Q4 2024 Earnings Call Transcript

Ladies and gentlemen, thank you for standing by. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the Cooper Companies Fourth Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise.

After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] And I would now like to turn the conference over to Kim Duncan, Vice President of Investor Relations and Risk Management. You may begin.

Good afternoon, and welcome to Cooper Companies fourth quarter and full year 2024 earnings conference call. During today's call, we will discuss the results and guidance included in the earnings release and then use the remaining time for questions. Our presenters on today's call are Al White, President and Chief Executive Officer; and Brian Andrews, Chief Financial Officer and Treasurer. Before we begin, I'd like to remind you that this conference call will contain forward-looking statements, including revenues, EPS, interest expense, operating income, tax rate, FX and other financial guidance and expectations, strategic and operational initiatives, expectations for collaborations and acquisitions, market and economic trends and product launches and demand.

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 that are described in our SEC filings, including Cooper's Form 10-K and Form 10-Q filings, all of which are available on our website at coopercos.com. Also, as a reminder, the non-GAAP financial information we will provide on this call is provided as a supplement to our GAAP information.

We encourage you to consider our results under GAAP as well as non-GAAP and refer to the reconciliations provided in our earnings release, which is available on the Investor Relations section of our website under quarterly materials. Should you have any additional questions following the call, please email ir@coopercos.com. And now I'll turn the call over to Al for his opening remarks.

Thank you, Kim, and welcome, everyone, to today's earnings call. I'd like to start by congratulating our employees on a fantastic fiscal 2024. This was a tremendous year with all-time record revenues of $3.9 billion, including both CooperVision and CooperSurgical reporting record revenues. Within this, Q4 also closed with record revenues and improving margins that drove record non-GAAP quarterly earnings. We've now entered fiscal 2025 with a focus on taking share, driving profitability and executing on our strategic priorities, including increasing the availability of our innovative products, expanding our state-of-the-art manufacturing capacity, optimizing our technology investments, developing and launching new products and investing in our people.

Before getting into the details, let me provide some high-level comments on Q4 and fiscal 2025. For Q4, CooperVision had a solid quarter, led by strength in silicone hydrogel dailies and our full suite of torics and multifocals, with the main offset being unexpected softness at the end of the quarter. CooperSurgical also had a solid Q4, led by double-digit growth in fertility, offset by a greater decline in PARAGARD than expected. Our Q4 -- I'm sorry, our P&L improved with prior investment activity driving margin improvements and strong earnings growth. Moving into fiscal 2025, we forecast the contact lens market growing 5% to 7% in constant currency with us taking share growing 6.5% to 8.5%.

Price should offset inflation, supporting around 1/3 of the growth, with the rest coming from a variety of items, including the ongoing trade-up to dailies growth in torics and multifocals, growth in wearers and, for us, growth in myopia management. For CooperSurgical, we expect organic growth in the mid-single digits with fertility reporting high single-digit growth and the remainder of the business posting low single-digit growth. Moving to Q4 details. Consolidated revenues were $1.018 billion, up 10% year-over-year or up 7% organically.

CooperVision reported quarterly revenues of $676 million, up 9% or 8% organically, led by strength throughout our market-leading product portfolio. CooperSurgical posted quarterly revenues of $342 million, up 12% or up 5% organically, including fertility taking significant share growing 15% or 13% organically. Non-GAAP earnings per share grew 19% to $1.04. For CooperVision, we extended our position as the #1 contact lens company in the world in terms of wearers with our new fit data remaining very healthy. We also gained share on a revenue basis, driven by strength in dailies, torics and multifocals with the Americas growing 6%, EMEA, 11% and Asia Pac, 7%.

Within categories, torics and multifocals grew 9% and spheres grew 7%. Within modalities, our daily silicone hydrogel lenses, MyDay and clariti grew 14% and our silicone hydrogel FRP lenses Biofinity and Avaira grew 8%, and our myopia management business grew 7% with MiSight up 24%. Turning to daily silicone hydrogel lenses, we posted another great quarter. MyDay, our premium daily silicone hydrogel lens led the way with strong growth across its full portfolio of spheres, torics and multifocals.

In particular, MyDay Energys drove growth in the U.S., and we look forward to that trend continuing. MyDay Energys offers an innovative digital boost technology designed specifically for today's digital lifestyle and patients love it. Meanwhile, our MyDay toric parameter expansion across North America and Europe is performing nicely with its market-leading design and industry-leading SKU range. And our MyDay multifocal continues to do well with its unique combination of an advanced design, paired with an easy fitting system that has resulted in very high satisfaction levels including a 98% fit success rate in two pairs or less.

For all these products, the future remains bright as demand is strong and improving capacity will allow us to expand availability. Moving to clariti. We had another solid quarter. These lenses are known for their comfort, easy handling and affordability and this is resulting in strength in fitting new wearers and upgrading legacy hydrogel wearers.

We've also seen momentum with the launch of our upgraded multifocal, which brings our highly successful MyDay multifocal design into the clariti material. This lens is being received well in the U.S., and we'll be launching it around the rest of the world during this year. Speaking from personal experience, both of these multifocals are terrific products. If you're presbyopic and not wearing multifocal contact lenses yet, you're missing out.

For me, I didn't need any visual correction until I got into my 50s, and then it hit me. Getting clear crisp vision without reaching for reading glasses has been a game changer. So I'm really happy that we now offer several outstanding multifocals to choose from. Moving to our frequent replacement silicone hydrogel lenses.

Biofinity and Avaira had another strong quarter in Q4. We continue to see consistent growth from both of these franchises and our innovative manufacturing platforms and market-leading lens designs have created an effective moat, especially with respect to extended ranges and made-to-order products. We expect this performance to continue given our momentum. Moving to myopia management. MiSight fitting activity remained strong in the quarter, and October was our second highest revenue month ever, benefiting from back-to-school momentum.

That being said, U.S. inventory contraction in October depressed results. Regardless, given the positive fitting trends that we're seeing around the world, we remain comfortable that MiSight will grow around 40% in fiscal 2025, similar to what it did this year. Regarding activity, we just concluded national media campaigns in the U.S. and targeted Asia Pacific markets educating parents about myopia and the benefits of proactive treatment. These campaigns were very successful and resulted in a significant number of children being fit in MiSight.

We also showcased our global scientific leadership and extensive clinical evidence at the 2024 International Myopia Conference in China and at our annual Asia Pacific myopia management symposium in Korea, partnering with the Korean Association of Pediatric Ophthalmology to deliver insights on gold standard clinical interventions. In the U.S., our myopia collective partnership with the American Optometric Association continues to gain momentum, creating considerable visibility through media interviews, seminars and presentations at conferences. Moving to CooperSurgical. We reported revenues of $342 million, up 12% or up 5% organically.

Within this, fertility posted quarterly revenues of $139 million, up 15% or up 13% organically. Fertility continues to be driven by our leading portfolio of innovative products and services, including consumables, capital equipment, reproductive genetic testing and donor activity and we're continuing to drive our portfolio forward with innovation. This was highlighted at the recent American Society of Reproductive Medicine Conference, which featured meetings and presentations on our leading genomics capabilities. As the forefront fertility company offering genetic testing build on statistical machine learning and artificial intelligence methods, we were excited to present updates to our suite of tests being developed that will detect variations in the DNA at an embryo level, providing further insights to improve the likelihood of having a healthy baby.

We also announced a groundbreaking collaboration with ASRM and the Society for Reproductive biologists and technologists for a newly formed clinical embryology learning lab, a first of its kind national training program to support the growing need for more highly trained professionals in the fertility space. Regarding the broader fertility industry, the global market continues to expand, driven by strong underlying macro growth trends. These include women delaying childbirth, improving access to treatment increasing patient awareness, increasing benefits coverage and improving technology. The World Health Organization estimates that one in six people worldwide will experience infertility at some point in their lives due to a variety of health factors.

So this is a large industry that offers significant long-term growth potential. As a leader in the space, we remain deeply committed to supporting patients and clinics by driving innovation, improving access to care and addressing the critical global challenges of declining birth rates. Our focus on offering the most advanced solutions is continuing into 2025, where we'll be launching new products and services, providing extensive clinical training, expanding geographically and advancing our R&D efforts. Moving to office and surgical.

We posted sales of $203 million, up 11% year-over-year, driven by the successful strategic acquisitions of certain Cook Medical assets at the beginning of the year and more recently, obp Surgical. Excluding these deals, office and surgical sales were flat organically. Our medical devices delivered solid growth led by our minimally invasive gynecological surgical devices such as our Ally Uterine manipulator portfolio in our labor and delivery portfolio of products but this was offset by a 10% decline in PARAGARD, which was weaker than expected as we continue to feel the pressure from other birth control options.

To wrap up on CooperSurgical, we had some challenges this year with the Q2 upgrade of our U.S. IT system, but that system is now stable and puts us in a much better position to continue our great growth trajectory. With our diversified portfolio of products and services, we expect solid revenue growth and margin improvements this coming year as we launch new products, leverage prior investment activity and reap the benefits of successful integration work. Before I turn the call over to Brian, let me say this was a great year for Cooper.

We reported record revenues and made significant advancements throughout our organization, investing in capacity expansion, operational improvements and employee development. As we enter fiscal 2025, we're continuing to execute on our long-range strategic objectives and looking forward to reporting another strong year. 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. For the fourth fiscal quarter, consolidated revenues were $1.018 billion, up 10% as reported and up 7% organically. Consolidated gross margin was 66.9%, up from 66.7% driven primarily by price and efficiency gains, offset by the negative impact of currency.

Operating expenses were managed well up only 6.8% and reducing to 41.1% of revenues. We're continuing to see leverage at both CooperVision and CooperSurgical as our prior investment activity pays off. Consolidated operating income was up 16.2%, improving the margin to 25.9%, led by strong SG&A leverage. Below operating income, interest expense was $25.6 million and the effective tax rate was lower than expected at 11.8% due to stock option exercises.

Non-GAAP EPS was $1.04, with roughly 201 million average shares outstanding. With respect to FX, it was $0.02 negative for the quarter as expected in our Q4 guidance. Free cash flow was $128 million with CapEx of $140 million. Net debt decreased to $2.48 billion with our bank-defined leverage ratio dropping to 1.94x.

Regarding full year results, we delivered record revenues of $3.9 billion, up 8% and up 8% organically. This included 9% organic revenue growth at CooperVision, which was at the high end of our initial guidance range and 5% for CooperSurgical, which was at the middle of our initial guidance range. This was an excellent year with particular strength in daily silicone hydrogels and fertility. Within the P&L, we continued our momentum, delivering stronger gross margins and leveraging our SG&A investments.

Gross margin improved 60 basis points, SG&A improved by 90 basis points and operating margin expanded 130 basis points. Operating income grew 19% in constant currency, which exceeded the top end of our initial guidance of 13% to 16%, and EPS grew 15%, which hit the top end of our initial guidance of 12% to 15%. We've talked about our commitment to driving efficiency gains and EPS growth and we delivered in 2024. Moving to fiscal 2025 guidance for CooperVision. The revenue guidance range is $2.733 billion to $2.786 billion, up 6.5% to 8.5% organically and for CooperSurgical, the range is $1.347 billion to $1.372 billion, up 4% to 6% organically.

On a consolidated basis, this translates to revenues of $4.08 million to $4.158 billion, up roughly 6% to 8% organically. Moving down the P&L. We closed this past fiscal year strong from a production perspective and expect this to translate to improving gross margins, which should help deliver roughly 10% to 12% constant currency operating income growth, which matches our guidance commentary from our last earnings call. Assuming no interest rate changes by the Fed, we expect interest expense to be roughly $90 million, with improving free cash flow being prioritized to reduce debt.

We expect the full year effective tax rate to be slightly over 15% and expect non-GAAP EPS in the range of $3.92 to $4.02. For currency, we're expecting a headwind of roughly 1.5% to revenues and roughly 4% to earnings. With that, let me conclude by saying that we met or exceeded the expectations we set for fiscal 2024, and we'll work hard to do that again in fiscal 2025. We're in a great position from a revenue perspective with market leading products and improving capacity and we expect strong operational performance as we remain focused on delivering a more leveraged P&L. This includes gross margin expansion from higher production levels, price increases and cost reduction projects, helping to drive operating margin expansion.

Within this, we'll still invest balancing our financial objectives with support for new product launches and expanding our leadership positions in myopia management and fertility. And now I will hand it back to the operator for questions.

[Operator Instructions] Your first question comes from the line of Craig Bijou with Bank of America.

I wanted to start with the comment on unexpected softness at the end of the quarter and hoping that you can provide a little bit more color on that. And -- is that -- and maybe just a clarification of where that softness was from a geographic perspective as well?

Sure, Craig. Yes, because we were running along with a pretty good quarter and had some softness at kind of mid-October to end the year. And frankly, carrying over into the beginning of November here. We saw some softness in the U.S. market, no doubt.

It's a little hard to put your finger on whether that was coming from something with the hurricanes or some other activity, but saw some softness here. And then there were a few other pockets around the world where we saw some softness like China as an example. As I mentioned, it kind of has worked its way into November for a little bit but then it kind of stopped and we've seen things move back to normal here. So kind of like a month of softness there, which was unexpected.

Okay. That's helpful. And maybe if I could follow up on the CVI guide. So the last two years, you've guided 7% to 9%.

Obviously, it's 6.5% to 8.5% this year; you're 50 basis points less. I think your market expectations are still -- I think you said it was 5% to 7% for next year and I think that's what you said last year as well. So, maybe just a little bit more color on the lower guide. What's reflected in that?

Any concern about the level of share you can take. Just want to understand kind of the dynamics of the slightly lower guide than what you've done previously?

Sure. Yes, I wouldn't read too much into that from the perspective of comparing to prior years. Like to me, I think we're going to continue to grow faster than the market. The 5% to 7% when I look at it is a little bit slower.

I think that I was thinking at least for last year, we came in a little bit higher. This current year, the market grew 5% in the first calendar quarter and then 7% and then 7%. We'll see how it plays out going forward for us. And when I look at our growth guidance, the 6.5% to 8.5%, I think is a fair way to start the year.

We're still in a situation where demand for MyDay exceeds our manufacturing capacity. So we're bringing new lines on. We're advancing that. We're doing well in those efforts and so forth, but we're not able to meet all the demand that we have right now.

So that would be one of the things that would kind of hold us back just a little bit. I think we're going to continue to make -- I know we're going to continue to make advancements, bring on lines and so forth on. It will position us well as we move through this year and certainly as we think about fiscal '26 and '27.

And your next question comes from the line of Larry Biegelsen with Wells Fargo.

Maybe first question on PARAGARD, the 10% decline in Q4 and the pressure you talked about. Talk about -- a little bit more color on that and what you're assuming for fiscal '25 from a growth standpoint for PARAGARD and a competition standpoint? And I had one follow-up.

Yes. So PARAGARD grew 2% for the year, which was probably pretty similar to what we were thinking at the end of the day. We came in softer than I was thinking we were going to down 10% in this quarter. I think when you look at the market right now and you look at competitive products out there, we're going to continue to see pressure in PARAGARD from a unit perspective.

And I've talked about that for a while now. And I think we're going to continue to see that next year. Now each individual quarter will bounce around a little bit like it does for PARAGARD. So I think when I look at fiscal '25, it's going to be down a little bit too maybe up a little bit.

We haven't heard anything new on the competitive side of things. So, if a competitive product does get approved, it will depend when and how it launches and so forth. But I think to think about PARAGARD in that kind of down a little bit to up a little bit range for fiscal '25 is probably the best way to think about it.

That's helpful. And Brian, any color on cadence of sales and margins in fiscal '25. And any color on Q1.

Thanks for the question. Honestly, I really wouldn't highlight much of anything. I mean you follow us really closely, and you know all about the seasonality of Q1 and Q2 tend to be lighter than Q3 and Q4. So I would just think about 2025 and modeling '25 kind of similar to the way you've seen it in the past.

And your next question comes from the line of Jeffrey Johnson with Baird.

Al, maybe I just want to confirm the lightness in the market, softness in the market that you were seeing in October into the first couple of weeks of November. Is that different than the MiSight inventory reduction? And assuming those are factors, any way to quantify how much that MiSight inventory reduction weighed on F Q4 and then just kind of what drove that channel correction there?

Yes. So MiSight would have been pretty similar to its normal growth rates without that. So I think what we ended up seeing was some buy-in in fiscal Q3 and you saw some of that kind of level itself out in fiscal Q4, meaning kind of like Q3 wasn't quite as strong as we thought. Q4 is clearly not quite as weak as we thought.

Then, the marketplace itself, I think -- being different than that, you're right. The marketplace itself was -- it wasn't dramatic, right? Like I don't want to act like there was some big all of a sudden thing, but it was softer oddly enough than we saw. Now we see that every once in a while.

It usually doesn't happen where it impacts the quarter where I talk about it, but it did this quarter for a little bit in a couple of markets. So -- but again, I mean, it happened and it ran through a little bit and we've kind of seen things return back to normal here. So I think it feels like that was just a little blip for some reason. And maybe that was even kind of inventory or something where some people were tightening some things down.

But there's nothing that indicates that there's any continuation of that.

Okay. No, that's fair. And then I guess just pushing a little bit on that kind of comment there about the end market and what have you. If I look at J&J and Bausch, they both put up kind of double-digit U.S. growth in their calendar third quarter, and I know it's not a perfect overlap, and they didn't have October in there, obviously.

But look, I think the U.S. market is getting a little bit more competitive or there's just lots of new products coming out from a lot of good manufacturers in that. So how to think about, I guess, the 6.5 to 8.5 that you're guiding to your confidence level on being above market in 2025. And how important is it that you maintain -- are you managing the business to beat the market by a couple of hundred basis points or if the market is a good market, you're just trying to -- if you're a point or 2 above it, that's good enough?

Yes. I think a couple of points on that, and all fair points. Good question, right. If I look at calendar Q3, in calendar Q3, we grew 9% and the market grew 7%.

So when I look at it by calendar quarter, I didn't really see much of a difference in performance against our competitors. But when you roll October and you drop a month, pick up a month, right, for our fiscal and you get the impact of October, like that's where you start to see a little bit of a difference. Now obviously, I don't know what our competitors did in October. And so we'll be able to comment on that at a later date.

But no, I think that there are some good competitive products that are entering the market. But at the end of the day, we're going to continue to take share. We're going to grow a little bit faster than the market. I don't see that change.

And then some of that will be because of our myopia management or MiSight franchise and some of that will be because of what's happening in the dailies space with MyDay. I do think that -- we're not trying to hit like some particular number, and we wouldn't take any strange like short-term moves or anything in order to try to drive market share gains. I mean I think we're going to have a good market, and I think we'll grow faster than the market. I mean my gut tells me we're probably being a little conservative when we talk about 5% to 7% to the market, when I look at what the market is doing right now and I look at price increases and so forth.

And then my gut tells me we're probably a little conservative on our guidance. But beginning of the year, right, prudent to set expectations at an appropriate range.

And your next question comes from the line of Jon Block with Stifel.

I'll start on MyDay. And Al, just any color on when you think that supply will sort of get back to where it needs to be. I just feel like that might be taking a little bit longer than anticipated. And just to tackle on to that, would you point to that as sort of the sole culprit to the more modest APAC numbers that we saw in fiscal '24, that growth rate was steadily right around 13%, 14% in '21, '22, '23, sort of cut in half?

Or would you point to any changes to the competitive landscape in APAC as well? And then I just had a follow-up.

Sure. Yes, APAC is definitely tied to my day. There's no question about that. That would be a region -- probably out of the three regions, that's the one most negatively impacted by not having sufficient MyDay capacity.

So I think as capacity improves, you'll see the Asia Pac region strengthen there. We're going to continue to add capacity there. We continue to be challenged, to be honest with you, by new fit data. So we're continuing to see strong new fit activity in MyDay and we keep adding capacity.

I think we're investing enough right now, and you can see it in our CapEx numbers that we're catching up, and we're going to be in a good spot as we work through this year and into next year, catching up by adding capacity and being able to meet the demand out there. But it's a journey, right? Because this isn't an industry where you can order a line and get it the next day. It can still take 1.5 years or something to get a line in and have ordered it in for full production.

So that's what's taking time.

Okay. Helpful. And then maybe just as a follow-up, I'll stick to CVI. The delta from like torics and multifocals, I think that was up 9%.

And overall CVI was up 7%. So both certainly healthy numbers, but it's sort of one of the tightest spreads that I can remember between the two, call it the specialty and overall CVI. So is there anything on the toric and multifocal competitive landscape, new entrants or anything there that you'd point to that changes dynamic?

Not too much. Multifocal's strong, no doubt about that. I think if we broke those out, you'd be like, okay, that's the one that makes sense to me. Torics may be a little bit in just that we're trying to build some inventory and so forth with respect to MyDay to get some additional product out in the marketplace in some different locations.

So I wouldn't take too much out of that. That's more us than it is the marketplace.

And your next question comes from the line of Robbie Marcus with JPMorgan.

Wanted to ask on the P&L for '25. And I know you've been talking a lot about a focus on reported margins and we saw that play out in fiscal '24, particularly in fourth quarter here with nice margin upside. How should we be thinking about gross margin and operating margin in '25? I know you said improving gross margin and 10% to 12% operating income growth. How do we translate that into hard reported numbers for 25?

And then I have a follow-up.

Robbie, yes, I'll take that. Yes. I mean I'd say -- we are executing at a high level. We're seeing leverage from the investments that we've been putting into the business, paying off.

You saw that play out in '24. I think as I sit here today, I'm probably a bit more confident today than I was a year ago that we would see gross margin expansion. We're raising prices. We're getting better freight costs that help out our intercompany shipping but the productivity and the successes that we're driving within manufacturing, I've got a lot of confidence we're going to see gross margin expansion this year. So that will drive those efficiencies.

And I think our ability to leverage the P&L and also balance out our investment activity, while also being committed to operating margin expansion that 10% to 12% constant currency OI growth, we're committed to that. And so the investments we want to make sure we invest in this business to drive future growth and get future returns. So it will be a bit of a balance this year, but certainly, we've got shots on goal to drive leverage in 2025.

And any color on the reported numbers, how we think about gross and operating margins on a reported basis?

Well, unfortunately, FX from where we were three months ago to today has turned kind of in the other direction. But even with the guidance that we've given, as reported operating margins are going to be up year-over-year implied based on what -- the guidance that we shared today.

Okay. And then as a follow-up, I think at this point, it's anyone's guess as to what will actually happen with the incoming administration and tariffs. I know you have a lot of manufacturing plants outside of the U.S. Maybe just help us understand your exposure should there be tariffs put in place? And how much of your product is manufactured outside the U.S. and sold inside the U.S.?

Yes. I mean it's hard -- I don't want to speculate on what happens with the administration change. But based on the news that's out there and it seems like there's a lot of concern about companies that are manufacturing in places like China, Mexico and Canada and happy to report that we have no manufacturing in any of those countries. So we've got manufacturing in a number of different places, and they serve different markets around the world.

But without sort of knowing what the new administration says and how it's going to come down, it's really hard to speculate.

And your next question comes from the line of Chris Pasquale with Nephron.

Al, I was hoping you could just comment on the sustainability of the pricing environment you're seeing in contact lenses. Inflation is not quite where it was pre-pandemic but it's come down. And it feels like the improved pricing environment is sticking. So as you look at FY '25, are you confident that, that trend will continue?

Yes. I think that we're in a market right now where the contact lens industry will offset the impact of inflation. So, we'll see where our competitors come out with our price increases. But if we look at inflation being somewhere around 2.5%, 3%, something like that I think you'll see pricing offset that.

So my belief is we'll see that this year, and frankly, where pricing is and where products are and so forth, I think you probably have a pretty good chance that you'll see that kind of pricing next year. I won't speculate too much on the future, but depending upon where inflation is, I think the industry itself is now at a position where it will pass along those inflationary pressures.

That's helpful. And I just want to make sure as we're thinking about the contribution from acquired revenue, particularly before it sort of becomes part of the organic base. I think we've lapped cook now, so that should be done. But are we right in thinking you guys have about $25 million in annualized revenue from the more recent deals that will be coming out over the next few quarters?

And then maybe just talk a little bit about the M&A environment that you see heading into FY'25. Do you expect to continue to be active?

Yes. I mean that number -- that $25 million is pretty close to right. I mean we had obp, which grew really nice. It was up like 30% or something like that since we bought it.

And ZyMot has been up nicely. I think maybe that's 10%, 11% or something since we bought that. So, a couple of smaller deals but performing really well. I would say right now, for us, the environment is really quiet.

It's really quiet. So we did a couple of good deals there. It's worked out really well for us. We're continuing to integrate those.

We have to finish some integration activity we have out there, continue to perform on those deals. If other deals come along, so be it. And if they don't, then that's okay, too. Right now, it's pretty quiet.

And your next question comes from the line of Jason Bednar with Piper Sandler.

Al, as we contemplate the revenue softness that we were discussing earlier, you did institute a price increase that took effect, I think, November 1. Can you talk about when you communicated those price increases? I guess I just thought I saw the communication maybe didn't come out as early as normal, which maybe would have limited some of that pre-buying activity that normally occurs in October. So maybe I'm totally off base, but just trying to understand to what extent price increases influenced or didn't influence contact lens buying activity in your fourth quarter.

Jason, that's a good question. I asked that same question, right? Because the price increases that we put in place go in kind of throughout the first quarter around the world. So different geographies at different times and different amounts by products and so forth.

So it's pretty hard to triangulate back and say, it was due to this or it was due to that. But I think that's a fair question as to whether there was an impact because of some of the price increases, especially since the timing was slightly different than it was last year.

Okay. All right. That's helpful. You mentioned a couple of things at the outset just kind of in your very first part of your prepared remarks, manufacturing capacity, launching new products.

Maybe on that latter piece, if you could help us out what's on the docket? What's coming out of the pipeline here over the next 12 to 18 months that we can look for? Because as Jeff noted, your competition has -- seems like picked up the pace on their own respective launches.

Yes. And I think that the 1 thing they're going to do and that we're going to do is continue to get products pushed out, if you will around the world. So when you think about things like MyDay Energys, which has been a really nice success for us here in the U.S., we'd love to get that product launched in additional markets and have it around the world. I think we'll get there.

We'll be able to do that. When I look at MyDay toric, the expanded range, love to get that in more markets and increase availability by a multifocal, love to get that in a few more markets, increase availability. So when I look at almost anything associated with MyDay, I mean even includes spheres, right? Like, I mean, that's what you're going to see more of.

So it might sound like the same old, same old because we've talked about MyDay for a little while. But we still have products that we got -- we have to get out into the marketplace around the world. And I think you'll see something similar from our competitors, right? If you listen to them and they're saying, we've got some product launch.

We need to continue to get those products out around the world. So I think we're all probably in a pretty similar boat right now. But I feel good that our products have proven to be very successful products. And as we launch them and increase availability that we're going to get a good return from that.

And your next question comes from the line of Issie Kirby with Redburn Atlantic.

First one on the vision piece. One of your competitors coming out with a seven day wear lens in 2025. Just wanted to get your thoughts on that category and any risks you potentially see to your SRT portfolio.

Yes. So very early on that. I haven't seen any reaction in the market yet. I think that that's probably more targeted kind of the two week market.

We don't really play in the two week market. I mean we're dailies and monthlies, which is where the majority of the market is. But there still is a two week market. You see it certainly here in the U.S.

So at the end of the day, we'll see how that seven day lens plays out. I'm not quite sure how it will play out, but I do think that it will be much more linked to those wearers who are two week wearers and people who use contact lens solutions.

Okay. Great. And on fertility and the growth side, I mean, can you just comment on exactly perhaps give some color on what's really supporting the outperformance there, the share gains and what you're also seeing in the market, again, particularly with some of the commentary that's been made by the incoming administration.

Sure. It's interesting when you look at the incoming administration, they've made a number of comments, Trump has about being very positive about IVF and reimbursement associated with IVF. So it seems like a lot of people have asked us questions or have asked me questions about that from a negative angle, like it's the new administration is bad. From everything I've seen and that we're hearing in the marketplace, I would argue that is actually going to be positive for the industry.

So we'll see how that one plays out. I mean we had strength this quarter from a number of different areas in fertility. Our consumables were good with products like media and so forth. Our genomics was good.

I mentioned some of the new tests we have coming out. So that part of our business was good. Our donor activity that we had acquired back from the old Generated acquisition that was good. We are probably a little bit stronger than usual this quarter with some of our capital equipment.

And I've mentioned in the past how sometimes you'll see quarters be a little stronger or a little bit weaker depending upon capital equipment. This would have been a quarter that was lifted up because of capital equipment activity. So it was pretty much across the board. It's just a really good sound quarter by the fertility team.

And your next question comes from the line of Steve Lichtman with Oppenheimer.

A couple of questions on the financial side. First on free cash flow as we look into FY'25, CapEx obviously moved up in this past year and put a little bit of pressure on free cash flow conversion. How should we be thinking about that into FY'25? Will you see any relief on CapEx or given the supply commentary we've talked about today will be pretty steady?

Thanks for the question. Yes, the CapEx came in just a little bit higher than we anticipated. We talked last year about how free cash flow is going to be around $300 million, we ended up around just under that. And then CapEx is around $420 million.

So I would probably steer people towards really thinking about CapEx on a percentage basis. So if you think about CapEx as a percentage of revenue being around 11%, that's probably a good place to think sort of where CapEx will land in 2025. I talked about in my prepared remarks how free cash flow is going to be driving higher from somewhere in the neighborhood of $350 million to $400 million. I think that's going to come from some combination of revenues and operational improvements, working capital improvement. Interest expense will be a little bit better but FX and taxes and then that CapEx driving a bit higher, somewhere in the neighborhood of $450 million is going to be sort of your puts and takes that gets you free cash flow higher next year.

So certainly, capacity expansion drives future growth, and we're investing in the business to ensure that we capitalize on the opportunities.

Okay. Great. And then just a follow-up on FX. Obviously, as you mentioned, dynamic here. One, where will we see some of that headwind? Will it be on gross margin again on a reported basis; and two, anything first half, second half on that front in terms of when -- where the flow-through of that headwind will show up?

Yes. I guess I would just say FX is kind of hitting us relatively evenly through the quarters. I mentioned 1.5% headwind to revenues and 4% headwind to EPS. So I think on the EPS side, you're kind of looking at it sort of fairly consistent from quarter-to-quarter.

And primarily in the gross margin side is where we'll see it?

Yes. I mean cost of goods hasn't impacted quite so much, but certainly to revenues, you'll see it.

And your next question comes from the line of Brett Fishbin with KeyBanc Capital Markets.

A lot of good ones already asked. So I'll just ask a question on my side. I think you mentioned 40% growth expectation for FY'25. And I was just curious how you're thinking about the contribution from the U.S. versus some of the international markets? And then maybe just as a follow-up to that any more color on how you've seen the momentum progress in areas such as being in the U.K. and Korea for MiSight?

Yes. Good question. So some of the areas out there, like Korea is an example. We've been very successful with MiSight.

And we're trying to take a lot of those learnings and put them in other markets. The U.K. is another market where we're gaining some real traction there as we start working with some of the bigger key accounts in the U.K. and in Europe. I think at the end of the day, when I look at the U.S. and the other one, I think all the markets are going to drive MiSight forward. We grew about 40% this year.

The number is bigger but I still think we'll grow 40%, something like that next year. And I think you'll end up seeing it driven by markets around the world. The one thing that could drive that higher that I continue to watch is the uptake by some of the bigger key accounts and some of the bigger retailers that are out there. That activity I've talked about it in the past has definitely started, it's definitely gaining traction.

So we're getting some good positive movement there. So I'm optimistic that we'll be able to be north of 40% this year. But we'll see how that plays out, and we'll see what markets move a little bit faster in that direction. But I think Europe will definitely be one of them.

And Asia Pac should be pretty good, too.

All right. Super helpful color. And then just one follow-up. You've talked a bunch in recent quarters about MyDay Energys as well as Biofinity Energys supporting growth for their respective product families. Just curious if you can comment a little bit directionally how sizable the Energys product lines have become just thinking about the CVI business as a whole?

Yes. Well, I guess, for competitive reasons, I won't get into the size of them, but I will say that they're doing well. And certainly, MyDay Energys is doing well. I highlighted that one as a product is pulling a lot of growth forward.

Yes, that's a true innovation, right? It's a very unique product for us. I think people sometimes have a tendency to forget some of the innovation that we deliver to the market, whether it is something like MiSight or Energys. But yes, I'll steer clear of giving numbers, but I will say it's becoming more material.

And your next question comes from the line of Navann Ty with BNP Paribas.

I had a follow-up on the greater erosion in PARAGARD. So is that in anticipation of that new competitor? Or is PARAGARD losing share versus organisms in plants? And also does the 2025 guidance, including the low double-digit operating income growth assume the entry of that new low copper IUD?

And then also on fertility, if you could discuss the trends across the government. I know you touched base on the U.S., also the corporate fertility benefits and the competitive landscape that supports the high single-digit growth going forward.

Sure. Couple of points there. On the fertility market, I think the fertility market will grow nicely again this year. I mean, the piece that we play in, if you will, the medical device broadly defined piece.

I'll be surprised if we don't see mid-single-digit growth there, maybe a little bit above mid-single-digit growth. We've been seeing pretty good growth in the industry for a while now. There's great underlying growth characteristics. I mean you touched on some of them when you look at insurance reimbursement.

And there are some countries that are getting more focused on reimbursement for fertility. So the trends there are positive. So I think the industry-wide growth being mid-single digits, a good solid mid-single digits is probably going to be in place for a number of years. And that's why I always talk about us kind of being in upper single digits.

And we clearly posted double-digit quarters, and we can continue to post that. But I think that's a good, solid, healthy market with a lot of good underlying macro growth trends. When I look at PARAGARD in the IUD space, I mean, PARAGARD is still the only non-hormonal IUD on the market, so it has the full market share here in the U.S. The competitive product has not been approved.

I don't know when that's going to get approved. I don't have any details on that. So I would say the performance of PARAGARD has had nothing to do with that. I do think that some of the other products that are out there, some of the competitive products that are out there and they're hormonal products, but some of the products out there are doing a little bit better and maybe taking a little bit of share from IUDs in general, I think.

I'm not sure we're doing worse than the IUD market, but the IUD market is a little bit softer, I believe, from a unit basis. And that's probably due to some of the other competitive products that have entered the marketplace.

And your next question comes from the line of Young Li with Jefferies.

I guess to start I wanted to ask about the health of the consumer in key regions worldwide. You have a sizable private label business, so a wide range of pricing. Any incremental changes with the consumer price sensitivity daily adoption, trade-ups, trade downs and private label growth.

Certainly -- nothing to highlight there. I mean we're continuing to get nice growth and similar growth in our branded products as we are our store brand products that are in the marketplace. You're seeing kind of the continued strength in the monthlies space, which is a little bit less expensive. But you're also seeing the continued growth in multifocals and in the dailies space where we were in the teens again.

So pretty consistent performance from our portfolio, not seeing a lot of change from consumer behavior right now. And I mean, this quarter, calendar quarter grew 7%, last calendar quarter grew 7%. So not a lot of change from consumer fitting activity and consumer wearing habits.

Okay. Very helpful. For my follow-up, just on the supply-demand dynamics. You made a lot of investments in the past two years, doubling CapEx and are seeing some of the excess capacity coming online.

Where do you think the competitors are in terms of ramping up their own supply? How much more manufacturing capacity is still needed to sort of balance demand as an industry? Any risk for overcapacity as their capacity comes online in addition to yours?

I don't believe so. I believe everybody is investing right now because of the shift to dailies. So as wearers move to dailies, we have – we as an industry, obviously, CooperVision, we have to produce a lot more lenses. Producing a lot more lenses, obviously, is taking more machinery, more time.

It creates more challenges throughout your logistics. So I think the shift over to dailies is going to continue for many, many years in front of us and that's going to require a lot of capital from a lot of people. Now, we've kind of had this ball going, and I think we probably have it again in '25 before it starts coming down some because we've had some facility expansion and so forth in addition to the line. So we're putting ourselves into a lot better position here with more flexibility in our manufacturing lines and kind of a little bit of a different mindset around some of our expansion activity.

So I think we're in a better spot here to position ourselves for kind of 2026, '27, '28. But at the end of the day, I think as long as the market shift into dailies, you're going to have to continue to add capacity. And I think the industry is and will for a while to be catching up. Because, again, the point I made earlier is well worth remembering, right? Like when you order a manufacturing line, it's going to take you a year or two years from the time you're ordering that to getting it in and fully producing product to put it into the marketplace.

So it's not a fast solution.

And our next question comes from the line of Anthony Petrone with Mizuho.

Maybe one on CVI and one on MiSight. Al just on CVI, SiHy daily torics in particular, silicone hydrogel daily torics are margin accretive to the business. SiHy as a material within dailies has been growing. But maybe just to recap on where your SiHy daily mix is overall?

And how much of that can shift to toric over time? And what would that mean for margins? And then I have one quick follow-up on MiSight.

Yes, Anthony. That's a good question. There's a lot to that one. You kind of peeled that onion back, right?

Because -- when you're talking about a sphere wearer, making a sphere and getting a sphere throughout your logistics system and your distribution and into the marketplace pretty straightforward. As somebody has astigmatism and gets fit in a toric, the toric range is considerably larger, right? I mean, we're the #1 company in the world in terms of selling toric lenses out there. We know how complex it is.

And as you do those expanded ranges it increases the complexity. I mentioned earlier how we're trying to build up some inventory on that to be able to launch that a little bit more aggressively in a couple of spots and get some more fitting sets out there. So that's a dynamic that I could probably talk about for a couple of hours. I'll kind of try to summarize it quickly by just saying that we are seeing nice growth in torics, you are seeing opticians fit -- recognize, if you will and correctly fit patients who have astigmatisms in toric.

It's a great product for us. It's got good margins. We're going to continue to see it grow. So I'll kind of pause there just because that's a little bit of a hard one to answer.

It's a good question but it's a hard one to answer. And I do think because of the price point, you're going to continue to see torics grow faster than the overall market for ourselves and our competitors. I'll be surprised at you're not hearing for years, almost every competitor getting on and talking about strength in torics driving their contact lens numbers higher.

That's helpful. And really just quick on MiSight side. You mentioned a little bit on an inventory contraction. So you had strong back-to-school fits. But then in October, you had inventory contraction. So anything there? Or is that do you think that's just going to be the seasonal pattern?

Yes. I think that's just seasonal pattern tied to distributors. I mean, we have seen distributors around the world tightened some of their inventory up. We've kind of seen people generally tighten up inventory just a little bit, right, as everybody is looking at cash and interest expense and so forth.

So to me, that's just a matter of a fairly high-growth product where you have distributors managing their inventory. And I think you'll see some fluctuations higher and lower on MiSight because of that. And I think we'll probably deal with that a little bit as we move through next year. And I'll just try to really be transparent on that, that if it's helping growth, kind of highlighting that a little bit, and in a quarter like this when we kind of pull the growth numbers down a little bit, mentioning it.

And that concludes our question-and-answer session. I will now turn the conference back over to Mr. Al White for closing remarks.

So great. Well, thank you, everyone. As Brian summarized with the numbers, and I said, fiscal '24 was a really good year. We closed strong, and we feel good about where we're at today.

And we're confident we're going to be able to produce really strong results in fiscal '25. And we're obviously going to do what we always try to do, which is outperform the guidance that we give. So I look forward to catching up with everybody through the quarter and when we report our next quarter. Thank you. Thank you, operator.

You're welcome. And ladies and gentlemen, this concludes today's call and we thank you for your participation. You may now disconnect.