Hello, and thank you for standing by. Welcome to the Second Quarter 2021 Cooper Companies Earnings Conference Call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer It is now my pleasure to introduce Vice President, Investor Relations and Risk Management, Kim Duncan.
Good afternoon, And welcome to the Cooper Companies Second Quarter 2021 Earnings Conference Call. During today's call, we will discuss the results and guidance included in the earnings release and then use the remaining time for Q and A. Our presenters on today's call are Al White, President and Chief Executive Officer and Brian Andrews, Chief Financial Officer and Treasurer. Before we begin, I'd like to remind you that this conference call contains forward looking statements, including all revenue and earnings per share guidance and other statements regarding anticipated results of operations, market or regulatory conditions and integration of any acquisitions or their failure to achieve anticipated benefits. Forward looking statements depend on assumptions, data or methods that may be incorrect or imprecise and are subject to risks and uncertainties.
Events that could cause our actual results and future actions of the company to differ materially from those described in forward looking statements are set forth under the caption forward looking statements in today's earnings release and are described in our SEC filings, including Cooper's Form 10 ks and Form 10 Q filings, all of which are available on our website at coopercos.com. Should you have any additional questions following the call, please call our investor line at 92546036 63 or email ircooperco.com. And now I'll turn the call over to Al for his opening remarks.
Great. Thank you, Kim, and welcome everyone to Cooper Companies' fiscal 2nd quarter conference call. I'm happy to report that CooperVision And Cooper Surgical both posted all time record quarterly revenues, which drove record quarterly earnings. Our businesses have rebounded nicely from the COVID lows with silicone hydrogel lenses and Myopia Management leading CooperVision and fertility and PARAGARD driving CooperSurgical. For the quarter and reporting all percentages on a constant currency basis, consolidated revenues were $720,000,000 with CooperVision at 523,000,000 up 25% and CooperSurgical at $197,000,000 up 58%.
Non GAAP earnings per share were $3.38 For CooperVision, the Americas grew 38% with Claroty, MyDay and Biofinity leading the way. The U. S. Was the strongest part of the region and it allowed us to rebound quickly and strongly, offsetting challenges from markets such as Canada, which are still facing significant COVID restrictions. We're still seeing nice momentum in the U.
S. And we're looking forward to the back to school season. EMEA grew 15% in the quarter led by strength in MyDay and Biofinity. We're the number one contact lens company in EMEA, so we're obviously over indexed in this region and the impact from COVID did temper the market's performance. But we're executing at a very high level and taking share, which is offsetting the challenges.
This is a region where we've been a leader Lastly, Asia Pac was up 19% led by strength in Claroty and MyDay. Asia Pac is making progress rebounding from COVID, but it's slow in many countries, including Japan, where we have a strong presence. Nevertheless, similar to EMEA, our teams are executing at a very high level and taking share, which is helping offset the market challenges. Overall, given our geographic mix, I'm extremely happy with our performance and expect it to remain healthy as vaccines roll out around the world and consumer activity improves. Moving to some details, Silicone hydrogel dailies grew 31% with MyDay and Clarit both posting strong results.
MyDay in particular is taking share led by approving availability, especially for myDayToric. From a market perspective, there's still roughly $2,400,000,000 in annual global sales of of older daily hydrogels that we expect to be traded up to silicones in the coming years. This tailwind is a significant positive for us as we're under indexed in dailies, that are seeing great performance from Claroty and MyDay. Moving to our FRP portfolio, we saw solid growth around the world led by Biofinity. In particular, Biofinity Energous, our unique and innovative lens that uses digital zone optics to help alleviate eye fatigue from excessive screen time and our market leading Biofinity Toric Multifocal posted extremely strong results.
We also just announced that we've doubled the number of prescription And to provide context on how significant this is, Biofinity Toric is the most prescribed Toric lens in the world and is now available in over 33,000 prescriptions. That's more options than all other monthly silicone hydrogel toric lenses combined. Regarding product launches, we remain incredibly active. Claroty and the MyDay second base curve sphere are being rolled out in Japan And myDay Toric, Biofinity Toric Multifocal and our extended Toric ranges for clariti and Biofinity continue rolling out around the world. And I'm happy to now add myDay Multifocal to this launch list.
We'll start seeding select countries in the coming months with a full launch plan for late this calendar year. As part of our pre launch activity, we completed product testing in 8 countries with thousands of patients and I'm excited to say the responses have been absolutely fantastic. That's not a huge surprise given the extremely strong clinical data and the success of MyDaySphere and Toric, but it's still great to see. The multifocal category is roughly 10% of the $8,500,000,000 global contact lens market and roughly half of that is in dailies. Given we're currently under indexed in the daily segment at roughly a 16% share, we believe the MyDay multifocal will be very successful.
Moving to Myopia Management, our portfolio grew 122 percent this quarter to 14,000,000 Within this, MiSight grew 152 percent to $4,000,000 and OrthoK grew 112% to 10,000,000 As a global leader in the Myopia management space, our portfolio is the broadest in the industry comprised of MiSight, the only FDA approved Myopia control product, a broad range of market leading Ortho K lenses and our innovative Sightglass vision spectacles. Given the strength we're seeing, we now expect this portfolio $65,000,000 in sales this year and exceed $100,000,000 next year. Regarding MiSight, we've made fantastic progress with our key accounts and have entered into multiple new pilot programs with retailers and buying groups around the world. Our momentum has been accelerating including in the U. S.
Where sales grew sequentially from $100,000 to $700,000 and we're about to launch in South Korea, which should be a great market. The only thing holding us back from growing MiSight even faster is COVID restrictions in several important countries such as Canada, Spain, Taiwan and Singapore. Regardless, we're making tremendous progress and expect very strong growth moving forward. From a fitting perspective, the average age of a new MiSight wearer remains 11 compared to a regular new contact lens wearer of 17 showing this treatment is bringing kids into contact lenses at a much younger age. Additionally, Multiple professional associations are now recommending Myopia Management as standard of care, including the World Council of Optometry and more universities are adding educational training courses to their curriculums.
Regarding OrthoK, we had a great quarter driven by our broad product portfolio and from the halo effect we started seeing from MiSight. As the Myopia management market develops, we're seeing the value of offering multiple options to eye care professionals and this is helping our OrthoK franchise. We also believe it will benefit our Sightglass Myopia Management Spectacles, which are scheduled to be launched in multiple European markets prior to calendar year end. With respect to CyGlas, we just received 2 year clinical data and are in the process of submitting it to the FDA for approval as a myopia management treatment. It took 3 years data to get MiSight approval, but we're hoping to receive approval faster for Sightglass given the strong data and that these are glasses rather than contact lenses.
In the meantime, we're finishing the legal and regulatory work to close our joint venture with Escalora Luxottica and remain very excited about the potential of that partnership. To wrap up on Myopia Management, we're actively investing in sales and marketing, new launches, regulatory approvals and R and D to keep driving success. Our focus remains on leading with clinical data and providing the best and broadest portfolio on the market. To conclude on vision, the rollout of is definitely benefiting us given the consumer nature of our business. We're seeing plenty of opportunity heading into what should be a strong back to school season and we're gearing up for some great presentations and meetings at several upcoming eye care conferences.
On a longer term basis, the macro growth trends remain solid Roughly 1 third of the world being myopic today and that number expected to increase to 50% by 2,050. Given our robust portfolio, new product launches, Momentum with Myopia management and strong new fit data were in great shape for long term sustainable growth. Moving to Cooper Surgical, this was an outstanding quarter with record revenues of $197,000,000 in all three focus areas, fertility, PARAGARD and office and surgical medical devices outperforming. Starting with fertility, revenues grew 53% year over year to $84,000,000 easily becoming the best fertility quarter we've ever had. Strength was seen around the world and throughout the product portfolio.
We're taking share and we're well positioned for future gains with improving traction in several markets. Our key account strategy is creating opportunities capitalizing on our market leading portfolio of products and services, which cover this full spectrum of clinic's needs outside of pharma offerings. We're seeing strong growth from consumable products like media and our iWitness, our proprietary automated lab management system that clinics implement to maximize safety and security by optimizing their lab practices And we're benefiting from increased utilization of our artificial intelligence based genetic testing platform, which increases the doctors' ability to select the best embryos for transfer and also from our capital equipment business with growth in products like incubators. From a market perspective, COVID is still negatively impacting patient flow in many countries, but the combination of share gains and healthy patient flow in the U. S.
And parts of Europe is driving our results. Overall, increasing vaccination activity will continue supporting the recovery of the IVF industry as more patients are able to return to clinics. And increasing maternal age and better access to IVF treatments are trends that will continue supporting strong growth for many years to come. Within our office and surgical unit, we grew 62% with PARAGARD up 103% and Office and Surgical Medical Device is up 41%. PARAGARD performed really well as positive health and wellness trends continue driving patient activity.
As the only 100 percent hormone free IUD in the U. S. Market, the product offers fantastic long lasting birth control that as the needs and interests of women looking for a healthy alternative. Within Medical Devices, several products performed well, including EndoSee Advance, our direct visualization system for evaluation of the endometrium and our portfolio of uterine manipulators. To conclude our Cooper Surgical, This was an excellent quarter.
Some of it was tied to reopening activity and capital equipment sales, which are tough to forecast, but you'll note in our guidance that we expect to continue delivering Similar to Vision, we have powerful macro trends supporting our growth and our exposure to consumer activity is benefiting us as To finish, let me add that we'll be releasing our new ESG report in a few weeks. For those of you like me who are passionate about environmental sustainability, social responsibility and good governance, You'll see a great summary of where we stand today and insights into our future efforts. We're in an excellent ESG position And I look forward to continuing advancements and providing additional updates in the future. And with that, I'll turn the call over to Brian.
Thank you, Al, and good afternoon, everyone. Most of my commentary will be on a non GAAP basis. So please refer to our earnings release for a reconciliation of GAAP to non GAAP results. Our 2nd quarter consolidated revenues increased 37% year over year or 32% in constant currency to $720,000,000 Consolidated gross margin increased year over year to 68.1%, up from 65.8%. Improvement was driven by strength in our higher margin CooperSurgical business led by PARAGARD and a nice improvement in Fertility margins where we're seeing the positive impact of transferring a significant amount of production to Costa Rica.
CooperVision also posted improving margins driven by currency and product mix. Moving forward, we're in excellent shape to continue delivering solid gross margins. We've completed the largest parts of our capital expansion projects at both CooperVision and CooperSurgical and expect to receive the benefits of this over time as capacity utilization increases. OpEx was up 17% year over year as expenses naturally increased with the rebound in revenues along with higher sales and marketing expenses associated with investments in areas such as Myopia Management. Having said that, expenses were kept under control resulting in consolidated operating margins of 26.8%, up from 17.4% last year.
Interest expense was $6,100,000 due to lower interest rates and lower average debt levels and the effective tax rate was 9.6% driven by a 2.1% benefit from options exercises. Non GAAP EPS was $3.38 with roughly 49,700,000 shares average shares outstanding. Free cash flow is very solid at $143,000,000 comprised of $193,000,000 of operating cash flow offset by $50,000,000 of CapEx. Net debt decreased to $1,600,000,000 and our adjusted leverage ratio decreased from 2.1 to 1.8 times driven by lower debt and improving EBITDA. Before moving to guidance, it's worth noting we acquired 2 businesses since we last reported earnings.
The first was number 7 contact lens, a UK based contact lens manufacturer primarily focused on specialty lenses including Ortho K that had annual revenue of roughly $4,400,000 which we purchased for roughly $12,000,000 The second was OVP Medical, a U. S.-based Medical device company that develops and markets a suite of differentiated women's health medical devices with integrated LED illumination. OVP Medical had roughly $10,000,000 in annual revenues and we purchased them for $60,000,000 Both deals are highly strategic and fit perfectly into CooperVision and CooperSurgical respectively. Moving to guidance. We continue to monitor and evaluate the scope, duration and impact of the ongoing COVID-nineteen pandemic on our operations and financial results.
While we still view this as a risk factor, our visibility is sufficient to allow us to provide the following update to our fiscal 2021 guidance. Consolidated revenues are expected to range from $2,855,000,000 to $2,885,000,000 up 14% to 15% in constant currency with CooperVision revenues between 2.11 and $2,130,000,000 up 11% to 12% in constant currency and Cooper Surgical revenues between 7.45 and $755,000,000 up 25 percent to 27 percent in constant currency. Non GAAP EPS is expected to range from $13.20 to $13.40 To provide color on this EPS range, our gross margin expectations are unchanged as we expect CooperVision's improved manufacturing efficiencies to be offset by moderate margin pressure from growing dailies and surgical continuing to post strong results. We expect OpEx as a percent of revenues to track higher than the first half of the year, led by sales and marketing investments to support reopening activity and for the ongoing support of Myopia Management. Given the lower tax rate in Q2, we now expect our full year tax rate to be around 11%.
Lastly, FX has moved against us primarily due to the end, but we expect the tax improvement to offset this negative impact. And to wrap up on guidance, our business continues to strengthen and we now expect free cash flow to exceed $500,000,000 this year. And with that, I'll hand it back to the operator for questions.
Thank you. And due to time constraints, we ask that you please limit yourself to one question and one follow-up. Our first question comes from the line of Matthew Mishan with KeyBanc.
Great. Thanks for taking the questions. First off, how should we think about phasing from here of the next couple of quarters? My sense is sequentially we should see improvement in both CVI and CSI based on re openings.
Yes. Matt, hi. So As far as phasings go, obviously, our guidance range for revenues is expecting consolidated revenues obviously to ramp up in the second half of for the year. CooperVision, I would expect, is going to be up sequentially quarter over quarter as we work through the year. CooperSurgical is going to be We had a really strong Q2.
We talked Al talked about the strength from markets reopening, but also the sort of the one time impact of some So we still expect really strong results for surgical, maybe not quite as strong as Q2, but still improving. And then on a consolidated basis, up sequentially, Q3 and Q4.
Okay. Excellent. And then, one of your competitors Just launched Genortha K product, just sort of a labeling thing, FDA approved for myopia management. What is the difference between approved for Myopia management versus Myopia progression control for you guys?
Yes. So Myopia control being much I don't know how to put a powerful claim. Myopia management being the more general term, right? You'll hear people talk about OrthoK and other products being used for myopia management. I've talked about it in that context Fairly frequently, frankly, historically, as a general term, Myopia control being a much more specific term.
So to receive approval From the FDA on a Myopia controlled basis is much more powerful than a general management, which you'll see Kind of all OrthoK products are used for that. You'll see the spectacles that are in the market, Myopia Management, So much looser designation, if you will, talking about myopia management versus control.
Yes.
Thank you. And our next question comes from the line of Jason Bednar with Piper Sandler.
Hey, good afternoon. Thanks for taking our questions and congrats on a nice quarter here. Al, hoping you can help us out with how consumers are Behaving here, just as society and the economies reopen, we move back to more of a normal state. Are you seeing any change in eye exam behavior, contact lens consumption, a greater percentage of annual supplies being purchased, just any color there?
Yes. So that's a good question, right? It gets very regional dependent would probably be the easiest way to say it, right? Because if you look at The U. S.
Is an example. We've seen consumption come back up, a lot of activity return to normal. Now we're still not quite seeing The amount of new fit activity that we'd like to see, that's still down. So that's still impacting some of like your new dailies. MySite is an example of some of that kind of activity, but we're getting there and we're getting there quickly, right?
So I'm pretty optimistic As we get to like the back to school season this year, you're going to see that new fit activity and so forth in the U. S. As you move to somewhere like Europe, The region from a contact loans perspective is continuing to move in the right direction. It almost feels like it's like 4 months or 5 months or 6 months ago where the U. S.
Was at. So, I hope that's the case and I hope we See the continuing progress there as consumption as things pick up as you're seeing the vaccines roll out. Asia Pac is a little different. Again, though you probably even Break that into markets like we're weaker in China than we are in some of the other spots out there. China is doing well, but some of the other markets like, even Japan is Still in the single digit when it comes to vaccination.
So I think you're seeing different levels of improvements, Different levels of improving consumption activity and so forth. The trend mostly across the board is positive. I guess I'd kind of give you that as like a high level overview.
Okay. That's super helpful. I thought those original comments. Just as a follow-up, I mean, you threw out that $100,000,000 target for Myopia management next year. I'm just curious if you could bucket the contributors there.
I mean, does MiSight still account for $50,000,000 of that or has that changed just with the pace of reopening progression? And then within that $100,000,000 what's the right way to think about maybe Sightglass contributing to that figure versus OrthoK? Thank you.
Yes. So I would still put MiSight in there at 50,000,000 Frankly, I think we have a chance to do better than 50. We're running into a few challenges this year. It's COVID related. There's no question about that because the demand out there and the interest is crazy strong.
But I think at the rate we're going right now, I would still think $50,000,000 plus when it comes to MiSight next year, the remaining portion largely being OrthoK. We'll launch Sightglass this year later this year we'll get into some European markets start rolling around it has CE Mark. So we'll get that product out there And that will contribute. It'd just be a question mark of how much it contributes. And by the way, Jason, just note that when it comes to Sightglass right now, that's Fully rolling through our P and L, when we close the joint venture with Essilor Lexotica that most likely will not show up in revenues.
Any gain or loss attributable to that joint venture will be below the line. So I would envision frankly at the end of the day next year You might not see any Sightglass revenue coming through our P and
L. Okay, makes
sense.
Thank you. Yes.
Thank you. And our next question comes from the line of Larry Biegelsen with Wells Fargo.
Hey, guys. Congrats on the nice quarter. Thanks for taking the question. Just a couple of Al on MiSight. I guess to follow-up on the last one, is $25,000,000 still the right way to think about 2021?
Are you And are you making any tweaks to the business model? I think right now it looks like going from 3 to 4, some people may be concerned about the pace to get to that $25,000,000 And I had a follow-up.
Yes, I think that's fair. I wouldn't take $25,000,000 off the table right now, but I do think we're going to have a hard time getting there. We're going to need COVID to move in our favor, if you will, in some of these markets because I mean, we still have the significant portion of MiSight being outside the U. S. So we've actually We've seen some of the markets take a step backwards if you will with COVID restrictions.
And then obviously other markets maintain COVID restrictions. So That's a challenge for us. I mean, probably a more attainable number would be something kind of in the low 20s, dollars 20,000,000 to 21 1,000,000 something like that. Again, I don't think that's going to stop us from hitting $50,000,000 next year because I think the momentum and so We have a strong enough to get there. When I look at like the ramp up, we've seen a faster ramp than I was anticipating in terms of like Trialing, piloting activity from retailers and from buying groups and so forth.
So that work takes a little time, but We'll work through that and I still crazy bullish on the product and I think we're going to be in great shape. I mean, When you look at tweaks to the business model right now, not really because of kind of, if you will, the underlying success that we're seeing with respect to the product And the interest that we're getting from some of the what are ultimately going to be very, very large bidders of MiSight.
And just one follow-up on MiSight, Al. So China, how are you feeling about approval there this year? And that retailer, large retailer in Europe that you talked about in the last call. Any update on that? Thanks for taking the questions.
Yes. On China, we've had some more dialogue back and forth with them, all good, I would say. I guess since it's regulatory based, I should just say cautiously optimistic. I'm not going to change my stance on that. As a matter of fact, maybe I'm A little bit more cautiously optimistic, and I can't wait to get that approval and get that product into China because that should be hugely successful there.
Great response from the retailer I mentioned last quarter. We've actually expanded that trialing activity. So things are going really well there. Maybe that's part of the reason we're seeing some other retailers and buying groups kind of jump in on that. People don't want to get Left behind on that activity.
So, yes, taking definitely taking steps forward there.
Thanks, Al.
Yes.
Thank you. And our next question comes from the line of Jeff Johnson with Baird.
Thank you. Good evening, guys. Al, look, I hate to keep focusing on Myopia. I know it's such a big future growth driver, But it's a small part of the business right now. But we're starting to see things like SLR do they're saying 1,000 patients a day in China with their Stellus lens.
Hoya and Zeiss seem to be having decent success, at least Hoya does with their Myopia glasses, things like that. So help us think about the next couple of years. Is SightGlass potentially as big or bigger than MiSight? Do you think MiSight Will it still be the dominant product within your portfolio? Just glasses versus soft contact lenses, I guess, first question, then maybe I have a follow-up on top of that.
Yes. It's going to be really interesting to see how the market develops because you're right that when it comes to the Myopia Glasses, Essilor is a great example. They're doing really well with that product. Now that's a Great company to start with, right, and great distribution network and so forth. But they're doing really well right now.
A lot of attention going there by optometrists. So, Sightglass is a phenomenal product and I think once it gets in the market, it's going to do really well. And as we tie that together With Essalur Lassatica and with MiSight in a lot of markets and even with OrthoK, I think we're going to be hugely successful. The question mark that I kind of have on that ends up being a lot of optometrists have come back to us and obviously they like glasses and they want to go with glasses because it's an easy sell. But they also have commented back saying, hey, I think that MiSight contact lenses are going to be a lot more efficacious because we really want these kids wearing them all the Right.
It's like metal braces. We want the kids wearing them all the time and we know we'll get that from contact lenses. So Some of the feedback has been, hey, I want to get kids into a myopia management program at like 5 or 6 years old. Obviously, they're not going to put them And contacts that, right? So what I'm hearing more is like, hey, from 5 to maybe 8, 9, 10, we're looking at a little bit more at glasses And from 10 kind of onward, we're pushing and talking much more about contact lenses.
So it'll be interesting to see how it comes out. I'm just Kind of happy we have both of them.
Yes. No, I would agree with that. And then I guess I'll forego my other And just follow-up on something you said there on just the efficacy in that. I mean, we have seen now 2 year data, 3 year data out from Hoya, from SLR just in the last month or showing those kind of 60%, 65% reductions in myopia progression, things like that. So as glasses do show to be as efficacious, does that Change kind of your marketing message?
Does that change price points? It looks like to me, even some of the U. K. Price points on myopia glasses around $7.50 a year versus $1500 per year for MiSight here in the U. S.
How comfortable and I know markets are different, but how comfortable are you at Price point you're at with MiSight when glasses seem to be coming in at a less expensive option at least in some of your international markets?
Yes, a couple of things. The price point on my side is lower outside of the U. S. So when we talk about the U. S, right, FDA approval and And running at about $750,000,000 You're getting outside of the U.
S. Let me call it global range more $500,000,000 to $750,000,000 And we're seeing a lot of the optometrists out there sell this as like a package offering. So that wouldn't surprise me moving forward that they kind of do that as, hey, Regardless of what product you're getting and how we're going to sell it, we're going to sell these together. So maybe you get it's a year of contact lenses or it's 2 or 3 glasses, Right, because kids are going to lose their glasses or break them or need to update their script that kind of stuff, right? So I think that at the end of the day, my gut is that the pricing is Probably in a pretty good place right now.
Where I've seen the pricing on glasses lower as you're talking about, That's also for one pair of glasses, right? So you end up saying, okay, well, you either kind of give them 2 glasses or 3 glasses, how you're going to look at that? It seems to be coming together at At a pretty decent price point around where we're sitting at right now. So then I think the next thing goes to saying, 2 components of it, right, is, yes, they're both efficacious and they're being Proven to be relatively similar at the end of the day in their success rates. So then you go to, okay, is the kid going to really wear those glasses, Right, because they have to wear them all the time, right, 10 hours a day, every day.
And that's where we're seeing optometrists push towards it and say, hey, they're both As efficacious, but one of them I'm guaranteeing the child's wearing contact lenses, the other one I'm not. That's why we're seeing more of the push from a lot of optometrists for kids who are 10 or older moving them into contact lenses.
Okay, got it. Thanks so much.
Yes.
Thank you. Your next question comes from the line of Anthony Petrone with Jefferies.
Thanks and congrats on the quarter. Al, I want to start with the overall calendar 1Q trends in contact lenses and kind of matching that to the fiscal quarter. So what is your internal data telling you about where calendar 1Q Exited from sort of a market data standpoint, some competitors are saying that the global market was flattish with mixed performances by geography. The company put up 25% CVI growth. So when we look at that 25%, How much of that was actually the April trend and how much of that was perhaps share gain?
Yes. So, well, obviously April was a massive growth number for us, right? If you kind of go back, I mean, this fiscal quarter, We grew in every region every single month. So I can say that much. I do think that if you look at calendar Q1, It was as an industry, it was flat, maybe it was up 1% or 2% something like that.
I think you just saw kind of improve through the quarter. I know like we had a bunch of business I know in March Yes. I guess at the end of the day, I would probably answer that. Maybe the easiest way to summarize it is to say, calendar Q1 was okay, flat to up just a little bit. April was definitely a strong month, and we're continuing to see that performance.
Big differences regionally, no question about that. Big difference is regionally. The U. S. Was very strong.
So, that's one of the things I was talking about. Anthony, when I was saying like I'm really happy with our performance from a geographic We're kind of under indexed in China. We're frankly a little under indexed so to speak here in the U. S. Where we're the number 3 Contact Lens Company.
So yes, I do believe if you look at it for the fiscal quarter, a decent chunk of it was us taking share and that includes in Some markets like Europe and Asia Pac.
That's helpful. A quick follow-up, I'll actually shift to surgical. IVF and IUD both strong. So maybe a little bit, is there backlog still out there? If there is, Do you know what is the tailwind linked to backlog in both IVF and IUD?
Thanks again.
Yes. I'd say We're going to post another really strong PARAGARD quarter because May of last year was pretty non existent. So we're going to have another really High growth rate in PARAGARD. I don't think there's anything out there with respect to channel inventory or The kind of backlog, if you will, I think that's just kind of business as usual right now. Fertility is really strong.
We're taking a lot of share Even with struggles in places like India as an example, I mean it's really tough to see what's going on there. That's a really nice market for us. We're stronger there than In some of the growth markets like China. The question really for fertility ends up being how much of that growth was tied to reopening and capital equipment activity that won't repeat itself. I'm probably more optimistic maybe than most on that because You're continuing to see fertility clinics open around the world.
As they open, they stock up and so forth. You're continuing to see new fertility clinics Build or build out and that's capital equipment purchases and so forth. So those things are always hard to forecast, but the backlog is Pretty damn good within fertility.
Thank you. Yes. Thank you. And Our next question comes from the line of Chris Cooley with Stephens.
Good evening. Thanks so much for taking the questions. I apologize, but let's go back and talk about Myopia management a little bit more. I'm specifically interested in your comments and the prepared comments where you talk about greater focus with kind of the mass account or the chain account. I've always thought of this product as being a little bit more high touch, for the kind of the spoke ECP type products.
I'm just kind of curious when we think about MiSight, should we think about its adoption being driven Much more like dailies in the early days from push more so from the chain. And then similarly, maybe as a second part to that Question, little bit interested here, you have the broadest portfolio clearly and have been bulking up the OrthoK franchise, but kind of the one missing piece here is Pharma. I'm curious if there is an appetite as well to maybe just complement the Spectacle and Contact Lens piece at that exact I've just got a quick follow-up on surgical.
Sure. I'll answer Quick one on the pharma piece kind of atropine and so forth. We are doing work on that within R and D. I don't know if you'll see anything anytime soon on that, But that's an interesting kind of component of the Myopia Management business. So yes, we're keeping an eye on it, so to speak.
When it comes to MiSight on the retail side, that is going to be one of the big drivers that's out there. The independents have grabbed a hold of this. We've had a lot of People continue to get trained and start selling the product. Some of the bigger retailers are looking at this saying, okay, well, wait a minute, I don't want to get left behind on this. This is clearly gaining some traction.
World Council of Optometry going out and telling people that they should be standard of care and so forth is pushing things along relatively quickly. So what you're seeing from the retailers right now is really trying to figure it out, right? Say, should we have this in all of our stores Or should we put this in certain stores, right? So if we have a bunch of stores in London, should we select stores where we're going to drive all of our pediatric patients Or should we have everybody get certified and kind of everybody fit MySite, right? So you're getting retailers kind of trying to figure that strategy out.
You've seen the same thing Here in the U. S. Frankly with TreeHouse Eyes and some different organizations becoming more focused on myopia management. So this is still like Such early stage in the marketplace, we're really creating a brand new market here. It makes it kind of exciting, right?
But there's some definite question marks out there. The thing I am happy about and I was kind of saying is moving faster than I expected right now is the interest from some of those big retailers of kind of saying, hey, I don't want to get left behind here. I need to get moving and figure this out one way or another. So that's a key The other thing I would add just quickly when it comes to retailers is it's a little easier for an independent, they run their own store and so forth, how they want to price it, How they want to handle selling it, communicating it and so forth. You go to a retailer where they want to standardize that throughout their operations, That takes them a little while longer, right, figuring out how we're going to price it, how we're going to sell it, all the different components that go into it.
So A lot, a lot of work being done behind the scenes on that.
I appreciate all the color there. And then just quickly for me on Cooper Surgical, You mentioned obviously the strong growth in fertility and also continued lift with PARAGARD. With both of those Categories having strong momentum. Do we think about kind of a structural lift here in the operating margin contribution going forward from Is there more of a step up that we should think about as we exit the fiscal year? Just help us think about kind of the margin contribution profile of that business unit going forward?
Thanks so much.
Yes. So that business certainly has higher gross margins And we're continuing to see those trend in the right direction. The consolidation effort I've talked about over the last couple of years with respect to Costa Rica It's starting to generate returns right now. Obviously, a product like PARAGARD has very high gross margins. We're probably still A little inefficient if you will with respect to that business model in total.
So as we continue to grow revenues, we'll be able to continue to leverage That basis, I mean the fertility business is a global business as an example, with a global infrastructure, largely global You're talking about a business even if you annualize this quarter, right, that's a little over $300,000,000 So we need to continue to grow that to leverage it. But Long story short, the answer to that is yes. We anticipate margins our operating margins continue to improve within the CooperSurgical And that will obviously help the overall business as surgical continues to strengthen.
Thank you.
Yes.
Thank you. And our next question comes from the line of Jon Block with Stifel.
Thanks guys. Good afternoon. Al, I'll start with you. I know share price, call it, it's usually not a big driver in the lens market. ASPs are Usually, you treat from, call it, material or modality.
But in this supposed inflationary environment, is there more of an opportunity this year for price For you guys to take that. And Brian, while I'm going down that same road, for you, are there any material cost to call out, In your opinion putting pressure on the supply chain or other areas of the business? And then I've just got a follow-up.
Yes. On pricing, I would say, yes. We've seen pricing trending higher. Matter of fact, we've just heard some stuff, which I haven't confirmed that it sounds like one of our competitors just Recently here took list pricing up a little bit. But you have seen list pricing moving up a little bit.
You've seen some rebate activity Come down a little bit. I think when you look at the world that we're in today, right, with some of the inflationary pressures that we see out there, there's probably a little bit more ability to take price than As been certainly over the last several years.
Hey John, I'll take that the other question. Nothing really to point to. We've got long term contracts with our suppliers. So nothing to highlight really right now on inflationary sort of raw materials or other costs.
Okay, great. And then a follow-up question is sort of multiple parts down the MiSight row, but maybe just for clarity, dollars 50,000,000 next year, Al, that Is not including China is sort of the question there. And then maybe the $700,000 for my site this quarter that I think you referenced in the U. S, Was that a clean number this quarter? And what I mean by that is, is that sort of reflecting no free fittings?
If so, Al, maybe you can just comment on The utilization, I think everyone's just trying to sort of rectify a ton of docs, Trane, 700 ks in U. S. Revenue. Is this somewhat maybe Lower than anticipated utilization, a function of difficulty getting the kid into the optometrist office or That optometrist wanting to fit 1 kid and watch him or her progress for, I don't know, 6 or 12 months before starting kids 2 through 5. Thanks.
Yes. So you do get some of that, where you're getting an optometrist to a couple of kids and then they might wait a little bit. Maybe The other point to make on that, John, that's probably important is, we recognize our activity, all of it Upon shipment, one of the challenges that we've had with MiSight is shipping it on a quarterly basis or 6 months rather than manual You've heard me talk historically more about, hey, dollars 7.50 right? We fit a kid, we get $7.50 I guess mentally, that's how I think of it. But in actuality from an accounting perspective depending upon what you're shipping, if you're shipping a full year in the U.
S. Then yes, you would get $750 or if it's outside the U. S. Whatever you would get whatever that price is. But certainly more than half of our sales of MiSight are Shipped as 6 months or quarterly sales.
So I think maybe the maybe I haven't been as clear about that, right, because the number of Fittings that we're actually doing, the kids getting fitting is greater I think than what people think it is because we're not recognizing as much revenue as I think people maybe are thinking we are right away, right? That's what one of the things that kind of gives me more comfort out of $50,000,000 next year frankly is because I
see the number of children actually being fit in the product. I know that revenue will come, right?
It's a Being fit in the product, I know that revenue will come, right? It's a renewing cycle anyways for the annual purchaser, but for all the kids who are not annual purchasers, 6 months or whatever. You know that that's going to continue to come. So I think that's part of it. The $700,000 in the U.
S. Would be A true number, if you will, right? No free lenses being included in that. When it comes to China for $50,000,000 for next year. I guess I think of it about it altogether, right?
It will depend when we get approval for China, When we're able to get launch that product as to how much that's going to contribute, but that would be part of our $50,000,000 plus I think if to say it that way in terms of my side numbers for next year.
Perfect. Thanks guys.
Yes.
Thank you.
And our next question comes from
the line of Izzy Kirby with Redburn.
Hi, guys. Thank you for taking my question. I have 2 on MiSight, please, and then one on Surgical. Firstly, just on MiSight, Just thinking about where you are with your investments into sales and marketing and whether or not that Change given the dynamic you've outlined in these larger retailers and what that really means for the margins of that product? And then following up on Sightglass actually and MiSight, just thinking about your partnership with Obviously, they have a vast distribution network.
Just thinking about any potential to cross sell Either technologies, between the two companies outside of Sightglass? Then I'll follow-up on Surgical.
Yes, I'll start with Asilor Laxatic, because we have a great relationship with them. We're selling right now their We manufacture the Ray Ban contact lenses here that they're selling, which is a great product that's doing really well. Yes. I would love to grow and expand that relationship because it's good now. They have a great team of people.
I've gotten to know them better. Our team has gotten to know them better. If we can kind of combine our efforts to improve things like Myopia management, then fantastic, right? They distribute Our Ortho K lenses in China, if we can work something out, I'd love to see us kind of come together on a product like my side. That's Potential home run kind of opportunity there.
So we'll see how that builds up over time, right? We're having a lot of discussions with them right now. And as you can kind of tell a lot of Like positive good discussions. On the margin side right now with respect to the retailers, that's not impacting anything because the price point on that Is what the price point is, if you will. I think that will only ultimately be a question mark as to like if someone becomes really large and starts Doing a lot of volume.
My guess based on history is that we would continue the price point that we're at. We would hold the price point we're at, if you will. It would be more in terms of like, hey, if you do that much volume, we'll give you a cross promotional activity for other products and services That type of thing, more sales and marketing in a broader sense than it would be any discount activity associated with a product like MiSight.
That's very helpful. Thank you. And then on fertility,
it would be great if
you could comment on some of the dynamics You're seeing in the end market in the clinics, particularly around perhaps seeing any sort of acceleration in the consolidation of clinics, whether or not this has accelerated due to COVID and how you guys over at Cooper Surgical are well positioned to service these larger accounts?
Yes. So we have seen some of that. We've heard a few things from competitors about like Supply concerns and stuff, we have not had any of those. When you look at consolidation activity, which has increased, That is a positive for us because one of the things we started investing in and you can tell that I'm a big fan of is key account activity. We have a very broad the broadest portfolio you're going to have.
So as you see consolidation activity, You naturally get clinics coming and saying, hey, we want to buy it on volume. We want all the products and we want to push those products in a standardized format through our clinic. We're clearly the number one option for that kind of activity, right? We can offer them everything and we can pull it together for So that consolidation activity, some of the bigger trends, if you will, in the fertility space are positive to us because of
our current business model.
That's very helpful. Thank you and congratulations on the quarter.
Great. Yes, thank you.
Thank you. And Our next question comes from the line of Joanne Wuensch with Citibank.
Good evening and nice quarter. A couple of little things
at this stage of the call.
Was there any stocking in the quarter? What is your foreign exchange guidance for the year? And gross margins, you said that there was no change to your gross margin assumption for the year despite the 68.1% in
the quarter. So I'm just curious If
you could reiterate what the assumptions are and why would there be no change? Thanks.
Yes. I'll take the first one, Then I'll flip it to Brian. There was nothing to mention in terms of stocking with respect to vision or surgical, normal kind of activity there.
Hi, Joanne. Yes, so the on the FX guide, FX previously was a 3% tailwind to revenues And an 8% tailwind to EPS. FX has moved against us. It's a margin it's on the margins just slightly worse On the revenue line, but still 3% tailwind. On the to EPS, it's about a 7% tailwind now, so moved down about 1%.
So that's obviously factored into our guidance and the impact of FX in the second half of the year is offset by the effect Tax rate reduction going from around 12.5% from last quarter to around 11% now with this new guidance. On the gross margin side, I had said last quarter around 67.5% to 68% on a consolidated basis And bouncing around kind of range bound, yes, we ended up at 68.1%. I still think we have a chance maybe to get to 68, but we're still going to kind of hold to the upper 67s. I talked in my script about the push pull around Higher dailies offset by better utilization or better efficiencies in our manufacturing plant with volumes and then strong CooperSurgical gross margin. So some of that's going to be driven by mix.
So, but high 67s. And then on the operating margin line, that's really where we're kind of We're saying, hey, there's just going to be a little bit more OpEx than what we were expecting, let's say, last quarter. So all of the Myopia management Product launches, just general market opening activity and back to school is going to result in slightly higher OpEx as a percentage of sales and so that's how you get to or EPS guidance.
Excellent. Thank you so much.
Thank you. And our next question comes from the line of Robbie Marcus with JPMorgan.
Great. Thanks for taking the question. I'll add my congratulations on a good quarter. Maybe just a follow-up on Joanne's question. Can you remind us what FX was In 2nd quarter on the top and bottom line and what acquisitions were in the quarter and what's in the guidance now versus last quarter.
Sure. On the FX to revenues is $24,500,000 FX to EPS was $0.21 In the guidance, we've got About $2,000,000 for number 7 Lens and about $5,000,000 from OVP. Those are both 2 quarters' worth. And then in the for M and A contribution in the quarter, you had About $1,000,000 from Vision and about just a little bit under $3,000,000 for CSI, so a total of 4.
Great. And I know you don't break out segment margins anymore. I was wondering though if you could just give us Maybe a high level of thought on vision versus surgical and how we should think about the Gross and operating margin trends for each of the businesses throughout the year. You talked a lot about spending in CooperVision. I just Any color you can give us to help with the split would be great.
Thanks a lot.
Yes, no problem. So on CooperVision, obviously, I talked about earlier, some of the both of them were up, vision and surgical were up. Some of the trends that we're seeing are still playing out. We had some volume related absorption. That's starting to go away as volumes pick up.
But though that's being offset by higher sales of dailies. Our daily silicon hydrogel suite of products It's not quite as high as our company wide gross margins or CooperVision gross margins. So That's going to be a little bit of a push pull, but we should see we have a chance of seeing CooperVision margins trending a little bit upwards, But flattish and then on the Cooper Surgical side, obviously stronger PARAGARD sales with that high gross margin product And fertility, all of the work that we're doing to consolidate into Costa Rica, all helps CooperSurgical gross margins. So that's a positive trend that should continue. On the operating margin side, I'll touch on CooperSurgical operating margins just a few minutes ago.
On the vision side, again, I think most of what you're seeing as markets reopen and all the rebound activity that we're doing to see these markets to Prepare for product launches and really to put some need around myopia management and make sure we're supporting the launches Of all of our suite of Myopia Energy products, you'll see some OpEx increases there ahead of some of the revenues that you'll see down the road.
That's really helpful. Thanks a lot.
Thank you. And our next question comes from the line of Steven Lichtman with Oppenheimer.
Thank you. Hi, guys. Al, in SiHy Dailies, it sounds like MyDay continues to be very strong, and I assume the main Driver, beyond the improved supply and certainly new launches for Mi Day, is there anything else that you're seeing in terms of broader patient preference trends? Is there A mix toward a more premium lens that's surprising you. I guess overall, what's your view on the mix of clarity versus my day looking ahead and the outlook for clarity overall.
Yes. So it's been interesting how it's played out. Both performing really well, both within their kind of Segments if you will, Clarity being more mass market. And we've seen good success from Clarity kind of right through, right? Sphere, Toric, Multifocal all doing Okay.
MyDay Sphere doing well, but MyDay Toric doing really well. So that product's Once we got it in the marketplace, we knew it was going to be a hot product. And I can tell you it's just continued to go, which is doing really, really well. So that's probably been kind of the biggest driver or the biggest positive. That's one of the things that makes me kind of optimistic about MyDay multifocal, right, like all our clinical testing data feedback has been very similar to all that positive feedback and good Stuff we were getting on my day tour.
So I'm pretty excited about the multifocal coming up.
Great. Thanks. And then Just your outlook for PARAGARD overall looking out over the next 1 to 2 years, how are you thinking about underlying Growth potential and given the health and wellness trends, are you anticipating increasing DTC activity?
Not necessarily. I mean, we'll have a new campaign out and replace our old campaign. You saw some of the TV advertising and so forth. But no, we're continuing To get good results on that from the marketplace and a lot of interest and so forth, given the momentum and interest that we have right now, I don't see the necessity to kind of go blast out of DTC campaign or something above and beyond the activity we've been doing. Our PARAGARD team is really strong.
We just moved a few people around there. So we have A great team of people who ran it, great team of people who are currently running it all together. Our insight into the IUD market and PARAGARD in Particular is incredibly strong. So you'll continue to see DTC activity and targeted activity, but I wouldn't expect Yes, significant increases in costs associated with it, but I would continue to expect pretty good performance out of Perrigar.
Great. Thanks, Al.
Yes.
Thank you. And our next question comes from the line of Rob Cottrill with Cleveland Research.
Hi, good evening.
Thanks for fitting me in here. Two quick questions for you. First, Al, you mentioned that New fit data is still lagging a bit and a bit soft. Clearly, that's not impacting the quarter outlook yet. But wondering how you're thinking about the timeline for New fits to return to normal and whether that is included in the outlook for this year, you think it can it might stretch into 2022?
Yes. It's so different by region. We're definitely seeing the improvements Around the world, the U. S. Continues to move in that right direction and that's critical for us right now because that's an important one From my side, especially in the back half of the year, but also for our dailies, right?
Because what we were seeing pre COVID with respect to new fit data was that you were seeing a much higher percentage of people being fit in daily SiHy's than you will or any other product. So obviously that's an area of strength for us. I'm making the assumption that when we look at the world at New Fitz, you're going to continue to see New Fitz trend in the right direction. I wouldn't anticipate like a big jump all of a sudden anywhere. I think it's just going to be a matter of vaccines rolling out, continuing to be Successful continuing to allow more foot traffic, if you will, will improve new fit data.
The other thing is like, I mean, you get to California here, right? We still have June 15, we get to the point finally where we basically don't have restrictions. That's going to allow a greater volume of Patients go into optometry offices and so forth. So there's some big markets out there, California being one of them that continue to take steps in the right direction. You go outside of the U.
S, you look at markets like the U. K. Continue to move in the right direction, right? So Moderate positives, but I'm not saying like some massive big step up.
Got it. Okay. Thank you. And then quickly on MiSight, Now you talked about revenue recognition moving out every 6 months. Curious, as you start to expand these pilots with retailers, is that something where You expect retailers and buying groups to stock inventories to where MiSight might be a little bit more lumpy in the future or still retain the shipping to patients?
Yes. I would say right now there's no stocking on my side. So, that's a good point. Just to be clear, right, that everything that you're seeing, everything We'll report this product being shipped out to patients to wear. We'll see how that changes in the future.
I would guess certainly for the foreseeable future, It's going to continue to be managed the same way it is right now. It will be shipped when the patient orders the product. And then it's just a matter of How the doc wants to do it? A lot of them want to say, hey, I'll get a year supply because the child's eyesight is not going to change that much. So let's get the product.
Let's get it in our house. We're certainly as I said over half of optometrists are saying, hey, I want to see the kid more frequently. I want them to come in for eye exams. So I'm going to do a 3 month or I'm going to do a 6 month and then I'm going to do the eye exam and then if there is a parameter change or tweak that needs to be made, I'll do it and Send them new lenses, otherwise I'll continue to send them the original script. So we'll kind of see how that plays out over time.
My guess is though that you're not going to have a lot of stocking on My site anytime in the near future.
Got it. Thanks so much.
Yes.
Thank you. And our next question comes from the line of Chris Paschall with Guggenheim.
Thanks. Al, can you give us an update on where you stand In the U. S. Today with MiSight and physicians trained or the installed base maybe in the U. S.
And globally?
I think we're around 4,000 certified Eye care professionals in the U. S. Right now, I don't have the number off top of my head. I know it's larger than that outside of the U. S.
To be honest with you, I've kind of stopped looking at it just because there's so much variability around fitting and How much people fit, anyone who's really interested in myopia management has a tendency to fit a lot and then we're getting a lot of professionals Optometrist, if you will, getting certified on that because you're getting some staff and some other people who are now responsible for it. The optometrist doesn't want spend their time educating mom and dad on what Myopia is and how it progresses and so forth. So you kind of see a broadening of some of the trading activity. But It continues to increase. I know we continue to get a pretty decent number of certifications coming through on a monthly basis.
About from an installed base perspective, how many kids do you think you're up to now?
Well, That's
a good over 30,000, 30 some 1,000. Numbers like started ratcheting way up. Sorry, I've been focusing on other stuff, but yes, it's certainly over 30,000.
Okay. And then curious with the fertility business, do you have much of a presence in China today? Any Impact to you guys from the change in the child policy over there? Is that something you're looking at as an opportunity? How do you think about that?
Yes. Boy, I wish we had a bigger presence there. We do not have a really large fertility presence in China. We do have a presence. We have a decent business there.
We're working right now to try to get some of our products registered so we can sell them there. Some of our Top products in different markets around the world are currently not registered in China. So they're going through the process. I think the change in terms of the 3 kids is Great for fertility in China and that's going to help all of us in the fertility space who compete in that marketplace. We have much higher market share in other markets than we do China.
So I look forward to getting some of those product registered and having some more success in that market.
Thanks.
Yes.
Thank you. I will now turn the call back over to President and CEO, Al White for any closing remarks.
Great. Fantastic. Well, thank you everyone. Appreciate the time and the interest and so forth. Always happy to talk about all this stuff.
As You can imagine I spend a lot of my time with Dan talking about MiSight and the team and Myopia management in general. So Happy to go through all this detail and it was a good quarter, so happy to be in talking about it. So thanks for the time and look forward To catching up with everybody in the coming weeks here and certainly in 3 months when we report in the beginning of September. Thank you, operator.
This concludes today's conference call. Thank you for participating. You may now disconnect.