Our team in China is strong and our advisory board of key opinion.
<unk> that are affiliated with hospitals, representing over 50% of myopia management contact lens volume in China has us positioned for success in a market where childhood myopia rates are estimated to be over 80% and we're reducing myopia is a priority for the government.
Lastly on <unk>, our industry, leading seven year clinical data has been getting a lot of exposure as it highlights at my site works for nearly all myopic children. It cuts myopia progression by roughly 59% on average it works at any age a child starts treatment. It works for as long as the child wears that and there is no rebound if treatment is stopped.
Yeah.
Moving to site glass myopia management glasses, following our co launch in the Netherlands with Este Lauder in November we started early launches in additional markets, including the U K and Canada within Canada, We've launched the product under the <unk> name, which is an exciting step in combining our myopia management glasses and contact lenses under one <unk>.
<unk> name we've.
We've also accelerated activity in China and plan to launch the product later this fiscal year.
To conclude on myopia management.
Our momentum is strong and we're still targeting roughly $100 million in sales for this fiscal year.
To wrap up on Coopervision for calendar Q4, we estimate the global contact lens market grew 10% with coopervision growing 16%.
Within this COVID-19 related challenges did negatively impact optometry offices around the world and combining this with heightened patient demand as myopia rates continue to rise is resulting in many eyecare offices, having full calendars of appointments.
This demand is great, but it's still impacting fit activities such as in the U S, where new fits are still roughly 8% below pre COVID-19 levels.
Having said that progress is being made and we expect to continue seeing positive trends as COVID-19 subsides and economies around the world reopen when people returning to the office and becoming more active in social settings.
Meanwhile, long term macro growth trends remain intact with roughly one third of the world being myopic today and that expected to increase to 50% by 2050.
For Coopervision, we have a robust product portfolio ongoing product launches a fast growing myopia management business and our fifth data remains strong. So we are we remain very bullish on our business.
Moving to Cooper surgical we're extremely busy integrating generate which we just closed in mid December in the meantime, we had another strong quarter with organic growth of 9%.
Before getting into the details let's cover generate we recognized roughly $34 million of revenues in the quarter. As this was a stub period with only roughly one five months of revenue.
Of this $23 million wasn't a stem cell storage and $11 million in fertility. It's.
It's tough to get exact growth rates for a stub period, but growth for the business for the full equivalent fiscal quarter with 10%.
Moving to our fertility business, we posted sales of $97 million up a very healthy 27% when excluding generate and the small acquisition of embryo options from last January .
Strength was seen on a global basis and throughout our product portfolio, including from consumables capital equipment and genomics.
Within our office and surgical unit, we posted sales of $129 million up 24% as reported but down 3% when excluding generate in other acquisitions. This was due to the negative impact of Covid on sales of PARAGARD as well as certain surgical products, having said that we did see growth in many areas such as our.
<unk> surgery closure products in our acquired businesses grew nicely, especially fetal pillow and our labor and deliver area, which grew 160%.
Based on current trends, we expect the office and surgical sales to improve in Shaw show organic growth in Q2.
To wrap up on Cooper surgical let me touch on some market information for fertility were largely back to pre COVID-19 levels. Some markets like the U S are stronger while others outside the U S are still dealing with COVID-19 related challenges, but net net the market is in a good place. This industry continues to grow nicely and we estimate our addressable market is approaching two.
$1 billion with 5% to 10% long term annual growth.
It's estimated that one in eight couples has trouble getting pregnant due to a variety of factors such as increasing maternal age and that more than 100 million individuals worldwide suffer from infertility, given the improving access to treatments, increasing patient awareness greater comfort discussing IVF and increasing global disposable income we expect.
This industry to grow nicely for many years to come.
Within office and surgical as mentioned earlier, we expect growth to return in Q2 as the market fundamentals are improving.
To summarize this was a really strong start to our fiscal year coopervision posted a great quarter, and we're well positioned to continue delivering success with the best team in the industry and the broadest product portfolio in the market. Our fertility business is growing nicely and taking share and that generate business is integrating really well with some exciting potential as we incorporate stem cell story.
Age into our labor and delivery product portfolio 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.
First quarter consolidated revenues were $787 million up 16% and up 13% organically.
Consolidated gross margin decreased year over year by 90 basis points to 66, 9% driven primarily by currency, but also lower sales of PARAGARD, partially offset by lower manufacturing costs at coopervision.
Operating expenses grew 19% to 42, 3% of revenues with the addition of generate and higher investment activity.
Consolidated operating margins were 24, 6% down from 26, 9% last year due to the negative impact of FX and higher investing.
In addition, we did see higher freight and secondary handling and distribution costs within cost of goods and opex.
And expect us to continue although price increases are helping to offset the impact.
Interest expense was $6 6 million in higher average debt, partially offset by lower interest rates.
The effective tax rate was 13, 3% higher primarily due to the generated acquisition.
non-GAAP EPS was $3 and 24 with roughly $49 9 million average shares outstanding.
FX negatively impacted us by 37 in the quarter, which was <unk> <unk> worse than we forecasted at the time of our last earnings call.
Free cash flow was solid at 109 million comprised of $166 million of operating cash flow.
Offset by $57 million of Capex.
Net debt decreased by $1 6 billion to $3 billion, driven by the acquisition of generate and our adjusted leverage ratio increased to 271 times.
During the quarter, we repurchased roughly 191000 shares of the company's common stock for $78 $5 million.
At an average purchase price of $4 10, 41 per share that's $110 41 says.
Roughly 256 million remains authorized for repurchase under our program.
Moving to guidance, we've updated our numbers to reflect our outperformance in Q1 the.
The addition of generate new currency rates and the assumption of a 25 basis point rate increase by the fed next week.
Prior to the Russian invasion of Ukraine. This would have meant the midpoint for EPS would have been roughly <unk> 35.
But currency has moved significantly against us over the past week.
We are increasing prices to offset the negative impact and hopefully the currency moves are temporary.
While we're taking a conservative approach and fully incorporating negative currency into our guidance, noting that the scope degree and duration of the crisis on the global economy is an evolving risk.
With this the new consolidated revenue range is three to six one to 3.329 billion up six five to eight 5% organically.
Within this coopervision revenue guidance is $2 to 2122 264 billion.
Up 7% to 9% organically.
Cooper's surgical revenues are expected to be between one dollar or I'm.
I'm, sorry, one four and $1 <unk> 5 billion up 35% to 38% as reported or 5% to 7% organically.
non-GAAP EPS is expected to be in the range of $13 70 to $14 20.
We estimate interest expense around $42 million, which assumes a 25 basis point rate increase remembering that $1 billion of our debt is fixed.
Is at fixed rates.
We estimate the full year tax rate to be around 14%.
Regarding currency on a year over year basis, the negative FX headwind is now roughly three 5% to revenues and roughly 10% negative impact to EPS.
Note. This guidance does not include our pending Cook medical reproductive health acquisition as the transaction has not yet closed.
Regarding Cook, we announced this acquisition on February 748 hundred $75 million.
This is a really nice strategic fit as they manufacture and sell minimally invasive medical devices focused on their fertility and gynecology markets.
With this acquisition will be improving our international fertility footprint, especially within the Asia Pac region.
And we will be adding highly synergistic and respected labor and delivery medical devices.
From a financial perspective, this business had roughly $158 million in sales in calendar 2021 and.
And we expect long term growth in the range of 5% to 9%.
Additionally, we expect year, one non-GAAP EPS accretion of roughly 60.
For more information please visit our IR website, where there is a presentation.
In summary, we're pleased with this quarter's performance and believe our momentum will continue driven.
Driven by strategic investments in both businesses that will support share gains and durable long term revenue and earnings growth.
And with that I'll hand, the call I'll hand, it back to the operator for questions.
Certainly ladies Lynn if you have a question at this time. Please press Star then one we ask that you. Please limit yourself to one question and one follow up you may get back in the queue. As time allows our first question comes from the line of Matthew <unk> from Keybanc. Your question. Please.
Hey, good afternoon guys.
Just first on the <unk> acquisition, I mean, it's a little bit difficult because you guys have been guiding.
Right before closing an acquisition and then having update and will you have to do the same thing again.
When cooks vs.
First.
Can you give an update on when do you think that might close.
And then given 60 in year, one, but it's probably going to be has in house.
How should we phase that that first half of year, one versus the second half of the year one.
Yes.
No update on.
Now we're working through the regulatory approval processes right now we have here in the U S. And then some work counsels and stuff in Europe . So I'd note no real update on that with respect to the 60, when we do close.
That should be pretty stable, if you will not a lot of seasonality in that business. So are you.
Could almost say 15 cents a quarter is probably a easy way to look at it but yeah, we seem to be closed and he's in the middle of the quarter, which which I appreciate it makes things a little bit more different difficult.
Excellent and then the second question is just on phasing of Coopervision, you really had an excellent quarter.
In the first quarter.
<unk>.
Okay.
But as I look at my previous history prior to Covid.
Second quarter is usually above the first quarter seasonally speaking.
Is there any reason why that shouldn't be the case this year and then if that.
<unk> is better than <unk>, what would be driving the second half deceleration in the growth.
Yes, that's a good question.
That Q2, if we look at coopervision.
Is going to end up being fairly similar to Q1, which is different than it usually is because usually Q2 is a little bit stronger.
We did see a nice rebound in activity certainly in Europe , and Asia Pac we didn't get stocking. It was just the increase in activity. So that was a good sign.
We had some good trends going.
The situation with Russia, and Ukraine, and how that impacts Europe's a little bit of a question Mark right now and then the impact of currency I mean, we've added situation here, where basically the dollar has strengthened against all currencies across the board. So.
That's obviously taken a bite out of our earnings and out of our revenues. So we will see how that plays out, but but I think that the.
This quarter I'll be meeting this quarter, meaning fiscal Q2 will be somewhat similar from a revenue perspective for coopervision as Q1.
I appreciate the color. Thank you.
Thank you. Our next question comes from the line of Larry Mutual Fund from Wells Fargo. Your question. Please.
Good afternoon, and thanks for taking my question and congrats on a strong quarter here.
Just to follow up on that last question.
You grew so CVI. It's the same question for CVI and CSI, So 14% organically in Q1, the guide implies 5% to 7% for Q2 to Q4, the same thing for CSI, 9% growth organically.
And again Q2 to Q4, it looks like implied about 5% to 7% the math Bryan I'll correctly on the math, but obviously it implies a pretty steep deceleration.
So so far.
That's a mechanic. So I guess my question is how much are you baking in for Russia, and Ukraine, and all of those businesses and is there anything else that might be leading to that deceleration.
Yes, so the way I look at it ends up being more on a comp basis I mean, we're starting to be in a situation here in 2022, where we're comping against a more traditional if you will marketplace, where we didn't have a lot of those the COVID-19 swings of the COVID-19 weaker quarters. So when I look at for instance, the contact lens market and I think about something in that.
Maybe it's 4% 6% growth.
Kind of a range and we're at the high end of that or arguably.
Arguably go a little bit above that but.
But then I do ratchet it back and kind of think a little bit about what's going on around the world with supply chain and trade disruptions and that type of activity and try to incorporate a little bit of that so Brian and I were just talking about that.
Tough tough tough timing.
With what's going on obviously in the world right now to try to incorporate the guidance on that so I certainly hope that we're being a little conservative on that guidance.
But for right now I think is probably pretty reasonable.
In other words, there I mean, one kind of takeaways I don't want to imply in any way that our business isn't strong that theres not great momentum because there was what we saw in Q1.
Continuing in this quarter, and we feel pretty optimistic about things across the board, but a little bit more conservative certainly based on what's transpired over the last week.
And just for my follow up Al maybe I'll ask about.
Site class.
Whats the timing on the approval or launch in China.
And then in the U S. What's your expectation how do you feel about approval in.
In 2022, thanks for taking the questions.
Sure, Yes, sequester in the U S. I think we're in a situation here where.
Well, just wait and we will give the three year data. So we've been having some conversations.
With the FDA about approval for that but we're closing in on a point, where we'll get the three year data and a couple of months be able to pull that together and submit that to them. So I think I'd still optimistic that we'll get something during 2022, but my guess is it's probably more towards the latter part with.
With respect to China TBD on the data that you don't have the same regulatory restrictions there that you do here. So it's a matter of working out the agreements with SLR and lining up the distribution and so forth on that so I do think that that when it happens, but I'll hold back for right now at least on the on the timing of that one.
Al.
Yes.
Thank you. Our next question comes from the line of Jeff Johnson from Baird. Your question. Please.
Hey, Thanks, good afternoon guys.
Want to go back so so if we're talking.
Sequentially stable CVI revenue in the fiscal Q2 with Q1 you'd be talking probably a little north of double.
The whole digit organic growth for CVI and this quarter is that you are a month and you obviously see what's going on in your numbers that you feel good with that just want to make sure I understand that.
I'm looking at Brian I know Youre talking about.
In Q2 organic growth.
My model works, if I go to 561 million CVI in the second quarter, that's probably right around 10% 10, 5% organic CVI growth I think unless my model squarely.
Yeah.
Uh huh.
I think youre right yes.
That's about right.
Okay. So it wasn't a quick question I just wanted to sure my math.
Right, Okay, we did yes.
No that's right, Jeff I'd, just look I, just pulled issue that youre right.
Okay, and then just on the my day.
Multifocal, especially I mean, obviously, we've been getting good feedback here in the U S. But just talk to us, maybe where where is that lens that from a global launch standpoint, where the tailwind is coming over the next few quarters from that launch and just how to think about my day multifocal.
Yeah, that's a really good question because that product is doing really well.
As you know there is some competitive products in the marketplace that have been launched so we've been really happy with the reception of that.
We obviously have it in the U S and still launching it we did launch it in some other of our larger markets around the world, but there are still numerous markets to launch into and we still have to finish launches. If you will in a number of markets, including rolling out more fitting sets and so forth here in the U S. So.
We're going to continue to put up strong <unk> multifocal growth through the year I would imagine every earnings call.
Have me make this statement of around that based on the momentum that we have right now.
Understood. Thank you yes.
Thank you. Our next question comes from the line of Chris Pasquale from Guggenheim. Your question. Please.
Yes, thanks, guys congrats on a great start to the year.
Al.
Left to do before you transition to the full my site launch in China, and how you're thinking about the ramps there.
Yeah, So there's a big conference.
Kind of in the end of March timeframe into the beginning of April .
It's just a big optical conference in China. So that's really the target. So the product is available now we're starting to launch the product get it into.
Hospitals, and so forth docs are getting their hands on it certainly.
We've done seminars and other things the true Big launch if you will will be at that optical conference. So.
No delays no problems no issues nothing along those lines I, just think that it will really get rolling towards the end of this fiscal quarter and then in the back half of our year.
Okay, and then I don't think I heard a parrot guards revenue number could you just give us how that performed in the quarter.
Yes, it was down 10% down.
Down 10% yeah.
Is that just related to some of the issues with getting patients into office as you think or was there something mechanical around.
Purchasing.
No I think it was well it was foot traffic, we had heard some of that commentary from some of our competitors and I would agree with that that's what we've kind of seen because we haven't seen anything else associated with that.
Based on current trends here when I look at just what's going on how January went and how February is in our expectations.
Just to be back to posting growth here in Q2 on that one, but but I do think that that was due to two things one was staffing shortages associated with Covid and then the other was just some reduced foot traffic. If you will due to AUM a crime related issues.
Perfect. Thanks.
Okay.
Thank you. Our next question comes from the line of Jon Block from Stifel. Your question. Please.
Thanks, guys. Good afternoon, maybe for CVI to start out I think to kick off the year of your fiscal year you were talking about.
Market growth of 4% to 6%.
CVR, we're going to grow 6% now I believe up at <unk>.
Kevin Hern died for CVI.
Love your thoughts on the underlying market in other words is there.
That moved up as well or is it just sort of your share gains that have expanded and when we think about the extra 100 bps for CVI. What do you attribute that to how much of that is price that I believe you alluded to that you're taking to help offset some of the FX movements.
Yes, so basically what we did there was took the 6% to 8% guidance that we had beforehand, we increased it to seven to nine to reflect the strong performance in Q1, we didn't really move it.
Outside of just incorporating that if you look at the numbers. It's almost like you could take out on an as reported basis. We had a nice beat and then currency took the delta away. There so from that perspective kind of holding our expectations, where they are for Q2 to Q4, even in the face of some of the global uncertainty if you will.
A lot of that came from.
Outperformance in Europe , and in Asia, Pac, where we're over indexed we're number one in Europe , and we have a really strong presence for example in Japan. So as we've seen those markets start to come back and get closer to where the U S is that.
We have a tendency to outperform in those areas. So so that's what you saw I mean, yes, there is a little bit of price everyone has taken a little bit of price. So that's a little component of it but I think it was more starting to see global economies really economies outside of the U S start to return to normal.
As they did and they catch up to the U S contact lens market if you will.
Or a greater recipient of that type of positive activity.
Got it helpful and second question.
I think it would earlier question you mentioned coke somewhat linear if you would when we think about the accretion of the 60 <unk> wanted to generate I don't know if I missed it Brian but as generate still call. It 50 cents accretive in the first 12 months and then you got it for I guess, roughly like turn and a half this fiscal year, how does that onboard if you would in any commentary around the pace or the <unk>.
Cadence of that or.
From a linear perspective, thanks guys.
Yes, so youre exactly right and.
We were.
We're heading towards the roughly 44 or so.
That gets you to that 10 five months of 50.
<unk> that we guided to so definitely on track to hit that 50, but that's kind of how you get there and I would say that the gating. If you will is going to be fairly similar per quarter.
Thank you.
Thank you. Our next question comes from the line of Jason Bednar from Piper Sandler Your question. Please.
Hey, good afternoon. Thanks for taking the questions al I wanted to ask a follow up here on the contact lens pricing topic as well just maybe hoping you can help in interpreting some of the data that's out there I mean, it looks like retail price points are showing something like mid single digit increases, but I think a chunk of those are probably stemming from increases that are happening at the distributor and retail level to cover there.
Higher operating costs. So maybe you can clarify for us how you're handling price increases regionally or across the board globally, and so we'd be thinking about any load in her stocking ahead of some of these additional increases that youre planning.
Yes, I don't think Theres really been any activity in terms of stocking or anything that ive really seen from our perspective associated with pricing we.
We are taking price increases low single digit kind of price increases, but but you're exactly right. It's very difficult to see because not only do you have the component of direct price from the manufacturer and list prices. You also have markups associated with distributors or anyone else frankly, a lot of the processes as they look to take price to offset kind of inflationary pressures.
Pricing is a little different around the world.
Some countries right now even if we get to Russia in particular, right, where we're taking a much larger price increases to offset currency moves. So it's a little bit all over the place right now, but I would say it's positive.
<unk> kind of raising price to just varying degrees and then seeing how that plays through and we've always been a little lower for instance, if you look at rebate activities in some of our competitors have been.
So that's another factor that you'd have to take into consideration when we're looking at price.
Okay, Alright, that's helpful and maybe as a follow up I know I ask you about this topic last quarter, but I'll come back to it again it does look like you've just recently.
CMS grant side a level two code I know, we may still be a ways off from seen dedicated reimbursement for my side or myopia management contact lenses, but maybe can you talk about the significance or importance of what this code does for Cooper or their competitive advantage is that it provides and then how does this position the company to eventually seek elevated or dedicated payments.
<unk> four something like my site. Thanks, Yes, sure absolutely no. We received that Kona is fantastic and it's a.
Totally specific related Cove, which is really good news.
The ultimate question ends up on that is how much is the reimbursement amount associated with that.
And that would be the reason, where I'm excited about that and I'm optimistic about where things are going and so forth but.
Ill temper any enthusiasm till we get to a point, where we're seeing what those remember reimbursement.
Amounts are but.
Overall, we are positive and a clear step in the right direction and that's for sure.
Great. Thank you.
Yep.
Thank you. Our next question comes from the line of Andrew <unk> from William Blair. Your question. Please.
Hey, guys. Good afternoon, and thanks for taking the questions al maybe I can just get some high level thoughts around sort of my side here I think we're coming up on the two year anniversary of the launch here in the U S. So maybe could you just sort of reflect on what you've put this product in the domestic market, specifically and maybe how has that view changed one way or the other over that time.
Yeah, I think the clear learning on this has been over the last couple of years is is it takes a little while to get traction.
We were more optimistic certainly early on that as a physician got their eye care practitioner got the product into their practice they would start selling it to every pediatric patient who walk into the door.
What we saw is they were pretty active right away and they would choose a patient or two patients.
But it wasn't as sticky right upfront as we thought it was going to be so we've kind of altered some of our attention to some of our focus if you will to ensure that we're helping eye care practitioners.
Build up their myopia management practice, because if you really try to optometrists right now and you dig into what's going on myopia management. So many of them are trying to figure out how to create a myopia management practice, it's something they want to do they're excited about it they see the value in it.
Whether it's ortho K, whether it's my say, it's something they want to do but prescribing to kids and talking to parents and so forth as is oftentimes.
Significant difference from what they're used to doing so helping them along that journey is proving to be really really valuable for building a long term relationship.
But really recognizing that and understanding that and figuring out how to help eyecare practitioners build a subset of their business. If you will has been a big learning for us and the team has done a really nice job on that I feel like.
They pivoted quickly their understanding that they are out there helping.
<unk> and build practices and so forth, but I would say that's our biggest learning is that this takes time and I was really optimistic that was going to shoot up really really fast, but it takes time, we're building a lot of traction we're putting up good numbers, we're getting good growth all that kind of stuff. It just takes a little bit of time.
Great appreciate that and then maybe a follow up for Brian anything more that you can sort of tell us about what you saw a related with sort of inflationary pressures in the quarter and then how should we be thinking about those factors sort of playing out throughout the year. Thanks guys.
Yes sure Thanks, Andrew so.
Yes, as I mentioned in my prepared remarks, we're definitely seeing inflationary pressures and we are helping to offset some of those with price increases that was obviously factored into our guidance last time, and we factored into our guidance inflationary pressures. This time around I mean, obviously, it's definitely a headwind. We're seeing you know I mentioned also create secondary handling distribution.
So whether it's cost of goods or Opex, we've got some good guys offsetting that but certainly if things get worse and there is contagion.
As a result of the Ukraine crisis in fuel prices continue to increase and there is a knock on effect and that's hard to factor in but for now we think we've got a pretty good handle on what we've seen so far and we think we've factored into our guidance.
Thanks, guys.
Thank you. Our next question comes from the line of exact from Jefferies. Your question. Please.
Hey, Thanks for taking the questions just wanted to continue off that last one on my site retention rates. After the first couple of years of the launch.
If you could give any color there and then additionally, if.
You did give some color on new fits versus switch fit through the quarter.
How that trended and if theres any one particular, one that stands out is driving those new fits and switch.
Thanks.
Yeah on my site retention rates have remained pretty high. So there is still in that 85% to 90% kind of range, which is which is a really good sign and it's part of what's supporting.
The business that are the underlying growth of that business is we don't have a lot of kids dropping out once they get into the product.
New fits to switch fits.
<unk> are continuing to get better we're seeing better foot traffic in optometry offices, we're seeing improvements in fed activity.
That's clearly benefiting ourselves and frankly, the industry, but it's benefiting us a little bit more given a lot of our growth comes from new FID activity.
I'm not sure I would highlight anything to particular other than probably daily silicones, because we've talked about that in the past that as the driver of the market when youre getting new FID activity in patients who are coming in that's where the optometrists has a tendency to go is to grab one of the new daily silicone hydrogel in the marketplace.
So that's a positive obviously for the entire industry you saw it in our daily silicone numbers of 25% growth. So really strong numbers there were certainly capturing our fair share and more of our new FID activity when it comes to that space.
Thanks.
Mhm.
Thank you. Our next question comes from the line of Robert Marcus from Jpmorgan Your quake.
Hi, This is actually <unk> on for Robbie Thanks for taking the question.
Just another one on my side is there any way you can quantify how many positions you've trained at this point and what percent of the total opportunity that is.
I honestly don't know that off the top of my head I stopped looking at that number because we were training. So many people and then we were training office people also it wasn't just ecp's.
So it's a pretty significant number.
I think that there is definitely more room here for training in the U S, but but I would probably venture to say the bigger focus has shifted from getting more people trained to deeper relationships with existing accounts and with those who we know should be big accounts. So certainly more focus there I think.
There is still significant opportunity I really truly believe that the myopia management space is going to be a multibillion dollar industry and that will include glasses and contact lenses, but there is a massive amount of momentum out there in the optometry space right now talking about myopia management and I don't see that changing so it's more about.
Deeper relationships and helping people grow that part of their business than it is getting them trained and up to speed on it.
Got it that's helpful and then.
You've obviously been pretty active on the M&A side, not just with bigger deals like tuck in January but a bunch of even smaller tuck ins as well. So do you still have an appetite for M&A right now and where does M&A stand on your list of priorities for capital allocation.
Sure Yes.
Yes, we do acquisitions, we've had a couple of bigger ones here, Brian mentioned, we just bought some stock back this last quarter. So we continue to look at the same thing we invest in our business wherever we can find opportunities that always provides the best return for US we look at acquisitions, if they make sense and we will buy stock back if we think it makes sense.
With Cook coming up and closing will focus a little bit more of our energy and attention on paying down debt, we're not going to we don't anticipate seeing leverage go even over three times, but having said that we're up a little bit higher than we historically or so we'll probably have a little bit greater focus.
In the near term at least of paying down debt and maybe looking at some stock buybacks and then another larger acquisition.
The Q once again, if you have a question at this time. Please press Star then one.
And this does conclude the question and answer session of today's program I'd like to hand, the program back to Al White, President and Chief Executive Officer for any further remarks.
Great. Thank you everyone I appreciate everyone's attention and for calling in I know a lot of people have a lot of things going on right now as we've discussed we started the year off really well here. So we're really excited about.
Our vision sits today and where surgical sets and we've got good momentum and we think that's going to continue so.
If anyone has any questions or follow ups, certainly give us a call otherwise we look forward to speaking with everyone on our next earnings call in early June .
Thank you operator.
Thank you and thank you ladies and drew participation in today's conference. This does conclude the program you may now disconnect good day.
Okay.
Okay.
[music].