I’ve been here a long time now, what history would tell you is when we have this stuff happen, we get comfortable with the organic growth, if you will, the better organic growth that we have. And it certainly appears to be sustainable higher organic growth than we have had historically. Once we get comfortable with that, and I mean by that is you get these facilities in place, you get the packaging lines in place and the shipping lines and everything else and Brian touched on some of that. Once you get that stuff in place, you start leveraging it and you’re able to really drive some margin expansion. I think that will happen. As a matter of fact, I’m highly confident that, that’s going to happen. But I think we’re going to continue to deal with some of those challenges over the next year if you will, or some time frame managing that growth tied to the investment activity that we’re talking about, whether it’s in the fertility business, where we’re putting a lot of dollars or within our myopia management business, especially MiSight, where we’re putting a lot of dollars right now.
So, I think when you put that all together, and you step back and you go, okay, low double digits kind of makes sense for this year, it makes sense for next year. It will be interesting as we move forward and we build out some of this infrastructure and are able to leverage it, what will happen in some of the years after that.
Bradley Bowers : That’s helpful. And one follow-up on that, specifically within the CBI business. You mentioned your strategy to carry more SKUs in the Toric side. I just wanted to kind of hear about how much do you think that’s contributing to some of the wins in ophthalmology. We had heard from J&J that potentially there was some focus on the more core business as opposed to some of the more tail SKUs. In addition to how much of the infrastructure build-out is related to kind of maintaining that SKU range. And if we talk about in the past, I think it’s at least a couple of years, maybe 24 months to 36 months to see the benefit from manufacturing those contact lens lines. Is that the right way to be thinking about that and also from a market share perspective?
Albert White : Yes, Brad, that is a great question and a great point on that SKU range. I mean we do take the position that if a patient walks into an optometrist’s office, they’re able to be fit in a CooperVision product. So, we do have very wide SKU ranges, largest in the industry, there’s no doubt when you look at like the daily Toric, the MyDay Toric is by far the widest SKU range that’s available. It is expensive to manufacture those. It’s expensive to manage them through your logistics chains through — chain through distribution and so forth. But you’re exactly right. You move through a period of time where you’re increasing your production capabilities you’re improving your distribution capabilities and so forth, you get that behind you and you’re really, really in an excellent place, and it does take several years in order to get there.
So, we are on that journey right now. We’ve been there before. We’ve done it before. We’ve done it successfully before. I’m highly confident the team will deliver again. But that is another great example of one of the challenges we’re dealing with right now around our growth.
Operator: [Operator Instructions] Your next question comes from the line of Patrick Wood from Morgan Stanley. Please go ahead. Your line is open.
Patrick Wood : Thank you, so much, for taking my questions. I guess, the first one maybe on my side. You alluded to some of the work to happen on consumer awareness on that side. I mean you’ve got better coverage now. Do you think the marginal dollars need to be spent on the optometrist to convince the consumer? Or are we thinking DTC? And why shouldn’t we expect quite a lot of money to go in here to take advantage of the better coverage?
Albert White : Yes. I don’t think it’s going to be DTC-related. I mean we spent money on that side of things. We’ll continue to spend some, but I don’t think it’s going to be significant dollars because that’s more social media and so forth. The focus is more on the optometrists themselves. I think the one thing that could be a little different would be we’re starting to see insurance reimbursement or insurance coverage if you will. I mentioned Aetna is now covering MiSight site. We’ve had Kaiser here for a little bit covering it. As we, knock on wood, pick up other insurance companies covering it, working with optometrists, and ensuring that they know it’s available and how it works and with families. That will take us a little bit of work.
That’s easier with like pediatric ophthalmologists who are a little bit more comfortable with some of the insurance reimbursement activity. But I think that could be a little bit of — a little bit of work and cost us a couple of bucks, but we built that into all of our assumptions. But I do think that we’re gaining — well, I do — I know we’re gaining traction in MiSight right now. We see it in a lot of different markets, especially here in the U.S. and throughout Europe. So, we’re going to continue to invest in it. I mean, we’ve got our shoulder behind it. Now we are going to leverage some of that. We did build out a fairly large infrastructure, and we will start leveraging that a little bit more as we move forward. But there’s still dollars to be spent, no question about it driving that business forward.
We want to drive it. It’s a good long-term sustainable business. So, we want to continue to push it. That’s for sure.
Patrick Wood : Totally. And then maybe just one more. In vision, I guess, I think I know the answer to this because there’s been supply chain challenges with some of your peers. But do you have any sense from like sell-in relative to sell out? Like is the channel presumably quite lean in terms of inventory side of a lot of players? Or is it quite normalized at the moment?
Albert White : I would say inventory is lean.
Patrick Wood : Thank you, so much.
Operator: Your next question comes from the line of Robbie Marcus from JPMorgan. Please go ahead. Your line is open.
Robbie Marcus : Okay, thanks for taking my question. And I’ll add, congrats on a good quarter. Two for me. Maybe first, gross margin and operating margin are both fairly below pre-COVID levels. How do you think about your ability to return to the pre-COVID margins, particularly on operating margin? And how far out is that event?
Brian Andrews : Yes, Robbie, I’ll take that. So, I mean, if you look at pre-COVID, a big, big driver to operating margin reduction is FX, that’s almost half of that difference. You’ve got some operational items in there. Obviously, we talked about this a few quarters ago about share-based comp. We had some changes of vesting from five years before. Supply chain in general, inflation, higher cost, freight, even though things have gotten better, they’re elevated from where they were in 2019. And then, of course, all those infrastructure investments, IT being a big one right there that’s been elevated since 2019. So, if I just kind of just play back what Al just said earlier and I had in my prepared remarks, we’re going to start to leverage some of that stuff.
And hopefully, one of these days, FX starts to move in our favor. But I’m confident that we’ll start to get some — we got some OpEx leverage this quarter. You’ll see some more next quarter and as we get into next year from leveraging those investments from this year.
Robbie Marcus : Great. And maybe one on free cash flow. I know this year has a lot of investments, you’re at about a 48% free cash flow conversion through third quarter, fourth quarter is going to be even lower. So, let’s say you end the year 45% or lower on conversion. Same sort of question. Are you comping yourself against the med tech average of about 80%? And when do you think you might be able to get back up to those levels? Thanks.
