Ladies and gentlemen, thank you for standing by, and welcome to The Cooper Companies Inc. Third Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to, Kim Duncan, Vice President, Investor Relations and Risk Management. Please go ahead.

Good afternoon, and welcome to The Cooper Companies’ third quarter 2020 earnings conference call. During today's call, we will discuss the results included in the earnings release and then use the remaining time for Q&A. Our presenters on today's call are Al White, President and Chief Executive Officer; and Brian Andrews, Chief Financial Officer and Treasurer. Before we begin, I'd like to remind you that, this conference call contains forward-looking statements, including all revenue and earnings per share guidance and other statements regarding anticipated results of operations, market or regulatory conditions and integration of any acquisitions or their failure to achieve anticipated benefits. Forward-looking statements depend on assumptions, data or methods that may be incorrect or imprecise and are subject to risks and uncertainties. Events that could cause our actual results and future actions of the Company to differ materially from those described in forward-looking statements are set forth under the caption Forward-Looking Statements in today's earnings release and are described in our SEC filings, including Cooper's Form 10-K and Form 10-Q filings, all of which are available on our website at coopercos.com. Should you have any additional questions following the call, please call our investor line at 925-460-3663 or e-mail ir@cooperco.com. And now, I'll turn the call over to Al for his opening remarks.

Thank you, Kim, and good afternoon, everyone. There are a number of things to cover on today's call, but let me start by saying our businesses are performing really well. They improved as we moved through the quarter, and that momentum continued in August. Before getting into the details, I want to first congratulate Dan McBride and the entire CVI organization for their performance during COVID. With our relatively strong June performance of down 3%, we hit key milestones, including increasing our global market share to 25% and becoming the number two contact lens company in the world. The team is executing at an incredibly high level right now, driving our key strategic initiatives of expanding key account relationships, launching new products, upgrading distribution capabilities and expanding manufacturing. Combining this with our strong support of the independent optometrists, our extremely high customer service levels and the recent U.S. launch of the most innovative contact lens in the world, MiSight, we remain in a great position to continue taking share. Moving to the numbers and reporting all percentages on a constant currency basis. We posted consolidated revenues of $578 million in Q3, with CooperVision revenues of $449 million, down 11%; and CooperSurgical revenues of $129 million, down 24%. Non-GAAP earnings per share were $2.28. These results were stronger than expected as both businesses bounced back nicely from COVID lows. Our strength continued in August, and we've incorporated that in our guidance, which Brian will cover later in the call. For CooperVision, all three regions posted improving performance as we progressed through the quarter with both June and July being down low single digits. For the full quarter, the Americas and Asia Pac were down 9%, while EMEA was down 15%. These results were better than expected as the strategic initiatives we've…

Thank you, Al, and good afternoon, everyone. Most of my commentary will be on a non-GAAP basis, so please refer to today's earnings release for a full reconciliation of GAAP to non-GAAP results. Our third quarter consolidated revenues decreased 15% or 14% in constant currency to $578 million. Consolidated gross margin decreased year-over-year to 66.3% from 67.3%, primarily driven by lower PARAGARD sales and higher expenses associated with COVID, partially offset by positive product mix at CooperVision. CooperVision's gross margin decreased to 64.8% from 65.6%. CooperSurgical's gross margin was 71.5%, down from 72.4%. OpEx was down 5.8% year-over-year, resulting in consolidated operating margins of 23.2%, down from 28.4% last year. Despite the top line pressures, our performance exceeded expectations as we effectively managed expenses, offsetting higher COVID-related costs. We did this while supporting our employees, funding higher MiSight and PARAGARD advertising programs and maintaining investments in internal projects, such as upgrading our IT infrastructure. We will continue to closely monitor expenses, balancing the costs against investment opportunities. Interest expense for the quarter was $5.7 million, driven by lower interest rates. The effective tax rate was 14%, reflecting the geographic mix of income and lack of option activity. Non-GAAP EPS was $2.28 with roughly 49.5 million average shares outstanding. And the year-over-year FX impact for Q3 to revenue and EPS was a negative $3.3 million and a positive $0.03. Free cash flow was $68 million comprised of $113 million of operating cash flow, offset by $45 million of CapEx. Net debt decreased by $67 million to $1.75 billion, and our adjusted leverage ratio was 2.23 time. Given we're approaching the end of our multiyear capital expansion project, we remain very comfortable with our current and expected liquidity and leverage. Moving to guidance for Q4. We're guiding to consolidated revenues of $665 million to $693 million. This includes CooperVision at $500 million to $520 million, which is minus 2% to plus 2% on an as-reported basis or minus 4% to flat in constant currency. This incorporates our strong Q3 and tough comp from last year, which included 11% growth in Asia Pac from buy-in associated with the Japan VAT increase. For CooperSurgical, we're guiding to $165 million to $173 million, which is minus 9% to minus 5% as reported or minus 10% to minus 6% in constant currency. This also incorporates our strong Q3 and tough comp from last year, which included 12% fertility growth. Non-GAAP EPS is expected to be between $3 and $3.20. And with that, I'll hand it back to the operator for questions.

[Operator Instructions] Our first question is from Larry Keusch from Raymond James. Please go ahead.

I guess, Al, maybe just starting with a question on rebating. Obviously, that had been stable for some quarters now and saw a little bit of movement in this most recent quarter. So just wanted to get some sense of kind of how you're thinking about rebating activity out there. And are you still thinking that net pricing is actually still positive?

Yes. Larry, when we're talking about rebating, the vast majority of what we're discussing here and what you're referencing, I believe, is associated with U.S. consumer rebating. So it's a relatively small part of what occurs on a global basis from a pricing perspective. But there was some activity during the quarter from one of our competitors. I guess all I could say is when you look at that, I'm not going to comment on their strategy behind why they've decided they wanted to give up profits. But for us, we have a pretty strong product portfolio, obviously, we're gaining market share. We're doing really well with what we have in the marketplace, and rolling out new products, and we're excited about where we stand. So we feel like we're in a really good position. So I don't have much to comment on that other than just we're pretty happy with our position and where things are going.

Okay. Perfect. And then I just -- secondarily, just, again, can you, I guess, kind of a 2-part question, just talk a little bit about kind of how you're thinking about your manufacturing capacity for MyDay toric, kind of where that sort of sits right now? And then I guess along with that, there was about $22 million adjusted out of COGS for COVID in this quarter, very similar to the levels in the fiscal 2Q. So does that imply that the production lines are still idled? And do you -- where do you stand versus the last call when you expect those expenses to start to decline in the fiscal fourth quarter?

Yes, sure. So from a production perspective, we're in really good shape right now. We're definitely in a good shape with MyDay and included -- including MyDay toric, as we talked about, we ramped up a number of lines here over the last couple of quarters, and production is ramping up nicely. So we've continued with full production on MyDay. I think we'll continue on full production. I don't see us stepping back with respect to MyDay production based on the demand we're kind of seeing around the world. With respect to the call-outs from the quarter, yes, we had a number of COVID-related call-outs associated with some specific COVID-related actions that we took if we had an employee or someone who was infected and we had to take actions. And then we also proactively initiated an inventory control project, and that meant taking some lines down. So those were the costs that were incurred associated with that. We do not anticipate having any of those kind of costs occurring in fiscal '21.

Our next question comes from Larry Biegelsen with Wells Fargo. Please go ahead.

Congrats on a good quarter in a tough environment. Al, let me start with CVI. First, how much should restocking contribute to fiscal Q3? Do you expect that to continue in Q4? Will you provide us, Al, with the growth rates in July and August? I heard you say June and July was down low single digits, but will you give us specific monthly growth rates? And maybe this is nitpicking a little bit, Al, but on the Q2 call, you said you would be flat to up slightly for CVI in Q4. Now you're guiding to negative 4% to flat on a constant currency basis despite the fact you did a little better -- you did a lot better in Q3 than you expected. So why the slightly lower guidance for Q4? And I guess I'll drop, Al, given the multipart -- after that, given the multipart question.

This is a multipart question. First off, thanks, Larry. Yes, it was a good quarter, so appreciate that. On the restocking, some of it is a little hard to get your hands around as you go down in doctors' offices and so forth. But I think it would be fair to say that we probably had about half of that restocking come in this past fiscal quarter. So in fiscal Q3, I think we'll get the rest of the stocking that we lost in Q2 back during Q4. So I've kind of split the two of them in half to some degree. If you look at June, July, August, June was down 3%, July was down 2%. I'm not going to get into specific monthly numbers going forward because I'm not sure that's a good thing to keep doing. We did it because of COVID and so forth, but I guess I will say that, for August, CooperVision and CooperSurgical both grew year-over-year on a constant currency basis. So obviously good news there. If you look at the Q4 guidance for CooperVision, yes, I was talking about fighting hard to get back to flat. Our guidance shows minus 4% to flat on a constant currency basis, up a little bit without currency, as reported. I think part of that frankly just goes to -- we've seen consumption increase, and it increased faster than we were anticipating, which is great news, right? But that did pull some of that channel inventory fill into Q3. So let's say that we were thinking $5 million, $7 million, $8 million, something in Q3, we ended up with probably $10 million extra channel fill that moved from Q4 into Q3 that you don't have that as an easier way, if you will, to report the stronger Q4. Having said that, I'll take all day long the pickup in consumption and improvement in the marketplace.

Our next question is from Matthew Mishan with KeyBanc. Please go ahead.

Al, I just want to get back to the ECPs. And I think you mentioned that parents were proactively scheduling like eye time. Your performance seems to be outpacing the patient visits to the ECPs. Kind of what do you think the capacity for ECPs are at versus a pre-COVID level? And like down low single digits, it just seems like you're well ahead of where the ECPs are with visits.

Yes, I think so because I think right now, ECP offices are open. They're basically all open right now. Now there are different degrees in terms of how many patients are seeing -- a very significant percentage of them are back doing new fits, so that's good news. Now they're not at the same level they were historically, but their back door is open, patients coming in, new fits occurring, so a lot of positives from that perspective. Yes, our performance is better than that, if you will. That's coming from share gains. And we kind of saw that in calendar Q2. I believe we're continuing to see those share gains right now. And I think that, that goes back to what I've talked about over the last couple of years, right, which has been more tied to our own strategies. And I know a few people may have been frustrated every quarter, I get on, I talk about distribution investments and product launches and that kind of stuff. But if you look at what we've accomplished over the last couple of years and where we are with key account relationships, the focus that we put there, right, with launching the new products, with upgrading those distribution capabilities so we can ship product directly to people's homes and what we've done in terms of expanding our manufacturing, we're just in a really good spot. So yes, the market is coming back, and we're taking share in that market. And when you look at some of the unique products we have like Biofinity Energys and our ortho-k lenses, specialty lenses and so forth, it puts us in a really nice position to continue that. And that's the last point I'd touch on, which is we're launching MiSight. We're having conversations with a lot of optometrists about MiSight, and we are starting to see that halo effect, where you're having those conversations with people, you're able to talk to them about your other products.

Okay. Excellent. And then just as a follow-up to that, I think you mentioned that you had new offerings in the pipeline coming. I guess where do you think you have portfolio gaps on the contact lens side? And do you think it makes sense to migrate Energys down to the dailies?

Yes. Good question. I'm not going to get too much into the pipeline. I mean we have some new products that will be coming out. We also have some expanded things like the expanded toric range we have going out for clariti right now. So I don't want to get too much into that from a competitive perspective other than to say that the backlog is pretty good right now, and you'll be seeing more products coming.

Our next question is from Jeff Johnson with Baird. Please go ahead.

So Al, I wanted to talk about that, you said August up a little bit for CVI, it sounds like, or in positive territory. I'm sorry, you can probably hear my dog barking, perfect time here as I start my question but -- sorry about that. But with up in August, talking to flat to down 4% for the quarter, is that just conservatism in there? Is that how we should think about that? And how do you reconcile -- I find it interesting in the Eyecare Business data, I don't know if you follow that, but they talked about June and July down 4%, 5% as well, but then a little bit worse in August. And you guys are obviously bucking that trend. But has there been some backlog in June and July that's helping that, that might ease out a little bit over the next couple of months? Just how to think about kind of the backlog versus normalized demand?

Yes. I think the backlog is helping a little bit, right, because we did see some of that pullout of inventory in Q2. And because consumption has picked back up, that's a situation where distributors, retailers need to order product back up and stock their shelves, so we have not really seen a pullback in terms of the marketplace right now. So when you look at fitting going on there, new fitting, but I'm speaking with respect to our products. Again, I think where -- we took share. I think we're continuing to take share. So I can't really comment on that on the marketplace, but I can tell you, things continue to move in the right direction for us. If you look at Q4, I certainly don't want to stay conservative. And I guess I'd say that for two reasons. One, COVID still exists, and it's still out there, and there are still spikes and so forth. So I think you still need to take into consideration the potential for some disruption associated with COVID around the world. And the other one I would mention is, as a comp, we did 7% last quarter, and including we had some buy-in in September last year in Asia Pac because of the VAT increase in Japan. So we'll see how it plays out. I mean I'd love to be able to tell you after the fact it was conservative. But right now, I think that's probably a pretty reasonable guidance.

All right. That's helpful. And then MiSight, are you still thinking $7 million to $8 million? I just don't remember what the number is, with $1.5 million this quarter, what that brings the year-to-date number to. And then, Brian, just to make sure, is there any tailwind from the C&E acquisition you did in the quarter for CVI? Or is that too small to really matter?

Yes. On MiSight, what are we at, around $4.5 million for the year. So yes, I still think we have a chance to get into that $7 million to $8 million range based on how successful things are going right now. You would think that new fit -- with the way new fits are and so forth, that would be impacting it a lot more than it is. But we seem to be kind of plowing through some of that from a physician's perspective. So I still think we can be in that $7 million to $8 million range. And then I still think we'll be $25 million or so in MiSight revenue next year. I think on the acquisition you're talking about...

GP Specialists, the...

GP Specialists, that one you're talking about?

Yes. I'm sorry, yes, GP Specialists, I called it, C&E. But yes, same thing, sorry.

Yes, same thing -- okay. Yes, yes, yes. On the product, yes. So we acquired that business at the beginning of August for about 25 -- I'm looking at, Brian, $27 million, something like that.

Yes.

It will add about $1 million of revenue per quarter.

Our next question is from Jon Block with Stifel. Please go ahead.

I'll start with MiSight. Sort of one question with two quick hits to it, the first is just, Al, you did a great job breaking down the market and the market size. What would it take for you guys to get label expansion beyond 8 to 12? You mentioned a pretty big chunk sitting in the teen years, so how do we think about your ability to go 13 to 18 over time? And then you also talked about the halo effect. And I get it, it's early, Al, but is there any data that you have on for a MiSight adopter, what their overall CVI growth rate is versus, call it, the non-MiSight adopters? And then I've just got a follow-up.

Yes. So getting the label beyond 8 to 12 will be a little challenging here just in terms of where we are from a clinical perspective. Now we're doing a lot of R&D and clinical work and so forth, and we'll have -- we'll expand out the product offering and so forth. But I don't think we'll be seeing a label beyond 8 to 12 for a little while. But keep in mind two things. One, that's here in the U.S. market per the FDA. Outside of the U.S., you don't have that restriction. And then even here in the U.S., based on some of the initial fitting -- because we already have hundreds of kids in the U.S. are already wearing MiSight, and a doc could fit it off-label if they wanted to. With respect to the halo effect, it's still really early here in the U.S. We've seen some of that halo effect outside of the U.S. We're seeing it some here in the U.S. in terms of conversations we're having because we're getting ECPs wanting to talk to us, wanting to have a dialogue about what is MiSight, how does it work, how do I sell it, how do I bring that into my practice, right, how do I adjust my practice to accommodate MiSight, how do I incorporate telemedicine into that sale. All that kind of stuff, well, as you can imagine, when you're having that dialogue with them, you're also taking the opportunity to talk about your other products. So there's no question there's a positive halo effect there. But at this point in time, I don't really have numbers to be able to give you to specifically point to.

Okay. Got it. Fair enough. And then second question is just when you talked about CVI last quarter, you talked about three distinct headwinds. It was inventory, it was consumption, it was new fits. And you mentioned about sort of clawing back to normalized inventory between 3Q and 4Q, consumption is just partially dependent on COVID, and then there's a new fit. I guess where I'm going with this is with most of the practice opening, when we look to next year, whether that's your fiscal year or the calendar year, do we revert back to normal growth, right? Because inventory should be trued up by the end of the fiscal 4Q. When we think out to fiscal '21 or calendar '21 for you or the industry, do we think about a reset in the market sort of reverts back to that mid-single-digit to mid-single-digit-plus range?

Yes, I do think it can. I mean you're going to have inventory work itself back here, as we talked about. So you kind of take that off. If you look at consumption, I think we were all concerned about consumption to some degree. People working from home and what was going on, what we've seen more recently here over the last couple of months is, one, people going back to work. Our office here is probably a third to a half filled up on most days. But the other thing you're seeing is the video conferencing. You do video conferencing now, in our company at least, and I think it's trued in a lot of places. You are on the screen, so it's not a conference call. It's a video call. So the same reason that people are wearing lenses for cosmetic reasons, they're now wearing them because they're probably even more conscious about how they're looking than they were even coming into the office. So that's helped. There's other anecdotal stuff you talk about glasses fogging up as an example, right? I mean so you're seeing contact lens wearers actually wear their contact lenses more because they're getting annoyed with glasses fogging up, and you think that's only going to be worse in many parts of the country as winter gets here. So I think there are some -- there is obviously negatives on consumption, but there's positives on consumption that we probably weren't anticipating. New fits are definitely coming back up. There's been some pent-up demand on new fits. We've heard that. We've seen that in the research that we're doing out there and especially among your teenagers, your younger group of people. So COVID is still out there. It still exists, right? It's still a challenge in a lot of parts of the world and some markets coming back. So I certainly don't want to get ahead of ourselves. But I do think, as we move into next year, depending upon when it is during the year, you're going to see contact lenses move back to normal growth rates, if you will.

Our next question comes from Anthony Petrone with Jefferies. Please go ahead.

And maybe two follow-ups there to Jon's questions. One on CVI, I'm just wondering what was the benefit in fiscal 3Q from new fits specifically associated with back-to-school? And just how is the back-to-school season playing out, I guess, in fiscal 4Q? And how much of that is reflected in that guide? And then on margin expansion, just a follow-up there would be, you mentioned that, obviously, some of the benefit was cost control. How much of the cost control is sort of completely executed? Or is there more cost control efforts that are still available to the Company when you look out the next 12 months, should the COVID cycle sort of extend?

Sure. I'll answer the first one, give a shot on the second one and let Brian add, if he has color he wants to add. It's tough on the back-to-school side of things. I mean we're -- we were sitting, at one point, months ago, thinking that, that was going to be close to zero. Back-to-school has kind of turned to, if anything, back to learning, if you will, right, where you're seeing people online and learning online. And what we've seen from a lot of people and kids, right, is everything that goes along with that, the headaches, the digital eye fatigue and so forth and parents reacting by calling optometrists and asking them about that. So the decline that we saw -- that we thought we would see has not happened. It's really hard to give specific numbers around that, but it's clearly better than we anticipated it was going to be, and it seems to be holding that way with parents concerned about their kids' eyesight. On margin expansion or on expense control, if you will, I mean, I think we did a really nice job. Well, I know Brian did a really nice job and the team here in terms of controlling expenses, some natural, some controlled, if you will. I'm not sure there's quite that much more to do, but I think we're in pretty good place with our expense control. I'll let Brian add to that.

Yes. No, there's not much to add to that. I mean we were down $5 million sequentially, $53 million more revenues. We'll have some MiSight investments that will hit us in Q4. But I think we're in a good place and nothing really to add to Al.

Our next question is from Chris Cooley with Stephens. Please go ahead.

Congratulations again on a really solid third quarter. Maybe just I'll shift gears a little bit to CooperSurgical. Could we maybe go back -- if I missed this, I apologize, but talk about the growth that you saw in PARAGARD, maybe there in total for the quarter? And when we think about CSI as a whole -- I should say PARAGARD as a whole coming back into the next fiscal year. Do you think that that's kind of in line with historical expectations for growth? Are you starting to see more of a natural lift? I'm just curious about what do you think about the normalized growth rate for PARAGARD longer term? And I'll just go ahead and ask as well for my second. On CooperVision, just following up as well there to Matt's earlier question, Energys has been around for a while. It's a great product. But should we expect to see maybe heightening marketing around that, kind of reintroducing it to practice? I'm just kind of curious what additional color you can provide around increased focus on Energys. That's, I think, the first time I've heard you call this one out in quite a long time. So I just want to hear a little bit more there as well if I could?

Yes. I'll touch on that one first. It's interesting. We talk about digital eye fatigue with kids because they're doing social media or TikTok or video games and all that other kind of stuff they do, and now they're doing their school on, on video. But it happens with parents also, obviously. We're on screens and doing all of our stuff. And then we're also at work doing stuff, and now we're on Zoom calls and whatever else all the time. That's what Biofinity Energys is about. So yes, I mean, it actually grew in the quarter, which was a pleasant surprise. I don't think you're going to see really higher marketing, if you will, from us associated with it. But you'll certainly see us reminding people that it's out there. I mean they know that it's out there because sales are growing, but putting a little emphasis on it and just saying, hey, guys, as a reminder, for those of you who are not fitting Energys, for all those people who are calling and talking to you about digital eye fatigue and some of the issues you're having, this is a perfect product for them. So, yes, that product is doing really well. We launched it probably two, three years ago, something like that, and it's done fine. But it's clearly doing better now, and I guess, if anything, right, COVID is like upside, if you will, for a product like Biofinity Energys, bringing attention to it. On PARAGARD, I mean we were down on PARAGARD for the quarter. We were, what, down 28% for Q3 because basically we had no sales in the first month of the quarter, and then everything kind of ticked back up, as I talked about, the channel inventory came back. We'll see the rest of the channel inventory come back in Q4. We're already seeing that right now. We're seeing placements go back to what they were at pre-COVID level. So we're pretty good shape on PARAGARD. I think at the end of the day, PARAGARD will still be down in Q4. And some of that is because you remember, last Q4, we had a strong PARAGARD quarter because we did a price increase. So we had a buy-in for PARAGARD in Q4 last year, so we have a tough comp on that. But I think as you move into next year, like I would anticipate PARAGARD going back to normal, to that kind of true normal in terms of placements and so forth, it's a mid-single-digit grower. It will obviously do better because it's got a couple of months it's comping against where we didn't have sales. But no, PARAGARD is doing well, and people seem to be a little bit more concerned about good health and so forth. And that trend in the marketplace about focusing on good health is obviously a positive for a product like PARAGARD, which is a non-hormonal IUD option and the only one in the market.

Our next question is from Matthew O'Brien with Piper Sandler. Please go ahead.

Al, the delta between you and the market this quarter was larger than we've seen it. And I get it's all relative because they're both down. But can you talk a little bit about where some of those gains are coming from? So if you kind of parse out how durable they are, you've obviously got the online retailers picking up and some of your own internal investments, but what are some of the real key drivers where we've seen that increase in that delta? And then how durable do you think some of those are, especially in an environment where you've got a big competitor rebating and another company coming out with some more and more competitive products?

Yes. I mean at the end of the day, I look at it and say, there's -- in my mind, there's no one more active in the market today with new products than CooperVision is. And I believe over the next year to probably several years, there will be no one in the marketplace more active with new products than CooperVision, period. So that's how I would answer that one. From the perspective of sales, we're not big with online retailers. So I think that -- and with online, I'm talking about nonfitters. We're big with fitters. Not the kind of the online distributors, if you will, right, the guys who aren't fitting product. So where we were probably heard initially because of that, as the markets rebounded, like when you look at June and July, the market rebounded with fitters. And it rebounded with key accounts and fitters and buying groups and so forth. That's where we're over indexed. That's where we're strong. So when I look at kind of durable growth and market share gains, I'd say, "Hey, we grew around the world. We posted record market share in all regions around the world, and it was driven by the stuff where -- by what we're doing." Right? We're strong with fitters. We're strong with key accounts. I've been talking about all the investments we put in that over the last couple of years. We're strong with new product launches where we're doing more and better product launches than anyone in the marketplace right now. We're strong with distribution. I've been talking about that over the years, and our capabilities now being able to ship product to people's homes and so forth. We're strong on that side of things. And we're strong on manufacturing, where I've talked about how we reallocated resources to focus more on manufacturing. That strategic plan there of focusing on those areas and executing on those areas for long-term share gains, when you had COVID hit and you're coming out of COVID now, all those past investments and so forth, all those strategic initiatives are coming to light to show the value behind them, and that's why we're taking share. And that's why I think that it's durable that we'll continue to take share.

Okay. That's really helpful. And then shifting over to MiSight again, the -- I understand again, we're in a COVID environment, but it looks like you might come up a little light of that $7 million to $8 million that you talked about. I know everybody loves Sarah Michelle Gellar and everything. But getting up to $25 million from maybe around $6 million seems like a big step. So I know there's a lot of investment coming in Q4, too, but what gives you that comfort? What have you seen maybe in some of those early accounts as far as uptake goes? And then how it progresses for the other 1,000 optometrists that gives you comfort that you can get to that $25 million in '21? And are you still comfortable with $50 million in '22?

Sure. Yes. When we look at the $25 million for next year, the assumptions that build to that $25 million are based on what we've already seen in other markets. So in markets around the world where we've launched the product and has seen success, like in Spain, in the U.K. and Australia and so forth, we did those launches. Now we didn't have the same consumer advertising programs and so forth. But the growth rates that we saw in those markets are the same growth rates that we're assuming we'll see in the U.S. and in Canada and other places. Now I would think that we could do better because we do have Sarah and other direct-to-consumer programs and other activity. And we're seeing a lot of acceleration and interest in new fits and so forth. But we are not looking at some abnormal growth rate or some crazy thing happening. We're just looking at saying, "Hey, if we do what we've done in other markets, we'll get up to that $25 million range." I think we can do better than that because at the end of the day, there's enough interest and enough success right now that I think we can exceed that. But there's nothing special there. There's nothing fancy there. It's just saying, "Hey, if we just do what we've done in other markets, that's what we'll do." And yes, I would confirm the $50 million number because as you break down the market and you actually look at the size of the market, and as MiSight moves to becoming standard of care within the optometry practice and as you see more offices looking and thinking about pediatric optometry, you're going to see that accelerate. And that market size might seem really big to some people…

Our next question is from Joanne Wuensch with Citibank. Please go ahead.

I'm going to put them both upfront. The first one has to do with reimbursement for MiSight. If it is being thought of as a treatment, do you think at some stage that you might be able to get the proper reimbursement for it? And then my second question is, usually on the third quarter calls, you sort of gave some broad guidance or commentary about the next fiscal year. Is there some way that you can frame next year?

Sure. On the reimbursement for MiSight, that would really blow up the market around myopia management. I think the answer to that question ultimately is yes. I do believe there will be reimbursement for myopia management and MiSight, in particular, at some point in the future. We're working on that ourselves as a matter of fact, spending money on that process right now. To be determined on the timing around that, but as medical professionals become more and more comfortable with the fact that this is standard of care, and this will be standard of care as a treatment, you'll ultimately get to the point where you're going to have reimbursement. So it's just a matter of time in my mind. Yes, on 2021, right now, we're not going to give any commentary on 2021. I'm sure you can appreciate that, right? We gave guidance on Q4. And we'll give 2021 commentary in December when we get there.

Our next question comes from Chris Pasquale with Guggenheim. Please go ahead.

One on guidance and then a quick follow-up for Brian. Al, I'm not sure I understand the idea that 4Q is an unusually tough comp. If I look at the numbers for last year, you did 7% in the fourth quarter that was in line with your full year growth rate. Asia Pac actually grew a little slower in 4Q last year than either 3Q or the year overall. So what is it about 4Q that makes it an unusually tough comparison?

Yes. I wouldn't say it's unusually tough comparison, except we did have the buy-in in Japan that created at least a tough comparison from that perspective. But I guess maybe more than anything, Chris, the point behind it is that COVID still exists, right? It's still out there. There are still issues with it. There could still be spikes and so forth with it. So I don't want to say things are -- we're guiding conservative or anything by those means because I don't think that would be appropriate to say. So I do think that 7% is not an easy comp. If you look at Q1 as an example, that's a little bit different of a story, right? Q4 is kind of a more normal/challenging comp from last year. So I don't want to overplay that by any means. So just kind of highlight that as one reason that we're not guiding to growing in Q4.

Okay. But fair to say that the fourth quarter guidance implies or at least bakes in some increased uncertainty rather than just taking into account known factors today.

Yes, that's a good way to put it, correct.

Okay. All right. And then, Brian, you mentioned you're coming up on the end of a multiyear CapEx investment cycle. Can CapEx actually come down meaningfully either next year or over the next couple of years to free up cash? There was a time when you were averaging closer to $150 million a year versus the more like $300 million we've been at for a while now.

Yes. I absolutely believe that, that could be the case. I mean I would expect that this year will be our peak year for CapEx, coming down next year and then coming down the year after. So with that comes free cash flow delivery, and I would expect free cash flow to go up.

And our next question is from Steve Willoughby with Cleveland Research. Please go ahead.

I have two. First, as a follow-up to a question that Jon Block asked, which he asked about sort of changing consumer wear trends. Al, I was wondering if you could talk about some other things that have potentially changed to either your business or the industry because of COVID. First, have you seen any change in the purchasing or the rate of purchasing and the annual supplies? And then secondly, it seems like there's been a shift over the last six months as it relates to direct-to-patient shipping. Just wondering what your thoughts are on that and if that sticks around or what impact that could potentially have. And then the third is just, do you think there has been any impact because of COVID as it relates to patients switching their brand or type of contact lenses less frequently because of a desire from both the patient and the physician to get the patient in and out of the practice? And then -- that's one question. My second question is just, do you have any concern over any potential pull forward in demand by patients wanting to use up their vision benefits prior to potentially losing their job later on in the fourth quarter. Sorry for all the question, but I appreciate it.

Yes. Yes, no worries, Steve. Yes. I don't know about a pull forward. We're not anticipating that. Every year, there always seems to be a little bit of buy-in that goes in associated with benefits and people using up their benefits and so forth. So I'm not sure it will be any different this year. We're not anticipating any changes associated with that. When you look at some of the different kind of consumer wear trends, right, some of the changes that have been happening out in the marketplace. I talked to Biofinity Energys as an example of a nice pleasant surprise for us. But you look at some of the other stuff out there, annual supply purchases, that's mostly a U.S. thing. It gets driven by those rebates, right? But it's mostly U.S., it's not so much the rest of the world. And even in the U.S., it's not that big of a number, but we haven't seen much of a change there. So from where we were running to where we are today, I wouldn't really highlight any real changes in that. And I don't know maybe there's like a push and pull there between some higher rebates, but people holding on to some money a little bit, but we haven't really seen a lot of changes on that side of things. The direct-to-patient shipping, I do think that that's a difference, and we saw a very significant spike in that around the world. We've seen that come back as people are getting out and are going to their doctors' offices and so forth. And I think we're all the same, right? I mean every single one of us wants to help people, and we want to help small businesses. So when you go into your optometrist office,…

Our next question is from Steven Lichtman with Oppenheimer. Please go ahead.

Al, I was wondering if you could give us an update on your key account work. You alluded to it earlier, of course. I know it's tough to be aggressive on that front when you were capacity constrained. Have you been able to really reengage there now given better supply? Or has COVID impacted that?

Yes. I won't get into specific details, but yes, we have been able to reengage and be more aggressive in terms of our discussions that we're having with those key accounts right now.

Okay. Fair enough. And then just a follow-up on fertility, I think last quarter, you talked about delayed recovery there as offices reopen, you have to go through the consultation, of course, process first. It sounds as though your visibility on a recovery there has improved. Are you seeing that patient consultation activity really picking up here over the last couple of months?

Yes. It's picked up really well, fertility. We're taking a lot of market share in fertility right now so -- although our numbers weren't that great, right? But we're still -- we're taking good share in fertility. We're doing really, really well in that space right now. The one thing I would say about that that's a little bit of a struggle is Asia Pac. We haven't seen Asia Pac rebound as fast as we've seen Europe and the Americas in terms of fertility clinics opening and traffic coming through. So I feel good if I look at the Americas and Europe in terms of clinics opening, foot traffic, which we have good visibility on, our market share gains, I think that Asia Pac is lagging a little bit. If you look at some place like India, as an example, where we do fairly well, and we were getting a lot of growth, they only have about 30%, 35% of their IVF clinics open right now. So I think that will come. There's no reason that, that doesn't come and they don't open, but that's kind of why I was referring to maybe it's more Q1 before you start getting cycles back to kind of pre-COVID levels.

And our last question comes from Robbie Marcus with JPMorgan. Please go ahead.

Maybe to start, I was wondering, you kind of talked around these, but if you could just put a finer point on them, what PARAGARD growth in the quarter was and how much stocking in fiscal -- or destocking fiscal 2Q and the dollar amount of stocking in this quarter and what you're expecting guidance in the fourth quarter.

I don't think we ever got into any of the stocking numbers on PARAGARD. Do you have the Q3 numbers for PARAGARD?

For PARAGARD, yes, the PARAGARD number for Q3 was 40 -- sorry, $34 million.

And any way just to frame the impact? Is it like 1% or 2% in stocking, more meaningful than that? Just trying to figure out what underlying versus stocking is as we exit the year.

Yes. I guess rough numbers, right, I say we're running somewhere roughly in the $15 million a month. It's a little bit higher than that, kind of in PARAGARD sales. And then we didn't have anything basically in April and May, so we probably were down about $30 million in sales, something like that because of the stocking. And that's what you're seeing work its way back through right now.

Sorry, Al. two separate questions, one is CVI stocking and destocking and the other was just PARAGARD.

Okay. Yes. So for PARAGARD, that would -- that answers kind of the PARAGARD. For the CooperVision stocking, I think that some of the inventory stocking, you'd probably never get back. People operate at lower levels, more efficient, that kind of thing. You're going to have some of that happen for a period of time or maybe it takes a while to come back. But I think of what we did get back, I think we got, say, half of it back in June and July. And then throughout fiscal Q4, we'll get the other whatever that amount is, $15 million or so, back in fiscal Q4.

Great. I appreciate that. And then just lastly, Bausch is moving to a split out as a stand-alone vision company. Can you maybe give us some thoughts on how, if any way, that will impact Cooper at all going forward?

Yes. I don't know how it would impact us. I mean from our perspective, I think Bausch is around 8% global market share, somewhere in that kind of range right now. So no, I don't see that having much of an impact on us one way or another.

And I'm not showing any further questions in the queue. I would like to turn the call back to Albert White for his final remarks.

Yes. Thank you, and thank you, everyone, for calling in and taking the time. I think the difference this quarter from what people were expecting to some degree, with some of the pickup in consumption, and then a lot of the unique things we have that are capitalizing on some of that real positive trends in the marketplace. There are some big trends that are going on and some new trends that are there. You look at things like Biofinity Energys taking advantage of what's going on in that -- the trend of more screen time. You look at MiSight with myopia management in kids and our ortho-k products and what we're seeing with Endosee Advance and so forth. And lastly would be fertility is another big mega trend that's moving in the right direction. So we're just hitting -- we have products kind of in the right place right now. I feel good about where we are and where the trends are going in the marketplace. So with that, we'll kind of wrap up. I hope everyone has a great Labor Day weekend and look forward to speaking with everyone in beginning of December for our next earnings call. Thank you, operator.

You're welcome, sir. And ladies and gentlemen, thank you for participating in today's conference. You may now disconnect. Have a wonderful day.