Q2 2024 Cooper Companies Inc Earnings Call

Operator: Thank you for standing by, and welcome to the Cooper Companies second quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise.

Thank you for standing by and welcome to the Cooper Companies' second quarter 2024 earnings Conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time simply press star followed by the number one on your telephone.

Operator: After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question again, press star number one. Thank you. I'd now like to turn the call over to Kim Duncan, Vice President of Investor Relations and Risk Management. You may begin.

Keypad, if you'd like to withdraw your question again prestige star one. Thank you I'd now like to turn the call over to Kim Duncan Vice President of Investor Relations and risk management you may begin.

Kim Duncan: Good afternoon and welcome to Cooper Company's second quarter 2024 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 and Treasurer.

Speaker Change: Good afternoon, and welcome to Cooper Companies' second quarter 2024 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.

Or and treasurer.

Kim Duncan: Before we begin, I'd like to remind you that this conference call will contain forward-looking statements, including revenues, EPS, operating income, tax rate, FX, and other financial guidance and expectations, strategic and operational initiatives, market and regulatory conditions and trends, and product launches and demands. Such forward-looking statements depend on assumptions, data, or methods that may be incorrect or imprecise and are subject to risks and uncertainty. Events 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 coopercos.com.

Speaker Change: Before we begin I'd like to remind you that this conference call will contain forward looking statements, including revenues EPS operating income tax rate FX in other financial guidance and expectations strategic and operational initiatives market and regulatory conditions and trends and product launches and demand.

Speaker Change: 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.

Speaker Change: 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.

Kim Duncan: Also, as a reminder, the non-GAAP financial information we will provide on this call is provided as a supplement to our GAAP information. We encourage you to consider our results under GAAP, as well as non-GAAP, and refer to the reconciliations provided in our earnings release, which is available in the Investor Relations section of our website under Quarterly Material. Should you have any additional questions following the call, please email ir@cooperco.com. Now, I'll turn the call over to Al for his opening remarks. Thank you, Kim.

Speaker Change: Also as a reminder, the non-GAAP financial information, we will provide on this call is provided as a supplement to our GAAP information.

Speaker Change: Or would you to consider our results under GAAP as well as non-GAAP and refer to the reconciliations provided in our earnings release, which is available on the Investor Relations section of our website under quarterly materials.

Speaker Change: Should you have any additional questions. Following the call. Please email IR at Cooper co Dot com.

Albert G. White: And now I'll turn the call over to al for his opening remarks.

Albert G. White: Thank you, Kim, and welcome everyone to today's call. I'm pleased to report record quarterly revenues and great operational progress throughout our organization. Cooper Vision returned double-digit revenue growth, driven by our portfolio of leading silicone hydrogel lenses, and Cooper Surgical posted a solid quarter, despite some unexpected challenges with a system upgrade impacting our U.S. distribution sector. Margins improved as we leveraged prior investment activity, and we delivered excellent earnings growth. As we move forward, we're increasing our revenue and earnings guidance by incorporating this past quarter and the momentum we're seeing in our market. Moving to the details and reporting all percentages on an organic basis, consolidated quarterly revenues were a record $943 million, up 8% year-over-year.

Albert G. White: Thank you Kim and welcome everyone to today's call I'm pleased to report record quarterly revenues and great operational progress throughout our organization Coopervision return to double digit revenue growth driven by our portfolio of leading silicone hydrogel lenses and Cooper surgical posted a solid quarter. Despite some unexpected challenges with the system up.

Albert G. White: Cooper Vision posted record quarterly revenues of $636 million, up 11%, led by strength in our daily silicone hydrogel portfolio. And Cooper Surgical posted revenues of $307 million, up 4%, margins improved, and non-gap earnings per share were $85. For Cooper Vision, the Americas grew 10%, EMEA 14%, and AsiaPAC 7%. All three regions were led by our innovative product portfolios, market-leading flexibility, and strength in key accounts. Within categories, torques and multifocals combined to grow 12%, and spheres were up 9%.

Albert G. White: Within Modalities, our Daily Silicone Hydrogel lenses, Mi-Day and Clarity, grew 18%, and our Silicone Hydrogel FRP lenses, Biothin and Invera, combined to grow 10%. And our myopia management portfolio was up 17%, with my site growing 39%. All in a very nice quarter with sales strikes around the world and throughout our Focus product portfolio.

Albert G. White: Great impacting our U S distribution center.

Margins improved as we leverage prior investment activity and we delivered excellent earnings growth as we move forward, we're increasing our revenue and earnings guidance by incorporating this past quarter and the momentum we're seeing in our markets move.

Albert G. White: Moving to the details and reporting all percentages on an organic basis consolidated quarterly revenues were a record $943 million up 8% year over year Coopervision posted record quarterly revenues of $636 million up 11% led by strength in our daily silicone hydrogel portfolio and Cooper.

Albert G. White: <unk> posted revenues of $307 million up 4% margins improved non-GAAP earnings per share were <unk> 85 cents for coopervision, the Americas grew 10% EMEA, 14% and Asia Pac 7%.

Albert G. White: All three regions were led by our innovative product portfolio is market, leading flexibility and strength in key accounts within categories towards the multifocal combined to grow 12% and spheres were up 9%.

Albert G. White: He then modalities, our daily silicone hydrogel lenses, mayday and clarity grew 18% and our silicone hydrogel FRP lenses by opening a <unk> combined to grow 10%.

And our myopia management portfolio was up 17% with my site growing 39%.

Albert G. White: All in a very nice quarter with strengths around the world and throughout our focused product portfolio.

Albert G. White: Turning to product details, and starting with our high-growth daily silicone hydrogel portfolio, we had another fantastic quarter with MyDay leading the way delivering outstanding results. MyDay is growing in every market and every category, with particular success in our innovative Toric and multifocal products. Our ongoing torque parameter expansion launch across North America and Europe is enabling eye care professionals, or ECPs, to fit more wearers in our market-leading design and industry-leading SKU range, which is by far the widest torque range in the daily market.

Albert G. White: Turning to product details and starting with our high growth daily silicone hydrogel portfolio, we had another fantastic quarter with <unk>, leading the way delivering outstanding results.

Albert G. White: <unk> is growing and in every market and every category with particular success in our innovative toric and multifocal products are ongoing toric parameter expansion launch across North America, and Europe is enabling eyecare professionals for Ecp's, Jeff bit more worse in our market, leading design and industry leading.

Albert G. White: SKU range, which is by far the widest toric range in the daily market.

Albert G. White: And MyDay Multifocal's unique combination of an advanced multifocal design paired with an easy fitting system has resulted in very high satisfaction levels, including a 98% fit success rate in two pairs or less. We continue to receive very positive feedback on this fantastic lens, and I continue to count myself as an ecstatic wearer of what is, without a doubt, the best multifocal contact lens in the market. We've also seen success with our My Day Spears, especially our Energist product, which is showing very strong growth.

Albert G. White: <unk> multifocal his unique combination of advanced multifocal design paired with an easy bidding system has resulted in very high satisfaction levels, including a 98% success rate in two pairs or less.

Albert G. White: We continue to receive very positive feedback on this fantastic lens and I continue to count myself as in a static where of what it is without a doubt the best multifocal contact lens in the market.

Albert G. White: We are also seeing success with our my day spheres, especially with our <unk> product, which is showing very strong growth.

Albert G. White: NRGIS is driven by its innovative Digital Boost technology, designed specifically for today's digital lifestyle, and this meaningful technological improvement is important to contact lens wearers and to eye care professionals. Given the strong performance of this lens in the U.S., we're excited to launch it in additional markets in the near future. Moving to Clarity, our other complete family of silicone hydrogel daily lenses, also remains a growth driver. ECPs love this product for its comfort, easy handling, and affordability, which makes it an especially good choice for new wear.

Albert G. White: <unk> is driven by its innovative digital boost technology designed specifically for today's digital lifestyle and this meaningful technological improvement is important to contact lens wearers and the Ecp's gear.

Albert G. White: Given the strong performance of this lens in the U S. We're excited to launch it in additional markets in the near future.

Albert G. White: Moving to clarity or other complete family of silicone Hydrogel daily lenses also remains a growth driver ecp's loved this product for its comfort easy handling and affordability, which makes it an especially good choice for new wearers.

Albert G. White: It continues to be an important driver in expanding our daily wearer base with noted success in upgrading legacy hydrogel wear. Outside of dailies, demand for BioAuthentity and Avera remains very healthy. The BioAuthentity portfolio has continued expanding beyond the traditional ranges of SPIRs, TORCs, and multifocals into expanded ranges, made-to-order lenses, TORC multifocals, and Energis, and now provides ECPs the ability to fit an amazing 99.9% of patient prescriptions. This is an incredible manufacturing accomplishment and a fantastic benefit to those patients who require the most complex types of vision correction.

Albert G. White: <unk> to be an important driver in expanding our daily wearer base would noted success in upgrading legacy hydrogel wearers.

Outside of dailies demand for <unk> remains very healthy the bio affinity portfolio has continued to expanding beyond the traditional ranges of Spears toric and multifocal into expanded ranges made to order lenses toric multifocal and energetic and now provides ecp's the ability to fit an amazing 90.

Albert G. White: Nine 9% of patient prescriptions.

Albert G. White: This is an incredible manufacturing accomplishment and a fantastic benefit to those patients who require the most complex types of vision correction.

Albert G. White: This is a true differentiator in any office and one of the reasons BioAuthentity remains so successful. With new state-of-the-art manufacturing lines now in service, we'll be expanding availability of these lenses in existing markets and launching in new markets in the near future. Moving to myopia management, my site continues to gain traction, powered by healthy demand. Asia-Pac posted a record quarter, AMIA was strong, and the Americas reported a record month in April.

Albert G. White: This is a true differentiator in any office and one of the reasons both entity remains so successful.

Albert G. White: With new state of the art manufacturing lines now in service, we will be expanding availability of these lenses in existing markets and launching in new markets in the near future.

Albert G. White: Moving to Myopia management MISO continues to gain traction powered by healthy demand Asia Pac posted a record quarter EMEA was strong in the Americas reported a record month in April.

Albert G. White: Although revenues were negatively impacted by a reduction in channel inventory during the holiday season, our back-to-school promotional campaigns are starting soon, and we expect robust results based on the success we saw last year, so we're expecting strong results in the back half of this year. In the meantime, we're marking a milestone anniversary for MiSite, with 2024 being the 10-year anniversary of the pivotal MiSite one-day clinical trial, which led to MiSite becoming the first and still the only FDA-approved optical intervention for myopia control. This study remains a gold standard in clinical trial study design and duration for myopia control in the longest running study of contact lens wear in children.

Albert G. White: Although revenues were negatively impacted by a reduction in channel inventory during the quarter.

Albert G. White: Our back to school promotional campaigns are starting soon and we expect robust results based on the success. We saw last year. So we're expecting strong results in the back half of this year.

Albert G. White: In the meantime, we're marking a milestone anniversary for my site with 2024 being the 10 year anniversary of the pivotal <unk>, one day clinical trial, which led to my side, becoming the first and still the only FDA approved optical intervention for myopia control.

Albert G. White: This study remains a gold standard in clinical trial study design and duration for myopia control and the longest running study of contact lens wear and children Coupe.

Albert G. White: CooperVision's commitment to establishing myopia control as standard of care continues and can be seen via two important initiatives launched this quarter. First, as part of the continuation of our exclusive partnership with the World Council of Optometry, we launched the Digital Myopia Management Navigator tool available to ECPs around the world. This interactive toolkit provides practical tips and resources to help offices integrate myopia management into their practice. Second, Cooper Vision and the American Optometric Association have partnered on a groundbreaking initiative, the Myopia Collective, to rally US eye care professionals to adopt myopia management as the standard of care for their pediatric patients. The program is currently recruiting 51 ECPs representing each state plus the District of Columbia who will work proactively with the AOA and Coopervision to advocate for community and policy change.

Speaker Change: Coopervision is commitment to establishing myopia control of standard of care continues and it can be seen via two important initiatives launched this quarter first as part of the continuation of our exclusive partnership with the World Council of Optometry, We've launched the digital myopia management navigator tool available to <unk> around the world.

Speaker Change: This interactive tool kit provides practical tips and resources to help offices integrate myopia management into their practices.

Speaker Change: Coopervision and the American Optometric Association have partnered on a groundbreaking initiative the myopia collective to rally USD Ecp's to adopt myopia management as the standard of care for their pediatric patients.

Speaker Change: Program is currently recruiting 51, ecp's, representing each state plus the district of Columbia, who will work proactively with the OE and coopervision to advocate for community and policy change.

Albert G. White: To conclude on contact lenses, the market grew roughly 5% in calendar Q1, with Cooper taking share up 7%. We continue to expect a robust market moving forward, driven by several positive long-term macro growth trends. And within this, we expect to remain a leader with our innovation, robust product portfolio, ongoing product launches, strengthened premium products, fast-growing myopium management business, and leading new FIT data. Moving to Cooper Surgical. We posted quarterly revenues of $307 million, up 4%.

Speaker Change: To conclude our contact lenses the market grew roughly 5% in calendar Q1, with Cooper, taking share up 7%.

Speaker Change: We continue to expect a robust market moving forward driven by several positive long term macro growth trends and within this we expect to remain a leader with our innovation robust product portfolio ongoing product launches strike in premium products fast growing myopia management business and leading new fed data.

Speaker Change: Moving to Cooper surgical we posted quarterly revenues of $307 million up 4%.

Albert G. White: Demand was strong, but a systems upgrade caused shipping interruptions in our U.S. distribution center for our medical device and fertility products. We were largely able to overcome this with strength and a pair of guards, but not entirely.

Speaker Change: <unk> was strong, but a systems upgrade cost shipping interruptions in our U S distribution center for our medical device and fertility products.

Speaker Change: We were largely able to overcome this with strength in PARAGARD, but not entirely.

Albert G. White: Having said that, we've made a lot of progress, and we're comfortable we'll manage the backlog and reach our full year organic revenue guidance range, which remains unchanged. Implementing IT infrastructure upgrades can certainly be challenging, but this type of work is critical to our long-term success as it supports efficient growth, creates a better customer experience, and makes internal operations more effective with improved real-time data. Moving to fertility, sales were 124 million, up 4%.

Speaker Change: Having said that we've made a lot of progress and we're comfortable we will manage the backlog and reach our full year organic revenue guidance range, which remains unchanged.

Speaker Change: Implementing our it infrastructure upgrades can certainly be challenging but this type of work is critical to our long term success as it supports efficient growth creates a better customer experience and makes internal operations more effective with improved real time data.

Speaker Change: Moving to fertility sales were $124 million up 4%, we continue seeing strong demand around the world with our leading products and services continuing to position us well with fertility clinics as they opened new facilities upgrade existing locations and look for opportunities to improve outcomes and optimize our operations.

Albert G. White: We continue to see strong demand around the world, with our leading products and services continuing to position us well with fertility clinics as they open new facilities, upgrade existing locations, and look for opportunities to improve outcomes and optimize their operations. We're also investing for the future, opening new donor sites, providing extensive training in our centers of excellence, expanding geographically, and accelerating innovation. Our focus on investing in and delivering the most innovative and advanced solutions to fertility clinics and patients remains unmet. This includes the first and only European approval for a uniquely formulated one-step medium.

Speaker Change: We're also investing for the future opening new donor sites, providing extensive training in our centers of excellence, expanding geographically and accelerating innovation.

Speaker Change: Our focus on investing and delivering the most innovative and advanced solutions to fertility clinics and patients remains unmatched. This includes a first and only European approval for our uniquely formulated one step media. This specialized culture and transfer media reinforces embryo and no metrial communication for improved embryo development.

Albert G. White: This specialized culture and transfer media reinforces embryo endometrial communication for improved embryo development, sustained implementation, and pregnancy. Similar to the advances we're making in fertility-based genetic testing, the science is complex, but the goal is straightforward, providing innovative, market-leading technologies to improve the journey to parents. Developing and delivering these types of innovations is why we're a leader in this space, and it's our commitment to continue this type of work. Regarding the broader fertility industry, this dynamic market is supported by several positive macro growth trends, including women delaying childbirth, increasing patient awareness, greater benefits coverage, technology advancements, and improving access to treatment. The World Health Organization highlights that one in six people will be affected by infertility at some point in their lives.

Speaker Change: <unk> sustained implementation.

Speaker Change: Plantation and pregnancy.

Speaker Change: Similar to the advances were making in fertility based genetic testing the sciences complex, but the goal is straightforward providing innovative market leading technologies to improve the journey to parenthood.

Speaker Change: Developing and delivering these types of innovations is why we're a leader in this space and it's our commitment to continue this type of work.

Speaker Change: Regarding the broader fertility industry. This dynamic market is supported by several positive macro growth trends, including women delaying childbirth, increasing patient awareness greater benefits coverage technology advancements in improving access to treatment.

Speaker Change: The World Health organization highlights are one in six people will be affected by infertility at some point in their lives. So this is an issue that impacts a lot of people and we'll do so in the future.

Albert G. White: So this is an issue that impacts a lot of people and will continue to do so in the future. As a leader in this space, we remain incredibly committed to advancing the industry by delivering innovative products, standing in support of patients and clinics, and improving access to treatment on a global basis. Moving to office and surgical supplies, we posted sales of $183 million, up 4%, with medical devices declining 6% due to the previously mentioned shipping challenge.

Speaker Change: As a leader in this space, we remain incredibly committed to advancing the industry by delivering innovative products standing in support of patients and clinics and improving access to treatment on a global basis.

Speaker Change: Moving to office and surgical we posted sales of $183 million up 4% with medical devices declining 6% due to the previously mentioned shipping challenges at.

Albert G. White: SemCell Storage was up 5%, and Paragard was up 22%. Within Medical Devices, demand was healthy, driven by our minimally invasive gynecological surgical products, led by our Ally Uterine Manipulator portfolio. And our labor and delivery portfolio is now arguably the most comprehensive obstetrics portfolio of medical devices, ensuring the safety of mothers and babies, and demand remains strong. Our stem cell business had a solid quarter, and PairGard outperformed expectations with the benefit of stocking related to a mid single-digit price. This stocking will naturally offset itself largely in fiscal Q3.

Speaker Change: <unk> storage was up 5% and PARAGARD up 22%.

Speaker Change: Within medical devices demand was healthy driven by our minimally invasive gynecological surgical products led by our ally uterine manipulator portfolio and our labor and delivery portfolio is now arguably the most comprehensive obstetrics portfolio of medical devices, ensuring the safety of mothers and babies and demand remains strong.

Speaker Change: Our stem cell business had a solid quarter and PARAGARD outperformed our expectations with the benefit of stocking related to a mid single digit price increase.

Speaker Change: This stocking will naturally offset itself largely in fiscal Q3.

Albert G. White: To conclude, with our expanding obstetrics portfolio of products and services, we can now update our impact on the global community and say that roughly every 30 seconds, somewhere around the world, a baby is born using Cooper Surgical products. We're making a difference in people's lives, and that makes this business very special. To wrap up, let me add that we just released our latest ESG report, which highlights our efforts around environmental sustainability, corporate social responsibility, and strong corporate governance.

Speaker Change: To conclude our Cooper surgical with our expanding our <unk> portfolio of products and services. We can now update our impact of the global community and say that roughly every 30 seconds somewhere around the world. A baby is born using Cooper surgical products, we're making a difference in people's lives and that makes this business.

Speaker Change: <unk> special.

Speaker Change: To wrap up let me add that we just released our latest ESG report, which highlights our efforts around environmental sustainability corporate social responsibility and strong corporate governance, it's on our website and well worth reading when you have a chance.

Albert G. White: It's on our website and well worth reading when you have a chance. We are passionate about sustainability, and I'm thankful to our employees around the world for their commitment to doing things the right way. So with that, let me say thank you to our 15,000 plus employees for their continuing hard work and dedication as they drive our success. And I'll now turn the call over to Brian.

Speaker Change: We are passionate about sustainability and I'm thankful to our employees around the world for their commitment to doing things the right way.

Speaker Change: So with that let me say, thank you to our 15000 plus employees for their continuing hard work and dedication as they drive our success.

Speaker Change: And I'll now turn the call over to Brian.

Brian G. Andrews: 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. For the second quarter, consolidated revenues were $943 million, up 7% as reported and up 8% organically. Consolidated gross margin was 67.3%, up from 67.1% last year, driven by continuing efficiency gains in price. Operating expenses grew in line with revenues, with SG&A showing leverage and R&D growing faster.

Brian G. Andrews: 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.

Brian G. Andrews: For the second quarter consolidated revenues were $943 million up 7% as reported and up 8% organically.

Brian G. Andrews: Consolidated gross margin was 67, 3% up from 67, 1% last year, driven by continuing efficiency gains in price.

Operating expenses grew in line with revenues with SG&A showing leverage in R&D growing faster.

Brian G. Andrews: Regarding R&D, we've increased our investment activity in several exciting areas to ensure we remain a technological leader by continuing to launch some of the most innovative products in our market. More to come on this as products are developed and launched.

Brian G. Andrews: Regarding R&D, we've increased our investment activity in several exciting areas to ensure we remain a technological leader by continuing to launch some of the most innovative products in our markets.

Brian G. Andrews: More to come on this as products are developed and launched.

Brian G. Andrews: Consolidated operating margin improved to 23.8%, up slightly from 23.7% last year, led by the gross margin improvement. The low operating income interest expense was $27.5 million. And the effective tax rate was 13.5% due to the positive impact of the stock option. Non-Gap EPS was $0.85, up 10% year-over-year with roughly 201 million average shares. Free cash flow was $37 million, with CapEx of $74 million. Net debt decreased to $2.6 billion.

Brian G. Andrews: Consolidated operating margin improved to 23, 8% up slightly from 23, 7% last year led by the gross margin improvement.

Brian G. Andrews: Below operating income interest expense was $27 $5 million and the effective tax rate was 13, 5% due to the positive impact of stock option exercises.

Brian G. Andrews: non-GAAP EPS was <unk> 85.

Brian G. Andrews: Up 10% year over year with roughly 201 million average shares outstanding.

Brian G. Andrews: Free cash flow was $37 million with capex of $74 million.

Brian G. Andrews: Net debt decreased to $2 6 billion.

Brian G. Andrews: Foreign exchange negatively impacted earnings by seven cents in the quarter, which was one cent worse than we were expecting at the time of our last guide, even with a positive offset from our hedging program. To summarize Fiscal Q2, this was a solid quarter. CooperVision returned to double-digit growth, and Cooper Surgical made tremendous progress implementing system upgrades, and margins improved year over year, even against currency headwinds. Tax and FX offset one another, and we delivered a strong bottom line.

Brian G. Andrews: Foreign exchange negatively impacted earnings by 7% in the quarter, which was <unk> <unk> worse than we were expecting at the time of our last guidance.

Brian G. Andrews: Even with a positive offset from our hedging program.

Brian G. Andrews: To summarize fiscal Q2, this was a solid quarter.

Brian G. Andrews: Coopervision return to double digit growth Cooper surgical made tremendous progress implementing system upgrades.

Brian G. Andrews: And margins improved year over year, even against currency headwinds.

Brian G. Andrews: Tax and FX offset one another and we delivered a strong bottom line.

Brian G. Andrews: Moving to fiscal 2024 guidance, we're increasing expectations for revenues and earnings by incorporating our Q2 performance and the momentum we're seeing as we enter the back half of the fiscal year. This results in full-year consolidated revenues of $3.86 to $3.9 billion, 7.5% to 8.5% organic.

Brian G. Andrews: Moving to fiscal 2024 guidance, we're increasing expectations for revenues and earnings by incorporating our Q2 performance and the momentum we're seeing as we enter the back half of the fiscal year.

Brian G. Andrews: This results in full year consolidated revenues of $3 86 to $3 9 billion up seven five to eight 5% organically.

Brian G. Andrews: For Cooper Vision, we're increasing our guidance to 2.59 to 2.61 billion, of 8.5% to 9.5% organically driven by healthy demand and improving capacity. For Cooper Surgical, our Organic Revenue Guidance is unchanged at 5 to 7%, which equates to $1.27 to $1.29 billion. Interest expense is also unchanged at roughly $108 million, which assumes no interest rate changes by the Fed for the remainder of our fiscal year.

Brian G. Andrews: For Coopervision, we are increasing our guidance to $2 $5 90 to $2 61 billion.

Brian G. Andrews: Up eight and half to 95% organically driven by healthy demand is improving capacity.

Brian G. Andrews: For Cooper surgical.

Brian G. Andrews: Our organic revenue guidance is unchanged at 5% to 7%, which equates to $1 87 to $1 9 billion.

Brian G. Andrews: Interest expense is also unchanged at roughly $108 million, which assumes no interest rate changes by the fed for the remainder of our fiscal year.

Brian G. Andrews: And for tax, we're forecasting a full year effective tax rate of roughly 14%, assuming no additional discreet items. Given all this, we're increasing our non-GAAP EPS guidance to a range of $3.54 to $3.65, up 11 to 13 percent. Regarding currency, the impact from FX is roughly two cents worse in the back half of the year compared to last quarter, but we expect to overcome that with stronger operational performance. Lastly, on quarterly gating, we anticipate non-GAP EPS to be higher in Q4 than Q3.

Brian G. Andrews: And for tax we're forecasting a full year effective tax rate of roughly 14% assuming no additional discrete items.

Brian G. Andrews: Given all this we are increasing our non-GAAP EPS guidance to a range of 3.3 dollars 54.

Brian G. Andrews: The $3 60.

Brian G. Andrews: Up 11% to 13%.

Brian G. Andrews: Regarding currency the impact from FX is roughly <unk> worse in the back half of the year compared to last quarter's guidance.

Brian G. Andrews: But we expect our hurdle that with stronger operational performance.

Brian G. Andrews: Lastly on quarterly gating, we anticipate non-GAAP EPS to be higher in Q4 than Q3.

Brian G. Andrews: This is primarily the result of a lower gross margin in Q3 associated with higher-cost contact lens inventory rolling through the P&L in Q3. Currency is also slightly more negative in Q3 than in Q4. In summary, on guidance, we're raising CooperVision's growth rate to reflect improving capacity, leaving Cooper Startuple's growth unchanged, and raising our non-GAAP EPS range by four cents on the bottom and $0.02 on the top, even against the negative impact of an additional $0.02 from FX in the back half of the year. To conclude,

This is primarily the result of a lower gross margin in Q3 associated with higher cost contact lens inventory rolling through the P&L in Q3.

Brian G. Andrews: Currency is also slightly more negative in Q3 than in Q4.

Brian G. Andrews: In summary on guidance, we're raising coopervision growth rates to reflect improving capacity.

Brian G. Andrews: Leaving Cooper surgical's growth unchanged.

Brian G. Andrews: And raising our non-GAAP EPS range by <unk> <unk> on the bottom and <unk> on the top.

Brian G. Andrews: Even against the negative impact of an additional <unk> <unk> from FX in the back half of the year.

To conclude we remain.

Operator: We remain focused on delivering strong revenue growth and consistent operational performance. Our capacity is improving. We're leveraging prior investment activity. And we're deploying capital with a focus on organic investments, which offer the highest return for investment dollars. Our momentum remains very healthy, and that's reflected in our updated guidance. And with that, I'll hand it back to the operator for questions.

Brian G. Andrews: <unk> focused on delivering strong revenue growth and consistent operational performance.

Brian G. Andrews: Our capacity is improving we're leveraging prior investment activity.

And we're deploying capital with a focus on organic investments, which offer the highest return for investment dollars.

Brian G. Andrews: Our month of our momentum remains very healthy and that's reflected in our updated guidance.

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

Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. Your first question comes from a line called Craig Bijou from Bank of America. Your line is open.

Speaker Change: Thank you we will now begin the question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad to raise your hand and joined the queue. If you would like to withdraw your question simply press Star one again.

Speaker Change: First question comes from the line of Craig Bijou from Bank of America. Your line is open.

Craig William Bijou: Good afternoon, guys, and congratulations on a strong quarter. So, I wanted to start with the CBI guidance, and, you know, the revised guidance for the year assumes growth is going to be similar in the second half to the first half.

Craig William Bijou: Good afternoon, guys and congrats on a strong quarter.

Craig William Bijou: So I wanted to start with the CVI guidance.

Speaker Change: The revised guidance for the year assumes growth is going to be similar in the second half to the first half.

Speaker Change: Despite tougher comps. So I guess the question is what gives you the confidence that you can maintain that level of growth.

In the second half despite the comps and any help.

Operator: ,. .. .. .. .. ... , on how to think about Q3 versus Q4 growth.

Speaker Change: On how to think about Q3 versus Q4 growth.

Albert G. White: Yeah Craig, thanks.

Greg: Yeah, Greg Thanks.

Albert G. White: Thanks. You're right. We do have harder comps. Q3 is a little bit harder, even than Q4 in the back half of the year. On the flip side, we have good momentum right now as we enter the back half of the year, and we have improving capacity. And as you know, one of the things that's held us back a little bit has been some capacity constraints in certain products. So here are some of those challenges: Jeffrey Johnson, David Saxon, Robert Marcus, Xuyang Li, Ron Feiner, Issie Kirby, and Cooper

Speaker Change: Youre right, we do have harder comps Q3 is a little bit harder even in Q4 in the back half of the year.

Speaker Change: The flip side, we have good momentum right now as we enter the back half of the year.

Speaker Change: And we have improving capacity and as you know one of the things Thats held us back a little bit expensive capacity constraints in certain products. So.

Speaker Change: As that as some of those challenges.

Speaker Change: Start to reduce right, we're able to put more product out and I've mentioned this before but we're in a situation, where we have demand exceeding supply and we probably will for a while here. So we know that as we bring these new lines on and produce more product that we're going to sell that product. So I think it positions us well so even in the face of tougher.

Speaker Change: Comps I'm still feeling pretty optimistic about our ability to deliver some strong growth in the back half of the year.

Albert G. White: Great, that's helpful. Thanks, Al. And then maybe just on the distribution, the U.S. Distribution Center for the Surgical Business, any way that you can quantify what that impact was in the quarter, and then how should we think about that impact impacting, you know, Q3 and Q4, basically the second half of the year?

Great. That's helpful. Thanks, and then maybe just on the district distribution U S distribution center for the surgical business any way that you can quantify what that impact was in the quarter and then how should we think about that impact impacting.

Speaker Change: Q3, and Q4 basically the second half of the year.

Albert G. White: Sure. I'm not going to quantify that. I don't like to go into that and say, you know, what would have happened if this hadn't happened, and so forth, and speculate around what those numbers are. But they clearly negatively impacted the quarter, right? Because medical devices are a great team, and they put up strong demand again and would have had a decent quarter without the shipping delays. And same with infertility.

Speaker Change: Sure I'm not going to quantify that.

Speaker Change: Don't like to go into that and say what would have happened. If this wouldn't have happened and so forth and speculate around what those numbers are.

Speaker Change: But they clearly negatively impacted the quarter Ike is medical devices does a great team and they put up strong demand again and would've had decent quarter without the shipping delays and staying within fertility group fertility, what 12 13 quarters in a row of double digits, it dipped down to 4% with some of those shipping issues having.

Albert G. White: We grew fertility, what, 12, 13 quarters in a row at double digits and dip down to 4% with some of those shipping issues. Having said that, we are proceeding better right now. I mean, we're having a pretty good May. We're working through the backlog, and so forth, to get ourselves in a better position. So, I'm optimistic as we work through this quarter that we can address most, if not all, of those and close out the year.

Speaker Change: <unk> said that.

Speaker Change: We are proceeding better right now I mean, we're having a pretty good may we're working through the backlog and so forth to get ourselves in a better position. So I'm optimistic as we worked through this quarter that we can address most if not all of that.

Speaker Change: And closed the year out strong.

Operator: Great, thanks for taking the questions, guys. Yeah. Your next question comes from a line called Larry Biegelsen from Wells Fargo. Your line is open.

Speaker Change: Great. Thanks for taking the questions guys Yep.

Speaker Change: Your next question comes from the line of Larry <unk> from Wells Fargo. Your line is open.

Lawrence H. Biegelsen: Hey, Al. Thanks for taking the question. Hey, Al, maybe just talk about

Speaker Change: Hey, Thanks for taking the question.

Speaker Change: Maybe just talk about the IVF market and your growth.

Speaker Change: Do you think you can get back to.

Speaker Change: Double digit growth in that business, which we saw for quite a few quarters before this quarter.

Albert G. White: Yeah, kind of following up maybe my commentary to Craig there, I would say the answer to that is yes. As a matter of fact, I think we have a good chance to report a double-digit revenue growth quarter right here in Q3. Okay, good to hear.

Speaker Change: Yes kind of following up maybe my commentary to Craig there I would say the answer to that is yes as a matter of fact, I think we have a good chance to reported double digit revenue growth quarter right here in Q3.

Albert G. White: And then on contact lenses, Al, what are you assuming for the price of the market and for your contact lens business this year? Thanks for taking the question. Sure.

Speaker Change: Okay. Good to hear and then on contact lenses out what are you assuming for price for the market for your contact lens business. This year. Thanks for taking the question.

Albert G. White: For price, I would say we've seen almost everyone take price earlier this year, either earlier this calendar year or, for us, the beginning of our fiscal year. So pricing is kind of holding where it's at. I think from a price perspective, the market is still very healthy, if you will. When we look at the contact lens market, probably growing in the mid, upper single digits, you're talking about maybe a third of that coming from price. So, very similar to what we've talked about in the last year.

Speaker Change: Sure.

Speaker Change: For price.

Speaker Change: I'd say, we've seen almost everyone take price everyone has taken price earlier this year either earlier this calendar year for us at the beginning of our fiscal year.

Speaker Change: So pricing is kind of holding where we are.

Speaker Change: Where it's at.

Speaker Change: From a price perspective, the market is still very healthy if you will when.

Speaker Change: When we look at the contact lens market, probably growing in mid upper single digits.

Speaker Change: You are talking about maybe a third of that is coming from price. So very similar to what we've talked about in Alaska last few quarters.

Speaker Change: Alright, thanks for taking the questions.

Speaker Change: Yes.

Operator: Your next question comes from the line of Issie Kirby from Redburn Atlantic. Your line is open.

Speaker Change: Your next question comes from the line of Eze Kirby from Redburn Atlantic Your line is open.

Issie Kirby: Hey guys, thanks for taking my question. I first just wanted to touch upon the MySite progress in the US and Europe. ConsciousGirl's been stocking up there this quarter, but wanted to ask about the growth there and whether you're seeing, I guess, a higher number of prescribers or prescribers essentially running more revenue per prescriber, basically, and then your thoughts on potential competition in the soft contact lens market for Myopia, and then I have a follow-up.

Issie Kirby: Hi, guys. Thanks for taking my question.

Issie Kirby: Just wanted to touch upon the mine site.

Issie Kirby: Your.

Speaker Change: Conscious ducking that of course helped that wanted to ask about the growth and whether you're seeing a higher number of prescribers all prescribed.

Essentially running more revenue guide that basically and then your thoughts on potential competition.

Speaker Change: Contact lens market.

Speaker Change: And then Alison.

Albert G. White: Sure. So, on activity, we are seeing both. We're actually seeing more fitters around the world, and we're seeing more fit occurring with those practitioners who are currently using my site. So, I'm really happy to say that.

Speaker Change: Sure.

Speaker Change: So on activity, we are seeing both we are actually seeing more bidders.

Alison: Around the world and we're seeing more bidding occurring with those practitioners who are currently fitting my side. So I'm really happy to say that now if I break up those two a little bit one of the thing Thats driving more bidders is because we're making progress with a lot of our key accounts. So some of the bigger names out there.

Albert G. White: Now, if I break those two up a little bit, one of the things that's driving more fitters is because we're making progress with a lot of our key accounts. So, some of the bigger names out there, the bigger optical chains and so forth that you would know, are incorporating MySite into their fitting activity. That's maybe moving a little slower than I was hoping because you're going through a lot of training and standardization within those big chains, but that's all moving forward, and we're seeing more fit activity out of that.

Alison: <unk> optical change and so forth that you would know.

Alison: Our incorporating my site into their bidding activity that may be moving a little slower than I was hoping because youre going through a lot of training and standardization within.

Alison: Those big chains, but that's all moving forward and we're seeing more fed activity out of that if.

Albert G. White: If we look at the doctors who are currently fitting MySite and how active they are fitting MySite, it's essentially universally increased fit, and we're seeing that throughout the world right now. So, I'm really happy where we are from a fit perspective on that. We did have a little pull-down in channel inventory a little bit here in the Americas and stuff. No surprise to me about anything that's going on, but I do think we're going to have a pretty strong back half of the year.

Alison: If we look at the doctors, who are currently filling my site and how active they are bidding my side, it's essentially universally increased bidding and we're seeing that throughout the world right. Now so I'm really happy where we are from a bidding perspective on that we did have a little pull down in channel inventory a little bit here in the Americas and stuff.

Alison: No surprise demand anything thats going on but I do think we're going to have a pretty strong back half of the year I think Q3, and Q4 is going to be pretty good for my site.

Albert G. White: I think Q3 and Q4 are going to be pretty good for MySite. From a competition standpoint, MySite is the first. It's the only product that's approved for myopia control, so there is, as of today, no competition in the market, other than people using something off-label or people promoting something that doesn't have the clinical data or the approvals of an organization like the FDA.

Alison: From a competition standpoint.

On my side is it's the first it's the only product that's approved for myopia control. So there is as of today no competition in the market other than people using something off label or people promoting something.

Alison: That doesn't have the clinical data or the approvals of organs.

Alison: Organization like the FDA.

Albert G. White: Okay, that's great, thank you. And then I just wanted to touch upon some of the areas of organic investment that you focused on, calling out heightened R&D investments, you know, perhaps across those divisions. If you could call out some particular areas you're looking at, anything that's exciting you in the pipeline at the moment. Sure.

Alison: Okay.

Speaker Change: Thank you and then I just wanted to touch upon some of the areas of organic investment that Tom.

Speaker Change: Pulled out.

Speaker Change: Heightened R&D investments.

Speaker Change: Perhaps across sites with Zika.

Speaker Change: If you could call out some particular areas you're looking at anything that's exciting in the pipeline at the moment.

Albert G. White: Sure. Again, one within CooperVision is probably pretty clear, and that's CapEx. We're investing a lot in manufacturing equipment right now to expand capacity. As I was mentioning, we have a lot of demand, especially for our MyDay products. We have a lot of things that we want to launch, we want to get out in the market, and we want to expand into additional markets.

Speaker Change: Sure Yes.

Speaker Change: One within Coopervision is probably pretty clear and Thats capex, we're investing a lot in manufacturing equipment right now to expand capacity as I was mentioned as you know like we have a lot of demand, especially for our <unk> products.

Speaker Change: A lot of a lot of things that we want to launch we want to get out in the market and we want to expand into additional markets. So there is quite a bit of launch activity. That's on hold as we increase our capacity.

Speaker Change: Capex investments would be a good example, within Cooper surgical I could think right off the top of my head on the R&D side of things, we've got some cool R&D things going on within surgical and I won't touch on the specifics behind that but I look forward to some of those projects come into fruition. So between capital expansion and R&D and R&D within my side also we have some.

Albert G. White: So there's quite a bit of launch activity that's on hold as we increase our capacity. So CapEx investments would be a good example. Within Cooper Surgical, I could think right off the top of my head on the R&D side of things; we've got some cool R&D things going on within surgical, and I won't touch on the specifics behind that, but I look forward to some of those projects coming to fruition. So between capital expansion and R&D, and R&D within my site also, we have some good stuff going on. There is definitely some organic investment activity going on.

Speaker Change: Good stuff going on there is definitely some organic investment activity going on as well.

Speaker Change: Alright, thanks, so much.

Speaker Change: Okay.

Operator: Your next question comes from the line of Jeff Johnson from Baird. Your line is open.

Speaker Change: Your next question comes from the line of Jeff Johnson from Baird. Your line is open.

Jeffrey D. Johnson: Thank you. Good evening, guys.

Speaker Change: Thank you good evening guys.

Jeffrey D. Johnson: Maybe a couple of follow up questions. Here. So one can you talk about kind of in your prepared remarks, 5% market growth, 7% Cooper growth and I think that would have been calendar <unk>.

Jeffrey D. Johnson: It's always dangerous to do this but you put up 11% organic does that mean your exit rate in your <unk>.

Speaker Change: April month, the month of April was much stronger than it was the first couple months of the quarter number one and number two I'm, assuming that's J F K data.

Speaker Change: What's going on maybe sell in instead of sell out retail data any changes there in inventory you did talk a little bit about my site inventory, but any channel inventory changes or concerns you have.

Speaker Change: U S or rest of world on the channel inventory side. Thanks.

Albert G. White: Al, maybe a couple follow-up questions here. So one, you talked about kind of in your prepared remarks, 5% market growth, 7% Cooper growth in the I think that would have been calendar year one, two. You know, it's always dangerous to do this, but you put up 11% organic.

Speaker Change: Sure a couple of comments April was a strong month no question.

Speaker Change: I think it was a good month for the industry may it is a good market I mean, we started the quarter off certainly well. So I'd say April may good months in the contact lens industry.

And certainly.

Speaker Change: Our performance shows that.

Speaker Change: From an inventory perspective.

Speaker Change: You're probably just seeing with higher interest rates everybody out there who holds inventory trying to reduce inventory levels and take them to kind of the contractual obligated levels.

Speaker Change: So if anything maybe inventories just a little bit tighter as you go through the channels right now I think you could probably comfortably say that on a global basis.

Speaker Change: Okay, just a follow up on that I mean, I'm, assuming since you raised CVI guidance youre not feeling like that's a big risk and then just on the APAC number being up 7%. We thought my day multi going back into Japan, APAC might've been a source of upside this quarter that obviously didnt happen or have you just been a little delayed on getting multi multi back into Japan.

Speaker Change: Or was there something else underlying and in Asia Pac this quarter. Thanks.

Albert G. White: Sure. Yeah, a couple of comments.

Albert G. White: Does that mean your exit rate in your April Month? The month of April was much stronger than it was in the first couple months of the quarter, number one. And number two, I'm assuming that's GFK data, you know, What's going on maybe sell-in instead of sell-out retail data, any changes there in inventory? You did talk a little bit about my site inventory, but any channel inventory changes or concerns you have, U.S. or rest of the world on the channel inventory side?

Speaker Change: Yeah, I would say first that in the first part of that the risk associated with the inventory contraction in that is that is not a big deal. We've already had I would say most of our.

Speaker Change: Most of our customers reduced their inventory levels. So I don't see any real risk associated with that right now we've already kind of worked through a lot of that.

If I look at the Asia Pac market, you're exactly right. It's still a capacity issue that team has a great team and if we could provide them more <unk> product they would.

Speaker Change: No question be selling that product. So right now thats just a capacity issue in terms of where we can get product and ultimately we will get it there and we'll sell it there. So yes, that's just a timing thing.

Speaker Change: Thank you.

Your next.

Speaker Change: Question comes from the line of Jon Block from Stifel. Your line is open.

Albert G. White: April was a strong month, no question. I think it was a good month for the industry. May is a good month. I mean, we started the quarter off certainly well, so I'd say April and May are good months in the contact lens industry, and certainly our performance shows that. From an inventory perspective, I think you're probably just seeing with higher interest rates, everybody out there who holds inventory trying to reduce inventory levels and take them to kind of the contractually obligated levels. So, if anything, maybe inventory is just a little bit tighter as you go through the channels right now. I think you could probably comfortably say that on a global basis.

Operator: Douglas Goldstein, CFP®, is the director of Profile Investment Services and the host of the Goldstein on Gelt radio shows. He is a licensed financial professional in both the U.S. and Israel. His book Building Wealth in Israel is available in bookstores, on the web, or can be ordered at www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. His book Building Wealth in Israel is available in bookstores, on the web, or can be ordered Uh, yeah, I...

Jonathan David Block: Great. Thanks, guys. Good afternoon, maybe just the first one a little bit of a clarification. So alpha those distributions center challenges.

Albert G. White: Yeah, I would say, the first part of that, the risk associated with the inventory contraction, that is not a big deal. We've already had, I would say, most of our customers reduced their inventory levels. So I don't see any real risk associated with that right now. We've already kind of worked through a lot of that. If I look at the Asia-Pac market, you're exactly right; it's still a capacity issue. That team's a great team.

Jonathan David Block: But you called out you also mentioned the backlog and the thought that you can get that out in subsequent quarters. So for those challenges are all of those cells coal pushed and not lost.

Jonathan David Block: A little bit of a combination of the two maybe some clarity there would be helpful. And then I'll just pivot for the follow up.

Speaker Change: Sure I would say most of that is pushed.

Speaker Change: Yes, you never really know at the end of the day, whether you lose some of those sales or not and if somebody is going to change some of their order patterns as they wait for your product.

Speaker Change: In this case it was it was in it related upgrade its not something that we see going multi quarters.

Speaker Change: The team's done a really nice job on that so I think generally speaking thats more of a push than it is lost sales.

Speaker Change: Got it helpful. Thanks, and then inhibit the CVI for the second question.

Speaker Change: You mentioned the good April arguably the mid may as well.

Speaker Change: We've seen some solid numbers from the market to so you did mention the 10% Psi FRP growth, it's a big number and it seemed like it was a little bit of an easier comp, but rarely argued double digit <unk> FRP. If you could just comment on anything to call out with the consumer modality changes is there anything there to look into.

Speaker Change: Yes, that's a really good question, John and you're right I mean that was a really strong quarter for us for.

Speaker Change: For <unk> and for <unk> by the way, which I think was also.

Speaker Change: Double digits, both of those product families did well I think the one thing thats happening with <unk> is that we just have such a broad portfolio and there's been a lot of demand on parts of that portfolio as we've expanded the offerings. We've been capacity constrained on a lot of those products for quite a while we have some new manufacturing.

Albert G. White: And if we could provide them with more of my day's product, they would, no question be selling that product. So right now, that's just a capacity issue and in terms of where we can get product, and ultimately, we'll get it there, and we'll sell it there. So yeah, that's just the timing.

Operator: Your next question comes from the line of John Block from Stiefel. Your line is open.

Speaker Change: <unk> some some really cool state of the art, new manufacturing lines that are producing product right now.

Jonathan David Block: Great, thanks guys. Good afternoon.

Speaker Change: So we're able to meet some of the demand that was out there. So I think you saw some of that in the second quarter I wouldn't read too much into anything outside of that other than just kind of a broad.

Speaker Change: Broad scope of success within the <unk>.

Speaker Change: <unk> family and of our families.

Speaker Change: Got it alright, thanks al.

Speaker Change: Yeah.

Speaker Change: Your next question comes from the line of Robbie Marcus from Jpmorgan. Your line is open.

Albert G. White: Maybe just the first one, a little bit of clarification. So, Al, for those distribution center challenges that you called out. You also mentioned the backlog and, you know, the thought that you can get that out in subsequent quarters. So, for those challenges, are all those sales pushed and not lost? Is it a little bit of a combination of the two? Maybe some clarity there would be helpful. And then I'll just pivot for the follow-up.

Speaker Change: Oh great.

Robert Justin Marcus: Thanks for taking my question and congrats on a good quarter.

Robert Justin Marcus: Two for me maybe the first one you showed really nice operating margin.

Robert Justin Marcus: Gross margin beat in the quarter despite the.

Speaker Change: The warehouse.

Speaker Change: Ramp issue, maybe just speak to some of the specifics of what Youre doing I know, it's been a focus for management.

Speaker Change: But any details on what drove that would be helpful.

Albert G. White: Sure, I would say most of that is pushed. You never really know at the end of the day whether you lose some of those sales or not, if somebody's going to change some of their order patterns as they wait for your product. In this case, it was an IT-related upgrade.

Albert G. White: It's not something that we see going multi-quarters. The team did a really nice job on that. So I think, generally speaking, that's more of a push than it is a loss.

Speaker Change: Hi, Ravi yes, thanks for the question.

Speaker Change: I would probably point to.

Operator: Got it. Helpful, thanks.

Speaker Change: Several areas, but one place in particular that we've been talking about a lot over the last couple.

Speaker Change: Really couple of years as all of the investment activity.

Speaker Change: In distribution and.

Speaker Change: Some of that comes with it within with envision as well, but putting all that together, we're really starting to get leverage from that prior investment activity, we're seeing improvements in our in our cost of moving product.

Speaker Change: Tween and among our different sites, but also in shipping out to our customers.

Speaker Change: Some of this also has to do with kind of.

Speaker Change: Influencing some of the customer behaviors around order patterns, and so forth, but certainly our initiatives around trying to drive down our distribution cost and getting more efficient.

Speaker Change: As one of the really meaningful areas within SG&A that we've seen.

Speaker Change: <unk>.

Speaker Change: That would lead to operating margin expansion.

Speaker Change: Maybe a follow up from me.

Speaker Change: I think two cents worse currency came in a whole lot better than the theories were that I was hearing at least.

Speaker Change: And I know probably a good part of that was due.

Speaker Change: Two I know you started I think it was fiscal third quarter last year, a hedging program on intercompany loans, which helps.

Speaker Change: Limit.

Speaker Change: Disruption on the other income line.

Speaker Change: Just wondering.

Speaker Change: When you look at currency, how much help have you gotten from starting that hedging program.

Speaker Change: And I'll just leave it there thanks a lot.

Jonathan David Block: And then to pivot to CBI for the second question, you mentioned the good April, arguably the good May as well, and we've seen some solid numbers from the market, too. So, you did mention the 10% PSI-FRP growth, which is a big number, and it seems like it was a little bit of an easier cutoff, but rarely are you double-digit PSI-FRP growth. If you could just comment on, you know, anything to call out with the consumer, modality changes, is there anything there to look into? Thanks.

Speaker Change: Yes, Thanks Ravi.

Speaker Change: I'm glad you asked that question and I put into my prepared remarks, I think there are some misconception out there that we're not hedging I mean were absolutely hedging we started last year, but we hedge different FX exposures to mitigate the impact of currency each quarter and we've been talking about wanting to drive not only top line beats, but our bottomline leads and part of that is.

Speaker Change: Trying to mitigate the impact from currency and I think we've done a nice job of improving on our hedging program. We continue to hedge and as a result, we've been offsetting the negative impact from currency and we did again this quarter. So.

Speaker Change: More to come but.

Speaker Change: But yes, we are having success there.

Speaker Change: Great. Thanks, a lot.

Albert G. White: Yeah, that's a really good question, John, and you're right. I mean, that was a really strong quarter for us, for BioAffinity, and for Avera, by the way, which I think was also double digits. Both of those product families did well. I think the one thing that's happening with BioAffinity is that we just have such a broad portfolio, and there's been a lot of demand for parts of that portfolio as we've expanded the offerings.

Speaker Change: Your next question comes from the line of Jason Bednar from Piper Sandler Your line is open.

Albert G. White: We've been capacity constrained on a lot of those products for quite a while. We have some new manufacturing lines, some really cool state-of-the-art new manufacturing lines that are producing product right now, so we're able to meet some of the demand that was out there, so I think you saw some of that in the second quarter. I wouldn't read too much into anything outside of that, other than just kind of a broad scope of success within the BioAffinity family.

Operator: Got it. All right. Thanks, y'all.

Jason M. Bednar: Hi, there I'll echo the congrats here on a nice quarter.

Jason M. Bednar: Howard Brian I wanted to start on EMEA.

Speaker Change: The performance there with CVI just continues to be extraordinarily strong.

Speaker Change: <unk> been putting up really good growth covering upwards, maybe being held back a little bit in APAC.

Robert Justin Marcus: Your next question comes from the line of Robbie Marcus from J.P. Morgan. Your line is open.

Speaker Change: Sustainable is the run.

Speaker Change: You've got in EMEA.

Speaker Change: Because it's been pretty impressive just would love to gauge your confidence level and staying up at these low to mid teens growth levels.

Robert Justin Marcus: Oh, great. Thanks for taking the question. Congratulations on a good quarter. Two for me, maybe the first one. You showed really nice operating margin and gross margin beats in the quarter despite the warehouse ramp issue. Maybe just speak to some of the specifics of what you're doing.

Speaker Change: Could help us out with what's supporting that with respect to the capacity expansion, that's helping or are these just like just simple wins that you're having with key accounts or other share gains.

Brian G. Andrews: I know it's been a focus for management, but any details on what drove it would be helpful.

Speaker Change: Yes, Jason I think it's a few of those things I mean.

Speaker Change: First off I mean, Debbie olive runs that part of our organization and she absolutely killed as she is fantastic and our team is fantastic and I couldnt be prouder of what they've been accomplished over there because the work they've been doing with with key accounts and expanding geographically and so forth just that fantastic. So I think when you combine that level of excellence with.

Speaker Change: Some of the wins that we're getting in some of the key account activities and.

Speaker Change: Some of the new product, that's coming into that marketplace as we start to be able to meet some of that demand in the earlier innings of that still but meeting some of that demand in a better way youre just seeing all that come together, so I wouldn't attribute it necessarily to one specific point, but just a lot of really good things happening.

Speaker Change: It's going to be very difficult to maintain that level of growth certainly quarter after quarter, but I do it.

Speaker Change: Expect EMEA to continue to put up pretty good numbers moving forward.

Brian G. Andrews: Hi Robbie, yeah, thanks for the question. I probably point to, there are several areas, but one place in particular that we've been talking about a lot over the last couple of really several years is all the investment activity and distribution. And some of that comes with IT and within Vision as well. But putting all that together, we're really starting to get leverage from that prior investment activity. We're seeing improvements in our cost of moving products between and among our different sites, but also in shipping out to our customers.

Speaker Change: Okay, Alright thats helpful.

Speaker Change: And then I want to.

Speaker Change: Maybe follow up with the <unk>.

Speaker Change: Clarification or a follow up from.

Brian G. Andrews: Some of this also has to do with influencing some of the customer behaviors around order patterns and so forth. But certainly, our initiatives around trying to drive down our distribution costs and getting more efficient are one of the really meaningful areas within SG&A that we've seen improved, which has led to the operating margin.

Speaker Change: Jon Block's question, just wanted to talk about the pushes.

Speaker Change: Pushes and pulls in CSI revenue assumptions for the back half of the year.

Robert Justin Marcus: Maybe a follow up from me. I think two cents worse currency came in a whole lot better than the fears that I was hearing, at least. And I know probably a good part of that was due to, I know you started, I think it was fiscal third quarter last year, a hedging program.

Speaker Change: I know you mentioned clearing some of the backlog it sounds like you think youre going to get a lot of that back that you lost you don't want to quantify it just yet but I think you also said that PARAGARD help make up some of the the losses here in the current quarter.

Brian G. Andrews: Yeah, thanks Robby. You know, I'm glad you asked that question and I put it in my prepared...

Operator: Your next question comes from a line from Jason Bednar from Piper Sandler. Your line is open.

Jason M. Bednar: Hi there. I'll echo the congratulations here on a nice quarter. Al or Brian, I wanted to start on EMEA.

Speaker Change: I guess, just curious how you're thinking about the components of that unchanged relatively unchanged CSI revenue guide and whether theres any margin implications from those assumptions if like maybe PARAGARD is helping a little bit more.

Albert G. White: The performance there with CVI just continues to be extraordinarily strong, putting up really good growth, covering up what's maybe being held back a little bit in APAC. But how sustainable is the run that you've got in EMEA? It's been pretty impressive, just like I would love to gauge your confidence level and stay up at these low to mid-teens growth levels. And, you know, if you could help us out with, you know, what's supporting that with respect to the capacity expansion that's helping, or are these just like, you know, just simple wins that you're having with key accounts or other shared gains?

Speaker Change: In your updated guide.

Albert G. White: Yeah, Jason, I think it's a few of those things. I mean, first off, Debbie Olive runs that part of our organization, and she absolutely kills it. She's fantastic, and her team is fantastic.

Speaker Change: Sure.

Speaker Change: You know PARAGARD I would expect PARAGARD to be negative here in Q3.

Speaker Change: Probably decently negative I think I mentioned last quarter I thought we'd have a strong Q2 for PARAGARD and we did.

Speaker Change: That will offset itself here in Q3 I would envision.

Speaker Change: Fertility medical device.

Speaker Change: Areas being much stronger in Q3 to offset that.

Yes, PARAGARD has higher margins arguably than some of those areas, but it's not so much that it's going to cause an issue certainly and as you can see in the back half guidance that we gave taking up numbers that we're comfortable we can work through that.

Speaker Change: Okay, great. Thank you.

Speaker Change: Yes.

Speaker Change: Your next question comes from the line of Anthony Petrone from Mizuho Group. Your line is open.

Anthony Charles Petrone: Hi, Thanks for taking the questions congrats on a solid underlying quarter here, maybe on capacity for contact lenses.

Speaker Change #100: Just to sort of revisit that Alan or Brian.

Speaker Change #101: How far ahead do you think your capacity overall.

Speaker Change #101: Is relative to some of the competitors out there that would be one question.

Speaker Change #101: Then the follow up to that would be just when we look out in terms of this latest capex growth cycle here on manufacturing capacity expansion for contact lenses. How long is this investment horizon going to be and when does it actually come to a conclusion. Thanks, a lot and congrats on the quarter.

Speaker Change #102: Thank you. Thank you Anthony it was a good quarter.

Speaker Change #103: Yes capacity I think we're probably in a similar shape to our competitors frankly right now.

Speaker Change #103: We've got capacity, we certainly need more capacity and we have capacity order we have lines ordered in capacity coming in line as we work through this year and through next year. We just have a lot of demand for our products and I think our competitors do too because the marketplace is strong the overall contact lens marketplace is strong.

Speaker Change #103: We're continuing to see a lot of interest and demand around daily products specialty daily silicone hydrogel and within that the toric and multifocal category. So.

Speaker Change #103: I think that capacity is a little bit of a challenge for everybody to some degree, but I think everyone would say hey, I'm, okay on capacity and I've got additional lines coming on.

Speaker Change #103: To meet the demand that certainly seems like it's going to be part of the contact lens industry here for many many many years in front of us.

Speaker Change #104: That's helpful. Thanks.

Speaker Change #104: Yes.

Your next question comes from the line of Joanne Wuensch from Citi. Your line is open.

Speaker Change #105: Oh, hi, Thank you for taking the question.

Nice quarter.

Speaker Change #106: We will have at a time.

Speaker Change #107: Operating margins because you are starting to push those up nicely and I don't know whether its a new you towards.

Speaker Change #107: Theyre, meaning our new levers that you have to call or at the new FX program that you've put into place, but I'd love to get a couple of the.

Factors that are driving that thanks.

Speaker Change #108: Yes, I'll give a high level answer Brian certainly has more detail than I do but I would say that youll remember over.

Speaker Change #108: The prior quarters here over the last several years, we've talked about investment activity in our distribution centers and in other areas of the company.

Speaker Change #108: And I know we've got questions on that why we were discussing it right like well when are we going to see a return out of that how is that going to play out well thats, what youre seeing right now we're in the earlier stages of leveraging those investments that we've done.

Albert G. White: And I couldn't be prouder of what they've been accomplishing over there because the work they've been doing with key accounts and expanding geographically, and so forth, it's just been fantastic. So I think when you combine that level of excellence with some of the wins that we're getting, and some of the key account activities, and, and some of the new products that's coming into that marketplace, as we start to be able to meet some of that demand, and the earlier innings of that still, but meeting some of that demand in a better way, you're just seeing all that come together.

Speaker Change #108: And those are two within the manufacturing side those are two within distribution and frankly, they are true in some other areas. When we talk about some of the work that we've been doing and becoming more efficient from an it perspective, so that investment activity, we've been doing over the last number of years.

Speaker Change #108: We're starting to see leverage on that and success from those programs. So I think we're kind of in some of the earlier innings arguably of being able to deliver some leverage through the P&L.

Speaker Change #109: Yes, I don't have much to add there Joanne.

Speaker Change #110: Well I mean, what's nice is that we've got some really really important initiatives behind us towards the end of last year. So now we're working on sort of iterating and continuously improving on.

Speaker Change #110: And that that activity that we've put in to service.

Speaker Change #110: Getting that leverage this year has been a little bit easier than obviously it was last year and we continue to make progress across many fronts.

Speaker Change #111: Excellent. Thank you.

Speaker Change #112: Your next question comes from the line of Patrick Wood from Morgan Stanley. Your line is open.

Patrick Andrew Wood: Amazing. Thank you so much just two quick ones. Please.

Albert G. White: So I wouldn't necessarily attribute it to one specific point, but just a lot of really good things happening. You know, it's going to be very difficult to maintain that level of growth, certainly quarter after quarter, but I do expect EMEA to continue to put up pretty good numbers moving forward.

Speaker Change #114: I'd Love, if you could unpack EMEA in CVI and little bit more because again, it's another incredibly strong quarter, just how should we think about the durability given the region growth in general isn't great, but you guys seem to be killing it in that market.

Operator: Okay, all right, that's helpful. And then I want to maybe follow up with a clarification or a follow-up on John Block's question. Just wanted to talk about, you know, the pushes and pulls and CSI revenue assumptions for the back half of the year. I know you mentioned clearing some of the backlog. It sounds like you think you're going to get a lot of that back that you lost. I don't want to quantify it just yet, but I think you also said that, you know, Paragard helped make up some of the losses here in the current quarter.

Speaker Change #115: Yes, I don't know if I'd add too much on top of what I said earlier really strong team.

Operator: So, I guess I'd just curious how you're thinking about the components of that unchanged or relatively unchanged CSI revenue guide and whether there's any margin implications from those assumptions if, like, maybe Paragard's helping a little bit more, you know, in your updated guide.

Speaker Change #115: Great products, well positioned with a lot of the key accounts that we have there.

Speaker Change #115: And I think we've got potential for solid growth moving forward.

Speaker Change #116: We're running into Ma.

Speaker Change #116: Multiple quarters years of really strong performance out of that region. So it gets a little bit more difficult to continue to put up that sizable.

Speaker Change #116: Levels of growth, but I would anticipate we're going to continue to perform well there for all those reasons.

Speaker Change #117: Sure and then quick second one is can you guys sort.

Speaker Change #118: So at a temperature check on capital allocation because you know.

Speaker Change #119: You're obviously running with a relatively unlevered balance sheet and I know, it's challenging to work help Mike what kind of assets are out there and I. Appreciate you to those the coke assets fairly recent but how are you thinking about the broader capital allocation landscape going forward.

Albert G. White: Sure. You know, Paragard. I would expect Paragard to be negative here in Q3, probably decently negative. I think I mentioned last quarter that I thought we'd have a strong Q2 for Paragard, and we did. That'll offset itself here in Q3. I would imagine fertility, medical device, those areas being much stronger in Q3 to offset that. Yeah, Paragard has higher margins, arguably, than some of those areas, but it's not so much that it's going to cause an issue, certainly, and as you can see in the back half, guidance that we gave taking up numbers that were comfortable we could.

Operator: Okay, great, thank you.

Speaker Change #120: Well I would say.

Speaker Change #121: I would answer that by saying number one is organic investments we touched on that earlier investing.

Anthony Charles Petrone: Your next question comes from the line of Anthony Petrone from Mizuho Group. Your line is open.

Speaker Change #121: And bringing more capital online investing on creating or expanding products that we have in the marketplace right now.

Speaker Change #121: So I would say theres a lot of focus on that right now internal investments if you will which are.

Speaker Change #121: Higher return lower risk type investment activity.

Speaker Change #121: And then paying down some debt I still don't think there's anything wrong frankly, we're paying down debt right now, we'll see what happens with interest rates, but we carry a decent amount of debt.

Speaker Change #121: Regarding your last point I mean, if acquisitions come along or if we see some smaller tuck in type deals like we would evaluate those and if they make sense, we'd consider doing them.

Anthony Charles Petrone: Hi, thanks for taking the questions. Congratulations on a solid underlying core here.

Speaker Change #122: So I appreciate the color thanks for taking the questions.

Albert G. White: Maybe on capacity for contact lenses, just to sort of revisit that, Alan or Brian. How far ahead do you think your capacity overall is relative to some of the competitors out there? That would be one question. And then the follow-up to that would be, just when we look out in terms of this latest CapEx growth cycle here in manufacturing capacity expansion for contact lenses, you know, how long is this investment horizon going to be, and when does it actually come to a conclusion?

Speaker Change #123: Your next question comes from the line of Chris Pascal from Nephron. Your line is open.

Albert G. White: Thanks a lot and congrats on the quarter. Yeah. Thank you. Thank you, Anthony. It was a good course.

Chris Pascal: Thanks Al I wanted to clarify the expectations for Paragon <unk> was a particularly easy comp you have.

Chris Pascal: Pretty tough comp in <unk>, so its little hard to disaggregate, the Destocking dynamics I'm just all the Lumpiness in FY 'twenty. Three do you think sales are going to be down sequentially in <unk> or just down year over year, and maybe just frame for us what do you think full year growth it looks like at this point.

Speaker Change #125: Yes, I think full year growth is probably in that flattish to up a little bit it probably be up a little bit depending upon competitor launch or something along those lines.

I think we did around $46 million in this quarter.

Speaker Change #126: Sequentially expect that to be lower Q3 lower than Q2.

Speaker Change #127: Okay. That's helpful. And then one for Brian on the tax rate guidance is walk down from 15% to 14 five to now 14, and even getting to 14 would require you to be higher in the back half than the first so.

Speaker Change #128: What's driven and lower why should it go back up and then it's 15% is still a good starting point as we look ahead to FY 'twenty five.

Albert G. White: You're continuing to see a lot of interest and demand around daily products, especially daily silicone, hydrogels, and within that, the torques and multifocal category. I think that capacity is a little bit of a challenge for everybody to some degree, but I think everyone would say, hey, I'm okay with capacity, and I've got additional lines coming on to meet the demand that certainly seems like it's going to be part of the contact lens industry here for many, many, many years to come.

Albert G. White: Thank you. Thank you, Anthony.

Speaker Change #129: Hi, Chris Yes, thanks for the question.

Albert G. White: It was a good quarter. Yeah, capacity. I think we're probably in similar shape to our competitors, frankly, right now. We've got capacity. We certainly need more capacity, and we have it on order. We have lines ordered and capacity coming in line as we work through this year and through next year. We just have a lot of demand for our products, and I think our competitors do, too, because the marketplace is strong. The overall contact lens marketplace is growing strongly.

Operator: That's helpful. Thanks. Yep. Your next question comes from the line of Joanne Wuensch from Citi. Your line is open. Oh, hi. Thank you for taking the questions.

Brian G. Andrews: Really the story behind our effective tax rate going down in the first and in the second quarter as stock option exercises.

Brian G. Andrews: As you know, we don't it's hard to forecast again forecast when or how much people are going to are going to exercise.

Brian G. Andrews: But stock.

Brian G. Andrews: Stock option exercises drove the effective tax rate down probably by 1%.

Brian G. Andrews: In the second quarter, So youre right I think if you model out the rest of the year getting to 14% around there at least.

Brian G. Andrews: Incorporates a lower tax rate in Q2, and roughly 15% for the balance of Q3 and Q4 as it relates to our organic tax rate our underlying organic tax rate. It is hovering somewhere around that 15% to 15, five or so range. So.

Brian G. Andrews: I would expect that kind of if we were to start next year would be somewhere probably in that in that ballpark.

Speaker Change #130: Okay. Thank you.

Speaker Change #130: Yes.

Joanne Karen Wuensch: Your next question comes from the line of Joanne Wuensch from Citi. Your line is open.

Speaker Change #131: Your next question comes from the line of Brett <unk> from Keybanc capital markets. Your line is open.

Albert G. White: Yeah, I'll give a high-level answer. Brian certainly has more detail than I do.

Speaker Change #132: Hey, guys. Thank you so much for taking my questions sorry to harp on the PARAGARD question just wanted to ask one more clarifying one there just given some of the trends. So I know you kind of called out that you thought the second quarter would remain strong, but just trying to make sense of the 22% growth maybe the first part would just be.

Albert G. White: But I would say that in some prior quarters here over the last several years, we've talked about investment activity in our distribution centers and in other areas of the company. And I know we had questions about that, why were we discussing it? Like, when are we going to see a return on that? How is that going to play out?

Speaker Change #132: It was pricing still in the mid single digit range in terms of the contribution and then maybe if you could just elaborate a little bit on why you're expecting such a sudden change into the back half if that's more weighted to a market slowdown or really just based off of.

Speaker Change #133: Potential changes in the competitive landscape. Thank you.

Speaker Change #134: Sure, Yes, you get Lumpiness in PARAGARD, we've always had it I mean, if you go back and look over the years, you've always seen a lot of lumpiness around PARAGARD tied to channel inventory and tied to price I mean in this case, we did a mid single digit price increase.

Speaker Change #134: Customers had a chance to buy in on that.

Speaker Change #134: At the end of our first fiscal quarter, because that actually helps on that and then during the second fiscal quarter. So we saw some buying activity.

Speaker Change #134: And Youll, just naturally see that kind of play itself out in Q3 and go in the other direction underlying kind of themes. If you will in that marketplace from our perspective as the market is still a struggle from a unit perspective, so yeah, you're getting growth from price, it's not coming from units I mean, theres competitive products out there there is no other non hormonal IUD in the market.

Speaker Change #134: Today, and maybe a competitive product will come but there is easier access to birth control pills and and other birth control related items that are out there that continues to make that challenging market.

Alright Super helpful. And then really quick follow up I know, you're not giving the exact numbers anymore, but just curious on the 12% organic growth in the toric and multifocal category. If directionally, one was a lot stronger than the other or more consistent across those two categories and thanks again.

Speaker Change #135: Yes, they were pretty similar.

Speaker Change #135: They're pretty similar.

Speaker Change #136: Our next question comes from the line of David Saxon from Needham Your line is open.

Speaker Change #135: Great.

Speaker Change #137: Alan and Brian Thanks for taking my questions and congrats on the quarter.

David Joshua Saxon: Wanted to start in CVI ortho K it looks like it was down kind of low single digits.

David Joshua Saxon: How much of that weakness is driven by China still and how are you.

David Joshua Saxon: Thinking about the recovery in that market.

Speaker Change #139: Well that was China, because if you go ortho K outside of China. We grew off the top of my head it may even been double digits.

Speaker Change #139: It was China as a matter of fact, China is a weak market for us pulls down our Asia Pac numbers in total it's one of the reasons that that region is probably a little bit less than maybe what some people were expecting or at least what I was hoping it would be.

Speaker Change #139: I still believe we have a really strong team in China. So we just need some stability in that marketplace. I think we will see ortho K start growing here in Q3.

Speaker Change #139: And being better footing in the back half of the year.

Speaker Change #140: Okay got it and then just a follow up on margins.

Speaker Change #141: Looking kind of pre Covid. If you will your operating margins were closer to the high 20%. So just as a follow up to a previous question is there anything structurally limiting you from kind of returning to those levels or is it more about.

Speaker Change #141: Leveraging some of these investments over time.

Speaker Change #142: You were talking about thanks, so much.

Speaker Change #143: Yeah, I'll give a quick one on that and let Brian jump in.

Speaker Change #144: I know FX has been a negative clearly for us and some of the year as it's been a pretty significant negative to us.

Albert G. White: Well, that's what you're seeing right now. We're in the early stages of leveraging those investments that we've made. And those are true on the manufacturing side. Those are true on the distribution side. And frankly, they're true in some other areas when we talk about some of the IT work that we've been doing and becoming more efficient from an IT perspective. So that investment activity we've been doing over the last number of years, we're starting to see leverage on that and success from those programs. So I think we're kind of in some of the earlier innings, arguably, of being able to deliver some leverage through the P&L. Yeah, I don't have much to add there, Joanne.

Speaker Change #145: Outside of that I think it is a matter of leveraging the investments there's nothing fundamentally that has changed in our ability to drive margin improvements for the foreseeable future. I think is something that we can accomplish let me turn that over to Brian.

Brian G. Andrews: Yeah, I don't have much to add there. Joanne, I think I'll put it well.

Brian G. Andrews: Again, I don't have a whole lot to add I mean, we're we're executing really well, it's really just about internal investments organic growth and execution and we're demonstrating that right. Now we will continue to demonstrate that in the back half of this year and I expect that will continue.

Operator: I mean, what's nice is that, you know, we had some really, really important initiatives behind us towards the end of last year. So now we're working on sort of iterating and continuously improving on that activity that we've put into service. So, you know, getting that leverage this year has been a little bit easier than, obviously, it was last year. And, you know, we continue to make progress across many

Speaker Change #146: Great. Thank you.

Patrick Andrew Wood: Your next question comes from the line of Patrick Wood from Morgan Stanley. Your line is open.

Speaker Change #147: Your next question comes from the line of Nevada time from BNP Paribas. Your line is open.

Albert G. White: Amazing, thank you so much. Just two quick ones, please. I'd love if you could unpack EMEA and CVI a little bit more, because again, it's another incredibly strong quarter. Just how should we think about the durability given that region growth in general isn't great, but you guys seem to be killing it in that market?

Speaker Change #148: Hi, good evening, Thanks for taking my question.

Speaker Change #149: Alright got it.

Nevada time: So when do you expect.

Nevada time: No.

Speaker Change #151: Ebay competitor.

Speaker Change #152: The balance would be approved.

Speaker Change #152: Is there a chance that that appear.

Speaker Change #153: We welcome you to push to 2020 high impacting your guidance for the year. Thank you.

Albert G. White: Yeah, I don't know if I'd add too much on top of what I said earlier. Really strong team, great products, and well positioned with a lot of the key accounts that we have there. And I think we've got potential for solid growth moving forward. I mean, we are running into, you know, multiple quarters, years of really strong performance out of that region. So it gets a little bit more difficult to continue to put up such sizable levels of growth, but I'd anticipate we're going to continue to perform well there for all those reasons.

Speaker Change #153: Sure.

Speaker Change #154: No idea.

Speaker Change #155: Any guess where that stands.

Speaker Change #156: Theres a competitive product out there that is going through the FDA approval process.

Speaker Change #157: I don't know where that stands.

Speaker Change #157: If when they get approval and.

Speaker Change #157: And how they decide to launch that product and so forth will obviously be transparent about our expectations and how we think that will impact our business, but until that point in time I won't speculate on their approvals.

Speaker Change #158: Thank you.

Speaker Change #158: Yes.

Speaker Change #158: Yes.

Speaker Change #159: Again, if you would like to ask a question press Star one on your telephone Keypad. Your next question comes from the line of Steve Lichtman from Oppenheimer <unk> Company. Your line is open.

Albert G. White: And then a quick second one is, if I could get a sort of temperature check on capital allocation, because, you know, you're obviously running with a relatively unlevered balance sheet, and I know it's challenging to work out, like, what kind of assets are out there, and I appreciate you did the Cook Assets fairly recently, but how are you thinking about the broader capital allocation landscape?

Albert G. White: Well, I would say, I would answer that by saying number one is organic investments. We touched on that earlier, investing in bringing more capital online, investing in creating or expanding products that we have in the marketplace right now. So I would say there's a lot of focus on that right now, internal investments, if you will, which are higher return, lower risk type investment activities, and then paying down some debt. I still don't think there's anything wrong, frankly, with paying down debt right now.

Albert G. White: We'll see what happens with interest rates, but we carry a decent amount of debt. Regarding your last point, I mean, if acquisitions come along or we see some smaller, top-end type deals, we would evaluate those, and if they make sense, we'd do those.

Steven Michael Lichtman: Yes, hi, thanks, guys.

Speaker Change #161: Brian on gross margin, how should we think about that.

Speaker Change #162: Half versus the first half.

Speaker Change #163: Overall, and you mentioned on three Q higher TDI Cogs.

Speaker Change #164: Talk a little bit more about that and why it would just be I guess limited to that one quarter.

Operator: So, I appreciate the call and thanks for taking the questions.

Steven Michael Lichtman: Sure, Yes, so Steve I mean, I mentioned on our last earnings call and I'll say it again here I mean gross margins on an as reported basis really should be pretty similar to last year.

Operator: Your next question comes from the line of Chris Pascal from Nefron. Your line is open.

Steven Michael Lichtman: So that would indicate that the second half gross margins on an as reported basis are going to be down on an absolute basis versus the first half.

Chris Pascal: Thanks. Al, I wanted to clarify the expectations for Paragard. You know, 2Q was a particularly easy comp. You have a pretty tough comp in 3Q, so it's a little hard to disaggregate the stocking dynamic from just all the lumpiness in FY23. Do you think sales are gonna be down sequentially in 3Q or just down year over year? And maybe just to frame it for us, what do you think full year growth looks like at this point?

Steven Michael Lichtman: The color I gave in my prepared remarks around Q3.

Steven Michael Lichtman: Really speak to just <unk>.

Steven Michael Lichtman: Higher cost inventory.

Steven Michael Lichtman: And our production levels in Q1 that roll through six months later into Q3, so we have visibility into that.

Speaker Change #165: No that is going to be it's going to impact our gross margins. There and then of course, when we look at the impact of FX to.

Speaker Change #165: Gross profit we can see that.

Speaker Change #166: <unk> in Q3 is worse than in Q2, and frankly and it is also worth in Q4. So that's driving Q3, a little lower than Q4, but to get to sort of a gross margin that's pretty similar to last year. Your second half gross margins are a little bit down versus the first half.

Speaker Change #167: Got it thanks, and then just on free cash flow, Brian I guess.

Speaker Change #168: The first half was was a bit behind prior years.

Speaker Change #169: Anything you'd point to there and whats your outlook for free cash flow for the year. Thanks a lot.

Brian G. Andrews: Okay, that's helpful. And then one for Brian on the tax rate. Guidance has walked down from 15 to 14 and a half to now 14. And even getting to 14 would require you to be higher in the back half than the first. So what's driven it lower? Why should it go back up? And then is 15% still a good starting point as we look ahead to FY 25?

Albert G. White: Yeah, I think full-year growth is probably flat-ish to up a little bit. It'd probably be up a little bit depending upon, you know, a competitor launch or something along those lines. I think we did around $46 million in this quarter. I would sequentially expect that to be lower. Q3 lower.

Speaker Change #168: Sure.

Brian G. Andrews: Hi Chris. Yeah, thanks for the question.

Brian: No change to my commentary I mean, I said I think the last quarter and maybe the prior quarter, though we expect free cash flow to be about $100 million higher than last year.

Brian G. Andrews: Hi Chris, yeah, thanks for the question. Really, the story behind our effective tax rate going down in the first and second quarter is stock option exercises. As you know, it's hard to forecast, you can't forecast when or how much people are going to exercise. But stock option exercises drove the effective tax rate down probably by a percent in the second quarter. So you're right.

Brian: Obviously taxes interest FX, all or a detriment this year and thats, providing a bit of a headwind in.

Brian: On a limiter to how much higher.

Brian G. Andrews: I think if you model out the rest of the year, getting to 14 percent, around there, at least, incorporates the lower tax rate in Q2 and roughly 15% for the balance of Q3 and Q4. As it relates to, you know, our organic tax rate, our underlying organic tax rate, it is hovering somewhere around that 15 to 15 and a half or so range. So, you know, I'd expect that kind of, if we were to start next year, it would be somewhere... probably in that ballpark.

Brian: So I'd say, we're doing the right things, we're driving free cash flow higher and obviously capex is a big part of that I'll talk about the capacity expansion and Capex is going to be high again this year. So.

Operator: Your next question comes from the line of Brett Fishbin from KeyBank Capital Markets. Your line is open.

Brian: But it's all for the right reasons, and we will continue to drive better free cash flow as we look forward.

Speaker Change #171: Got it thanks, Brian.

Speaker Change #171: Yes.

Speaker Change #171: That concludes our question and answer session I will now turn the call back over to al White for closing remarks.

Brett Adam Fishbin: Hey guys, thank you so much for taking the questions. Sorry to harp on the Paragard question, but I just wanted to ask one more clarifying question there, just given some of the trends. So I know you kind of called out that you thought the second quarter would remain strong, but just trying to make sense of the 22% growth. Maybe the first part would just be, was pricing still in the mid-single-digit range in terms of the contribution?

Brett Adam Fishbin: And then maybe you could just elaborate a little bit on why you're expecting such a sudden change in the back half, if that's more weighted to a market slowdown or really just based on any potential changes in the competitive landscape. Thank you.

Great. Thank you everyone for taking the time today to join US on our call I thought we had a really strong quarter and we've got good momentum in the business.

Albert G. White: Sure. Yeah, you get lumpiness in Paragard. We've always had it. I mean, if you go back and look over the years, you've always seen a lot of lumpiness around Paragard tied to channel inventory and tied to price. I mean, in this case, we did a mid-single-digit price increase, and customers had a chance to buy in on that at the end of our first fiscal quarter because it actually helps with that, and then during this second fiscal quarter.

Albert G. White: So we saw some buy-in activity, and you'll just naturally see that kind of play itself out in Q3 and go in the other direction. So that's another direction. Underlying kind of themes, if you will, in that marketplace from our perspective is that the market's still a struggle from a unit perspective. So yeah, you're getting growth from price. It's not coming from units. I mean, there are competitive products out there. There's no other non-hormonal IUD in the market today, and maybe a competitive product will come, but there's easier access to birth control pills and other birth control-related items that are out there that continue to make that a challenge.

Operator: All right, super helpful, and then really quick.

Operator: Your next question comes from a line David Saxon from Needham. Your line is open.

Brett Adam Fishbin: All right, super helpful. And then, really quick follow-up. I know you're not giving the exact numbers anymore, but just curious about the 12% organic growth in the toric and multifocal category, if directionally one was a lot stronger than the other or more consistent across those two categories. Thanks again.

David Joshua Saxon: Great. Hi, Al and Brian. Thanks for taking my questions and congrats on the quarter. I wanted to start with CBI, ortho K. It looks like it was down kind of low single digits. So how much of that weakness is still driven by China, and how are you thinking about the recovery in that market?

Albert G. White: Uh, well, that was China. Because if you go to an ortho K outside of China, we grew up off the top of my head; it may even have been double digits. But it was China. As a matter of fact, China is a weak market for us and pulls down our Asia Pacific numbers. In total, it's one of the reasons that that region is probably a little bit less than maybe what some people were expecting, or at least what I was hoping it would be.

Albert G. White: I still believe we have a really strong team in China, so we just need some stability in that marketplace. I think we'll see OrthoK start growing here in Q3 and be on a better footing in the back.

So I'm looking forward to Q3 and continuing to get positive update so.

Albert G. White: Okay, got it. And then just to follow up on margins. So I mean, looking kind of pre-COVID, if you will, your operating margins were closer to the high 20%. So just as a follow up to a previous question, is there anything structurally limiting you from kind of returning to those levels? Or is it more about leveraging some of these investments over time that you were talking about? Thanks.

Albert G. White: Yeah, I'll give a quick one on that and let Brian jump in. I know FX has been a negative for us for some years. It's been a pretty significant negative for us. Outside of that, I think it's a matter of leveraging the investments. There's nothing fundamentally that has changed.

Albert G. White: That concludes our question and answer session. I will now turn the call back over to Al White for closing remarks.

Brian G. Andrews: And our ability to drive margin improvements for the foreseeable future, I think, is something that we can accomplish. Let me turn that over to Brian to add. Yeah, again. I don't have a whole lot to add.

Albert G. White: Great! Thank you everyone for taking the time today to join us on our call. I thought we had a really strong quarter and we've got good momentum in the business, so I'm looking forward to Q3 and continuing to get positive updates.

Thank you again, and we'll certainly talk during the quarter.

Brian G. Andrews: I mean, we're executing really well. It's really just about, you know, internal investments, organic growth, and execution. And we're demonstrating that right now. We'll continue to demonstrate that in the back half of this year. Great, thank you. Your next question comes from the line of Navann Thai from BNP Paribas. Your line is open.

Operator: Your next question comes from the line of Navanti from BNP Paribas. Your line is open. Hi, good evening.

Albert G. White: Sure. No idea. I don't have any guesses as to where that stands. There's a competitive product out there that's going through the FDA approval process, but I don't know where that stands. So when, when they get approval, and how they decide to launch that product, and so forth, we'll obviously be transparent about our expectations and how we think that'll impact our business. But until that point in time, I won'

Operator: Again, if you'd like to ask a question, press star 1 on your telephone keypad. Your next question comes from the line of Steve Lichtman from Oppenheimer & Company. Your line is open.

Operator: Thank you again, and we'll certainly talk during the quarter. This concludes today's conference call. Thank you for your participation. You may now disconnect.

Steven Michael Lichtman: Yes, hi. Thanks, guys. Brian, on gross margin, how should we think about the second half versus the first half overall? And you mentioned in 3Q that there was a higher CVI COGS. Talk a little bit more about that and why it would just be, I guess, so limited to that one quarter.

Speaker Change #172: This concludes today's conference call. Thank you for your participation you may now disconnect.

Brian G. Andrews: Sure, yeah, so Steve, I mentioned on the last earnings call, and I'll say it again here, gross margins on an as-reported basis really should be pretty similar to last year. So that would indicate then that the second half gross margin, on an as-reported basis, is going to be down on an absolute basis versus the first half. You know, the color I gave in my prepared remarks around Q3 really speaks to just higher-cost inventory and our production levels in Q1 that roll through six months later into Q3. So we had visibility into that.

Brian G. Andrews: Know that it's going to be – it's going to impact our gross margins there. And then, of course, when we look at the impact of FX on gross profit, we can see that FX in Q3 is worse than in Q2 and, frankly – and is also worse than in Q4. So that's driving Q3 a little lower than Q4. But to get to sort of a gross margin that's pretty similar to last year, your second half gross margins are a little bit down.

Steven Michael Lichtman: And then just on pre-cash flow, Brian, I guess the first half was a bit behind prior years. Anything you'd point to there and what's your outlook for pre-cash flow for the year? Thanks a lot.

Brian G. Andrews: Sure, Steve, yeah. No change to my commentary. I mean, I said in the last quarter and maybe the prior quarter that we expect free cash flow to be about $100 million higher than last year. Obviously, taxes, interest, FX, all are a detriment this year, and that's providing a bit of a headwind and a limiter to how much higher. So I'd say we're doing the right things. We're driving free cash flow higher, and obviously, CapEx is a big part of that. Al talked about capacity expansion, and CapEx is going to be high again this year, but it's all for the right reasons, and we'll continue to drive better free cash flows.

Speaker Change #172: [music].

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Speaker Change #172: Okay.