Q2 2025 The Cooper Companies Inc Earnings Call
So thank you for standing by at this time I'd like to welcome you to the Q2 2025 different.
Operator: Hello, thank you for standing by.
Operator: At this time, I would like to welcome you to the Q2 2025 Cooper Companies Earnings Conference Call. All lines have been placed on mute to prevent any background noise.
Companies.
Earnings Conference call all lines have been placed on mute to prevent any background noise.
Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again.
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 keypad.
He would like to withdraw your question Press Star one again.
Kim Duncan: I would now like to turn the conference over to Kim Duncan, VP of Investor Relations and Risk Management. Please go ahead.
Kim Duncan: Now I'd like to turn to conference over to Kim Duncan VP of Investor Relations and breast management. Please go ahead.
Speaker Change: Good afternoon, and welcome to Cooper Companies' second quarter 2025 earnings conference call. During today's call. We will discuss our 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.
Al White: Good afternoon, and welcome to Cooper Company's second quarter 2025 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.
Al White: Our presenters on today's call are Al White, President and Chief Executive Officer. and Brian Andrews, Chief Financial Officer.
Kim Duncan: <unk> treasurer.
Al White: Before we begin, I'd like to remind you that this conference call will contain forward-looking statements. CPS, Cash Flows, FX and Tax Rates, Tariffs, and other financial guidance. and Operational Initiatives. market conditions. and Product Launch.
Speaker Change: Before we begin I'd like to remind you that this conference call will contain forward looking statements, including statements relating to revenue.
Speaker Change: Cash flows FX and tax rates tariffs and other financial guidance and expectations strategic and operational initiatives market conditions and trends and product launches and demand.
Al White: Overlooking statements depend on assumptions, data, or methods that may be incorrect or and our subject. events that could cause our actual results in. to differ materially from those described in are set forth under the caption forward.
Speaker Change: We're looking statements depend on assumptions data or methods that maybe incorrect or imprecise and are subject to risks and uncertainties that could cause our actual results and future actions of the company to differ materially from those described in forward looking statements are set forth under the caption forward looking statements in today's earnings release and are described in our SEC.
Al White: Today's Earnings Release and are described in our SEC file. including Cooper's Form 10-K and Form 10-Q filings, all of which are available on our website at cooperco.com.
Speaker Change: Finally, including Coopers Form 10-K, and Form 10-Q filings all of which are available on our website at <unk> dot.
Speaker Change: Com.
Al White: Also, as a reminder, the non-GAAP financial information we will provide on this call is provided as a supplement to our GAAP. I encourage you to consider our results under GAAP as well as non-GAAP and refer to the reconciliations provided in our earnings. which is available on the investor relations section of our website under quarterly.
Speaker Change: So 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 I refer to the reconciliations provided in our earnings release, which is available on the Investor Relations section of our website under quarterly material.
Speaker Change: Yeah.
Speaker Change: Should you have any additional questions. Following the call. Please email IR at <unk> Dot com.
Al White: If you have any additional questions following the call, please email ir at cooperco.com.
Al White: And now I'll turn the call over to Al for the opening. Thank you, Kim, and welcome, everyone, to today's Fiscal Q2 Earnings Call. This was another solid quarter with consolidated organic revenue growth of 7%, led by double-digit growth in both our daily silicone hydrogel lenses at Cooper Vision and our office and surgical portfolio at Cooper Surgeons. We also continued executing at a high level, delivering operational improvements and OpEx leverage that drove double-digit non-GAAP earnings growth. Similar to other companies, we're dealing with a more complex global operating environment, but we're controlling what we can by executing well, including taking share, delivering leverage, launching products, and completing capacity expansion projects.
al: And now I will turn the call over to al for his opening remarks.
al: Thank you Kim and welcome everyone to todays fiscal Q2 earnings call. This was another solid quarter with consolidated organic revenue growth of 7% led by double digit growth in both our daily silicone hydrogel lenses at Coopervision, and our office and surgical portfolio of Cooper surgical.
Speaker Change: Also continued executing at a high level delivering operational improvements in opex leverage that drove double digit non-GAAP earnings growth.
Speaker Change: Other companies were dealing with a more complex global operating environment, but we're controlling what we can by executing well, including taking share delivering leverage launching products and completing capacity expansion projects will cover all of that on today's call.
Al White: We'll cover all of that on today's. Moving to the numbers, consolidated revenues were $1.002 billion, up 6% year-over-year, or up 7% organically. Cooper Vision reported quarterly revenues of $670 million, up 5%, or up 7% organically. Cooper Surgical posted quarterly revenues of $333 million, up 8%, or up 7% organically. Margins improved nicely and non-GAAP earnings were $0.96, up 14% year-over-year. For CooperVision and reporting growth rates organically, the Americas grew 8%, EMEA 6%, and AsiaPac 5%. Within categories, torques and multifocals grew 7%, and spheres were up 6%. Within modalities, our daily silicone hydrogel lenses, MiDay and Clarity, grew 10%, and our silicone hydrogel FRP lenses, BioAffinity and Avera, were up 6%.
Speaker Change: Moving to the numbers consolidated revenues were 1.002 billion up 6% year over year or up 7% organically Coopervision reported quarterly revenues of $670 million up 5% or up 7% organically.
Speaker Change: Cooper surgical posted quarterly revenues of $333 million up 8% or up 7% organically.
Speaker Change: <unk> improved nicely and non-GAAP earnings were <unk> 96 up 14% year over year.
Speaker Change: For coopervision reporting growth rates organically, the Americas grew 8% EMEA, 6% and Asia Pac 5% within categories towards the multifocal is grew 7% and spheres were up 6%.
Speaker Change: Within modalities, our daily silicone hydrogel lenses, my data and clarity grew 10% and our silicone hydrogel FRP lines as bio affinity and of ore were up 6%, our myopia management portfolio grew 19% with my site up 35%.
Al White: Our Myopia Management Portfolio grew 19%, with MySite up 35%. Turning to products, and starting with daily silicone hydrogel lenses, MyDay continued growing double digits with particular strength and torques, multifocals, and our innovative EnerGIS offering. We remain very bullish on this product family as we increase availability in new markets and in new channels to capitalize on opportunities from greater penetration in existing accounts and with new customers. With improved capacity, we're back to being aggressive, and that can be seen in a number of areas, including increasing availability of our multifocal and extended torque ranges, new launch activities such as MyDay Energis in Canada, and our upgraded Clarity One Day Sphere with wet-lock technology in Japan, and expanded private label discussion.
Speaker Change: Turning to products and starting with daily silicone hydrogel lenses <unk> continued growing double digits with particular strength in toric multifocal and our innovative <unk> offering.
Speaker Change: We remain very bullish on this product family as we increase availability in new markets and new channels to capitalize on opportunities from greater penetration in existing accounts and with new customers.
Speaker Change: With improved capacity, we're back to being aggressive and that can be seen in a number of areas, including increasing availability of our multifocal and extended toric ranges new launch activities, such as <unk> in Canada, and our upgraded clarity one day sphere with wet lock technology in Japan and expanded private label.
Speaker Change: <unk>.
Al White: A lot of this activity is tied to increasing bidding sets and trial lenses, so we expect this to accelerate revenue growth starting in fiscal Q4, which is supported by the strong bidding activity we're seeing today. To add a little more color, we just launched MyDienergist with its innovative digital boost technology in Canada through a series of well-covered events and early feedback is extremely positive. We're receiving significant requests for fitting sets, and initial orders are rolling in. Meanwhile, our MyDay Toric Parameter Expansion, which provides eye care practitioners with the widest skew range by far for a daily toric lens, continues progressing well across North America and Europe, and we'll be launching the range expansion in targeted Asia-Pac markets soon.
Speaker Change: A lot of this activity is tied to increasing bidding sets in trial lenses. So we expect this to accelerate revenue growth starting in fiscal Q4, which is supported by the strong bidding activity we're seeing today.
Speaker Change: Do you add a little more color, we just launched <unk> with its innovative digital boost technology in Canada through a series of well covered events and early feedback is extremely positive.
Speaker Change: We're receiving significant requests for fitting sets and initial orders are rolling in Meanwhile, our Monday toric parameter expansion, which provides eye care practitioners with a wider SKU range by far for a daily Toric lens continues progressing well across North America, and Europe, and we will be launching the range expansion and targeted Asia Pac.
Speaker Change: Market soon.
Al White: And lastly, MyDay Multifocal's unique advanced 3-ADD design, paired with its easy-fitting system, is performing exceptionally well as market availability continues to increase. Turning to Clarity, we posted solid results with this high-quality, lower-priced lens portfolio, offering a great alternative to Mi-Day. The redesigned multifocal, which now mirrors Mi-Day's design, is a fantastic product and grew double digits this quarter.
Speaker Change: And lastly, <unk> multifocal is unique advanced three AD design paired with its easy bidding system is performing exceptionally well as market availability continues to increase.
Speaker Change: Turning to clarity, we posted solid results with this high quality lower price led portfolio offering a great alternative to my desk, the redesigned multifocal, which now mirrors my days design is a fantastic product and grew double digit this quarter.
Al White: And I could speak to this product's great handling, comfort, and visual acuity as I'm happily wearing them right now reading this script. Moving to Frequent Replacement Lenses, BioAffinity continues to strengthen its position as the number one contact lens in the world, with more people wearing it than any other lens. We're seeing nice growth throughout its full portfolio of market-leading prescription options, including Spears, Torex, Multifocals, Extended Ranges, made-to-order products, and Energi. BioAuthentity provides eye care practitioners the ability to fit an amazing 99.9% of all patients, by far the widest offering of any contact lens family on the market.
Speaker Change: I can speak to this products, great handling comfort and visual acuity as im happily wearing them right now reading this script.
Speaker Change: Moving to frequent replacement lenses bio affinity continues to strengthen its position as the number one contact lens in the world with more people wearing it than any other lines.
Speaker Change: We're seeing nice growth throughout its full portfolio of market, leading prescription options, including spheres torque multifocal extended ranges made to order products and energy.
Speaker Change: <unk> provides eye care practitioners the ability to fit an amazing 99, 9% of all patients by far the widest offering of any contact lens family on the market.
Speaker Change: Turning to my side, we saw growth in bidding activity accelerate this quarter with revenue, reaching $25 million up 35% a key component to the improved bidding activity is the implementation of a new pricing model initiated following the conclusion of our global pricing review that confirm that the annual.
Al White: Turning to my site, we saw growth in fitting activity accelerate this quarter, with revenue reaching $25 million, up 35%. A key component to the improved fitting activity is the implementation of a new pricing model initiated following the conclusion of our global pricing review that confirmed that the annual wearer cost is not a significant barrier to greater fitting activity. Price certainly matters, and training eye care practitioners and educating parents on myopia is important, but the key driver is just getting kids into the lens. Once kids begin wearing MiSight, they love it. And with retention rates running around 90%, they stay in it.
Speaker Change: We're of course is not a significant barrier to greater bidding activity.
Speaker Change: Certainly matters and training eyecare practitioners and educating parents on myopia is important but the key driver is just getting kids into the lens what kids begin wearing my side, they love, it and where retention rates running around 90% they stay in it and when parents verify the benefits of the treatment whether ecp's, they're sold on the technology.
Al White: And when parents verify the benefits of the treatment with their ECPs, they're sold on the technology. With this data, our focus is now heavily on reducing upfront fitting barriers by offering promotions, such as an initial one to three months free. This provides a no risk opportunity for parents to get comfortable with their children wearing contact lenses and for kids and young adults to get comfortable wearing contacts for the first time. With a broader rollout of this strategy, along with the launch of a large key account private label deal, we're already seeing a nice acceleration in fitting activity in EMEA, and we expect similar success in other markets.
Speaker Change: With this data our focus is now heavily on reducing upfront fitting barriers by offering promotions such as an initial one to three months free.
Speaker Change: This provides a no risk opportunity for parents to get comfortable with their children wearing contact lenses and for kids and young adults to get comfortable wearing contacts for the first time.
Speaker Change: With a broader rollout of this strategy along with the launch of a large key account private label deal. We're already seeing a nice acceleration in bidding activity in EMEA and we expect similar success in other markets.
Al White: This new initial pre-fitting period will result in a moderate headwind in Q3. But based on current fitting activity, we expect a considerably stronger Q4.
Speaker Change: This new initial free fitting period will result in a moderate headwind in Q3, but based on current bidding activity. We expect a considerably stronger Q4, and lastly, we are progressing well with our launch planning for my site in Japan, along with my view My site in EMEA with both anticipated to occur in early 2020.
Al White: And lastly, we're progressing well with our launch planning for MiSite in Japan, along with MiDay MiSite in EMEA, with both anticipated to occur in early 2026. Moving to Cooper Surgical, we reported revenues of $333 million, up 8% or up 7% organically. The quarter was driven by success in our surgical medical devices, labor and delivery portfolio, and ParaGard.
Speaker Change: Six.
Speaker Change: Moving to Cooper surgical we reported revenues of $333 million up 8% or up 7% organically.
Speaker Change: It was driven by success in our surgical medical devices labor and delivery portfolio and PARAGARD fertility was a little softer than we were expecting so let me start there for.
Al White: Fertility was a little softer than we were expecting, so let me start there. For the quarter, fertility revenues were $127 million, up 3% and up 2% organically. Although supported by positive signs, such as double-digit growth in our donor business and in our witness system consumables that fertility labs use to track activity, overall growth was lower than expected due primarily to market softness. This was largely tied to Asia-Pac where fertility cycles continue to decline year over year and from fertility clinics managing cash tighter, which is including delaying capital purchases and installments. We expect this softness to continue and to put pressure on market growth and our growth.
Speaker Change: For the quarter fertility revenues were $127 million up 3% and up 2% organically.
Speaker Change: Although supported by positive signs such as double digit growth in our donor business and in our witness system consumables that fertility labs used to track activity.
Speaker Change: Overall growth was lower than expected due primarily to market softness.
Speaker Change: This was largely tied to Asia Pac where fertility cycles continued to decline year over year and from fertility clinics, managing cash tighter, which is including delaying capital purchases in installments.
Speaker Change: We expect this softness to continue and to put pressure on market growth and our growth, having said that cycle of growth in EMEA and the Americas remained solid which supports the market near term and we remain incredibly bullish on our long term prospects for fertility as the underlying growth fundamentals remain intact, including women delaying childbirth improve.
Al White: Having said that, cycle growth in EMEA and the Americas remains solid, which supports the market near term, and we remain incredibly bullish on the long-term prospects for fertility as the underlying growth fundamentals remain intact, including women delaying childbirth, improving access to treatment, increasing patient awareness, increasing benefit coverage, and improving technology. Additionally, it's estimated that one in six people worldwide will experience infertility at some point in their lives, so this is an issue that impacts a lot of people. And as a leader in the space, we will continue delivering innovation, launching new products and services, providing extensive clinical training, and expanding geographically.
Speaker Change: <unk> access to treatment, increasing patient awareness, increasing benefit coverage and improving technology.
Speaker Change: Additionally, it's estimated that one in six people worldwide, we will experience in fertility at some point in their lives. So this is an issue that impacts a lot of people and as a leader in this space. We will continue delivering innovation launching new products and services, providing extensive clinical training and expanding geographically.
Speaker Change: Moving to office and surgical we posted sales of $206 million up 13% or up 10% organically.
Al White: Moving to office and surgical, we posted sales at $206 million, up 13% or up 10% organically. As mentioned on our last earnings call, we expected a strong Q2, and we delivered. Performance was driven by strength and minimally invasive gynecological surgical devices, such as our Ally Uterine Manipulator Portfolio, and within labor and delivery with products such as Fetal Pillow and our Cervical Ripening Balloon. Although not included in Organic Growth, we also saw considerable strength in OBP Surgical, our most recent acquisition of an innovative suite of single-use lighted cordless surgical retractors, which grew 31%. ParaGuard grew 18% this quarter, supported primarily by the conclusion of buy-in activity before our May 1st price increase, but also due to continued interest in our new single-hand inserter, which we launched earlier this year.
Speaker Change: As mentioned on our last earnings call, we expected a strong Q2 and we delivered.
Speaker Change: Performance was driven by strength in minimally invasive gynecological surgical devices, such as our ally uterine manipulator portfolio and within labor and delivery with products, such as Vito pillow and our cervical ripening balloon.
Speaker Change: Although not included in organic growth. We also saw considerable strength in OBP surgical our most recent acquisition of an innovative suite of single use light cordless surgical retractors, which grew 31%.
Speaker Change: PARAGARD grew 18% this quarter supported primarily by the conclusion of buying activity before may one price increase but also due to continued interest in our new single handed <unk>, which we launched earlier this year.
Al White: With Paragard now having grown 15% through the first six months of the year, heavily driven by channel fill, we now expect a mid-teens decline in fiscal Q3 before a flattish Q4, resulting in low to mid-single-digit growth for the full fiscal year.
Speaker Change: With PARAGARD now having grown 15% through the first six months of the year heavily driven by channel fill.
Speaker Change: We now expect a mid teens decline in fiscal Q3 before a flattish Q4, resulting in low to mid single digit growth for the full fiscal year.
Speaker Change: To conclude let me comment on our revenue guidance, which we are tightening and raising at the midpoint. This incorporates our solid <unk>, our solid Q2 performance and the positive impact from updated currency rates offset by lower organic growth rates that corresponds to a reduction in our mark.
Al White: To conclude, let me comment on our revenue guidance, which we're tightening and raising at the midpoint. This incorporates our solid Q2 performance and the positive impact from updated currency rates, offset by lower organic growth rates that corresponds to a reduction in our market growth assumptions for contact lenses and fertility. For contact lenses, the industry grew 4% in calendar Q1, so we're reducing growth expectations to the 4-6% range for the year, down from 5-7%. This new range matches the industry's historical growth range, which we saw for many years pre-COVID. With this change, we're adjusting Cooper Vision's organic growth expectations to six to seven.
Speaker Change: Kit growth assumptions for contact lenses and fertility.
Speaker Change: For contact lenses the industry grew 4% in calendar Q1, so we are reducing growth expectations to the 4% to 6% range for the year down from 5% to 7%.
Speaker Change: This new range matches, the industry's historical growth range, which we saw for many years pre COVID-19.
Speaker Change: With this change we are adjusting coopervision, our organic growth expectations to 6% to 7%.
Al White: To be fair, industry pricing remains solid and consumption remains healthy, so this may prove conservative depending on market conditions and channel inventory. For Cooper Surgical, we're reducing market growth expectations for fertility to the low single digits, down from mid to upper single digits, and correspondingly, reducing our fertility growth expectations. This is partially offset by the strength we've seen in Paragard, but still reduces Cooper Surgical's consolidated organic growth rate to the 3.5% to 4.5% range. Again, it's important to note our commercial execution at Cooper Vision and Cooper Surgical remains strong and we're taking share, but against an expectation for softer market growth.
Speaker Change: To be fair industry pricing remains solid in consumption remains healthy. So this may prove conservative depending on market conditions and channel inventory.
Speaker Change: For Cooper surgical we're reducing market growth expectations for fertility to the low single digits down from mid to upper single digits, and correspondingly, reducing our fertility growth expectations.
Speaker Change: This was partially offset by the strength, we've seen in PARAGARD, but still reduces Cooper surgical's consolidated organic growth rate to the three five to four 5% range.
Speaker Change: Again, it's important to note our commercial execution at Coopervision and Cooper surgical remains strong and we're taking share but against an expectation for softer market growth.
Brian Andrews: And with that, I'll turn the call over to Brian to cover our financial results in more detail, including our earnings. Thank you, Al, and good afternoon, everyone. Most of my commentary will be on a non-GAP basis, so please refer to for Reconciliation of Gap. For the second fiscal quarter, consolidated revenues were $1.002 billion, up 6% as reported, and up 7% as reported. consolidated gross margin was 68%. up from 67. Driven by continuing efficiency gains. Operating expenses increased 6% but declined as a percent of revenue to $43.1 million. driven by a leverage in several functional prior investment activity continues.
Speaker Change: And with that I'll turn the call over to Brian to cover our financial results in more detail, including our earnings guidance.
Speaker Change: Thank you al and good afternoon, everyone.
Speaker Change: Most of my commentary will be on a non-GAAP basis. So please refer to the earnings release for a reconciliation of GAAP to non-GAAP results.
Speaker Change: For the second fiscal quarter consolidated revenues were $1 <unk> 2 billion up 6% as reported and up 7% organically.
Speaker Change: Consolidated gross margin was 68% up from 67, 3%.
Speaker Change: Driven by continuing efficiency gains and mix.
Speaker Change: Operating expenses increased 6%, but declined as a percent of revenue to 43, 1% driven by leveraging several functional areas as prior investment activity continues to yield positive returns.
Speaker Change: One minor one line item worth highlighting this quarter is R&D, where expenses increased 21%.
Brian Andrews: One line item worth highlighting this quarter is R&D, where expensive. Investments in this area were higher than historical levels. Surgical, as development work continues. For competitive reasons, I won't get into it. We're certainly looking forward to working with you. Consolidated Operating Income was up 11% improving the operating margin to $20 billion. Below Operating Income, Interest Expense. $14.5 million and the effective tax rate was $14.5 million. Non-Gap EPS was $0.96, up $0.14. with roughly $101 million. Free cash flow with $18 million with CapEx. Net debt increased slightly to $2.47 billion, while our bank-defined leverage ratio to one point.
Speaker Change: Investments in this area were higher than historical levels for both coopervision and <unk> surgical is development work continues on several exciting projects.
Speaker Change: For competitive reasons I won't get into the details, but we're certainly looking forward to launching these new products in future years.
Speaker Change: Consolidated operating income was up 11% improving the operating margins of 24, 9%.
Speaker Change: Below operating income interest expense was $23 5 million.
Speaker Change: And the effective tax rate was 14, 6%.
Speaker Change: non-GAAP EPS was <unk> 96.
Speaker Change: 14% with roughly 101 million average shares outstanding.
Speaker Change: Free cash flow was $18 million with capex of $78 million.
Speaker Change: Net debt increased slightly to two $4 7 billion, while our bank defined leverage ratio reduced to one nine times.
Speaker Change: Lastly, we repurchased approximately 537000 shares of stock back this quarter for roughly $40 6 million.
Brian Andrews: Lastly, we repurchased approximately 537,000 shares of stock back.
Brian Andrews: for roughly.
Speaker Change: This leaves $215 8 million of availability under our board approved $1 billion repurchase plan.
Brian Andrews: This leaves $215.8 million of availability under our board-approved $1 billion Moving to Fiscal 2025 Guidance.
Speaker Change: Moving to fiscal 2025 guidance, we're adjusting our revenue guidance to incorporate in Q2.
Brian Andrews: We're adjusting our revenue guidance to incorporate Q- and Updated Mark. On a consolidated basis, this translates to revenues of roughly $4.11 to $4.15 billion. up roughly five and a half to six and a half. were up five.
Speaker Change: Improving FX rates.
Speaker Change: And updated market assumptions.
Speaker Change: On a consolidated basis. This translates to revenues of roughly $4, one 1% to $4 $1 5 billion.
Speaker Change: Up roughly five five to six 5%.
Speaker Change: 5% to 6% organically.
Speaker Change: Coopervision revenue guidance range is now $2 76 to $2 $79 billion upper.
Brian Andrews: Cooper Vision's Revenue Guidance Range is now $2.76 to $2.79 billion. up roughly 6-7% as reported. and a six to seven.
Speaker Change: Up roughly 6% to 7% as reported.
Speaker Change: In a 6% to 7% organically.
Speaker Change: Cooper's Surgical's range is $1 35 to $1 36 billion.
Brian Andrews: Surgical's range is 1.35 to 1.36. up five to six percent as reported or three and a half to four and a half.
Speaker Change: <unk> percent to 6% as reported or three five to four 5% organically.
Speaker Change: Regarding gating for revenues, we expect organic growth in Q4 to be stronger than Q3 when.
Brian Andrews: regarding gating for. We expect organic growth in Q4 to be stronger than... when considering year-over-year.
Speaker Change: When considering year over year comps.
Brian Andrews: timing around the rollout of products at. and the negating impact of Paragard for Cooper Surgical.
Speaker Change: Living around the rollout of products at Coopervision and.
Speaker Change: And the gating impact of PARAGARD for Cooper surgical.
Speaker Change: For earnings we are raising our non-GAAP EPS guidance to $4 five.
Brian Andrews: We're raising our non-GAP EPS guide. $4.05 to $4.00. which is growth of roughly 10 to 11 and a half.
Speaker Change: The $4 11.
Speaker Change: Which is growth of roughly 10 to 11, 5% year over year.
Speaker Change: For free cash flow are seasonally low Q2.
Brian Andrews: The free cash flow, our seasonally low... After a seasonally low.
Speaker Change: After a seasonally low Q Q2, we expect sizable improvements in the back half of the fiscal year and continue to expect free cash flow to be in the range of $350 million to $400 million.
Brian Andrews: We expect sizable improvements in the back half of the fiscal year and continue to expect free cash flow to be in the will prioritize debt reduction with these proceeds, but also opportunistically evaluate share...
Speaker Change: We will prioritize debt reduction with these proceeds but also opportunistically evaluate share repurchases as we did in Q2.
Speaker Change: Regarding tariffs.
Brian Andrews: Regarding Tariff We expect a negative impact to cost of goods this year of roughly $4 million, which is built too early to guide the next fiscal year but to help level We expect a pre mitigation negative impact of roughly 3% to fiscal Once we have clarity on what the tariffs will be, we will implement mitigation. With respect to the impact of currency and revenues and earnings for fiscal We now expect a roughly half a percent headwind to revenue. and a roughly 1% head. down from roughly one and a half. 4% headwind to revenues and EPS, respectively.
Speaker Change: We expect a negative impact on cost of goods. This year of roughly $4 million, which is built into our guidance.
Speaker Change: It's too early to guide to next fiscal year with the help level set everyone.
Speaker Change: If tariffs or tariffs remain as is we expect a pre mitigation negative impact of roughly 3% to fiscal 2026 earnings.
Speaker Change: Once we have clarity on what the tariffs will be we will implement mitigation actions to reduce this impact.
Speaker Change: With respect to the impact of currency on revenues and earnings for fiscal 2025.
Speaker Change: We now expect a roughly half a percent headwind to revenues.
Speaker Change: And a roughly 1% headwind to earnings.
Speaker Change: This is down from roughly one 5% and.
Speaker Change: And 4% headwind to revenues and EPS, respectively.
Brian Andrews: That was assumed.
Speaker Change: Was assumed in last quarter's guidance.
Speaker Change: There are a number of moving parts, but to summarize our updated guidance for earnings were.
Brian Andrews: There are a number of moving parts, but to summarize our updated guidance... We're increasing the midpoint of guidance by 10%. Passing along the positive impact of currency and our Q2 beat offset.
Speaker Change: We're increasing the midpoint of guidance by 10.
Speaker Change: Passing along the positive impact of currency.
Speaker Change: And our Q2 beat.
Speaker Change: Offset vitaros.
Speaker Change: With that I'll now hand, it back to the operator for questions.
Brian Andrews: With that, I'll now Thank you.
Speaker Change: Thank you we will now begin the question and answer session.
Operator: We will now begin the question and answer session. If you would like to ask a question, press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to redraw your question, simply press star 1 again.
Speaker Change: We would like to ask a question press star one on your telephone keypad to raise their hand and joined the queue.
Speaker Change: I would like to withdraw your question simply press Star one again.
Operator: You will be allowed to ask one question and one follow up.
Speaker Change: It will be allowed to ask one question and one follow up.
Operator: Our first question comes from Jeff Johnson from Baird.
Jeff Johnson: Our first question comes from Jeff Johnson from Paris, please go ahead. Thank you. Good afternoon, guys. I was wondering if we could just start on contact lens on the market. Sorry if that's my phone making some noise there. I guess my question more than anything is, last quarter, you seem to be a decent amount below market or a point or two below market for CVI. This quarter, a point or two above. You know, it'd be interesting to hear kind of some of your on-eye data, other independent industry data that you might have, because it does seem like channel inventory has really been making it hard to compare your growth rates versus others for the last couple quarters, and we just look at revenue reported from the different companies.
Speaker Change: Alright.
Speaker Change: Yes.
Speaker Change: Thank you good afternoon guys.
Speaker Change: I'm wondering if we could just first.
Speaker Change: Contact lens market, that's my phone, making some noise there.
Speaker Change: I guess my question more than anything is last quarter, you seem to be a decent amount below market or.
Speaker Change: A point or two below market for CVI this quarter.
Speaker Change: A point or two above.
Speaker Change: It'd be interesting to hear some of your on eye data other than the chemical industry data you might have because it does seem like channel inventory has really been making it hard to compare your growth rates versus others for the last couple of quarters. When we just look at revenue reported from the different companies.
Al White: So any on-eye data and or other independent industry data you could share? Yeah, good question. Fair question, certainly, because the numbers are bouncing around for ourselves and for some of our competitors, right, as you see some of the channel inventory move around. And I think that's going to continue, frankly, because distributors, retailers, people are just a little bit tighter with their money than they have been historically. So reduction in channel inventory is something that's probably going to continue to pressure us. When I look through for the FIT data, our FIT data remains strong. As a matter of fact, it's accelerating right now.
Speaker Change: <unk> other independent industry data you can share.
Speaker Change: Yes.
Speaker Change: Good question Fair question, certainly because the numbers are bouncing around for ourselves and for some of our competitors right. As you see some of the channel inventory move around and I think that's going to continue frankly, because distributors retailers people are just a little bit tighter with their money than they have been historically, so a reduction in channel inventory is something that's probably going to.
Speaker Change: To pressure him when I look through it for the fit data.
Speaker Change: Our fifth data remains strong as a matter of fact, it's accelerating right now so as we get more aggressive putting my day fitting sets out in the market and finally have some availability for trial lenses for people.
Al White: So as we get more aggressive, putting my day fitting sets out in the market, and finally have some availability for trial lenses for people, we're starting to see a pickup in my day activity, which is great in a number of markets. I touched on kind of my site, same thing that we're starting to see in my site was an acceleration of some fitting data. So I would say kind of behind the scenes, underneath the numbers, if you will, is some improvement in fitting.
Speaker Change: Starting to see a pickup in <unk> activity, which is great and a number of markets I touched on kind of my side same thing that we're starting to see in my side was an acceleration of some fitting data. So I would say kind of behind the scenes underneath the numbers. If you will is some improvement in fitting activity.
Kirby: Our next question comes from ETE Kirby from Brett Fair Nick planning.
Issie Kirby: Our next question comes from Issie Kirby from Redburn Academy. Please go ahead. Hey, thanks so much for taking my questions. I wanted to ask about the lower market growth assumption for vision care for this year. When you think about the four to six versus where you were at earlier in the year, is this lowering of the guide really more on perhaps softer pricing? Is it more on volume or is it really around mix as well?
Speaker Change: Go ahead.
ETE Kirby: Alright, thanks, so much.
Speaker Change: My questions I wanted to ask about the nylon market growth assumption and taking cash.
Speaker Change: Yes.
Speaker Change: When do you think about the <unk>.
Speaker Change: Layer.
Speaker Change: And your NDA.
Speaker Change: Narrowing of the guide really moron.
Speaker Change: Soft pricing is it more around volume or is it really around mix and just help us understand some of the puts and takes that thanks.
Al White: Just help us understand some of the puts and takes there. Sure. Yeah, the market for a long time was growing kind of in that 4% to 6% range, and it's been stronger than that post-COVID. And I think at the end of the day, we're back to that kind of growth range. And I know a couple of our competitors more recently had said that. You know, I'm pretty consistently an optimist when it comes to the market, but I do have to look at market data, right? And you look at calendar Q1, and the industry grew 4%.
Speaker Change: Sure, Yes, the market for a long time was growing kind of in that 4% to 6% range and it's been stronger than that post COVID-19.
Speaker Change: And I think at the end of the day, we're back to that kind of growth range and I know a couple of our competitors more recently had said that.
Speaker Change: Yes, I am pretty consistently an optimist when it comes to the market, but I do have to look at market data right and you look at calendar Q1, and the industry grew 4% and at the end of the day. The fitting activity is still pretty good out there as I said, it's accelerating some for us.
Al White: And at the end of the day, the fitting activity is still pretty good out there. As I said, it's accelerating some for us. Pricing is still sound. I'm not seeing anything when it comes to discounts or any pricing activity. As a matter of fact, the rumblings in the market are there's going to be some potential price increases here as we move forward. Volume is still good. The mixed shift, as you see in a mixed shift over to dailies, is driving a lot of the growth. The multifocals, specialty lenses, that kind of stuff is still doing well.
Speaker Change: Pricing is still sound I'm, not seeing anything when it comes to discounts or any pricing activity as a matter of fact, the rumblings in the market or theres going to be some potential price increases here as we move forward.
Speaker Change: Volume is still good the mix shift as you have seen a mix shift over to dailies.
Speaker Change: Is driving a lot of the growth towards multifocal as a specialty lenses that kind of stuff is still doing well. So I still remain an optimist about it but I also have to be practical and say hey look at the numbers of where they came out it came out at 4% for calendar Q1, if I look at the growth through this full year.
Al White: So I still remain an optimist about it.
Al White: But I also have to be practical and say, hey, look at the numbers of where they came out. They came out at 4% for calendar Q1. If I look at the growth for this full year, you know, it's probably more mid-single digits, probably historical ranges. And I think we'll take a little bit of share. So at the end of the day, I don't take back anything on what I've said about our business. We continue to do well. I continue to think we'll take share. But if the market's growing four to six, and I say we're growing six to seven, that's still decent market share gains, and I'm still comfortable with that.
Speaker Change: It's probably more mid single digits, probably historical ranges and I think we will take a little bit of share. So at the end of the day I don't take back anything on what I've said about our business. We continue to do well I continue to think we'll take share, but if the market's growing four to six.
Speaker Change: And I'd say, we're growing 6% to seven and that's still decent market share gains that I'm still comfortable with that so it's more taken down the market just for kind of general softness if you will rather than a specific thing I'm pointing to.
Al White: So it's more taking down the market just for kind of general softness, if you will, rather than a specific thing.
Speaker Change: Thanks, that's helpful I'm not sure if I can squeeze in a follow up on the tendency in the IVF market that and just any more color about what's driving the softness and Asia and then any thoughts on <unk>.
Al White: I'm not sure I can squeeze in a follow up on the fertility and the IVF market there. And just any more color about really what's driving the softness in Asia? And then any thoughts on really the consumer or the cyclical risks to IVF demand in the US? Sure, I think there's two pieces to that. AsiaPAC is, yeah, it's down on cycles. Now some of that goes to like the year of the snake in China, which is impacting some of the cycles there where I think some women either move forward faster or have delayed IVF cycles a little bit to avoid having a child in the year of the snake.
Speaker Change: Consumer all the cyclical risks.
Speaker Change: Demand in the U S.
Speaker Change: Sure I think there's two pieces to that Asia Pac.
Speaker Change: Yes, it's down on cycles now some of that goes to like the year of the snake in China, which is impacting some of the some of the cycles, there where I think.
Speaker Change: Some women either move forward faster or have delayed IVF cycle is a little bit to avoid having a child in the year of the snake.
Speaker Change: So.
Al White: So my gut tells me that's a little bit more of a temporary thing for AsiaPAC that we'll work our way out of as we move through this year. The consumer side of it, I do think that there's a little bit there on the consumer side. Now we became a large fertility player, frankly, number one fertility player in the marketplace when you look at MedDevice, probably starting 10, 11, 12 years ago. So this economic difficulty is something we haven't lived through, but I think there is a little bit of consumer pressure there. You're talking about a process that could cost somebody 15, $20,000 and a lot of that, all of that potentially is out of pocket.
Speaker Change: My gut tells me that's a little bit more of a temporary thing for Asia Pac that we'll work our way out of as we move through this year.
Speaker Change: The consumer side of it I do think that Theres, a little bit there on the consumer side now we became a large fertility player and frankly number one fertility play.
Speaker Change: Player in the marketplace when you look at med device.
Speaker Change: Probably starting 10 11 12 years ago. So.
Speaker Change: This economic difficulty is something we haven't lived through but I think there is a little bit of consumer pressure there youre talking about it.
Speaker Change: Process it could cause some by $15 $20 and a lot of that all of that potentially is the out of pocket.
Al White: I think when you combine that with fertility clinics themselves, just tightening up a little bit in terms of what they're doing with expansion activity and channel inventory, that kind of thing. I think when you put that together, you're getting a market that's growing a little bit softer. And last quarter, I was still very optimistic about that and thinking we would be able to work through that. I'm not sure that's the case right now. And again, I have to look at the market numbers. And when I look at the market numbers, our results and results of our competitors and what I'm seeing from some clinic and cycle activity, as much as I wanna be an optimist and think it's gonna be better, I think that fertility, the industry, probably more is a low single digit grower.
Speaker Change: I think when you combine that with fertility clinics themselves just tightening up a little bit in terms of what they're doing with expansion activity in channel inventory that kind of thing I think when you put that together you are getting a market that's growing a little bit softer in last quarter I was still very optimistic about that.
Speaker Change: We would be able to work through that I am not sure. If that's the case right now and again I have to look at the market numbers.
Speaker Change: And when I look at the market numbers are resolved some results of our competitors and what I'm seeing from some clinic in cycle activity.
Speaker Change: As much as I want to be an optimist and think it's going to be better I think that fertility the industry, probably more as a low single digit grower this year.
Larry Nicholson: Our next question comes from Larry Nicholson from Wells Fargo. Please go ahead.
Larry Biegelsen: Our next question comes from Larry Biegelsen from Wells Fargo. Please go ahead. Good afternoon. Thanks for taking the question. Al, can you hear me okay? Yep, I can hear you, Larry. Okay, good, good.
Larry Nicholson: Hello. Good afternoon. Thanks for taking the question can you hear me Okay, yes.
Larry Nicholson: Yes, I can hear you there okay. So back to the contact lens market I think you said in fiscal <unk> calendar Q4. It grew 9% calendar Q1, 4%, obviously, a big deceleration what changes are you seeing in the market at the distributor level and what changes are you seeing.
Al White: So, Al, back to the contact lens market, I think you said in fiscal, the calendar Q4, it grew 9%, calendar Q1, 4%. Obviously, a big deceleration. What changes are you seeing in the market at the distributor level, and what changes are you seeing, you know, from consumer behavior and in which geographies? We've heard that just consumers, you talked about fittings being strong, we've heard consumers are just buying lower supplies, in other words, three months as opposed to 12 months. At any color on April and May trends, and I did have one follow-up. Yeah, Larry, I think you're spot on there.
Larry Nicholson: Consumer behavior and in which geographies.
Larry Nicholson: We've heard that just consumers you've talked about Phoenix being strong we heard consumers are just fine.
Larry Nicholson: Lower supplies in other words three months as opposed to 12 months.
Larry Nicholson: Any color on April and May trends and I did have one follow up.
Larry Nicholson: Yes, Larry I think you are spot on there that some of what we're seeing which is when I talk about channel inventory.
Brian Andrews: That's some of what we're seeing, which is when I talk about channel inventory, a lot of times people think about that in the context of, you know, contact lenses at a distributor, but that does run through, obviously, distributors, retailers, individuals who are holding contact lenses, you know, in their medicine cabinet, so to speak. And if somebody's not buying a year's supply, but they're buying a three-month or six-month supply, or they're adjusting their wearing habits just a little bit, you know, and maybe stretching the lenses or something, you know, all that stuff has an impact. So you end up in a situation where consumption or fitting activity and so forth continues to look good, but you get a little bit of softness in your revenues.
Larry Nicholson: A lot of times people think about that in the context of contact lenses at a distributor, but that does run through obviously distributors retailers individuals who are holding contact lenses and their medicine cabinet so to speak and if somebody is not buying a year's supply, but they are buying a three month or six months supplier. They are adjusting their wearing habits.
Larry Nicholson: Just a little bit.
Larry Nicholson: And maybe stretching the lenses or something all of that stuff has an impact. So you end up in a situation where consumption of fitting activity and so forth continues to look good but you get a little bit of softness in your revenues and I think thats the situation that we're in right now.
Al White: And I think that's a situation that we're in.
Larry Nicholson: Got it April may trend.
Al White: I got April, May trend down. April, May trends go back, I think I'm remembering right, April was the best month that we've had this year. May, fine, certainly fine starting off this month. I mean, it's just I think what we're talking about, I think there's just a little bit of general pressure over there. There's not, there's not a like a big glaring thing that's coming out there that we can point to other, it's more just general market.
Larry Nicholson: April may trends go back I think if I'm remembering right April was the best month that we've had this year.
Larry Nicholson: May fine certainly find starting off this month I mean, it's just I think what we're talking about I think there's just a little bit of general pressure over there theres not theres not like a.
Larry Nicholson: Big Glaring thing that's coming out there that we can point to others, it's more just general market softness.
Brian Andrews: And Brian.
Brian Andrews: And Brian, Q3 versus Q4 in CVI and CSI, how much lower do you expect Q3 to be? I mean, you expected Q3 to be for both in the range of the full year organic growth guidance.
Brian Andrews: Q3 versus Q for CVI and CSI, how much lower do you expect Q3 to be.
Speaker Change: We expected Q3 to be for bolt.
Brian Andrews: Range of the full year organic growth guidance. Thanks for taking the question.
John Black: Thanks for taking the question.
Brian Andrews: Hi, Larry Thanks for the question I guess, what I would say is if youre trying to model Q3, I would think about those two vision and surgical being sort of below the bottom ends of the guidance ranges and then looking at Q4 kind of Conversely.
Al White: Hi, Larry. Thanks for the question. I guess what I would say is, if you're trying to model Q3, I would think about those two, vision and surgical, being sort of below the bottom. of Guidance Ranges.
Brian Andrews: At or above the top end of the guidance ranges.
John Glass: Our next question comes from John Glass.
John Black: Our next question comes from John Black from Staple. Please go ahead. Hey guys, thanks, and good afternoon. I guess maybe just following up on a couple questions here.
Nicole: Nicole Please go ahead.
John Glass: Hey, guys, thanks, and good afternoon.
Speaker Change: I guess, maybe just following up on a couple of questions here. So.
Al White: So, you know, Al, where are we with inventory? Maybe if you want to break that apart amongst the distributors and the consumers in your view, and, you know, what's the company's expectations going forward and call it the rest of the year? Because it seems like you're landing right around six and a half or one H. So, two dissimilar, one H, two H, when we look at, you know, a year ago. So, you know, curious what the assumption there is and overall market growth when we think about how to tie, sorry, the phone, when we think about how to tie after the balance of the year.
Speaker Change: Are we live.
Speaker Change: Inventory, maybe you want to break that apart.
Speaker Change: Meters.
Speaker Change: And the consumer is in your view and what's the company's expectations going forward call. It for the rest of the year because it seems like Youre landing.
Speaker Change: It's sort of half of what age.
Speaker Change: So.
Speaker Change: So look too dissimilar one age to age when we look at.
Speaker Change: Year ago. So.
Speaker Change: Curious what the assumption there is.
Speaker Change: Overall market growth.
Speaker Change: Sorry, the phone when we look out for the balance of the year. Thank you.
Al White: Thank you. Yeah, I think that I think that we're just going to continue to get pressure as we move through this year from inventory levels on a year-over-year basis. I wouldn't put my finger on one particular thing again. I wouldn't come back and say, focus on distributors in the U.S. or focus on retailers in Europe or an Asia pack or something. I would say just generally, I think as an industry, we're going to continue to have pressure on inventory levels on a year-over-year basis. As Larry said, somebody buying a three-month rather than a six-month or a three-month rather than a year or something like that, I think that that's what we're going to see.
Speaker Change: Yes, I think that.
Speaker Change: I think that we're just going to continue to get pressure as we move through this year from inventory levels on a year over year basis.
Speaker Change: I wouldn't put my finger on one particular thing again, I wouldn't come back and say focus on distributors in the U S. Our focus on retailers in Europe or in Asia, Pac or something I would say just generally.
Speaker Change: As an industry, we're going to continue to have pressure on inventory levels on a year over year basis, and as Larry said somebody buying a three months rather than a six month or a three months rather than in a year or something like that I think that that's what we're going to see now I don't want to overdo that by the way because I mean, you look at us our midpoint of our guidance was seven five and now our midpoint of our guidance.
Al White: Now, I don't want to overdo that, by the way, because you look at us, our midpoint of our guidance was seven and a half, and now our midpoint of our guidance is six and a half. The market is just coming down a point, so I don't want to overdo this, but I do think that we're going to see that consistent pressure as we move through this year. We'll lap that, obviously, and inventory will have reset itself down a little bit and probably lower than it should be, but I think we just see that through the year.
Speaker Change: Six and a half right and the market is just coming down a point, so I don't want to overdo this but.
Speaker Change: But I do think that we're going to see kind of that consistent pressure as we move through this year and then we will lap that obviously right in an inventory will have reset itself down a little bit and probably lower than it should be but I think we kind of just see that through the year not a dramatic shift in any individual quarter, but just a little bit softer.
Al White: Not a dramatic shift in any individual quarter, but just a little bit softer all year.
Speaker Change: All year long.
Al White: Okay, maybe just a quick follow-up. It seems like a change in June in fertility, right, and nobody's been relatively resilient, a consumer able to power through it, sort of different messaging this quarter in my view, and so how do we think about that, you know, over the next handful of quarters? Is it sort of, this is the new trend line, we're probably safest extrapolating that out until we get better clarity from a macro perspective? Just again now, the messaging seems a little bit different than maybe just a one-quarter blip, you know, if the cap equipment has been responsible for a year or there before.
Speaker Change: Okay, and maybe just a quick follow up it seems like a change in June fertility right. It's always been.
Speaker Change: Relatively resilient consumer able to power through.
Speaker Change: Alright, a different message this quarter in my view and so how do we think about that over the next handful of quarters.
Speaker Change: This is the new trend line, we're probably safest extrapolating that out until we get better clarity from a macro perspective.
Speaker Change: Just to get out of the messaging seemed a little bit different than maybe just a one quarter blip.
Speaker Change: Equipment has been responsible for year there before.
Al White: Yeah, and you know, I mean, we have a great, obviously, market leading fertility team, and our team, you know, knows the industry and what they're doing, like the back of their hand. And we grew, I believe it was 14 out of 15 quarters double digit before we got into Q1 of this year, and we've had the softer Q1 and Q2 of this year. So I look at it right now and say, okay, with that level of consistent growth that we had, that level of excellence and so forth, and now you see, you know, the pullback to where it's at right now, I think you're getting some of this kind of temporary activity out there as concerns with the economy or whatever you want to call it, have tightened up activity within fertility clinics.
Speaker Change: Yeah.
Speaker Change: I mean, we have a great obviously market, leading fertility team and our team knows the industry and what they're doing like the back of our hand, and we grew I believe it was 14 out of 15 quarters double digit before we got into Q1 of this year and we've had the softer Q1 and Q2 of this year.
Speaker Change: So I look at it right now and say, okay with that level of consistent growth that we had that level of excellence and so forth and now you see the pullback to where it's at right now I think youre getting some of this kind of temporary activity out there.
Speaker Change: <unk> concerns with the economy or whatever you want to call it have tightened up activity within fertility clinics.
Al White: To me, I think we probably swung that a little bit too far, it feels like. And I think the fertility industry and us also, you know, gets a little bit stronger here. And I would be really surprised if Q3 and Q4 don't show strength in comparison to the beginning of this year for the industry and for us. But I don't think right now that it jumps back up. I'm not confident like I was last quarter, it jumps back up to the mid or upper single digits. I think it's more low single digits for the market, you know, maybe a little bit stronger us mid single digit kind of growth in Q3 and Q4.
Speaker Change: To me I think we probably swung that a little bit too far it feels like and I think the fertility industry and US also gets a little bit stronger here and I would be really surprised if Q3 and Q4 don't show strength.
Speaker Change: In comparison to the beginning of this year for the industry and for us, but I don't think right now that it jumps back up I'm not confident like I was last quarter that jumps back up to the mid or upper single digits I think it's more.
Speaker Change: Low single digits for the market.
Speaker Change: Maybe a little bit stronger us mid single digit kind of growth in Q3 and Q4.
Robbie Marcus: Our next question comes from Robbie Marcus from Jpmorgan. Please go ahead.
Robbie Marcus: Our next question comes from Robbie Marcus from J.P. Morgan. Please go ahead. Oh, great. Thanks for taking the question. Sorry to belabor the point here, but... Think about the lowered guidance for the rest of the year.
Robbie Marcus: Oh great.
Robbie Marcus: Thanks for taking the question sorry too.
Robbie Marcus: Belabor the point here, but.
Robbie Marcus: As you think about the lowered guidance for the rest of the year.
Al White: I guess I'm still a little unsure, how much is, from what you've actually seen in results so far, because you did put up seven on a really tough comp in CVI, how much is... you know, what you're expecting, how much is what you're seeing so far in fiscal 3Q, and maybe just walk us through if fits are so strong as it changes in inventory or sell Maybe just put all the pieces together. Thanks.
Robbie Marcus: I guess I'm still a little unsure how much is from what you've actually seen in our results. So far because you did put up seven.
Speaker Change: A really tough comp in CVI, how much is.
Speaker Change: What you are expecting how much is what youre seeing so far in fiscal <unk> and maybe just walk us through if it fits are so strong is it changes in inventory or so on maybe just put all the pieces together.
Al White: Yeah, Robbie, it's a great question, right? And you could certainly make an argument that we're being conservative here based on the underlying data and the survey data and so forth that's out there when you look at consumption and FIT activity. And I sure as hell hope we are. But I also look at it and go, okay, well, what is reality? Like we had a 4% quarter here. We are seeing some pressure from the marketplace, if you will, in terms of channel inventory. We can't ignore that, right? So I hope I am being conservative, but I don't wanna ignore that.
Speaker Change: Yes, Robbie it's a great question and you could certainly make an argument that we're being conservative here based on the underlying data and the survey data and so forth. It's out there when you look at consumption in fed activity.
Speaker Change: Sure as Hell Hope, we are but I also look at it and go okay, well what is reality like we had a 4% quarter here, we are seeing some pressure.
Speaker Change: From from the marketplace. If you will in terms of channel inventory, we can't ignore that right. So.
Speaker Change: I hope I'm being conservative, but I don't want to ignore that and because of that I'm not it's not a dramatic shift down but it is a reduction now to be fair, obviously and to be clear right. I mean currency moved in our favor we passed all of that along our actual midpoint of our revenue guidance on an as reported basis is higher year over year, but again to go back to just the organic.
Al White: And because of that, it's not a dramatic shift now, but it is a reduction.
Al White: Now, to be fair, obviously, and to be clear, right? I mean, currency moved in our favor. We passed all that along. Our actual midpoint of our revenue guidance on an as-reported basis is higher year over year. But again, to go back to just the organic growth of the industry itself, yeah, I think it's just a matter of not ignoring the fact that something's going on with the channel inventory and it's coming down because the fitting data, consumption data, that type of activity, pretty much on a global basis, by the way, continues to be pretty good.
Speaker Change: Growth of the industry itself, yes, I think it's just a matter of not ignoring the fact that something's going on with the channel inventory and it's coming down because the true the fitting data consumption data that type of activity pretty much on a global basis by the way continues to be pretty good.
Speaker Change: Okay, Great maybe just one on margins moving forward you've shown good margin.
Al White: Okay, great.
Robbie Marcus: Maybe just one on margins moving forward. You've shown good margin progression, first quarter and second quarter here.
Speaker Change: <unk> first quarter and second quarter here.
Brian Andrews: As we think about the rest of the year, how should we think about the cadence of margins and where that'll come from on the lower? Revenue Guide. Yeah, sure.
Speaker Change: We think about the rest of the year, how should we think about the cadence of margins and where that will come from on.
Eric: Hello, Eric.
Eric: Revenue guidance. Thanks.
Eric: Sure Hi, Robert Thanks for the question yes.
Brian Andrews: Hi, Robbie. Thanks for the question. Yeah, the margin story is very much a continuation of what we've been seeing. You know, we're getting efficiency gains, leveraging investment activity from prior investment activity. You saw gross margins up year over year again this quarter. You know, I'd expect in the second half of the year gross margins are up. The OpEx line items, distribution being one of them, but certainly across a number of the support functions, we are being very disciplined in managing our investment activity and being disciplined around cutting some costs where it makes sense so that we can drive leverage through the P&L.
Eric: The margin story is very much a continuation of what we've been seeing.
Eric: We're getting efficiency gains leveraging investment activity from prior investment activities, our gross margins.
Speaker Change: Year over year again, this quarter I would expect in the second half of the year gross margins are up.
Speaker Change: Year over year for the second half that will help drive operating margins higher.
Speaker Change: Getting leverage from investment activity, our prior investment activity in the Opex line items distribution being one of them, but certainly across a number of the support functions. We are being very disciplined in managing our investment activity and being disciplined around cutting some costs, where it makes sense. So that we can drive.
Speaker Change: Leverage through the P&L, So I would expect that what youll see in.
Brian Andrews: So I would expect that what you'll see in the back half of the year is a continuation of the story that you've been which is Better Operating.
Speaker Change: In the back half of the year is a continuation of the story that <unk> been seeing which is better operating margins year over year.
Speaker Change: Our next question comes from Greg <unk> from Bank of America.
Craig Bijou: Our next question comes from Craig Bijou from Back of America. Peace guys Good afternoon, guys. Thanks for taking the questions. I wanted to start with a follow-up just on, not the contact lens market, but necessarily, but your outperformance of the market. And, you know, I think the outperformance is still the same, even though you lowered the guidance. I think it's still 150 basis points above the market at the midpoint.
Speaker Change: Please go ahead.
Speaker Change: Good afternoon, guys. Thanks for taking the questions wanted to start with a follow up just on.
Speaker Change: Not the contact lens market, but necessarily.
Speaker Change: But your outperformance of the market and.
Speaker Change: I think the outperformance is still the same.
Speaker Change: Even though you lowered the guidance I think it's still 150 basis points above.
Speaker Change: The market at the midpoint, so maybe al just with some of them moving quarters some quarters.
Al White: So, maybe, Al, just with some of the, you know, moving quarters, you know, some quarters you beat, some you're a little bit below the market, just what gives you the confidence that you can outperform the market for the rest of the year? Sure, I think there's two things tied to that. One is we spent a lot of time over the last couple years talking about My Day and the demand in My Day. It still remains strong out there. We're getting a lot of fitting sets and trial lenses out into the market so that more people can try that product.
Speaker Change: Some are a little bit below the market.
Speaker Change: What gives you the confidence that you can outperform the market for.
Speaker Change: For the rest of the year.
Speaker Change: Sure I think Theres two things tied to that one is we've spent a lot of time over the last couple of years talking about my day and the demand in my day.
Speaker Change: Still remains strong out there, we're getting a lot of fitting sets and trial lenses out into the market. So that more people can try that product.
Al White: We're in active discussions right now talking about expanding private label contracts that we have, deals that we have, getting more My Day into the channel. So when I look at it, and I look at the fitting activity and the interest in that product right now that I see around the world, I feel pretty confident that My Day is going to get going. It's going to accelerate some. I think it'll take just a little bit, as Brian said, because a lot of it's going to, again, trial sets and free lenses, that kind of thing, right now.
Speaker Change: We're in active discussions right now talking about expanding private label contracts that we have deals that we have.
Speaker Change: Getting more <unk> into the channel so when I look at it and I look at the fitting activity and the interest in that product right now that I see around the world.
Speaker Change: I feel pretty confident that.
Speaker Change: That might aid is going to go and it's going to accelerate so no I think it will take just a little bit as Brian said, because a lot of that's going to again trials sets and free lenses that kind of thing right now but.
Al White: But the fitting activity is there. I see the fitting activity. We see the improvement in it.
Speaker Change: The fitting activity is there I see the fitting activity, we see the improvement in it. So I think we will have a strong <unk>.
Al White: So I think we'll have a stronger Q4. The other thing when it comes to taking market, and you're right, the market right now, the midpoint of market we're talking about is 5%, and we're 6.5%. So we are not backing away from taking share in this market. That has remained consistent.
Speaker Change: Stronger Q4, the other thing when it comes to taking market and Youre right like the market right now the midpoint of market, we're talking about a <unk>, 5% and were six 5%. So we are not backing away from taking share in this market.
Speaker Change: That has remained consistent the other one I would say ends up being my site might say its around $100 million run rate, we will do over $100 million in revenues for my site. This year maybe.
Al White: The other one, I would say, ends up being MySite. MySite's on $100 million run rate. We'll do over $100 million in revenues for MySite this year. Maybe it's not growing quite at the clip that I thought it was going to grow, but we still probably do 30%, 35% growth in MySite this year. And I think you're going to see an acceleration in MySite activity in Q4. That's going to be our strongest quarter because, again, I can see a lot of fitting activity right now, and I see a lot of kids starting to wear that product.
Speaker Change: Maybe it's not growing quite at the clip that I thought it was going to grow, but we still probably do 30% 35% growth in my site. This year.
Speaker Change: And I think youre going to see an acceleration in <unk> activity in Q4, and that's going to be our strongest quarter, because again I can see a lot of bidding activity right now and I see a lot of kids, starting to where that product, we see that especially true in Europe right now where we're seeing the pick up we've got a brand new large private label contract we entered into first one like that.
Al White: We see that especially true in Europe right now, where we're seeing a pickup. We've got a brand new, large, private label contract we entered into, first one like that that's going out with MySite technology in Europe. We're seeing fitting activity associated with that. It's tied to free lenses up front. Try it. You'll like it and you'll keep it, but we're seeing that fitting activity right now with MySite. So when I look at that, I think we've got an excellent opportunity to continue to take Thanks, Alan.
Speaker Change: That's going out with <unk> technology in Europe, we're seeing fitting activity associated with that.
Speaker Change: Tied to free lenses upfront try it you'll like it and you'll keep it but we're seeing that fitting activity right now with my site. So when I look at that I think we've got a excellent opportunity to continue to take market share.
Speaker Change: Thanks, Alan maybe for Brian just on tariffs can you just help us give a little bit of color on what's what's driving.
Brian Andrews: Maybe for Brian, just on the tariffs, can you just help us give a little bit of color on what's driving, you know, that $4 million that you have in your guidance for tariffs this year? Which countries and how to think about that? Sure, Craig. Yeah, so similar to other companies, you know, the way that we account for the activity and cost of goods, we often capitalize that and run that through the P&L six months later. So a lot of the activity that's impacting us this year is really impacting us in Q4. We do have a lot of our manufacturing really does support the markets in those regions.
Speaker Change: At $4 million that you have in your guidance for tariffs this year.
Speaker Change: Which countries and how to think about that.
Speaker Change: Sure Craig.
Craig: Yes, so similar to other companies the way that we account for.
Speaker Change: The activity and cost of goods, we often capitalize that and run.
Speaker Change: Through the six months later, so a lot of the activity that's impacting us. This year is really impacting us in Q4.
Speaker Change: We do have a lot of our manufacturing really does support the markets in those regions. So we benefit from that activity, but where we're seeing tariff impact predominantly is from manufacturing out of Hungary.
Brian Andrews: So we benefit from that activity, but where we're seeing a tariff impact predominantly is from manufacturing out of Hungary and to a lesser extent, manufacturing out of... So, you know, that impact is impacting us this year, I talked about the 3% for next year.
Speaker Change: And to a lesser extent manufacturing out of the UK.
Speaker Change: <unk>.
Speaker Change: That impact is impacting us this year I talked about the 3% for next year.
Speaker Change: And.
Brian Andrews: and that basically summarizes it. We're using basically today's. I'm sorry, I think I said...
Speaker Change: Basically summarizes raising basically today's expectations on tariffs.
Speaker Change: Oh, sorry.
Speaker Change: I think I said hungry.
Brian Andrews: Hungary's actually, let me, let me correct that, actually. Costa Rica is the biggest impact to tariffs to us. Second is the UK, Hungary is negligible.
Speaker Change: Hungary is actually let me, let me correct that actually.
Speaker Change: Costa Rica is the biggest.
Speaker Change: Impact to tariffs to US second is the UK Hungary.
Speaker Change: Okay.
Speaker Change: Sure.
Speaker Change: Hopefully that's clear.
Brian Andrews: Hopefully that's clear.
Speaker Change: Our next question comes from John <unk> from Citibank.
Joanne Wuensch: Our next question comes from Joanne Wuensch from CBAN. Please go ahead. Good afternoon and thank you for taking my questions. I actually have two. What I'm trying to get my head around is When you put the new guidance together, how much of this is reflective of, oh, this is what we're seeing in the market? How much of it is, this is what others are reporting? And how much of it is maybe conservatism? I'm trying to get my head around this because you did just beat the quarter.
Speaker Change: Please go ahead.
Speaker Change: Good afternoon, and thank you for taking my questions I actually had two.
Speaker Change: What I am trying to get my head around is.
Speaker Change: When you put the new guidance together, how much of that.
Speaker Change: Reflective of this is what we're seeing in the market how much of it is this is what others are reporting.
Speaker Change: And how much of it is there any conservatism I'm trying to get my head around this because you did just the core.
Speaker Change: <unk>.
Al White: And then I have a follow-up question, please. Yeah, that's very fair, Joanne. And a part of it is, yeah, what we've seen other people reporting, I was a little surprised by some of the numbers that came up, but what we see reporting Q1 4%, what we've seen in the market, we are seeing some tightening of the market when it comes to the channel inventory that we've been talking about. And then I would say a portion of it, to be fair, is conservatism. I think that we needed to reset our numbers. Our expectations that were out there were a little bit high.
Speaker Change: And then I have a follow up question. Please.
Speaker Change: Yes.
Speaker Change: Very fair Joanne.
Speaker Change: And a part of it is yes, what we've seen other people reporting I was a little surprised by some of the numbers that came out but what we see reporting Q1, 4%.
Speaker Change: What we've seen in the market we are seeing some tightening of the market when it comes to the channel inventory that we've been talking about.
Speaker Change: And then I would say a portion to be fair.
Speaker Change: Is conservatism I think that we needed to reset our numbers, we our expectations were.
Speaker Change: There were a little bit high we just had a good quarter. We just did 7% we beat expectations for vision, we beat expectations for surgical we beat earnings expectations. I mean, frankly, we raised revenue guidance at the midpoint, we raised earnings guidance. So it's been across the board raise on that having said that.
Al White: We just had a good quarter. We just did 7%. We beat expectations for vision. We beat expectations for surgical. We beat earnings expectations. I mean, frankly, we raised revenue guidance at the midpoint. We raised earnings guidance. So across the board, raised on that.
Joanne Wuensch: Having said that, you look through that organic growth rate, and I think it's just a prudent time to be a little bit more conservative. Thank you.
Speaker Change: You look through that organic growth rates and I think it's just a prudent time to be a little bit more conservative.
Speaker Change: Thank you and then my follow up question has to do with FX FX has moved so dramatically since we all got together and talked less than 90 days ago.
Brian Andrews: And my follow-up question has to do with FX, because FX has moved so dramatically since we all got together and talked, you know, less than 90 days ago. What are you dialing in for FX impacts?
Speaker Change: Are you dialing in for Opex and tax and can you just remind us how to think about that.
Brian Andrews: And can you just remind us how to think about that, you know, as we go forward and the world continues to dance or shift?
Speaker Change: As we as we go forward.
Speaker Change: We're all continuing to dancer shift thank you.
Al White: Thank you. Yeah, I'll comment quickly, and then Brian obviously knows this like the back of his hand. With respect to OPEX, the one thing I would say is I think people are probably underestimating the efficiencies that we're driving in the organization right now. Like, there's a lot of moving parts here, but the operational efficiencies that we're delivering from our manufacturing team, who's driving cost per units down on the products, and then the leverage that we're getting through the P&L that Brian talked about, right, in some of these areas like distribution, is quite a bit more, I think, than people are thinking.
Speaker Change: Yeah, I'll comment quickly and then Brian obviously knows this like the back of his hand.
Speaker Change: With respect to Opex. The one thing I would say is I think people are probably underestimating the efficiencies that we're driving in the organization right now like there's a lot of moving parts here, but the operational efficiencies that we're delivering from our manufacturing team who is driving cost per units down on the products and then the leverage that we're getting through the piano.
Speaker Change: That Brian talked about alright, and some of these areas like distribution is quite a bit more I think than people are thinking we invested a lot of money for a couple of years, there and people saw that in terms of our investment activity and so forth. Those returns are now starting to work their way through the P&L. So theres a lot of noise with FX right, but it's operational efficiencies.
Brian Andrews: You know, we invested a lot of money for a couple years there, and people saw that in terms of our investment activity and so forth. Those returns are now starting to work their way through the P&L. So, there's a lot of noise with FX, right, but it's operational efficiencies.
Brian Andrews: And I'll turn it over to Brian because he's a big part of that, and he's one of the guys who's driving that throughout our entire organization. So, he deserves credit.
Speaker Change: And I'll turn it over to Brian because he is a big part of that and he is one of the guys who is driving that throughout our entire organization. So he deserves credit I should shut up and let him talk.
Brian Andrews: I should shut up in my end talk. Yeah, I mean, I think, Al, you said it pretty well. I mean, we are – it's a lot of really hard work. being demonstrated by our operational leaders around packaging, labeling, manufacturing, shipping. That's all across vision surgical, working together, really grinding away and making sure that we get the leverage from that prior. And that's also true with an op-ex. We all have to remain vigilant. during these uncertain times and making sure that we are thinking about and managing. So when you've got a big FX move, as we've done, you know, when we took down the revenue ranges at the midpoint for organic growth.
Brian Andrews: Yes, I mean, I think you said it pretty well I mean, we are it's a lot of a lot.
Speaker Change: Out of really hard work.
Speaker Change: Being demonstrated by our operational leaders around packaging labeling manufacturing.
Speaker Change: Shipping that's all across vision surgical working together really grinding away and making sure that we get the leverage from that prior investment activity.
Speaker Change: And Thats also true within Opex, we all have to remain vigilant and disciplined.
Speaker Change: During these uncertain times and making sure that we are thinking about managing our expectation or our expenses closely.
Speaker Change: So when you've got a big FX move as we've done when we took down the revenue ranges at the midpoint for organic growth.
Brian Andrews: You know, the operational Cost of Goods, and in Opex really helps offset all of that. And so what you're left with is FX really being a big part of.
Speaker Change: The operational efficiencies and cost of goods and Opex really helped to offset all of that and so what you're left with is FX really being a big part of the EPS raise along with the Q2 beat and the impact of tariffs. So that's how you get to the 10.
Brian Andrews: P.S. Ray. along with the Q2B and the impact of tariffs. So that's how you get.
Speaker Change: Our next question is from Jan.
Xuyang Li: Our next question is from Xuyang Li from Jeffreys. Please go ahead. All right, great. Thanks for taking the time.
Speaker Change: <unk> from Jefferies. Please go ahead.
Speaker Change: Alright, great thanks for taking them.
Speaker Change: Tom.
Al White: I guess to start, I wanted to hear a little bit about the private label business growth, if you can provide any kind of sort of the growth versus branded, and, you know, if you can sort of comment in general, if there's any differences you're seeing between sort of the higher-priced products versus lower-priced products, because the consumer seems to be a little bit... Sure, so two things on that. I'd say private label biz for us at Cooper Vision growing a little bit faster than our branded business. No real surprise there, kind of trends continuing. I think we probably will continue to see that activity based on what I'm seeing out there with contracts and sales and so forth.
Speaker Change: I guess to start warranted.
Speaker Change: We're a little bit about the.
Speaker Change: Private label business.
Speaker Change: Growth if you can provide any color on.
Speaker Change: The growth versus branded.
Speaker Change: If you can sort of constant generally.
Speaker Change: Any differences.
Speaker Change: <unk>.
Speaker Change: Higher price products versus lower price products.
Speaker Change: Consumer seems to be a little bit.
Speaker Change: Yes.
Speaker Change: Sure. So two things on that I'd say private label bids for us with coopervision growing a little bit faster than our branded business.
Speaker Change: No real surprise, there kind of trends continuing I think we probably.
Speaker Change: We will continue to see that activity based on what im seeing out there were contracts and sales and so forth I think youll see the private label business grow a little bit faster than the branded business.
Al White: I think you'll see the private label business grow a little bit faster than the branded business.
Al White: The high price, low price, if you will, that question, it's interesting. The high price products, when we talk about like MyDay, Torx, multifocals, and so forth, continue to outperform. They continue to do well. We haven't necessarily seen anyone moving to lower priced products, but we've seen a shift in some of the purchasing behavior for some of those more expensive products. So we'll see what happens with that. Is there ultimately a shift over to some of those where people say, hey, I want to wear my contact lenses every single day, and I shift over to Clarity or something?
Speaker Change: The high price low priced if you will that question.
Speaker Change: It's interesting the high priced products, when we talk about like <unk>, toric multifocal and so forth.
Speaker Change: <unk> continued to outperform they continue to do well.
Speaker Change: We haven't necessarily seen anyone moving to lower priced products, but we've seen a shift in some of the purchasing behavior for some of those more expensive products. So.
Speaker Change: We'll see what happens with that like is there is there ultimately a shift over to some of those where people say, hey, I want to make sure I want to wear my contact lenses every single day, and I shift over to clarity or something I don't know, we will say, but as of right now we're continuing to see.
Al White: I don't know. We'll see. But as of right now, we're continuing to see pretty good demand and activity around the higher priced products. All right, great, very helpful.
Speaker Change: Pretty good demand and activity around the higher priced products.
Speaker Change: Alright, great very helpful.
Al White: I guess to follow up, you know, once your competitors launched a weekly product, things like early momentum is pretty good.
Speaker Change: I guess to follow.
Speaker Change: There are competitors launched a week product.
Speaker Change: Okay.
Speaker Change: Early.
Al White: You know, wondering how much you're seeing in the market and, you know, your, I guess, interest in that type of modality, you know, if you were to try to get something out that's similar, how long would that take? Yeah, that's a market that's one that we don't really play in, which was is kind of funny, because it seems like we play in every market. But that would be a segment of the market that we're not really in, which is the weekly slash two week market. That's, you know, J&J and Alcon that are out there playing in that market right now.
Speaker Change: Pretty good.
Speaker Change: Wondering how much of it.
Speaker Change: Market.
Speaker Change: Your.
Speaker Change: Risks and that type of mortality.
Speaker Change: Try to get something out there.
Speaker Change: It's similar how long with that.
Speaker Change: Yes.
Speaker Change: That's a market that's one that we don't really play in which is kind of funny because it seems like we play in every market but.
Speaker Change: That would be a segment of the market that we're not really in which is the weekly slash two weak market.
Speaker Change: <unk>.
Speaker Change: J&J and Alcon that are out there playing in that market right now so.
Al White: So that's not a market we're going to enter. Like we're on the daily side of things, and we're on the monthly side of things.
Speaker Change: That's not a market we're going to enter like we're on the daily side of things and we're in the monthly side of things.
Speaker Change: No.
Al White: I'll leave it to those two guys to kind of battle out the winner of that space.
Speaker Change: Ill leave it to those two guys to kind of battle out the winner of that space.
Speaker Change: Our next question comes from Chris.
Christopher Pasquale: Our next question comes from Chris Pasquale from Nefron, please go ahead. Thanks.
Speaker Change: So from that front.
Speaker Change: Sorry.
Speaker Change: Thanks.
Al White: Al, one just on contact lens market and then Brian to follow up for you on tariffs on the market. So, Al, I think you used the word sound for contact lens price. The biggest difference between the last few years and the pre-COVID period, as far as we can tell, is that pricing has been above the historical trend. So is this downshift in market growth as simple as pricing trends returning to what we used to consider normal? And then you mentioned rumblings about a new round of price increases to come. As you look at your own business, do you still see the same opportunities for price as what you had the last couple years?
Speaker Change: One just on contact lens market and then Brian a follow up for you on tariffs on the market. So.
Brian Andrews: Al I think you used the word sounds for contact lens pricing.
Brian Andrews: The biggest difference between the last few years and the pre Covid period as far as we can tell is that pricing has been above the historical trend.
Brian Andrews: Downshift in market growth as simple as pricing trends returning to what we used to consider normal.
Speaker Change: And then you mentioned rumblings about new a new round of price increases to come as you look at your own business do you still see the same opportunities for price as what you had the last couple of years.
Al White: Yeah, I do. I think that as an industry right now, and I'll speak for us in particular, as we look at inflationary pressures, I think we have the ability to pass along price increases that tie to inflation. Not above and beyond that, but inflationary pricing, I think all companies can pass that along. We can pass that along. A retailer selling a product can pass that along. So I don't see much in terms of pricing. Yeah, there's some rumblings out there from at least one competitor about a mid-year price increase tied to tariffs and so forth.
Speaker Change: Yes, I do.
Speaker Change: As an industry right now and I'll speak for us in particular.
Brian Andrews: As we look at inflationary pressures.
Brian Andrews: We have the ability to pass along price increases tied to inflation.
Brian Andrews: Not above and beyond that.
Brian Andrews: Inflationary pricing I think all all people all companies can pass out we can pass that along of retailers selling the product and pass that along and so I don't see much in terms of pricing. Yes. There is some rumblings out there from at least one competitor or about a midyear price increase.
Brian Andrews: Tied to tariffs and so forth, we'll see how that stuff plays out, but I do think that pricing right now in the market is solid I think future pricing is probably going to be a little bit higher than what it was pre COVID-19.
Al White: We'll see how that stuff plays out. But I do think that pricing right now in the market is solid. I think future pricing is probably going to be a little bit higher than what it was pre-COVID. So I think this is probably more... you know, a period of challenges around channel inventory, that type of thing, and purchasing and wearing behavior than it is anything to do with.
Brian Andrews: So I think this is probably more.
Brian Andrews: Sure.
Brian Andrews: A period of challenges around channel inventory that type of thing and purchasing and wearing behavior than it is anything to do with pricing.
Brian Andrews: Okay.
Speaker Change: Okay. That's helpful. And then Brian you talked about a 300 basis point headwind from tariffs next year absent any mitigation efforts if I heard you correctly.
Brian Andrews: And then Brian, you talked about a 300 basis point headwind from tariffs next year, absent any mitigation efforts, if I heard you correctly. You guys seem to be perennially capacity constrained on manufacturing. So what abilities does the company have to move things around if you need to, you know, get some of that production to different geographies to try and mitigate that impact? Chris, yeah, thanks for the question. There's a number of things that we could do. You know, the first thing Al just talked about, it was considering additional price increases. You know, that's something that, you know, we don't have factored into our guidance for this year, but it's certainly something that we can consider that'll help offset.
Speaker Change: Guys seem to be perennially capacity constrained on manufacturing so what ability of the company have to move things around if you need to get some of that production.
Brian Andrews: Two different geographies to try and mitigate that impact.
Chris: Chris Yes, thanks for the question.
Brian Andrews: Theres a number of things that we could do first thing Alan just talked about it was considering additional price increases.
Brian Andrews: <unk>.
Brian Andrews: We don't have factored into our guidance.
Brian Andrews: For this year, but it's certainly something that we can consider that will help offset.
Brian Andrews: Beyond that, I mean, it comes down to how do we, you know, what do we do with our supply chain? We are absolutely in the planning mode of what should we do, what's easier to do, what's harder to do, but there's a number of things that we can do to plan. to take action on, but we just wanna make sure there's a little bit more clarity. And so that's why we're taking a bit of a wait and see approach before doing anything disruptive.
Brian Andrews: Beyond that I mean, it comes down to how do we what do we do with our supply chain flows where and how do we manage inventory differently.
Brian Andrews: And how do we adjust some of our manufacturing we have the ability to do some of that and we're evaluating some of those moves right now.
Brian Andrews: It just seems like over the last 48 hours, we've heard different commentary about the impact of tariffs and what might happen and what not happening as of a few hours ago. So we are absolutely in the planning mode.
Brian Andrews: Should we do with easier to do what's harder to do but there is a number of things that we can do to to take action on it but we just wanted to make sure. There is a little bit more clarity and so thats why were taking a bit of a wait and see approach before doing anything disruptive to our operations.
Speaker Change: Our next question comes from Jason Bednar from Piper Sandler.
Jason Bednar: Our next question comes from Jason Bednar from Piper Sandler. Please go ahead. Good afternoon, guys.
Speaker Change: Go ahead.
Jason Bednar: Hey, good afternoon guys.
Al White: Al, I want to start on, sorry to belabor this point, but the topic du jour on the CBI guide, it seems to be this channel inventory dynamic. But I'm having a hard time squaring that against the comment you made earlier that you posted your best month of the year in April. So where's the disconnect? Because you obviously didn't see it in April.
Speaker Change: Al I wanted to start on sorry to belabor this point, but the topic the jewelry on the CVI guidance seems to be this channel inventory dynamic.
Speaker Change: I'm, having a hard time squaring that against the comment you made earlier that you posted your best months of the year in April so where's the disconnect because he obviously didn't see it in April does this have to do with what you think's happening to channel inventory for others and you expect it to happen to your business or is this like visibility that you have inventory adjustments that.
Al White: Does this have to do with what you think is happening to channel inventory for others and you expect it to happen to your business? Or is this visibility that you have to inventory adjustments that you think are coming in the next few months? Okay, all right, fair enough.
Speaker Change: You think are coming in like the next few months.
Speaker Change: Yes, Jason.
Speaker Change: I say this like it feels like every quarter and like you just have to be so careful in this industry. When you look at any months performance because you talk about like a big April well you saw our numbers that would mean that February and March were softer months right like let's not read too much into any individual month, because you have big shipments that <unk>.
Speaker Change: <unk> to key accounts.
Speaker Change: And in channel inventory swings that are going from one month to the next month that can impact any months or any individual quarter. So I wouldn't read too much into that I still think at the end of the day. When you are a year in the future and you turnaround and look back right you see big months in low months, and so forth as shipments and so forth.
Speaker Change: What's happened, but ultimately what ended up happening for the year, that's where I get back to the 4% to 6% growth for the full year and Thats, where I get back to at the end of the day. Some some channel inventory contraction that happens in the marketplace.
Speaker Change: Okay, Alright fair enough.
Al White: On the pricing side, just a follow-up there on some prior questions. I mean, we've seen some of those pricing schedules from one of your peers. They do look like some large price increases. I guess I'm curious how you're thinking about your business in response or your pricing strategy in response. Do you try to move forward in a similar fashion because you now have cover to take price as well? Or are you going to take an approach of wait and see how the response to these tariff-related increases and then proceed as such? Yeah, right now, I'm not going to give any other color other than to say we're evaluating it.
Speaker Change: Pricing side, just a follow up there on some prior questions I mean, and we've seen some of those pricing schedules from one of your peers. They do quite some large price increases I guess I'm curious, how you're thinking about your business and respond to your pricing strategy. In response, Steve do you try to move forward in a similar fashion because because you now have.
Speaker Change: Cover to take price as well.
Speaker Change: Or are you going to take an approach of wait and see how the market responds to these.
Speaker Change: Tariff related increases and then proceed as such.
Speaker Change: Yeah, right now I'm not going to give any other color other than to say, we're evaluating it we'll see what what's going on with the market and we'll evaluate it and if it's appropriate to take price increases we will look to do that and we decided not to we want so the team's working on that right now.
Al White: Like, we'll see what's what's going on with the market, and we'll evaluate it. And if it's appropriate to take price increases, we'll look to do that. And if we decide not to, we won't. So the team's working on that.
Speaker Change: Our next question comes from Brett Hoselton from Keybanc capital markets.
Brett Fishbin: Our next question comes from Brett Fishbin from Key Bank Capital Markets. Please go ahead. Hey guys. Good evening. Thanks for taking the questions.
Speaker Change: Go ahead.
Speaker Change: Hey, Hey, guys. Good evening, thanks for taking the questions.
Al White: I just wanted to ask if you could expand a little bit on what you're seeing around broader demand for Torix and multifocals. It seems like we got into like a pretty steady cadence of double-digit growth from those categories for a pretty long time. And just like noting, you know, growth has come in a little bit, I think 7% this quarter and a lot closer to growth of the overall CBI portfolio. So just wondering if there was any competitive dynamics to call out or anything else that might be driving that. Thank you.
Speaker Change: Just wanted to ask if you could it's down a little bit on what youre seeing around broader demand for <unk> and multifocal. It seems like we got into like a pretty steady cadence of double digit growth from those categories for a pretty long time.
Speaker Change: Just like noting growth is.
Speaker Change: Comment a little bit I think 7% this quarter MLR closer to the growth of the overall CBR portfolio. So I'm just wondering if there was any competitive dynamics to call out or anything else that might be driving that thank you.
Al White: Yeah, no, not too much. I mean, I remember when I saw those numbers coming through this quarter, I asked that same question, right? But there's not too much to read into that. Now, torques and multifocals continue to do well. You definitely get some activity associated with dailies. Now that that marketplace has shifted more, it continues to shift more and more to dailies, you're getting some bigger swings in some of those kind of numbers. But no, the torque and multifocal markets continue to do well and our products continue to do well that got a little bit more tied to some of the bioaffinity shipments that were going out there for those products.
Speaker Change: Yeah, no not too much I mean, I remember when I saw those numbers coming through this quarter I asked that same question right, but theres not too much to read into that toric and multifocal has continued to do well.
Speaker Change: You definitely get some activity associated with dailies now now that that marketplace has shifted more it continues to shift more and more to dailies.
Speaker Change: Getting some bigger swings in some of those kind of numbers, but no the toric and multifocal markets continue to do well and our products continue to do well there that got a little bit more tied to some of the bio affinity shipments that were going out there for those products I wouldn't read too much into that.
Al White: I wouldn't read too much into that.
Speaker Change: Alright, very helpful. And then I'll just ask a really quick follow up I think last quarter, you mentioned that China was a decline year over year.
Al White: All right, very helpful. And then I'll just ask a really quick follow-up. I think last quarter, you know, you mentioned that China was a decline year over year. I'm just curious if you're able to give any color on how China performed in CBI this quarter as well. Thank you.
Speaker Change: Just curious if youre able to give any color on how China performed in CVI, just this quarter as well. Thank you.
Speaker Change: Sure Yeah, China was down quite a bit last quarter. It was it was essentially flat this quarter for us.
Al White: Sure. Yeah, China was down quite a bit last quarter. It was essentially flat this quarter for us. Our my site business was actually down a little bit. I mean, we had 35% growth in my site on a global basis with China being just a little bit negative, but essentially a flat business in China.
Speaker Change: Our <unk> business was actually down a little bit I mean, we had 35% growth in my side on a global basis with China being.
Speaker Change: Just a little bit negative, but essentially a flat business in China for Q2.
Speaker Change: Our next question comes from Steve Lichtman from Oppenheimer <unk> company.
Steve Lichtman: Our next question comes from Steve Lichtman from Oppenheimer & Company. Peace, God Thank you. Evening, guys. Al, I wanted to follow up on your comment on my site. I think you mentioned Price isn't the headwind based on your analysis, but you are instituting the free trial program. So what is driving you to start that program if Price isn't a factor? Yeah, Steve, 100%. So we did this work. We've done it for actually a decent period of time in a lot of different markets, looking at the annual price of that and thinking, hey, that's the thing that's holding back greater adoption of this product.
Speaker Change: Please go ahead.
Speaker Change: Thank you evening guys Al I wanted to follow up on your comment on my side I think you mentioned price isn't the headwind based on your analysis, but you are instituting the free trial program. So what is driving you to start that program if prices into factor.
Speaker Change: Yes, Steve.
Speaker Change: 100%. So we did this work we've done it for actually a decent period of time and a lot of different markets looking at the annual price of that and thinking Hey, that's the thing Thats holding back greater adoption of this product what we really truly found out is it's not that it's the initial pricing its initial activity.
Al White: What we've really truly found out is it's not that it's the initial pricing, it's the initial activity, you have to get the parents comfortable that their child can wear contact lenses, you have to get the child comfortable that they can put the contact lenses in and take the contact lenses out. The parents are kind of saying, hey, listen, I don't want to go down that journey and pay all this money up front when I don't think that my child is going to be able to wear them or like to wear them or so forth. So I'm hesitant to even get started in my site because of that.
Speaker Change: You have to get the parents comfortable that their child can wear contact lenses you have to get the child comfortable that they can put the contact lenses in and take the contact lenses out. The parents are kind of saying, Hey, listen I don't want to go down that journey and pay all of this money upfront when I don't think that my child is going to be able to wear them or like to wear.
Speaker Change: Or so forth so I'm hesitant to even get started in my side because of that once you go to them and say hey, Here's three months free go ahead and try this product right daily lenses here three months free to go ahead and try them wear them make sure that your kid can wear them make sure that your kid is getting the treatment benefit that the <unk>.
Al White: Once you go to them and say, hey, here's three months free, go ahead and try this product, right? These are daily lenses, here's three months free, go ahead and try them, wear them, make sure that your kid can wear them, make sure that your kid is getting the treatment benefit that the eye care practitioner is saying they'll get. Once you give them that and the kid goes through the process of figuring out how to put the lenses in and take them out, I mean, bam, they get the visual correction associated with the lenses. The kids love it and want to stay in them once they get comfortable with it.
Speaker Change: Care practitioners, saying, though get once you give them that.
Speaker Change: The Kid goes through the process of figuring out how to put the lenses in and take them out I mean band they get the visual correction associated with the lenses that kids love It and want to stay in and once they get comfortable with it. The parents go back and say Wow. This treatment is actually working I really like the fact this treatment is working I want to continue to offer that to my child well.
Al White: The parents go back and say, wow, this treatment is actually working. I really like the fact this treatment is working. I want to continue to offer that to my child. Once you get over that hump, then you're in. That's where the retainage rate is like 90%. So what we've really found is it's not that annual cost, it's the cost of the initial purchase activity. You have to hook them, if you will, into the value of contact lenses and into the value of the treatment. Probably not a shocker when you look at the massive success that you're seeing from spectacles outside of the U.S., right?
Speaker Change: Once you get over that hump, then you're in that's where the retainers rates like 90%. So what we've really found is its not that annual cost. It's the cost of the initial purchase activity you have to hook them. If you will into the value of contact lenses in into the value of the treatment.
Speaker Change: Really not a shocker when you look at the massive success that youre seeing from spectacles.
Al White: When you see it in China and European markets and so forth, right? I mean, parents are very interested in it. The hesitancy is tied to that initial cost.
Speaker Change: Outside of the U S right, where do you see it in China and European markets and so forth right. I mean parents are very interested in it. The hesitancy is tied to that initial cost. So that's what we're talking about with the free initial trial period.
Steve Lichtman: So that's what we're talking about with the free initial trial. Got it. Thanks, Al.
Speaker Change: Got it thanks Al and then and then just quickly on the fertility market commentary you mentioned.
Al White: And then just quickly on the fertility market commentary, you mentioned some capital purchasing delays, given the macro. Was that a comment for any particular region, or are you seeing that globally? Any more color on that? Thanks. Yes, we're seeing that. Well, for us, that would be greater in Europe and India, but we're also seeing that some here in the Americas. It's prevalent in a number of locations right now. I don't think that's going away. I think it's more somebody, a fertility clinic, looking at stuff saying, hey, do I need some new workstations? Do I need some of that kind of activity?
Speaker Change: Capital purchasing delays given the macro was that a comment for any particular region or are you seeing that globally any more color on that yes.
Speaker Change: Yes, we're seeing that.
Speaker Change: For us that that would be greater in Asia.
Speaker Change: Europe.
Speaker Change: And India, but were also seeing that some here in the Americas, it's prevalent in a number of locations right now I don't think Thats going away I think it's more somebody a fertility clinic looking at stuff, saying, Hey, do I need some new workstations do I need some of that kind of activity, yes, I would like to upgrade is do I have to upgrade to.
Al White: Yes, I would like to upgrade. Do I have to upgrade today? No. I can delay this activity a little bit. It seems to be much more tied to that than anything.
Speaker Change: Today, no I can I can delay this activity a little bit it seems to be much more tied to that than anything else.
Speaker Change: Our next question comes from David Saxon from Needham. Please go ahead.
David Saxon: Our next question comes from David Saxon from Needham. Please go ahead. Great. Thanks for taking my questions.
Speaker Change: Great. Thanks for taking my questions, maybe just a follow up on speeds on the buy side. So.
David Saxon: Maybe just a follow-up on Steve's on the MySite. So, you talked about the promo activity here in the third quarter. Can you quantify the impact of that that you're expecting?
Speaker Change: Talks about the promo activity during the third quarter can you quantify the impact of that.
Speaker Change: That you're expecting and then the myopia management portfolio, including Ortho K can you talk about the profitability of that portfolio is it profitable and then longer term at scale.
Al White: And then for the Myopia management portfolio, you know, including OrthoK, can you talk about the profitability of that portfolio? Is it profitable? And then longer term at scale, how should we think about the margin profile relative to kind of core CBI margin? Sure. So yeah, I was talking about my site, right? We're doing a lot of this activity. I guess I don't want to lead anyone down the wrong road. I mean, my site in Q3 is still going to be a decent quarter. My guess is probably 25%, 30% growth, something like that. And then we'll see, my expectation is we're over 40% growth in Q4.
Speaker Change: Should we think about the margin profile relative to kind of core CVI margins.
Speaker Change: Sure. So yeah, I'm sorry about my side, we're doing a lot of this activity I guess I don't want to lead anyone down the wrong Road I mean my site in Q3 is still going to be a decent quarter. My guess, it's probably 25, 30% growth something like that.
Speaker Change: And then we will see my expectation is we're over 40% growth in Q4. So this goes the way I think it's going to go solid quarter in Q3, maybe just a little bit lighter and good strong Q4.
Al White: So if this goes the way I think it's going to go, solid quarter in Q3, maybe just a little bit lighter and good, strong Q4.
Al White: Ortho K, this quarter was roughly flat. When I look at those combined from a profitability perspective, gross margins are good on those, kind of would fall in line with company-wide averages, if you will. Operating margins, depending upon how you allocate costs, you could argue those are still lighter because we're still investing a lot of dollars. We're, as you'll remember, we're integrating a lot of the sales activity into our regular commercial infrastructure to be able to sell the product more efficiently and get better coverage. So I think that at the end of the day, long-term, that is going to be a margin accretive portfolio.
Speaker Change: Ortho K this quarter was roughly flat.
Speaker Change: When I look at those combined from a profitability perspective.
Speaker Change: Gross margins are good on those kind of would fall in line with company wide averages if you will operating margins depend.
Speaker Change: Depending upon how you allocate cost you could argue those are still lighter because we're still investing a lot of dollars.
Speaker Change: As Youll remember, we're integrating a lot of the sales activity into our regular commercial infrastructure.
Speaker Change: To be able to sell the product more efficiently and get better coverage. So I think that at the end of the long term.
Speaker Change: That is going to be a margin accretive portfolio for us.
Patrick Wood: Our next question comes from Patrick Wood from Morgan.
Patrick Wood: Our next question comes from Patrick Wood from Morgan Stanley. Please go ahead. Hey, amazing, thanks. I'll keep it just to one to try and keep it time efficient. I don't mean to belabor the point, but the industry's taken probably cumulatively 10, 15% gross pricing over the last couple of years. Is it the mix of new fittings that's giving you confidence that you're not seeing any real beginnings of change in consumer behavior? Because I hear them de-stocking and holding less, and I think with the cumulative price increase, you can't help but worry a little bit on our end.
Speaker Change: Stanford.
Speaker Change: Alright.
Speaker Change: Hey, amazing Thanks, I'll keep it just to one try and keep it time efficient.
Speaker Change: I don't mean to belabor the point, but the industry has taken probably accumulatively.
Speaker Change: 15% gross pricing over the last couple of years is that the like mix of new things, that's giving you confidence that youre not seeing any real beginnings of change in consumer behavior, because I hear them Destocking and holding last time I think it was a cumulative price increases.
Speaker Change: You're calling out are a little bit on rins. So anything you can kind of speak to confidence around how they bid so about aggregate total pricing I'd love to hear anything.
Al White: So anything you can kind of speak to confidence around how they've absorbed that aggregate total pricing, I'd love to hear anything. Thanks.
Speaker Change: Yes, Patrick something I didn't touch on that I, probably should touch on here because I think it is a component of what's happening in that is some of the legacy products that are out there legacy hydrogel products that are out there.
Al White: Yeah, Patrick, you know, something I didn't touch on that I probably should touch on here, because I think it's a component of what's happening. And that is some of the legacy products that are out there, legacy hydrogel products that are out there. That's still a decent portion of the market, there's still quite a bit of older legacy hydrogels that are out there, that a lot in the industry are moving out of, we're moving out of, like our traditional hydrogel sales declined pretty decent this quarter, right? They are masking our growth, if you will. And I think you're seeing some of that impact in the marketplace.
Speaker Change: That's still a decent portion of the market. There is still quite a bit of of older legacy hydrogel that are out there that a lot in the industry are moving out of we're moving out of like our traditional hydrogel sales.
Speaker Change: Decline pretty decent this quarter right.
Speaker Change: Masking our growth if you will and I think youre seeing some of that impact in the marketplace. So as youre seeing older traditional hydrogel has continued to decline and people tighten up on what's out in the channel associated with those products as those products decline and go away because a lot of people are discontinuing.
Al White: So as you're seeing older traditional hydrogels continue to decline, and people tighten up on what's out in the channel associated with those products, as those products decline, and go away, because a lot of people are discontinuing those. I mean, we are, we discontinued, we had millions of dollars of discontinued sales this quarter. From older products, right? So as we continue as a company, as an industry, to shift away from some of these legacy hydrogel products, that puts pressure on channel inventory and puts pressure on our as reported growth rates.
Speaker Change: Those I mean, we are we discontinued we had millions of dollars of discontinued sales this quarter from older products right. So as we continue as a company as an industry to shift away from some of these legacy hydrogel products that puts pressure on channel inventory and puts pressure on our as reported growth rates.
Al White: You flip over to the other side, because Patrick, I get your point a little bit of a head scratcher here. And you say, okay, price is there, we're not seeing a pushback on price, which we're not, we're continuing to see good growth in these specialty lenses, and these higher price lenses, and so forth, we're getting good fitting activities. It's a little bit of how do I reconcile that? Like, we shouldn't ignore the negative impact coming from some of these traditional hydrogel lenses, because they are impacting industry growth. They're certainly impacting our growth, because we're dealing with that.
Speaker Change: If you flip over to the other side, because Patrick I get your point, a little bit of a head scratcher here and you say, okay prices. There, we're not seeing a pushback on price, which we're not we're continuing to see good growth in the specialty lenses and these higher price lenses and so forth. We're getting good fitting activity, it's a little bit of how do I reconcile that like we shouldn't ignore the negative impact coming.
Speaker Change: Some of these traditional hydrogel lenses, because they are impacting industry growth there certainly impacting our growth because we're dealing with that so that's an important component I, probably should've said that earlier.
Al White: So, so that's an important component. I probably should have said that earlier.
Speaker Change: Our next question comes from Nathan time from BNP Paribas. Please go ahead.
Navann Thai: Our next question comes from Navann Thai from BNP Paribas. Please go ahead. Hi, thanks for taking my question.
Nathan: Hi, Thanks for taking my question so back on fertility.
Al White: So back on fertility, there's a fertility pharma company that reported a sluggish performance in China, but. did not revise down their global fertility guidance.
Speaker Change: If I can just pharma.
Speaker Change: Reported.
Speaker Change: And that's in China.
Speaker Change: Good luck to revise down their global free cash flow guidance.
Al White: So I'm curious, what is Cooper's original mix for fertility revenues? Or maybe do you see a difference between fertility consumables and therapeutics? Thank you.
Speaker Change: What is Cooper's omnichannel mix.
Speaker Change: Maybe just the difference between consumables.
Speaker Change: Consumables and therapeutics. Thank you.
Al White: Yeah, we do not have any fertility pharma products. So I would definitely split those two, right? When you look at a fertility treatment, the largest cost associated with that treatment is on the pharma side. And we just don't have those products. So when I'm speaking about fertility growth, I'm talking about, you know, consumables, genetic testing, donor activity, capital equipment, and so forth, but not pharma-based. So I definitely would automatically link any commentary or any form of sales activity to our our There are no further questions at this time.
Speaker Change: Yes, we do not have any fertility pharma products.
Speaker Change: I would definitely split those two right. When you look at our fertility treatment the largest cost associated with that treatment is on the pharma side and we just don't have those products. So when I'm speaking about fertility growth I'm talking about.
Speaker Change: Consumables.
Speaker Change: Genetic testing.
Speaker Change: Donor activity.
Speaker Change: Capital equipment, and so forth, but not pharma base, so I definitely.
Speaker Change: Wouldn't automatically link any commentary or any pharma sales activity to our industry.
Speaker Change: Our market if you will.
Speaker Change: There are no further questions at this time I'll turn the call back over to Al White, President and Chief Executive Officer.
Al White: I'll turn the call back over to Al White, President and Chief Executive Officer. Great. Thank you, everyone. I appreciate the time. I know we had a lot to go through there, and hopefully we were able to communicate all that clearly. Look forward to catching up with people during the quarter, and certainly look forward to our next earnings call. Thank you.
Al White: Great. Thank you everyone I appreciate the time I know, we had a lot to go through there and hopefully we were able to communicate all that clearly.
Speaker Change: Look forward to catching up with people during the quarter and certainly look forward to our next earnings call. Thank you. Thank you operator.
Operator: Thank you, operator.
Speaker Change: This concludes the meeting.
Operator: This concludes the meeting. You may now disconnect.
Speaker Change: Now disconnect.
Speaker Change: Yes.