The Cooper Companies, Inc. (COO) Earnings Call Transcript & Summary

Good afternoon, everyone. I'm Robbie Marcus, the med tech analyst at JPMorgan. Very happy to introduce CEO of Cooper Companies, Al White. Al will do a presentation followed by some Q&A. Al?

Great. Thank you, Robbie. We'll go ahead and jump into it here. So most of you I recognize or vast majority I recognize. For those I don't or for those who are new to the story, I'll just take a quick minute on this overview slide here. For those who don't know us, Cooper Companies, we were founded in 1958 and been on the S&P 500 since 2016. We operate really under two different business units, CooperVision and CooperSurgical. I'll touch on each of these as we go through the presentation. But CooperVision is one of the leading contact lens companies in the world. We're actually the #1 contact lens company in the world in terms of wearers and #2 in terms of revenue dollars. And then CooperSurgical is a fertility women's health care business. We're a leader in the fertility space for non-pharma, for medical device and so forth. And we've had that business for a long time operating very successfully. We have over 15,000 employees around the world, and we have over 50 million people who are using our products between contact lenses and our women's health care and fertility products with about 42 million patients annually wearing our contact lenses. Our CooperVision business is about 2/3 of our consolidated revenues. And geographically, if you look at it, we're pretty geographically dispersed. We have a little bit over half of our revenues is in the Americas. Next biggest region is in Europe and then Asia Pac. If we look at our historical performance, you could see this chart, kind of nice chart up into the right other than the COVID disruption. You could see the growth as we come along here for the last 10 years being 8.6%. On a consolidated basis, CooperSurgical almost 16% and CooperVision at just a touch over 6%. A lot of the CooperSurgical growth has been driven by acquisitions over the years. We've done during this period of time, I don't know how many, but a lot of acquisitions. We did our last CooperSurgical acquisition in August of '24. We haven't done one since then. But you can see, it's driven a lot of nice growth. CooperVision comes from organic growth primarily. There's been a little bit of acquisition activity, but the contact lens market, I'll touch on it a little bit, but it's just a very consistent solid mid-single-digit growing industry. So that's delivered the 6.3%, and you can see the $4.1 billion in revenues. If I touch on a couple of the boxes there, two growing segments. Both of our industries are growing. Contact lenses mid-single digits, just very consistent year in and year out. Fertility was -- as an industry was growing upper single digits for many years. We had many years where we grew double digits. I'll touch on why we saw a pullback in that market, but it's still a nice growth market. The other comments are kind of self-explanatory here. Touching on guidance. So we're an October year-end company. Our fiscal year-end is October. This was the guidance we gave back in December. You see the growth for CooperVision and for CooperSurgical and here the organic growth. And you could see a little bit lower in Q1 with a little bit of improvement as we move through the year. And I'll touch on that kind of as what's transpiring and why we're confident that we'll continue to see improvements as we progress through the year. Non-GAAP EPS, $1.02 to $1.04 in Q1 and $4.45 to $4.60 for the full year. We've had double-digit non-GAAP EPS growth the last couple of years. This would be another year of double-digit growth. Free cash flow of $575 million to $625 million. We are kind of at an inflection point, if you will, when it comes to free cash flow. We had a number of years where we are investing very heavily in the business, especially on the CooperVision side. That included a pretty significant expansion associated with new manufacturing lines, new manufacturing buildings, distribution centers, packaging and labeling machines and so forth and even purchasing our own buildings that we hadn't done historically. That compressed our free cash flow for a number of years. This year -- that was kind of ending at the end of last fiscal year. This fiscal year, you see the tail off in a lot of spending that we have and some of the final big investment activity, and you're going to see the improvements in operating cash flow and so forth, lift our free cash flow back up to a more respectable $600 million, if you will, at the midpoint. We have talked about $2.2 billion plus in free cash flow over the next fiscal year. So this would be the first year of that. The future is really going to come from less capital CapEx in terms of CooperVision and some improvements that we're going to get as we operate the business from a working capital perspective. If I jump to this slide, I could probably talk about this slide for half an hour or something, but I won't go quite that long with it. But key strategic priorities when we look at the business before we jump into CooperVision and CooperSurgical. We are heavily focused right now on driving organic growth. We're in a position as a company, especially on CooperVision, where we invested for a number of years. That investment is now transitioning itself over to organic growth. And success with private label contracts and other type of business as we roll new products out around the world. Super excited about that and optimistic about the future that Cooper is back, if you will, to what we were producing for quite a long time. That organic revenue growth is important, but also is the operating income growth, the commitment to earnings and free cash flow. We did a reorg in Q4. That's part of the EPS guidance that we gave for this year. That was a fairly large reorg for us. In order to accomplish that, we had to do a couple of different things. We had to stop doing acquisitions in CooperSurgical, which we did so that we could finish the integration activity. We also had to finish our ERP, our big IT implementations, and we did that. We put a new ERP in CooperSurgical, and we finished a lot of our ERP upgrade work at CooperVision. That happened in 2024 and into 2025. We were able to take a look at the business at that point in time really in Q4 and pull a lot of costs out of the business as we consolidated a lot of the back-office operations. And that pulled a lot of dollars out, a lot of synergies. So I would kind of describe that almost as like a first step for us. It was a big step, but it was a first step. We have additional steps that will be taken to drive more efficiencies in the business. Everybody talks about AI. I could do the same thing. I mean the benefits of AI are spreading themselves through our business. We see that through our distribution channel with '09 and other areas where we're optimizing our inventory, but we also see it as just the general management of our business. And frankly, it's putting us in a position where we were able to reduce headcount. And on a go-forward basis, we'll be keeping headcount much lower, relatively flat compared to what we've done historically. Disciplined capital allocation approach is another important one. So as I mentioned, for many years, we were doing acquisitions. We were also investing heavily, and we'll continue to invest heavily. But without the acquisitions, which we don't need to do right now, we spend about 2/3 of our free cash flow last year on share buybacks. We anticipate spending about 2/3 this year. I would say on a go-forward basis, we'll probably spend somewhere around 1/3 to 2/3 of our free cash flow and share repurchases on a fairly consistent basis. So -- that will not be opportunistic, so to speak, it will just be like on a consistent quarterly basis entering the market and buying stock back. Our Board increased our share repurchase plan from $1 billion to $2 billion last year, and we have about -- we had about $1 billion of availability when we entered this quarter. So you can expect that to kind of be a consistent part of our capital allocation on a go-forward basis. And then the culture and community. I'm super proud of our company, love our employees, and we have dedicated people. We went through a lot of the reorg and so forth, and the people worked incredibly hard to drive success for Cooper. They're very passionate about our business. I'm passionate about our business. So we really focus on that and we -- and a big part of that is promoting from within. We have so many promotions from within, and that's where we really, really focus and we believe that's incredibly important for us. If I jump to the global soft contact lens market in total, and I look at it, the contact lens market grows somewhere around 4% to 6% every year. Now we'll get up and downs because of COVID and some other different things will happen. But at the end of the day, it's a 4% to 6% growth market, and there's almost -- it seems like nothing you can do about it. Kids everywhere looking at their phones and everybody in this room knows, you can go out to restaurants and all the kids are watching videos and everything else, right? All of that stuff is driving the myopia epidemic that we're dealing with right now. Somewhere around 1/3, 35% of the world is myopic today. It's estimated to be 50% in 2050. That's an amazing number. That -- all of those people are going to need some sort of correction, of visual correction. So whether that's glasses or contact lenses is going to drive the market forward. From a competitor perspective, you can see there's 3 leading companies. This is on a revenue basis. The market is about $11 billion. J&J is at the largest at about 36%. We're second largest at 27%, Alcon at 25%. The market continues to move. I kind of put it in three baskets. One is price. If you look at price, last year, price was about 1% of the market's growth. Global net pricing was about 1%. I had said this year that I think global net pricing will be about 1%, that was at the beginning of December. I'm actually optimistic, I have to say, based on what I've seen from competitors and so forth that pricing will be at least 1% this year. Our pricing in two of our competitors have taken pricing that I've seen. One of our large competitors I haven't seen yet. But based on the pricing that I've seen, if everybody goes along those ways, we'll actually have stronger pricing this year. So fingers crossed on that one. Growth on wearers. I just mentioned the growth of myopia in general. So we see about 1% market growth from wearers every single year. That was a little higher as we came out of COVID, but it's kind of settled at about 1%. Then the remaining portion of the growth in the market comes from daily lenses and daily silicone hydrogel lenses. So as the market has shifted, you go back a few years, people used to wear monthly lenses, right, or 2-week lenses and you take them out, you clean them every single day. Now the market shifted over to dailies. Put your lenses in like mine at the beginning of the day. At the end of the day, you take them out and you throw them away. That shift over to daily lens is a driver for market growth. As an industry, we get about 2.5x more revenue per patient for a daily were compared to a monthly or 2-week wear. So that's continuing to drive both. There is a long tail on that. I mean we still probably have 10-plus years of transition over to daily wearers and the daily marketplace. We also have multifocals that are part of the growth of the industry right now. I mean I'm wearing them right now. But it used to be when somebody aged out, so to speak, and started wearing reading glasses, they didn't want to switch to multifocals. Because one eye would do distance and one eye would do reading, and it was hard to get comfortable with that. Today's new technology kind of mushes those together, if you will. So it's very, very easy to wear multifocals. Look up, see distance, immediately looked out and read like I'm doing. So you're seeing growth in multifocals because it's the technology advancements have been there. So a lot of different things that are driving the contact lens industry forward. And it's one of the reasons like I firmly believe we'll continue to see that mid-single-digit growth for a long time. From an industry perspective, high barriers to entry. There's no question about that. These are all medical device products. We're talking about manufacturing billions and billions and billions of contact lenses to tight parameters. It's very expensive. The manufacturing lines are huge. So some pretty significant barriers to entry. And on top of all of that, you have technology, you have intellectual property and so forth. It's very difficult for someone to enter this marketplace. And I kind of walk through the favorable industry characteristics around this. Recession-resistant is probably one to add on that. We've always seen the contact lens industry be recession-resistant. Once people start wearing contact lenses, you keep wearing them. Anyone who starts wearing contact lenses never switches out. I can speak to that for myself, right? Once you get over the hump and you realize that you can put them in and you can take them out pretty easily, you'll never wear glasses again, trust me on that one. CooperVision, just quickly. I touched on this, right? We're the #1 contact lens company in the world in terms of wearers. 33%, 1/3 of people who wear contact lenses are wearing CooperVision contact lenses. We are under-indexed on dailies, the one part of the market I just talked about that we're excited about with our MyDay launch. If we can get our fair share of that part of the market, which we will. We've got some really nice growth in front of us. This is our portfolio here, our core portfolio. You've got MyDay and the different offerings within MyDay, which is our daily -- premium daily silicone hydrogel lens, clariti and then MiSight. I'll touch on MiSight in a second. In our FRPs, Biofinity is the broadest SKU range by far of a contact lens. So that product family can basically fit anyone. 99.99% or something like that, a contact lens wearers can be fit in a Biofinity contact lens. We'll custom make them for anyone. So it's an amazing, amazing successful product and then Avaira Vitality. If I look at the track record of CooperVision, half our business is fears, half is basically torics and multifocals, which I touched on multifocals. We're continuing to see torics grow. Toric is someone with an astigmatism that needs to be corrected. It's a little bit more of a difficult fit. But as technology advancements have come along, it's been much easier for optometrists to fit people in Toric lenses and give people truly the correct proper vision of wearing lenses. So we've seen growth in both of those, and we're market leaders when it comes to torics and multifocals. Right now, those two segments are about 40% of the overall market. You can see it's almost half of our business. So this is similar to the prior slide, the 6.3% organic growth. And you can see over the last 10 years, our market share within the contact lens industry has increased from 22% to roughly 27% now. I love this little slide here, performance meets potential, and this has like our new product launches on it. We have a product which is MiSight, and it reduces the progression of myopia. And something that's very, very important to mention is all contact lenses are myopia management. They're all FDA-approved myopia management products. Myopia control is different. Myopia control has myopia management. Yes, it corrects your vision, but it also has control. It reduces the progression of myopia. So it's for children to reduce their progression. It's an amazing product. The innovation around this is amazing. We're the only one who has an FDA-approved contact lens for this. Essilor now has an FDA-approved glasses for this was [ Stellest ] and they're launching that. And they're promoting that, and they're doing a great job like reinforcing that message and we are that no child should ever leave an optometry office without being in a myopia control product. Not myopia management, everything is myopia management. No child should ever leave an office and not be in a myopia control product, whether that's Essilor's Stellest here in the U.S. or whether that's our MiSight. We're also launching MyDay MiSight, which is our market-leading daily silicone hydrogel lens that has MiSight technology in it. We're launching that in Europe. That's ahead of schedule. We're actually going to start shipments of that product on Monday. The marketplace is receiving that really well. There's great interest in that because: One, it's a silicone hydrogel, the latest technology as UV protection, which they want. And it also creates this continuum, where some child who's wearing this for the treatment to reduce their progression of myopia, as soon as they age out of that at about 17 or 18 years old, they can transition straight into a regular MyDay lens. So we're linking all that together very successfully. So I love this. I'm super excited about it. It's going on right now. We're also launching our MiSight product in Japan in Q2. We've got MyDay Energys, which we're launching in Q2 in Europe. Energys is a product that helps people who are on their devices a lot. It's basically think about it as a product that you can wear that enhances your visual acuity a little bit. So if you're reading all the time and you're looking at a phone all the time, rather than using a regular sphere, this innovative technology allows you to read that a little bit easier. So it's a really clever technology. It's very successful in the U.S. market, and we're finally launching that in Europe and EMEA in Q2. MyDay MiSight, I mentioned, we're also going to be rolling that out by the end of the year in select countries in Asia. We're rolling MyDay multifocal throughout APAC right now. MyDay Toric expansion, which is the widest torque SKU range available on a daily SiHy. We're continuing to roll that out. And we have MyDay Toric multifocal, a little bit more of a specialty lens but excited about that and rolling that out at the end of this fiscal year. So a lot of activity. I will say this is just execution. We know how to do this stuff. We do it really well. We're rolling these products out. This is our next couple of years. We've had some other exciting stuff that's going to be in '27. We're going to roll these products out and be really successful with them. If I move over to CooperSurgical for a minute here, you can see the 16% growth over the last 10 years. 39% of that business is fertility and the remaining part is office and surgical, which is a couple of different areas. I'll touch on as I jump through this section. The fertility market, the fertility market was growing upper single digits for a number of years. We're talking about IVF here, and we were growing double digits. And we saw that come back pretty aggressively as fertility clinics last year, which are heavily owned by private equity, refocused from growth, growth, growth over to margin expansion and whether that was bringing some stuff in-house like some genetic testing or going through RFPs to consolidate their suppliers. We saw some of that activity have pulled the market growth down. We're starting to see green shoots on that some positivity coming out of that. But basically, you have a fertility market globally that's growing mid-single digits. We grow a little bit faster than that. The market is about $3 billion. It's underpinned by the fact that 1 in 6 people will experience infertility at some point in their lives globally. So this is a market that's large, it's not going away and it's going to continue to grow. We see more and more, whether it's countries or states like California or even the current administration talking about the importance of reimbursement, insurance reimbursement and so forth to support fertility treatment. So a lot of really positive macro growth trends. The first one I'll touch on here, which is women delaying childbirth. One of the things is that the later you wait to get pregnant, the harder it is to get pregnant. And the average age of a woman having a baby here in the U.S. is crept all the way up to 30 years. As you move into your 30s and anyone in this room or anyone who has tried to have children, as you get older, it gets challenging, that pushes the fertility market forward. So there are several things here that are driving the industry for, but we're going to continue to see a lot of long-term consistent growth out of the fertility marketplace. A couple of highlights here, but innovation is another important part. We launched 3 new products here. You can see recently. We have a number of additional products that we have within our fertility R&D operation that we're going to launch. We spent a lot of money and a lot of time on acquisitions historically. As we transition here over the years and built that business out, it's going to be more important for us to generate next-generation products. So that's where our focus is. You'll continue to see that. And I look forward to every year updating the innovation and the products that we're bringing to market. The other part of our business within CooperSurgical is office and surgical products, and you could kind of break that up 3 ways, if you will. A lot of it's medical devices, surgical medical devices, heavily focused on the OB/GYN. You have PARAGARD, which is a nonhormonal IUD, and you have stem cell storage, which is CBR. Many of you might know that if you stored your child's stem cells. Those 3 businesses make up the lion's share of the rest of our business. Good solid businesses. We have a real staple in some areas, real strength like in labor and delivery as an example. That's an area of the market where we're very strong in here in the U.S., and we're expanding labor and delivery into European market. So a lot of positives there. Things going well on our medical device side of our business. Last slide here, I'll summarize and then take some questions. Kind of 5 key points here that I've touched on as we've gone through the presentation, right? First off, we're operating in growing markets, starting with contact lenses and the fundamentals that are driving the contact lens industry forward, and fertility as a core market of ours, good solid fundamentals. Both of the industries are growing mid-single digits. We expect to take a little bit of share in both of those, which is going to give us kind of good, consistent solid mid-single to mid- to upper single-digit revenue growth, and we'll be able to drive a lot of good earnings and free cash flow off that. So we love the underlying fundamentals of the businesses that we operate in. Brand and private label leadership I didn't touch on private label, but it is an important component of our business. Within the contact lens industry, we're really the only player that does private label. Most of this is kind of an oxymoron, but it's kind of premium private label, if you will, like as an example, if you go to Costco and buy Kirkland contact lenses, you're buying CooperVision contact lenses. So as we roll products out around the world, we're fine rolling them out as private label products, and we're a clear, clear leader when it comes to private label around the world. And that's an important growth area for us right now. It's part of what we're working through is that first 6 months of last year, we had pretty solid growth. Next 6 months was disrupted. And right now, we -- during that 6 months, we won a whole bunch of private label contracts. This 6 months that we're in right now basically is executing on those private label contracts we've won, do what we know to do, do it well, execute on that. We're seeing that. We're having success on that as I stand here today. And then you'll get back in the back half of this year, the final 6 months seeing back to more traditional growth rates for CooperVision. Leverage investments and drive operating performance. We've invested a lot in the business. We did a lot through COVID and after COVID, heavy IT investments and so forth. We have to leverage those. We are -- we saw that in fiscal Q4. We're going to see that here this year. It's built into our guidance. So good leveraging of our investments. Long-term focus and discipline on creating shareholder value, transitioning from a lot of that investment activity to -- back to executing, driving organic growth, delivering bottom line earnings. We're seeing the acceleration in free cash flow right now and then good capital allocation of that buying stock -- buying our own stock back, which is which is depressed right now. So it makes all the sense in the world where our stock is trading to be buying stock back. And then a proven track record of delivering strong financial results. I mean we reported Q4. That was our eighth consecutive quarter of beating consensus earnings expectations. We also beat cash flow expectations. We raised expectations for this fiscal year for earnings. We raised expectations for free cash flow for this year. And we have a track record of doing that. We're going to continue to execute and deliver on earnings and free cash flow, much greater focus, as I mentioned, on organic revenue growth to ensure we're delivering that as we move through this year. So with that, I kind of talked a bunch. Let me go ahead and pause. Robbie, I don't know if you have questions or if anyone in the audience has any questions.

Great presentation. With regard to the private label business, how do you win that business? Is it price? Is it quality? Like what's...

Yes. So when we think about private label, we're competing against branded because it's someone else who's offering a branded product. So we're going in and offering a private label product for them. The real core reason behind that is the same reason that anybody has private label, right? Retailers have private label because it's sticky. They want to get repeat customers, have them come back and stay in their products, wear their products. They want very high premium products in this space in medical devices and contact lenses. So they require premium products. And they require something that they're going to get good support around. And then they're going to make more money on it, right? They negotiate that, whereby they're able to say to us, "Hey, you don't have to provide the same marketing support and so forth. But take that marketing support that you're not doing and go ahead and give us a little bit of price on that," right? So we negotiate that deal out. But it gets driven heavily by all the retailers or buying groups around the world who want to create a product that brings people back. The last thing you want to do is take your time and your energy and fit somebody in a product and a contact lens and have them turn around and just buy it online. You want them continuing to come back to you. So that's the core driver behind it.

Al, on the last earnings call, you announced a formal valuation to perform a strategic review to enhance shareholder value. Why now? What makes this the right time today versus in the past? And what can investors expect to see from Cooper as a result of this in 2026?

Sure. Yes, we announced with our December earnings call a strategic review, and it was a good time to do it. I mean, you can kind of tell from what I was talking about like an inflection or a transition in the business, if you will. We've completed the CooperSurgical build-out. That business is in a really good place right now. There's a lot of things that we can still do, and we're still very excited about it. But we had the same thing going on CooperVision. We completed a lot of work. So it was a good time to come out and just say, hey, everybody, we're doing a strategic review. We're looking at our business in total here and the vision side and the surgical side. What should these businesses be together? Should we continue to run on that? How should we think about it and go through that process? So we announced that probably no surprise, right? We received a number of calls from strategic private equity and so forth with some interest. We're working through that process right now with Chuck Adams and his team from Citigroup and evaluating different alternatives and we'll see how things play out, if at all, and we'll announce something, we'll announce an update as much as we can in our next earnings call.

Maybe -- you've talked a lot in the past of why it made sense to keep the businesses together. So we'll see what the strategic review holds. But how should we think about the financial synergies between the two? Are there tax synergies? How well integrated are these businesses have separately run? And how is the different facilities are they as we think about maybe some of the permutations of what could happen?

Sure. I think we're probably pretty similar to a lot of companies, right? I mean because there are a lot of people who spin businesses to off sell businesses. I mean, when you look at it, it's core, what are you getting from businesses being together. You're getting synergies, which we have and we announced a bunch of those $50 million in synergies we announced that we're going to be getting this year from our recent reorg, right? That's a back office. So they're largely back office, HR, IT, legal, finance and so forth. You can pull all that in and consolidate that together. So synergies is a big component of it. Scale is another one, right, bigger company, you're able to negotiate with FedEx or UPS or anyone else. You also have diversification built within scale to allow your business to perform or report results a little bit more consistently. And the last one, Robbie, you touched on, which is tax. A lot of the tax goes for everybody, us included, to cash taxes paid. So it's not so much necessarily the effective tax rate you see in the P&L as much as it is cash taxes paid, your ability to tie your profits to your expenses. In our case, CooperSurgical has a big profitable U.S. operation. We have expenses associated with corporate and vision, and we're able to tie those together to minimize our cash taxes paid. So I would say kind of those are the 3 components when I look at it and say, all right, you have those 3 positives. If you were to split the business, probably same analysis other people have done. If you were to split the business and you have two stand-alones, you're saying, well, my forward PE on these two stand-alone businesses is going to go higher because investors are able to focus specifically on those businesses. Is the split in the separation and the higher PE that's assumed enough to make up for what you're giving up and synergy scale and taxes paid, that's the question mark. And I think similar to other people, we're going through that same exercise.

You're about 2/3 of the way through your 1-month offset from calendar quarters. Any comments on how you're trending so far in the quarter as you sit here today?

Sure. It's interesting. I had said in December on our earnings call. We had taken share 17 straight years in the contact lens market. And I know everybody was telling me we weren't going to take share this year that we were struggling. And yes, we had -- we stubbed our toes a couple of times. But based on how we finished the year, I believe that we took market share for the 18th consecutive year. We had a good finish in the calendar year. So I haven't seen the calendar year numbers for our competitors yet, I'll see them soon. But based on how we finish, I think we're in good shape. So -- yes, we're continuing to execute. I mean this is blocking and tackling for us. It's what we've done for a long time as a company. Execute, launch these products, be successful with private label, support our customers, do advance innovation like all the things that we do, just core stuff is what we're doing right now. It's not new distribution centers. It's not new ERP. It's none of that kind of stuff. So we're seeing right now success from what we do best, and that's what we envision we'll continue to see.

If we look at fiscal '26 guidance start lower at the beginning of the year, higher in the back end of the year. Obviously, there's 2 components. There is Vision and there is women's health. If you think about the two separately what gives you the confidence in the line of sight to go from the lower end up to the higher end to achieve the guidance range and hopefully exceed it.

Yes. I think that one thing I'd mention, which was if I look at the market in total, it was pricing, I'm a little bit more optimistic based on what I've seen on pricing that the market where I had assumed 4% to 5% probably has a much better chance to be, what, at least like 4.5 to 5% or something like that because I think pricing is going to be a little bit better. If I look at us, in particular, we won a number of private label contracts last year in the last 6 months of the year. We've been executing on those private label contracts. Just to kind of lay out quickly the time frame on that. When you enter into a private label contract, you signed the deal with the customer, but they want their own packaging, their packaging and labeling and so forth. And then you're training their optometrists, bringing everyone up to speed, launching the product. That takes about 4 months on average before you have that product out and they're selling it. So when I look at the contracts that we've won the business in the last 6 months, that all starts transitioning into this year as we execute and we start picking up new wearers. We're winning new wearers right now. I've seen that in the most recent data, is that we're continuing to win new wearers. So when I look at winning new wearers, I look at the private label business that we've won, the execution on that, historical trends of how that plays out for us, like I have a lot of confidence that you're going to see -- Q1 do what it's going to do, it's going to be fine, right? Q2 be a little bit better and then Q3, as we're executing, we're really rolling things out. We're hitting on more cylinders, Q3, Q4 being stronger quarters.

I think you touched on the vision market pretty well in the presentation with volume and 1% pricing. How are you feeling about the global fertility market and the women's health market overall in 2026?

Yes. I think the fertility market -- the fertility market is going to be better in 2026 than it was in '25, right? We were running along really, really hot for a long time. You had fertility clinics, as I talked about, kind of pulled back. You had some of the things go on with the administration here and insurance coverage. You had some cultural things in Asia Pac. A lot of that has moved behind us. So as we move through this year, I think what we do is we start trending ourselves back to traditional historical growth rates, if you will, which are certainly mid-single digits. We were more conservative with that in our guidance because I do think that you start the year off slower, so it's probably low single digits for the fertility market starting the year off, kind of moving its way back up towards mid-single digit. Based on the wins that we have, the RFPs and some of the product launches that we have, I think we'll take a little bit of share above that. So nothing fantastic, but I do think we'll see consistent improvement.

Do you see any differences geographically, whether it's in the vision market or in the women's health fertility market where some regions are a lot better, some are weaker, just as we think about that?

Yes. Well, I certainly see it for us regionally when you think about CooperVision. If you look at the prior year, we grew 7% every quarter in Asia Pac. And then this past year, we bounced around a little bit. We were actually minus 5% in Q3 and flat in Q4. A lot of the contracts and the execution that I'm talking about is private label wins in that Asia Pac region for us. So we need to get that region going back, and I think we will. I'm confident that we will see improvements there. That would be the biggest one I would highlight. Outside of that, America is doing well. We're continuing to see pretty strong consumer behavior, frankly. Purchase activity continues to go to daily SiHys, more premium products, the torics and so forth and the newer product launches. Europe is doing well. We have a great European franchise for fertility and for our contact lenses. That's probably our best part of the world. It's EMEA for us on a company-wide basis, continuing to see good trends there. Asia Pac, I touched on, like, is a little choppier.

There have been some people that have tried to pitch publicly the idea that CooperVision either mergers or acquirers with another larger competitor. I won't ask you to comment on that specifically. But in general, do you think there's the ability for the large competitors in vision to do large acquisitions given the concentration? I know you're #1 by far in Europe in contact lenses. Do you think the regulators would tolerate large acquisitions of that size?

Yes. I mean I wouldn't say anything is impossible, right? You can push things through. I'd say it's very difficult, very difficult. I mean we are the #1 contact lens company in terms of revenues and wearers in Europe. We have a really strong position in a number of other countries around the world. So I think it'd be very difficult for us to do anything. J&J is a solid #1. Could Alcon buy Bausch an example, if they want, and those businesses completely overlap, maybe they could pull something like that off, I don't know. But I think it would be pretty difficult.

I think -- I feel like I'm your most avid free cash flow question asker on the earnings calls, and it's gotten a lot better over past few quarters. So it's great to see. And on the last earnings call, you went from $2 billion over the next 3 years to $2.2 billion already. So I guess, two-part question. One, what's driving the strong improvement of free cash flow? And then two, what gives you the confidence to raise it by 10% already before you even enter the time frame?

Yes. And I probably feel better about that as I stand here today. So if you go back when I was CFO before I became CEO, right? We had about 20% of our revenue converting into free cash flow. That number came way down as we invested very heavily to move into the daily silicone hydrogel space. And those -- that CapEx investment became dramatic. And layered on top of that was the fact we were buying a number of our buildings. So we had a lot of CapEx for a number of years, right? I mean -- and it's got up towards 10% of revenues. Now our maintenance and growth CapEx, kind of our core CapEx, if you will, that we're going to move to in '27, will be about 5% of revenues. So that drop alone is going to add a couple of hundred million dollars of free cash flow. The other thing that we had is we renew a lot of these acquisitions I talked about. And we had a lot of integration-related activity that had a lot of cash charges associated with it. As I mentioned, we've wrapped up -- we wrapped the vast majority of that up. So our non-GAAP adjustments are going to go way down and the cash going out the door will go way down. This year, we'll still have some of it. We'll have severance associated with the reorg. We got a build out of a big CooperVision R&D facility. We got final payments on a lot of lines. But we have a lot of improvements coming from working capital and from operating improvement and lack of charges. And then if I go into next year, you get to a much more traditional lower CapEx level. We're going to -- we'll have a strong free cash flow year next year.

We're out of time, unfortunately. I appreciate a great discussion, and I appreciate everybody joining us today.

Thank you.