All right, welcome back. I'm Larry Biegelsen, the medical device analyst at Wells Fargo, and I am pleased to host the next fireside chat with the management team from the Cooper Companies. With us, we have Al White, President and CEO, Kim Duncan, Vice President, Investor Relations and Risk Management. The format's fireside chat. If you have a question, raise your hand, and we will call on you. So, Al, thanks so much for being here.
Yeah, absolutely. I thank you.
You've been a big supporter of our conference. I appreciate it over the years.
Love Boston.
I thought it was me.
And you. And you, of course.
All right. So Al, we've got to start with the Q3 earnings, and I wanted to give you a chance to explain the issues you highlighted in CVI. Because obviously, you know, there's been some confusion since the quarter. Organic growth 2% versus your expectation of about 5%, or Street expectation. Talk about the two issues that you saw in the quarter. You know, I think people are still confused about what happened with the e-commerce in China and why people were trading up from MyDay or trading up to MyDay from clariti.
Mm-hmm.
Just help us better understand what happened, please.
Sure. Yeah, let me cover a few dynamics and then catch me if I miss something here you want to talk about. You know, but if I look at this last fiscal quarter, we were moving along through the quarter growing 5%, and things were looking pretty good because we obviously had good margins, and we had good free cash flow. So we were feeling good as we proceeded through the quarter. We started getting a lot more MyDay out into the marketplace, and I talked about that. And on the call, I put everything together when I talked about fitting sets and trial lenses and new contracts and so forth.
But I should break those up into two pieces because I think it's important to describe it that way. If we look at MyDay, and we look at the fitting sets and the free lenses that we were putting out in the marketplace, and let's use an example. Those go to an optometrist in the U.S. That optometrist gets it, they fit a patient, fitting set, trial lenses, "Here, take these home, try it, you'll like it, and you'll buy it." That's all been very successful, right? MyDay grew double digits this quarter. We had MyDay multifocal grew 20%.
We had a good quarter, and we have good positive fitting data and good positive revenues for the MyDay product that we have that's in the market being sold. So that's kind of piece one. If you look at the other side of it, this is the clariti piece, and this is the private label piece I was talking about. So when we agree to a private label contract, and let's just assume you go to Japan, and we do a private label contract with somebody.
From the time we sign that contract, where we negotiate the marketing activity, the launch activity, education activity, and importantly, and this is an important one, the packaging and labeling for that customer, that period to where we're delivering them product is somewhere in the three- to six-month timeframe. So when we go to them, and we sign an agreement with them, and I talked about the 30 plus contracts that we've entered into and expansion of some other contracts.
When we sign that, if you have a retailer who's out there who's currently fitting clariti and knows that they're going to be fitting their private label product, they'll stop ordering clariti because they want to take their clariti inventory levels lower, right? And they're doing that because we won't take the inventory back. So they intentionally stop ordering, they pull that down because they know that's going to get replaced with private label inventory. But we don't have anything to give them right now. We don't have... We're not going to send them fitting sets.
We're not sending them product because we have to package and label that product and get it all done so that we can send it to them. Now, you don't see that activity normally because that would just happen during a quarter. Somebody orders less of one, they order more of another, and there's no impact, and there's no visibility to that. But what we had happen this quarter was we were more successful than we thought we were going to be in terms of the contracts that we were winning and the magnitude of those contracts.
When that happened, and that happened faster than anticipated, we pulled forward, if you will, into Q3, the drawdown of that clariti, and we had nothing to replace it with. Now, as you sit here today and you move forward, we anticipated that was going to happen. We knew that was going to happen as you go through into Q4 and as you go into Q1 and Q2 of next year, right? So what that does is put us in a little better position with respect to Q4, Q1 of next year because we don't have all that drawdown that's occurring there.
That was the dynamic I was trying to explain, and I know I put those together, and it got confusing for people. I know that, right? But, but that was the dynamic of what was negatively impacting the clariti inventory. That doesn't impact any of our competitors or anyone else or fit data. That just impacts that dynamic that happened. So that's what happened with Q3, and then when I look at Q4, we talked about Q4, and some of that is going to offset itself, right? In terms of we will start getting some of that private label inventory into the channel.
We will get it to those customers. We will get them fitting sets and trial lenses and so forth, so they can start that activity and some revenue product that'll happen there. Now, we looked at our guidance a little differently than we do historically, right? Because what we said for the Q4 quarter was, "Hey, if we have the same stuff happen in Q3," let's assume kind of this scenario where channel inventory comes down in clariti in Asia Pac, and MyDay, for some reason, doesn't get there in the private label side of things, and you have the e-commerce. What would we do under that scenario?
And what we would do is a very similar quarter to what we just did this quarter. Now, we believe, obviously, for a multitude of reasons, we can do better than that, but that's how we built the guidance in Q4.
A nd the e-commerce in China issue, you said, I think you said you started the year with, like, six months of inventory. It's down to two. What exactly happened and why? Six months sounds high. I mean I would say in the U.S., people, we would think two months is normal. So it just sounds like inventory was just high, too high coming into the year, and that just bled down. Is it more complicated than that?
No, it's pretty, it's pretty straightforward. I mean, you ended up with a situation where we were selling product through that channel. We had maintained our pricing or even increased our pricing around the world, including in that channel, and we lost business out of that channel, and you saw a 25% reduction in Q1. It was flattish in Q2. In Q3, it was China down a similar amount, and some other countries that pulled that channel inventory down. To me, that's fine, right? What level of inventory do you need in that channel?
You know, call it three months or something like that, like, it's below that, but we're not gonna go chase that back. If somebody wants to be more aggressive on pricing and so forth, or they can be more aggressive on pricing on that, but we aren't gonna have that happen again.
So I have to ask, you know, if the inventory was higher than it should have been, somebody—the obvious question is, well, you know, it was inflated. Those are basically the term people would use, is they stopped the channel a year ago, right? So I just feel compelled to ask that question. Is it would that be a fair,
No.
Pushback?
No. Because, I mean, you have channel inventory go up and down, and different channels have different amounts of inventory associated with it, so you'll have, like, a pure play e-commerce channel, and keep in mind, that's what we're talking about, pure play e-commerce over there. You'll have that inventory levels move up fairly high or come down there on a frequent basis. This would be the lowest I think we've ever had it, but it would be higher than six months at times.
You've alluded to price competition. Could you be more specific, please, what you're seeing there?
Yeah. So for quite a while in the industry, we were seeing pricing that was lifting the industry. And I'm talking about pure pricing here, not trade up over, but pure pricing that was running about 2-3%, and that was supporting contact lens growth that we were seeing at the time was closer to, you know, 7-8%, that kind of thing. You're still seeing pricing, positive pricing on a global basis, so let's be clear about that. You're seeing positive pricing in the U.S. We've seen some price increases and so forth in an inflationary environment.
But when you look at pricing outside of the U.S., and especially in Asia Pac, there is definitely situations where competitors are getting more aggressive on pricing. In some of those channels, like, pricing is actually coming down, where people are being really aggressive. We've seen that on that pure play e-commerce side of the business. So could we get a little bit more aggressive there if we wanted to? Of course, we could, right? But we've chosen not to do that.
Okay.
As I said on the call, by the way, just to finish that thought, right? That is low-margin business. So when you look at the quarters that we're reporting, right, the organic... I get the organic growth, you know, but our profitability has been sound, our cash flow is improving, all that stuff is improving. That channel is not a particularly great or profitable channel. Now, you can move some older inventory through there, and we all have older hydrogels, and we all have product that we'd like to move down a little bit of inventory. So I don't begrudge anyone going in different ways and different strategies for that kind of stuff, but that's not really profitable business.
And you talked about the clariti issue bleeding into 2026 a minute ago. The China e-commerce issue.
No, no, no, not in the 2026, in the Q4.
Into Q4? The China issue, is that done? So in other words, you were down 25% in Q1, you're flat in Q2. You said you were down a similar amount in Q3 to Q1. You know.
Yeah.
Where are we now?
Yeah. So I would say, you know, whether some of that is impacts Q4 here, maybe it does, that we got down to two months right now. Like, unless that goes to zero, unless we exit that market entirely, then yeah, we're done with it. We're not gonna exit the market entirely, so yeah, we'll be done with it.
Okay. So, taking a step back, you grew 2%. The two issues are: you know, you grew below market for the second time in three quarters, and we haven't seen that Al, for 10-plus years.
Mm-hmm.
And then the market slowed to 4% from call it in the first half to call it 7% last year. Let me help address A, the confidence you're not losing share, and B, the market is not challenged.
Yeah. So let me break that into two pieces, right? Because I think if you look at the market from a share perspective, we have probably lost a little bit of share where we don't have MyDay. I mean, MyDay is our premier product. It's the product that everybody wants. It's the product that we're successful in the daily space, right? That's the product that people want from us. Will they take clariti and do they fit clariti and so forth? Yes. And do people like clariti as an entry-level product? Yes, and, and it does well there. I mean, clariti grew in EMEA this quarter, and clariti grew in the Americas this quarter, right?
But if we have a market where we don't have MyDay, and we can't really compete, like, that's a share pressure market. I mean, at the end of the day, look at Europe, right? We report as EMEA under our numbers. If you look at EMEA, like, that's a market where we're pretty much operating with our full set of products, with our full capabilities. Now, they don't have everything. They don't have MyDay Energys, as an example, but they have pretty much everything, and they have it positioned that way. They have MyDay as a more premium product and private label.
They have clariti as the entrance-level product, and look at our growth rates in EMEA. Look at the market where we're really doing well. If you get outside of that area where we've had less MyDay to be able to sell, you get pressure on share, right? I mean, we have good competitors, good smart competitors, who do a good job with good products. Like, and that's where we struggle or that's where we've been struggling, where we haven't had the MyDay capacity. So I think you have that piece. When you talk about the market, market's in pretty good shape.
I think, you know, I mentioned it on the last quarter's call, and I would kind of say there's been a little bit of consumer purchasing behavior and a little bit of movement there, but I don't put too much, too much weight on that.
What is the change in consumer behavior you've seen?
Yeah, and it ends up going to purchase behavior. So where we haven't seen a change is when someone goes into the optometrist, and the optometrist recommends or prescribes a more premium product, a silicone hydrogel daily, a toric or multifocal. We're continuing to see wearers purchase those products, so that's the good positive side of it. When you look at purchase behavior, does someone buy a year's supply or a three-month supply or some of that kind of activity, there's still a little bit of noise about that. Not a lot, but there's a little bit of noise about that.
Al, you know, help maybe talk about the market growth drivers. You were asked about it on the Q3 call, but I'm looking for more specifics. So, for example, where are we in the shift to dailies? Where are we in the penetration of silicone hydrogel in both frequent replacement lenses and dailies? I'm trying to understand the kind of, you know, that trade-off for the... That those drivers, you know, the dailies and silicone hydrogel have kind of plateaued.
Okay, yeah, from a market perspective.
You used to give that data, right? You used to give some of the market color.
Yeah, 'cause there's a lot of numbers that can come out there and get confusing fast. Let me, let me see if I can just give you some good numbers there. You know, if you look at the FRP market, probably about 90% of that is silicone hydrogels, right?
Dollars or volume?
Dollars. Yeah, try to go dollars.
Okay.
I'll keep it in dollars, right? 'Cause that's where it goes dollars to where it can get a little.
Just, just so we understand.
Yeah, so if we do it that way, we say about 90% of that. If we look at the daily silicone hydrogels are about 65% of that market, so
So frequent replacement.
Ninety.
S ilicone hydrogels, 90. Dailies silicone hydrogels, 65.
Sixty-five.
Okay.
Right? And there's no reason to believe that that 65 won't go to 90. It's just a matter of time of how it's gonna get there. That's probably the easiest way.
Good. And what about the conversion to dailies, like in the U.S. and major markets? Is there still this conversion opportunity?
Oh, absolutely. Yeah, absolutely, 'cause you're, you're seeing that in those numbers themselves, but you're also seeing it within dailies. Dailies continue to become a bigger part of the overall market, right? They just do.
Any numbers you can share?
You're probably not to try to confuse it, right? But you're probably about 40% of wearers are daily wearers right now, and that should clearly be 50% plus of wearers.
Is that U.S. or global number?
That would be a global number.
Okay, I'm just trying to understand if the tailwinds are still there.
Yeah, I absolutely think the tailwinds are still there. Like, when it comes to... I mean, if I looked at the market this year, and I look at the market maybe even next year, you know, where we sit today, I think you're probably gonna get about 1% from pricing, from net price. That's what we saw pre-COVID, was the market was right in there, and I think we'll probably see that again moving forward 'cause there is positive pricing in a number of markets. If I looked at wearers, you know, we'll probably get 1% of the market growth will come from wearers, and we continue to see that.
That was similar to pre-COVID number, right? If we say four to six are the market, you know, that remaining two to four will come because of trade-up to dailies, daily silicones, torics, multifocals, all that kind of stuff. I think that the days where we were growing, you know, six, seven, eight as a market, those are probably behind us because you pull that pure pricing side out of it.
When you talk about the myopia opportunity globally, not myopia management but just the explosion in myopia, why aren't wearers growing more than 1% globally for contact lenses?
Yeah, I think it's just the slow progression of how it's working out, right? Because right now, you probably have about 34-35% of people around the world are myopic. You know, the forecast is 50% of people will be myopic in the year 2050. So that's a big number that just continues to shift over time. I don't see that changing. I mean, people seem to keep reinforcing those numbers. So could you see a greater number? You could. I mean, as we went through COVID and came out of COVID, we were talking about how that was, like, 2%. But right now, it seems to be just a slow, consistent progression of people needing visual correction.
The other thing I wanted to ask about is your share in the silicone hydrogel daily disposable market. Because really, like, when I've looked at the numbers, that's really where that's driving a large part of the market growth, that subsegment, if you will. So you said you had $1 billion total MyDay clariti sales in fiscal 2025.
Yep.
O r you will, on the call. Like, can you talk about your share position in silicone hydrogel dailies? I'm trying to understand if you're gaining or losing share.
So we're probably about 25% global market share in daily silicone hydrogels right now. We're about 21% share of dailies in total, so higher in daily silicones than in dailies. So as the market continues to shift to daily silicone hydrogels, that's a clear positive for us, right? And the and we were better and growing faster for a number of years when we had the MyDay capacity. So I think we've held up fairly well in the grand scheme of things over the last year and a half, with pretty limited MyDay, relatively speaking.
But I think we probably have lost a little bit of share in that daily SiHi space over the last couple of years, and I think we'll be recouping it now. I think these private label deals that we're doing right now are gonna be the biggest driver that's gonna pull it back up.
Al, one question I've gotten is you've been spending a lot on CapEx.
Mm-hmm.
How can you not be in a good position on MyDay supply yet?
Yeah, so we are. So we are. But it was literally the month of May when we went out and told our salespeople, "Hey, you can go sell MyDay now." You can sell it. You can- we'll have fitting sets for you. We'll have trial lenses for you. You can win private label business. You can go out there. Now, I'm sure our competition does the same thing I do. Like, you hear somebody's constrained or somebody, you're out there going hardcore, doing everything you can against them. That's fine. We do the exact same thing, but we finally got in a position only a few months ago, where we could go out there and aggressively sell that product.
So, Al, on 2026 , you got a lot of questions on the call, and we talked afterwards. Just to understand, if I heard your comments correctly, you expect the core, you expect the market to grow four to six?
Mm-hmm.
Despite only growing 4% in the first half of the year?
Yeah.
You expect CVI, core CVI, to grow in line with the market, four to six, plus 100 basis points from MiSight, which would be five to seven. That's how I interpreted your comments on the Q3 call. My question is, A, well, just confirm that's the right way to think about it, and B, why not be more conservative right now?
I think that, so yes, I mean, directionally, I would agree with everything you said. Like, when we get in the December call, which is our fiscal Q4, and we give guidance, we'll give the numbers and details behind it. But I do think the market's gonna be fine. I think the market will grow four to six. And you're right, we've been four and four here to start this year out, but I think there's enough underlying characteristics that are gonna continue to drive the market mid-single digits, and I think it'll be a little bit better than the four we've been running at. I think that we'll take share against that.
I think, if nothing else, you know, candidly, we've had a couple of things here that are kind of maybe they're transitory, maybe they're not, however you want to define it, when you look at like the, some of the inventory pull-downs, but we're comping against that activity, and we should be able to put up better growth rates comping against that activity. Plus, and the thing I would say, most importantly, is MyDay capacity. Is.
I mean, I've been talking, Larry, I think for years, I could go back and look at the transcript of this conference, talking about being capacity constrained on MyDay and being able to sell it once we can make it. Like, being capacity constrained has been a challenge for us for a number of years. I mean, I feel really good sitting here for the first time in years saying that we can supply that product. And you're gonna see it because that's how we're gonna finish up the CapEx payments. You know, you pay for these big lines, roughly a third when you order it, right? A third upon delivery and a third upon completion, and that's what we're paying right now, is the completion orders and so forth.
It's why Brian talked about the $2 billion in cash flow and so forth. Like, I know it's been a tough process working through some of this, but I feel good being where we are right now, and I think we'll capitalize on that. And when I look at the MiSight growth that I referenced earlier, right, double-digit growth this quarter, like, that's what-- that's a precursor. What's to come on a bigger number?
Switching gears, because there's a lot to cover. I mean, I'd love to drill down on MiSight. Maybe we'll come back to it.
Sure.
But there's a lot to cover, so fertility.
Mm-hmm.
When does that market turn?
So that market's turning now. We're seeing it get a little bit better, right? There was probably three things that really were impacting that market a little bit, and it fell off relatively quickly, and for anyone unaware, right, we reported double-digit revenue growth in fertility. I think it was fourteen out of fifteen quarters. It was a long time, and then our growth rates came way down, so we've been seeing that underlying market starting to get a little bit better and starting to get a little bit healthier as the Year of the Snake and that stuff moves behind us, and some cycle activity starts to pick up a little bit, so I think all of that is a positive.
I mean, we have a really hard comp in Q4, but I think you're gonna see more, you know, single-digit growth starting to come from that market in the near future.
You still think this is a high single-digit market long term?
I think it's at least a mid-single-digit market, long term.
So that's a change. Is that fair? You used to think it was probably more of a high single-digit market.
You know, I would not say that it can't get back up there, right? But look at what happened. I mean, you had Trump come back out in February and said: "Hey, we're gonna cover IVF, or we're gonna require insurance companies to cover IVF." You had people wait for that. You've had people wait to go through that process because of that comment. Now, obviously, the government's not covering it and reimbursing it, and they probably won't, right? But you had some cycle activity softness because of that. You had some cycle activity softness in Asia Pac.
You have some consumer concern there, because unlike a lot of products, like if there's consumer concern about the whatever, the economy, right, this isn't like you're buying something and you're stopping. When you go through a fertility process, you have a baby at the end of it, right? Which you have to pay for and take care of and so forth. So there's a greater hit when it comes to any economic concern. So do I think fertility can get back up to the upper single digits? There's enough indications in the world around birth rates declining and so forth, that there's a lot of positive underlying fundamentals.
But I would say, at least as we get in the near term here, saying it's a mid-single-digit grower is where it should return to.
Okay, as soon as next year?
Yeah. Yeah.
Okay. So Al, while we're on CSI, I mean, let me ask, I mean, the question I probably ask you every time we talk publicly, the reason to keep these two together, has what's transpired the last few weeks or week make you rethink having these together? And the way I see it is, if I look back, with the exception of the Sauflon acquisition, you've largely used, like, cash flow from CVI to do CSI deals. So a lot of people own, most people own the stock for CVI.
Mm-hmm.
Why not just, if you separate these two, you could basically return cash? ... people own both these separately, you return cash to the CVI shareholders. You know, it's just different. Why keep them together?
I mean, a couple of things. I mean, one, we have never held back on any CooperVision investment activity because of something that's happened to CooperSurgical. I mean, we have always and will always invest in CooperVision first and foremost. So there's been nothing that's negatively impacted Vision because of that activity. You know, when I look at our stock, we were $110 or whatever a year ago, roughly, you know, and we had a forward multiple that was based off the success of the contact lens industry and the success of the fertility space, right?
And that multiple was obviously in our entire earnings, and that was good, right? And we were plugging along just fine. You kind of fast-forward a year later to today, and you've got, like, the negatives on both sides of that, right? So as I sit here, I look at it and say, "Okay, I do believe very passionately that our contact lens market is going to be growing better," right? And we're gonna we won't ratchet up in the snap of a finger, but are we gonna take steps there as consistent improvement? Are you gonna see better Q1, Q2, Q3? Yes. So as that plays out, we'll get the better forward multiples.
People get more comfortable that, yeah, like, this isn't a some strange, weird dynamic. The fundamentals are still sound in the industry, and our position with the industry is still just as good as it's always been. That's gonna play out. I do believe fertility is gonna get back to mid-single-digit growth, and we'll get strength on that side of things, and there's a few positives within our med device business. As we move that forward, I envision our multiple returning at least closer to normal levels or market levels, right? And everything kinda get pulls up.
Where I would go is, if all that happens, and we don't get that return, if this, if the multiple doesn't happen, if there's something holding us back, it has not happened historically, but if it does, and it holds us back from our ability to get the maximum shareholder value, then, yeah, we would take a look at it, and we'd say, "Okay, maybe we do need to split these businesses." There's dyssynergies that happen when you split these two businesses, right?
So y ou have to have somebody that's interested in both assets, to own both assets at a slightly lower earnings rate. We will make that move if we're not getting the valuation multiple we deserve.
Okay, fair enough. I was gonna ask you a follow-up question on that, and I forgot. I'm so interested in your answer to that one. I'm sure I'll think of it. Okay, twenty-six, I have, like, a long list of questions on kind of the P&L stuff you gave. But at the end of the day, you know, the Street, you know, the Street came out at about $4.43, you know, implying 8% year-over-year reported growth. We took kind of all the pieces you've given, and we got to call it four forty-one, so pretty close. I guess before asking kind of all the specific questions on tariffs, et cetera
Mm-hmm
D id the Street kind of, is the Street properly calibrated based on the pieces that you gave for twenty-six on EPS?
Yeah, trying to avoid giving guidance for next year, but I think if you took all the components, and I'm sure you have all the components there, how we get there, I think you're probably looking at it fairly. Like, I mean, we need to get to the point where we give guidance, and we look at current FX rates and taxes, tariffs, all the stuff that you, you kinda highlighted there. The one I would probably add there, that people don't really know yet, but, but it'll be an important one, will be this reorganization work that we're doing, right? Brian mentioned it on this last call.
So if you look at the CooperSurgical business, let's start there, right? We were doing probably three acquisitions a year. We probably did 30 or 40 acquisitions over 10 years. The last one we did was in August of last year, right? And we have done a lot of work in that business over the last year to finish the integration activity that we've been working on, right? We put a new ERP in there. We've automated a lot of stuff. That CooperSurgical business is not as efficient as it should be from an OI perspective, and we're doing a lot of work on that.
Now, we also have other related corporate work that we're doing and so forth, but we have an inefficient structure there. We still have good operating margins, certainly. We need to transfer it more to cash flow, but we also need to leverage our revenue growth to a greater degree. So, we're spending quite a bit of time on that right now internally. There's a heavy focus. Brian's doing an amazing job on that, at drilling down into those details to say, "Okay, what can we do? What makes sense?" Not impacting revenues, right? But what makes sense.
Now, the timing of this happens to coincide with what we're talking about, but this process was started quarters and quarters and quarters ago, right? This is all playing out under the strategy that we had envisioned, right? But we have not given numbers or details associated with that, other than, I think, Brian had made a comment like it would offset tariffs. But that's where that restructuring activity or reorg activity, what you wanna call it, that's important for us right now because that's how we're gonna leverage a lot of our earnings going forward.
Because when you look at next year, we've made some good improvements in gross margins, and we pulled our gross margins up higher. Everything we're talking about with MyDay and the daily growth pulls those gross margins down. That's pressure on gross margins. Now, we've got improvements, manufacturing improvements and everything else to work hard to keep gross margins where they're at, but we need to do a better job leveraging the revenues that come through the P&L, and that's what we're gonna focus on. I mean, we're still driving towards low double-digit constant currency OI growth.
Every year, that's what we strive for, right? And we're still striving for that. In order to accomplish that, when you're looking at tariffs, and what we said tariffs were $24 million or $25 million, something like that.
24, yeah.
$24 million . Like, to get over that and to hurdle that and continue to put those numbers up, we need to do a better job running a little bit more efficiently. So we haven't given any numbers around that. That's why I was just saying that was the one pause factor on that.
But it sounds like you still expect to be double-digit constant currency OI growth, excluding tariffs. Is that fair or no?
Well, we're not. I'm not giving guidance yet.
This program you talked about could make it difficult to achieve that, excluding the tax?
The program I'm talking about is a beneficial program.
Right.
Right? You take the earnings hit
Right.
or you take the charge, but you get the benefits, right?
Exactly.
So that provides upside to our results for next year. But I don't want to get into specific numbers or guidance around it yet. I guess I'd just say, you know, what the street is looking at, what you're looking at as we sit here today, is probably a fair way to look at it.
Okay. And thank you. And free cash flow, I mean, by our math, your guidance, you're a little bit shy of $400 million this year for free cash flow. Is that fair? So the $2 billion over the next three years implies $650 million a year. That's a lot. How do you get there?
It's not a lot today, to be honest with you. I mean, you go back in time, I mean, we have generated. I think one year we had 22% of revenues in free cash flow. We had many years in the upper teens and 20% as a free cash flow yield, if you look at it as a percentage of revenues. So we have been down for a number of different reasons, right? But we're in the uptrend on that right now. We're gonna have CapEx come down, our investment cycle has come in. We're at the very end of that, so you're gonna have CapEx come down, and you're gonna have your operating cash flow continue to improve. We'll do.
We'll stay focused on working capital metrics and so forth. But to me, that's a consistent improvement. That's not like some big bulbous, and then we stay flat. 2025 will be a better free cash flow year than 2024, 2026 will be better, 2027 will be better, right? We'll get a step improvement as we move over the coming years.
Two follow-up questions. One, I remember my question before, the shares, the insider buying. We saw, I think, some yesterday, but not everyone bought. I don't think we saw you. You haven't bought.
I have not.
So why... You talked about the stock being depressed, the multiple being depressed. Why, why not?
Well, somebody bought yesterday. I haven't had much time to stop. I flew here yesterday, so don't be surprised if you don't see something, but.
And what are you gonna do with the free cash flow, with the increase?
Twofold. We've talked about paying down debt, and we talked about stock buybacks. We didn't do stock buybacks for a number of years. We did a little bit in the first quarter or whatever we did, second quarter, I guess, our fiscal. We did a little bit more, like 52, and tip our hat, but no reason to me, we won't be more aggressive on share repurchases. We're more comfortable with our free cash flow today than we've been over the last couple of years, right?
So as we look at that $2 billion of free cash flow, and I look at the multiple of the stock right now and where things sit, like, the best return that we can get on our money right now is reinvesting in ourselves, and that's returning money to shareholders through stock buybacks. So we'll likely be a little bit more active there.
Al, I've got a little over a minute left. We covered a lot of ground. I know we skipped over MiSight, but you, you've talked to a lot of investors over the last week, I'm sure.
Yep.
What else, what do you wanna highlight, you know, during this fireside chat that we didn't cover, that you're hearing from investors?
Yeah, well, I definitely think we covered it. We covered the high, the hot topics on it. I mean, we have a good handle on our business, like, and we run it well, and you see that from an EPS perspective, and you're seeing it from a cash flow perspective. Where we've fallen short here recently has been on the organic growth side, right? And I really firmly believe that we've corrected that with MyDay, and you're gonna see the improvements on that in the coming years and the upswing from that. And the challenges that we've had here in Q3 and that we're finishing this year with, will be in the rearview mirror in the very near future. It's like, you know, somebody said it to me yesterday, or the day before, they were like: "Damn, the future is super bright. We just have to get there.
Good. Good. Perfect way to end it. Thank you again for being here.
Yep, absolutely.
Thank you.