The Cooper Companies, Inc. (COO) Q3 2018 Earnings Conference Call Transcript

The Cooper Companies, Inc. (NYSE: COO)Q3 2018 Earnings Conference CallAugust 30, 2018, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to The Cooper Companies, Inc. third quarter 2018 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session and instructions will follow at that time. If anyone should require assistance during the conference, please press * then 0 on your touchstone telephone. As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference, Kim Duncan, Vice President, Investor Relations and Administration. Ma'am, you may begin.

Kim Duncan -- Vice President of Investor Relations and Administration

Good afternoon and welcome to The Cooper Companies third quarter 2018 earnings conference call. During today's call, we will discuss the results included in the earnings release along with the updated guidance 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 revenues 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.

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Forward-looking statements depend on assumptions, data, or methods that may be incorrect or imprecise and may be subject to risks or 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, all of which are available on our website at cooperco.com. Should you have any additional questions following the call, please call our investor line at 925-460-3663 or email ir@cooperco.com.

And now, I'll turn the call over to Al for his opening remarks.

Albert White -- President and Chief Executive Officer

Thank you, Kim, and good afternoon, everyone. Welcome to our third quarter 2018 earnings conference call. We made a lot of progress this quarter and I'm happy to say our strategic investments are paying off through accelerated revenue growth and strong momentum.

As we continue driving success by capitalizing on current market conditions and our strong product portfolio, we have accelerated investment activity around several initiatives, including advertising and promotions associated with key accounts and CooperVision and PARAGARD at CooperSurgical. We're confident this investment strategy will result in continued strong revenue growth.

Regarding our third quarter consolidated financial results, we reported revenue of $660 million, up 19% year over year, which is an all-time high for the company. Non-GAAP earnings per share were $3.00, up 14% year over year. Overall strength in revenues, gross margins, and a lower tax rate were offset by planned spending and incremental currency headwinds, including FX being $0.10 worse than we had forecast for the quarter.

Looking at our two businesses, CooperVision posted record quarterly revenue of $489 million, up 12% or up 9% pro forma. We saw a noticeable uptick in our daily silicone hydrogel lenses with pro forma growth of 43%, driven by MyDay and Clariti posting solid growth worldwide. CooperSurgical posted record revenues of $171 million, up 44% or up 6% pro forma, led by stronger than expected growth of 9% from PARAGARD.

Moving to the details -- CooperVision posted solid revenue growth in all three regions with the Americas up 8%, EMEA up 6%, and Asia-Pac up 14% all pro forma. The Americas strength was driven by a very strong quarter for Clariti and MyDay. In particular, the launch of MyDay Toric is going extremely well and we're seeing a halo effect on the sphere, where MyDay sphere posted really strong results.

EMEA posted solid results against a very challenging comp, with growth in the region driven by our full suite of silicone hydrogel products, including our dailies and or Biofinity and Avaira suite of products. Success was especially evident within our key accounts, where we have been heavily focused and gaining traction.

Asia-Pac continued posting very strong results, driven by our silicone hydrogel dailies and Biofinity. This is a fantastic growth region for us and our investment strategies around key accounts, salesforce expansion, and geographic expansion continue yielding a lot of success. So, overall, Q3 was a very strong quarter for a number of reasons and we expect the strength to continue based our momentum.

On products, Biofinity and Avaira combined to grow 7% pro forma. Regarding Biofinity, we were slightly capacity constrained again this quarter, but have already added capacity and will be adding even more in the coming months. This capacity expansion will help the entire Biofinity franchise, but especially Biofinity Energys, where demand has exceeded supply as this new product has been more successful than expected. Regarding Avaira, total sales declined slightly, but the vitality upgrade is now finished outside of a few small markets where we're awaiting final regulatory approval.

A nice takeaway is that we had growth outside the Americas, where we've generally been able to focus on selling rather than transitioning the product and that's a good sign for future results.

Turning to product categories, we remain a global leader in torics and multifocals and grew 9% and 10% respectively pro forma. Growth was driven by our silicone hydrogel lenses, including MyDay Toric, which is being received extremely well in numerous markets, and Clariti Multifocal, which posted strong growth.

Turning to the broader $8.3 billion soft contact lens market, we're continuing to see strong growth led by the shift to daily silicone hydrogel lenses, broader product offerings, and geographic expansion. Daily lenses continue to drive the majority of the growth, now accounting for roughly $4.3 billion or 51% of the overall market. And within dailies, it's no surprise that silicone hydrogel lenses are driving the majority of that growth.

With respect to new fit data, CooperVision saw significant strength, with new fit solidly outpacing our market share. This was especially true for silicone hydrogel dailies. This strong new fit data is a great time for continued robust growth and is a nice segue into a topic I want to spend a couple minutes on and that's key accounts.

Key accounts is a general term we use which includes global retailers, regional chains and certain buying groups. This is a topic many of you have heard me discuss recently, as these accounts are growing faster than the overall market and we expect that to continue as a sustainable long-term growth trend.

As such, we have been proactively investing in this area and our performance has been exciting expectations, which is reflected in our revenue growth and strong new fit data. We further accelerated investments in this area in the third quarter, expanding our key account management sales and support teams, while increasing related promotional and advertising activity. This is in conjunction with our heightened investment activity enhancing our distribution and packaging capabilities to improve our ability to provide customized product offerings.

All this activity is focused on supporting our partners and shifting new wearers to CooperVision faster than in the past, as we look to capitalize on our robust portfolio of silicone hydrogel products and current market conditions.

A key part of this strategy is remembering we operating in an annuity business and while the upfront cost to win new patients will tail off, the revenue from these patients will continue for many years, as new wearers stay with their lenses on average seven years.

It's also important to add that the independent practitioner remains an important part of our business and we continue fully supporting this channel, including through our unique digital marketing and support platforms such as EyeCare Prime. Given all this, we are more confident in our future revenue growth and are raising CooperVision's Q4 pro forma revenue growth guidance to 8% to 10%.

Moving to CooperSurgical, we reported quarterly revenue of $171 million, up 44% or 6% pro forma. This was driven by our office and surgical products, which grew 8% pro forma, led by PARAGARD, up a healthy 9%. Regarding PARAGARD, based on the momentum we've been seeing, we've increased promotional and advertising support and recently added a number of additional sales reps. We remain confident this product offers a high-margin multi-year growth opportunity and are investing accordingly.

Outside of PARAGARD, but still within office and surgical products, we had a very strong quarter with strength in several focused products, including our Endosee hysteroscope and our next generation uterine manipulator, adding to some unexpectedly strong buy-in activity on some of our older products.

Meanwhile, fertility grew 4% pro forma led by fertility solutions, which includes products such as media and medical devices growing double-digits. This growth was offset by softness in our genomics business, where significant time was spent completing the transition away from carrier screening and NITT. This process wasn't easy, but we moved quickly and are now returning our full focus to the IVF clinics, which is exactly where we want to be.

We're a global leader in fertility and our engagement with fertility clinics around the world is very strong. We offer market leading products throughout our portfolio, including media, micro-pipettes, embryo transfer catheters, and certain genetic tests. This product portfolio has been growing nicely, which we expect to continue.

In conclusion, I want to highlight that I'm really excited about our market positions for both CooperVision and CooperSurgical. To summarize a few key points, CooperVision posted a very strong quarter with 9% pro forma growth, led by strength throughout the world, including a nice uptick in the Americas and very strong growth from our daily silicone hydrogel franchise.

CooperSurgical posted pro forma growth of 6% with strength seen in several areas, including PARAGARD growing 9%. Given our strong product portfolios in both businesses, combined with current market dynamics, we are excited about the future and look forward to maintaining our strong momentum.

And with that, I'll turn the call over to Brian.

Brian Andrews -- Chief Financial Officer and Treasurer

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.

As Al mentioned, revenues were strong this quarter and gross margins also showed nice improvement, increasing to 67.4%, from 64.8% last year. CooperVision's gross margin was 65.9%, up from 65.5% last year. Improvement was seen from positive manufacturing efficiencies due to the higher volume moving through our plants and favorable product mix of Biofinity and the shift to Avaira Vitality being key drivers.

This is partial offset by the negative impact of currency and a modest increase in rebate activity. CooperSurgical's gross margin improved significantly to 71.7%, up from 62.4%, driven by the addition of PARAGARD.

Regarding expenses, consolidated operating expenses grew 20.8%, driven by advertising and promotion activity supporting key accounts and PARAGARD and a 27% increase in R&D related to new product development work, including activity around Myopia Management. Operating income grew an impressive 27.5% with operating margins improving to 27.8%, up from 25.9% last year.

Below operating income, we reported $22.8 million of interest expense and an FX loss of $2.7 million from negative currency moves against our inner company loans. Our effective tax rate was 6.2%, which was lower than expected, primarily due to the realization of investment credits associated with offshore manufacturing expansion and excess tax benefits related to stock-based compensation.

Non-GAAP EPS for the quarter was $3.00, with roughly $49.7 million average shares outstanding. Within this, FX was $0.10 worse than we had forecasted. We posted $183 million of free cashflow for the quarter comprised of $235 million of operating cashflow, offset by $52 million of CapEx.

Free cashflow was very strong, helped by improved working capital management, including executed on an advantageous receivables program. With this strong cashflow, we reduced total debt to $2.294 billion, and net debt declined to $2.146 billion. Our bank-defined leverage or net debt to adjusted EBITDA decreased to 2.45 times, which moved us a tier lower on the pricing grid, thus reducing our borrowing rate by 25 basis points.

Regarding guidance -- for fiscal Q4, we expected total company revenues in the range of $634 million to $649 million, including CooperVision revenues of $468 million to $477 million, up 8% to 10% pro forma, and CooperSurgical's revenue of $166 million to $172 million, up 3% to 6% pro forma.

Non-GAAP EPS guidance is $2.90 to $3.00, assuming a roughly 8% effective tax rate. Within this, our FX assumptions from the time we provided guidance last quarter reduced revenue by roughly $10 million and reduced non-GAAP EPS by $0.13. On a full-year basis, this translates to consolidated revenue guidance of $2.515 billion to $2.53 billion with CooperVision at $1.869 billion to $1.878 bill, and CooperSurgical at $646 million to $652 million.

Full year non-GAAP EPS guidance is $11.55 to $11.65 and free cashflow is still expected to be around $423 million for the year. Regarding Fiscal 2019 guidance, we're not going to get into details at this time other than to say that we're focused on driving strong revenue growth and low double-digit constant currency operating income growth. As is our practice, we'll provide full guidance on our December earnings call.

And with that, I'll hand it back to the operator for questions.

Questions and Answers:

Operator

Thank you. Ladies and gentlemen, if you have a question at this time, please press the * then the number one key on your touchstone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the # key. Again, that's * then 1 to ask a question. To prevent any background noise, we ask that you please place your line on mute once your question has been stated. In the interest of time, we do ask that you limit yourself to one question and one follow-up. One moment for questions.

And your first question comes from the line of Jeff Johnson with Baird. Your line is now open.

Jeffrey Johnson -- Robert W. Baird -- Managing Director

Thank you. Good afternoon, guys. Can you hear me OK?

Albert White -- President and Chief Executive Officer

Hey, Jeff. Yeah.

Jeffrey Johnson -- Robert W. Baird -- Managing Director

Great. Al, I just want to dig into the key account commentary a little bit. I guess a couple questions on that. One, breadth versus depth of those accounts, these investments in that -- have you won any new key accounts, any that you can talk about versus how much are you going deeper, maybe capturing more business there? And then how much are the new distribution center capabilities?

I think in Rochester, some of the new robotics and labeling stuff that you've been working on hasn't yet come on or maybe it does here in the near-term. But how much does that maybe set you up in the longer term to kind of wish additional business or take even bigger share in those retail accounts and other key accounts?

Albert White -- President and Chief Executive Officer

Yeah, Jeff, good questions. On the first point on key accounts, we're talking about new business here. So, one of the things that's interesting is as we've done more work with what we're calling key accounts and some of the large retailers and other operations around the world, we've been winning new business there.

So, when we go in and win business with a new account, that is frequently a multi-year contract. Some of those contracts will very large and we're in the early stages of those contracts. So, when you when that kind of business and you got the opportunity, you have the chance to go in there and be aggressive and work with the partner in terms of increasing your advertising, your promotional activity with that partner to drive new wearers to your product faster. That's what we're talking about doing.

So, we're kind of in a unique opportunity here where we're winning some business, we won business, we actually have some business opportunities that we're working on that we're pretty excited about, so we're talking about executing upon contracts. That's different than what we discussed in the past. We talked about Salesforce and putting more feet on the street. We've done that. Well, that's proven to be successful. Some of that success has resulted in some new multi-year contracts and now, we need to execute on that. So, I'm pretty excited about that and it kind of props up our future revenue growth.

If you look at the DCs, we have been doing a lot of work on that -- you're exactly right -- to really operate our distribution centers and our capabilities around labeling and packaging and shipping smaller units and so forth. A lot of that activity is in process right now. We'll start that at the very beginning of this next fiscal year and slowly roll that out through our distribution centers so we don't have shipping problems and so forth. You'll see that in the coming years.

Now, one of the things that you naturally get any time you're doing the kind of work we're doing in DCs, which includes opening brand new distribution centers, expanding distribution centers and upgrading distribution centers, you build those out for future growth. So, you naturally end up with inefficiencies there because you have excess space or excess capabilities and so forth and you grow into those over time.

So, I think we're probably at that stage from a distribution perspective where we're on the front side of that and we're dealing with the burden of higher costs and so forth. But as you said or kind of alluded to, it positions us really well to be able to win these contracts and continue to be able to offer things to key accounts that they require in order to win bigger pieces of their business.

Jeffrey Johnson -- Robert W. Baird -- Managing Director

Yeah. I guess my follow-up on that would be if I look at your FX guidance, it looks like the cut you made to full year fits perfectly with the $0.10 and $0.13 you're talking about as headwinds this quarter next, but that would also mean none of the revenue upside or at least the pro forma organic growth upside is not flowing through to EPS. I would assume, again, because you're reinvesting that, it's the DC investments, it's the promotional investments and the new key accounts, things like that. Is that the way to think about it, that just doesn't flow through because of those investments?

Albert White -- President and Chief Executive Officer

Yeah. You're absolutely spot on. So, FX kind of brought us back. We incorporated that. Our tax rate came in a little bit lower this quarter and it looks like it will be a little bit lighter. But we are increasing our investments. Most of that stuff, the vast majority of those incremental investments are associated with winning wearers faster from contracts that we already have. I think that's a key point. This isn't about putting feet on the street hoping to win business. This is executing on business that we want.

And we're in a great position from a competitive standpoint of having products available, premiere products available in the marketplace. We have the most robust silicone product portfolio in the market right now and now is the time to be proactive and aggressive and capitalize on that.

Jeffrey Johnson -- Robert W. Baird -- Managing Director

Thank you.

Operator

Thank you. And our next question comes from the line of Larry Biegelsen with Wells Fargo. Your line is now open.

Larry Biegelsen -- Wells Fargo -- Analyst

Hey, guys. Thanks for taking the question. Al, can you just clarify one thing in Jeff's question? Is FX $0.23 worse since last time or is it $0.13 worse since last time?

Albert White -- President and Chief Executive Officer

It's $0.10 worse in Q3 and $0.13 worse in Q4, so $0.23 in the back half of the year, but a $0.10 and $0.13 by quarter.

Larry Biegelsen -- Wells Fargo -- Analyst

Perfect. Then for my question, I wanted to focus on 2019, Al. When you look at the full year 2018 guidance for Cooper overall, it's about 6%. It looks like pro forma CVI about 8%, but the second half is much stronger than the first half of the year. So, how should we think about the momentum into fiscal 2019? Should we be looking kind of at full-year 2018 guidance as a jumping off point or the second half of 2018 as a jumping off point? I did have one follow-up.

Albert White -- President and Chief Executive Officer

Well, I'll tell you, I look it a little bit more as the second half of this year. We have good momentum in both businesses right now. We're investing according to take advantage of that. I would anticipate you see that return, so to speak, starting to show up in revenues in Fiscal 2019.

Larry Biegelsen -- Wells Fargo -- Analyst

That's helpful. And then sticking with that Fiscal 2019, just turning to EPS, I heard the commentary there, but could you maybe quantify some of the headwinds, tax, how do you see that sequentially at this point, interest and FX. So, can you just help us just refine some of the comments you made or Brian made in his prepared remarks versus how to think about earnings in 2019? Thanks for taking the questions.

Albert White -- President and Chief Executive Officer

Yeah. I think that if you look at headwinds -- Brian was referring to operating income growth -- we obviously have taxes. We're probably looking right now at around an effective tax rate of let's say 14%, something like that with respect to next year. Now, we'll fine-tune that number as more tax information comes in. We do our work and so forth so we can give you a better number in December. Right now, it's probably a fair number to plug in there.

We're doing a great job on cashflow generation. So, we'll be generating cash. We'll be focused from a capital perspective on paying down debt, maybe looking at a couple small pocket acquisitions if we can find them and some stock buyback. We'll get in a situation where debt reduction will help offset any future interest rate increases. We'll see how that plays out. Again, we'll have more color on that by the time we hit December. And then FX and FX is always a little bit of the wildcard.

So, when I look at it, though, one of the points I think that's an important takeaway is we are doing incremental investments here in order to drive our revenue growth. But as a company, we're still going to put up strong OI growth. That's why we're going and saying, "Hey, guys, double-digit or low double-digit OI growth on a constant currency basis is something you can still expect from us, even with these enhanced investments."

So, next year by nature is a little bit more of a challenge year for us, if nothing else just because of having to hurdle the big jump in the effective tax rate.

Larry Biegelsen -- Wells Fargo -- Analyst

Thank you for taking the questions.

Operator

Thank you. Our next question comes from the line of Larry Keusch with Raymond James. Your line is now open.

Lawrence Keusch -- Raymond James -- Managing Director

Thanks. Good afternoon, everyone. So, Al, I just want to stay on the topic of the spending. Look, I think clearly, the topline reflects a lot of the efforts here. I think you've been, in fairness, suggesting that you were looking to invest more. I just want to be ultra-clear as we think about this going forward, do you anticipate that you will be in investment spending mode here for the next several quarters? I don't know if you want to sort of think of it as you move into 2019.

I guess the other part of that question is there's a lot of protective nature to this and focusing on the accounts, but I'm also wondering if you're seeing anything out there in the marketplace that also suggests to you that you need to spend more to keep that topline engine going.

Albert White -- President and Chief Executive Officer

Yeah, Larry, I would say probably a key point here is no, we're not seeing something out in the marketplace that's saying we have to go spend a bunch more money in order to drive our growth in order to keep it a certain decent number. We're looking at it saying from a market position, where we are today with our products and with our offerings and our capabilities, we believe we're in a position right now where we can execute and take a lot of share.

What I'm talking about is new wears, new fits. That's what you're seeing. We're seeing that in the new fit data, which continues to be very strong for us and our new fit data being solidly ahead of our market share. So, when I look at something like that and I say new fit data coming in strong.

We're winning business from key accounts, we need to execute on that and take advantage of that and convert wearers. You convert a new wearer and you spend a couple extra dollars to get that new wearer in and you're promoting, you're working with your partner, you're making that happen. You have that wearer for a long period of time, seven years on average. So, you're getting a fantastic return on that.

Right now, it's a matter of saying we can drive higher growth. You haven't seen CooperVision posting numbers like 9% pro forma growth in a long time. That's a really solid number. Our guidance for this number, 8% to 10% pro forma growth is a really solid guide. So, I look at this as we're investing and so forth, but we've proven that it can be successful. We just put up a good number in Q3. We're guiding to a good number and we feel confident we're going to be able to put up good numbers.

Now, when you look at the future, we are working on other opportunities out there. Frankly, I hope we win those opportunities and we continue to capitalize on them. You never know with the market. You have competitors and they have different things, but when you have opportunities, you take advantage of the opportunities. To me, that's exactly where we're at right now.

Lawrence Keusch -- Raymond James -- Managing Director

Okay. Perfect. That makes a lot of sense. Then I guess the second question is in Asia-Pacific, which on a comp-adjusted basis decelerated last quarter and then accreted this quarter, again, just thoughts on what's doing well there in Asia-Pacific. It feels very strong right now.

Albert White -- President and Chief Executive Officer

Yeah. The Asia-Pacific region is strong. You're right on that. The thing I love about that region when I look at it is how diversified the growth is. We'll talk about in the Americas the trade up to dailies and the trade up to daily silicones within that. You look at the Asia-Pac region and we're getting growth from our full portfolio of products there.

Daily silicones are doing really well. Biofinity is doing well. Even some of our traditional hydrogel products are doing well there. You're seeing diversified growth geographically, meaning there's a number of different countries driving growth there for us and you're seeing opportunities with some of the key accounts, some of the bigger chains there that we're getting in the door and having some opportunities with.

Keep in mind, we're under-indexed in Asia-Pac. So, we're investing there in order to be able to drive that growth. I think some people at certain points have thought that our investments in sales force expansion and so forth was really a US dominated theme, but it's not. It's also Asia-Pacific. You're right. We do have a good runway there for many years of strong growth.

Lawrence Keusch -- Raymond James -- Managing Director

Okay. Terrific. Thanks, Al.

Operator

Thank you. Our next question comes from the line of John Block with Stifel. Your line is now open.

John Block -- Stifel Financial Corp. -- Managing Director

Great. Thanks, guys. Good afternoon. Just two relatively quick ones -- the first one, I also want to go back to the key accounts. Does the margin profile, Al, of the key account, it seems like some of these wins are certainly helping to keep the topline momentum and we see that in your Fiscal 4Q guide. But on the margin side, is it really the upfront cost to win the business or is it the ongoing margin structure of the key accounts? Is that a bit lower due to the fact that they're larger accounts and maybe some pricing concessions. Maybe if you can flesh that out a little bit.

Albert White -- President and Chief Executive Officer

John, a lot of that is really upfront cost. What we're really trying to do right now is change the way we've handled some of these opportunities from the past. So, if we had a similar opportunity with some of these key accounts, we would go in there and we would convert wearers to our products, working with our partner trying to make that happen.

Now, at times, we would "tighten our belt," so to speak, because currency would move against us. Well, that as an example would mean pulling back on some of that activity. Now, that would pull back on some growth opportunities, but it would put better earnings in the very near-term to the bottom line.

What we're talking about right now is saying let's not react to short-term currency moves. Let's take advantage of the portfolio we have. Let's invest those upfront dollars. Let's win those new wearers and we'll keep those wearers for a long time. So, the returns are very strong on those. You'll see that in the outer years. There's not a situation here where the margins are worse. Now, each individual contract is different, but I would certainly not look at it as ongoing costs as much as I would look at it as upfront costs.

John Block -- Stifel Financial Corp. -- Managing Director

Okay. Got it. So, arguably, to your last point, those wins should start to pay off or materialize back half of fiscal 19, fiscal 20 when we see those returns really start to flush through the P&L more meaningfully.

Albert White -- President and Chief Executive Officer

Yeah, depending on the timing of any other new contract we want. If revenues start to come down, then our profit situation will be better than what it would have been before this strategy is being implemented.

John Block -- Stifel Financial Corp. -- Managing Director

Understood. Understood. Okay. And then just a quick shift over to the CSI part of the business and more specifically PARAGARD. So, the rev is up 9%. I think last quarter, it was up 11%, I believe. I think the 9% was a difficult comp because of what went on right before you guys acquired the asset. Maybe just, Al, high-level thoughts, good return from the sales hires, are you ready to go ahead and say this is a high single-digit grow or mid-single-digit plus or how do we view PARAGARD longer term? Thanks.

Albert White -- President and Chief Executive Officer

Yeah. Boy, the guys are doing a fantastic job there. I was impressed by that number and continue to be impressed by the work the team is doing there around PARAGARD. I've seen some of the new advertising work and I think it's spot-on. I'm really excited about it and excited about the numbers.

I still would probably temper some enthusiasm there. I think we'll probably get a mid-single-digit, maybe strong mid-single digit kind of growth number in Q4 and probably thinking that product has been in the market a long time so maybe I'm being conservative thinking mid-single-digits, um, but, um, you know, it's a little tough one to answer, like I don't want to get ahead of myself on that one, but the numbers keep coming in pretty strong.

So, for now, I would probably lean toward mid-single-digits. Frankly, if we could get mid-single-digit growth out of that product at the margins that it has and the cashflow that it throws out, we'd be really happy with that. Now, if we could invest a little bit more and get that to be more sustainable, kind of upper, mid-single digit or even in upper single digits, that would obviously be fantastic. So, we'll see how that plays out, but pretty good results and pretty good momentum there right now.

John Block -- Stifel Financial Corp. -- Managing Director

Perfect. Thanks, guys.

Operator

Thank you. And our next question comes from the line of Brian Weinstein with William Blair. Your line is now open.

Brian Weinstein -- William Blair -- Analyst

Thanks for taking my question. Talk about the new fits, Al, and your comments that you're already outpacing the market. Can you give us an idea of what the share of new fits are? Where are you referring to? Is that Americas? Is that worldwide? Is that within a specific product category or not?

Albert White -- President and Chief Executive Officer

Yeah, Brian. We get new fit data in different markets. A lot of that comes from the Americas here. What we try to do every single quarter -- and we kind of have a standardized internal model on the new fit data -- is look at all the data we get here from around the world and we pull that together and say what's the trend behind that.

Now, it's not the best data in the world because there are some people in the world that don't supply data. But frankly, over the years, we've accumulated a pretty good internal model that shows what the new fit data is and on an overall basis and then also down to some of the levels like on dailies and even some levels like daily silicones where we get some decent information.

When I look at that, the strength overall -- so, when I look at our overall new fit data strength, I'm not going to go into specific numbers, but it's a decent amount ahead of where our market share is, again, another quarter in a row where we've seen that kind of strength and we've really seen some robust improvements in the daily silicone hydrogel fitting side. So, when it comes to new fit, dailies, that's where we're strongest and that's where we're really trying to capitalize right now.

Brian Weinstein -- William Blair -- Analyst

Great. As a follow-up on the Biofinity constraints, what do you think that cost you in the quarter and would you say you felt you will have that taken care of in the fourth quarter? I think I missed that comment. Thank you.

Albert White -- President and Chief Executive Officer

Yeah. We have had a little bit of capacity issues with Biofinity, meaning demand has been ahead of supply. That was true a little bit last quarter. It was true again a decent part of this quarter. We have already added new production capabilities. Our capacity is up to the level right now that we need it to be. We are adding more Biofinity capacity in this quarter. We're in a pretty good situation in terms of now being able to meet the demand that's out there. I'm not going to quantify that other than to say it did impact us.

It probably impacted -- well, it did, in my mind, impacted Biofnity Energys probably more than the rest of the Biofinity franchise and that product launch went really well. People are excited about it. There's a lot of demand for that product. That caused a little bit of a problem there. We obviously didn't get into it until really now because now we fixed the capacity problem. Now we're unconstrained and the team can go out there and aggressively sell Biofinity including Biofinity Energys.

Brian Weinstein -- William Blair -- Analyst

Thanks, guys.

Operator

Thank you. Our next question comes from the line of Joanne Wuensch with BMO Capital Markets. Your line is now open.

Joanne Wuensch -- BMO Capital Markets -- Managing Director

Hi, guys. Can you hear me OK?

Albert White -- President and Chief Executive Officer

Yeah.

Joanne Wuensch -- BMO Capital Markets -- Managing Director

Wonderful. This is the first time, I think, in my memory that I've heard you discuss the concept of key accounts. I think this was asked previously, but I really want to make sure that we spend more on it -- is there a reason this is being discussed at this stage? Is there something in the market? Is it something in your portfolio? Why is this coming up now?

Albert White -- President and Chief Executive Officer

Great question, Joanne. If you look at the marketplace over the years and where we've had a lot of strength with independent practitioners, be that here in the US or in different spots around the world. We've had a lot of success there. That links back to the broad product offering we have with torics and multifocals and specialty lenses and so forth. Once we completed soft line acquisition and brought clarity in.

We had a mass market dailies silicone hydrogel line, not only a sphere but a toric and a multifocal in a unique product we're able to offer the marketplace. Not only can we offer it, we can make it. We have capacity and we can expand capacity relatively easy. That allowed us to walk into a lot of these buying groups in these huge retailers who are heavy on the dailies side where we've had historically a difficult time winning business, winning some of these big opportunities.

Well, you know what? We built out a sales team, we went in there, we tried to win some of those opportunities and say, "We're here. We have some of the best products on the marketplace. We can supply you. We don't have capacity issues. We're a market leader in terms of logistics and distribution. We can offer you unique capabilities in terms of labeling and packaging and so forth." That has been successful. That's been successful. There's always a little question mark around that. The CooperVision sales team, Dennis Murphy and team has done an amazing job there. They've won some new opportunities.

Once you get those opportunities, you try to take advantage of them. That's a position we're in. We started talking about it a little bit, but it's more important now. Now it's driving up our revenue growth a little bit. Here in the nearer term, it's also driving up some of our advertising and promotional activity.

Joanne Wuensch -- BMO Capital Markets -- Managing Director

That's helpful. As a second question, I want to spend a little bit of time on foreign exchange because that's impacting the third quarter, your fourth quarter guide and clearly it's going to be there for 2019. Can you walk us through at today's rate what type of impact you think you will be seeing in 2019? Remind us of the impact on gross margins. It will show up there also.

Albert White -- President and Chief Executive Officer

Yeah. So, we're not going to get into those specific numbers as we move into next year. We'll go through guidance and update guidance and so forth in December and incorporate current FX rates in there. You're right. That is something we have to deal with. It's a headwind out there. I think one of the points I wanted to make at least for next year is on a constant currency basis, we still are planning on delivering low double-digit operating profit growth. We have some issues below the line there but we're still intent on driving that.

Now, you might say wait a minute. You guys are going to invest and have heightened investments. I'm OK with that because you're going to drive better revenue growth. How are you going to drive double-digit OI growth in the face of currency and so forth? Well, we are anticipating gross margin expansion. We do have a lot of volume coming through the plants. It drives down our unit costs.

We have more efficiencies as we utilize equipment, utilize space and so forth in manufacturing. I would say that versus maybe six months ago or something like that, probably when I look at Fiscal 19, a little bit better gross margin that what I was thinking I was going to do, but heightened expenses associated with that. But net-net is allowing us to deliver that double-digit constant currency, that OI growth.

Joanne Wuensch -- BMO Capital Markets -- Managing Director

Thank you very much.

Operator

Thank you. Our next question comes from the line of Isaac Ro with Goldman Sachs. Your line is now open.

Isaac Ro -- Goldman Sachs -- Analyst

Good afternoon, guys. Thank you. Al, I just want to follow-up with another question on efforts you're making here to push forward into the channel with marketing dollars. I'm interested in the ways in which your marketing dollars have been allocated differently this time around versus in the past, whether that be some of the larger customers versus different mediums. I'm curious how the strategy is different now than it would have been a couple years ago and trying to get a better vision for where those dollars are being spent.

Albert White -- President and Chief Executive Officer

That's a good question and probably an important one. When you look at some of our competitors in the marketplace and how we talk about advertising, promotional sales dollars, what we're talking about here is partner-related activity. So, that's not TV ads. We're not talking about we're going through a big strategic shift here and we're going to have TV ads all over the place and ads all over and magazines and so forth.

That's not what we're talking about. We're talking about doing what we've done well for many, many years, which is partner or work with our partners, be they independent practitioners or groups or retail operations and so forth, work closely with them to help them be successful. A lot of those contracts, a lot of the work we do has buying discounts.

So, the more a retailer buys from us, the lower their pricing is. We want to work with them on that. We want more wearers coming to us faster. We want them to have the opportunity to get better pricing. We try to link all that together and be a good partner with them. The activity we're talking about is investing in that sales side of that, the advertising, the promotional, trying to link that all together so that we're a good partner with the big retailer. It's very similar to the advertising promotional sales work that we've done over the years.

Isaac Ro -- Goldman Sachs -- Analyst

Okay. Makes sense. Then just a quick follow-up on the surgical side -- can you maybe give us a bit of a sense of what's embedded in the guidance for the rest of the fiscal year as it relates to the impact of PARAGARD? I think you talked about the long-term growth potential but I'm trying to get a sense of whether it's three to six months, what's a reasonable expectation as we exit the calendar year and start to benefit a little bit more from some of the marketing dollars you talked about.

Albert White -- President and Chief Executive Officer

Yeah. I would think of PARAGARD being somewhere around that $45 million for Q4, which means our full year PARAGARD number is a couple million dollars higher than what we thought it was going to be last quarter. If you look at that, you're probably talking about somewhere in that kind of mid-ish, maybe even mid to slightly upper single digits.

I think that's probably where we're going to come in in the fourth quarter. Obviously, that's going to change a little bit. It's not that big of a product, the dollars aren't that big. So, if a little bit pushes into a quarter, that can swing it, but I think we feel pretty good about that right now being at least a mid-single-digit grower.

Isaac Ro -- Goldman Sachs -- Analyst

Got it. Thank you, guys.

Operator

Thank you. Our next question comes from the line of Matthew O'Brien with Piper Jaffray. Your line is now open.

Matthew O'Brien -- Piper Jaffray -- Analyst

Thank you. Good afternoon. Thanks for taking my questions. Just to put a little bit finer point, Al, on the outlook for the business next year, you've got currency going against you, you've got a higher tax rate, you're going to spend more money which I think everybody understands. Is this a business that can have some EPS growth next year out of a really difficult comparison? Then should we expect a big snap back in 2020 as maybe some of these investments wind down a bit?

Albert White -- President and Chief Executive Officer

We'll see where FX ends up in December, but as of today, I would certainly anticipate EPS growth next year, that's for sure. We need to hurdle the tax rate, but outside of the tax rate, we're generating a lot of cash and we'll be paying down some debt. As of today, I don't know why we wouldn't be growing EPS year over year.

If I looked at the following year, assuming similar tax rate then yeah, you're going to see a much better Fiscal 20 EPS growth rate than you would see in Fiscal 19. I think when you look at our tax structure and so forth too, obviously, the tax rate is moving higher as part of tax reform. We'll implement plans and strategies and so forth to do our best in terms of how we produce product and how we produce and ship it and so forth to manage our tax structure.

So, yeah, I would expect growth rates to be a decent amount better in 2020. When I kind of look at 2020, 2021, and so forth, these investments that we're doing right now should return pretty good numbers in those years. By the way, I don't want to go overboard here in these investments. When you look at it, our Q4 guidance that we're giving is adjusted down $0.13. That's the exact amount of FX hit that we're taking.

So, I don't want anyone to walk away from this call being like, "Oh my god, these guys are spending like crazy or this is out of control," because that's not the case at all. This spending is highly focused. It has return metrics associated with all of it and we're talking millions and millions of dollars here, certainly not tens of millions of dollars.

Matthew O'Brien -- Piper Jaffray -- Analyst

Got it. That's super helpful. Then as a follow-up, can you talk a little bit about the MyDay Toric rollout, where you're at as far as rolling that out to your accounts. Then sorry to do this to you a little bit on the investment side again, but I think historically you've talked about getting to 30% market share here with some of these investments and these capabilities that you have now. Can we expect you getting to that metric faster, maybe by a year or two or anything kind of qualitative commentary would be helpful there. Thanks.

Albert White -- President and Chief Executive Officer

Yeah. The MyDay Toric rollout is going really well. We see that in many markets. We see it right here in the US were that product is being received really well and what's exciting about that is the halo effect that we're seeing on MyDay Sphere because that product had a really nice quarter.

So, we're really excited about where MyDay is at right now and how that product is being received in the market and it kind of confirms, if you will, the strategy that we've had about having a multi-pronged approach about having a premium daily silicone in mass market and a more traditional hydrogel. We're in good shape on that and it's being received well.

So, I'm really happy about that. Obviously, we still have a strong uptick in terms of daily silicone hydrogel numbers. I think that's good. I think if you look at -- I think you're alluding to some past discussions. In very general numbers, when you look at our market share and you go, "Okay, you guys have a very strong 23% global market share, but you're in that 30% range for multifocals and 30% range for torics and in that 30% range for FRPs and so froth and silicones in general." We have been running at about 16% market share in dailies.

Now, that is improving. That's been true for a number of quarters. We actually moved up to 17% global market share in dailies this quarter. That number is accelerating. That is accerlating. So, as to when we move that up and get to the same level and take our total market share toward 30%, we'll see when that happens, but based on where we are today and the momentum we have today, yes, you're right, that will happen faster.

Matthew O'Brien -- Piper Jaffray -- Analyst

Great. Thanks so much.

Operator

Your next question comes from the line of Matthew Mishan with KeyBanc. Your line is now open.

Matthew Mishan -- KeyBanc Capital Markets -- Analyst

Thanks for taking the questions. Al, is it a fair assumption that over the next couple of years, MyDay, Oasis, Dailies Total 1 pretty much round out the full family of the daily SiHis, and then traditionally, it's positive for the brand. What do you think several brands doing it around the same time can do for the category?

Albert White -- President and Chief Executive Officer

I think it's fantastic. I really do. You talk about a trade up strategy that's great for the industry and great for the wearer, that is right where we're at right now. We're still in the early innings of that. You want patients wearing daily lenses. That's what's best for the patient. For their eye health, it's best for them to wear daily lenses -- throw that lens out every day, put a fresh clean one in every day. You want them wearing silicone hydrogel lenses for the oxygen permeability, the water content, the things we talk about in terms of the best combination of a lens you can offer your patient.

So, this is not only a situation where you have manufacturers offering premiere products and it's good for the manufacturer. Well, it's good for the wearer also. This is good for the marketplace. It's good for the health of people. It's good for manufacturers and the fact that you have -- you mentioned J&J and Alcon's products and ourselves as leading products in that space is to me fantastic and we should all continue to push that and be successful with that strategy and I think we will be.

Matthew Mishan -- KeyBanc Capital Markets -- Analyst

Got it. And just a follow-up -- how should I think about the accounting for rebates? Is it a net number reflected in sales or do you get the full benefit in sales within offset in advertising and promotion?

Albert White -- President and Chief Executive Officer

Yeah. The rebates are a reduction in revenues. That's taken as an immediate reduction in revenues in the quarter.

Matthew Mishan -- KeyBanc Capital Markets -- Analyst

Excellent. Perfect. Thank you.

Operator

Thank you. Our next question comes from the line of Robbie Marcus with JP Morgan. Your line is now open.

Christian -- JPMorgan -- Analyst

Hey, this is Christian on for Robbie. Thanks for taking the questions. Maybe taking a look at the overall contact lens market, strong rules from 9% pro forma and the competitors as well. It looks like that market has kicked up to the 7% range from a historical 4% to 6%. If you could maybe break it down for us, how much of that is attributed to same product pricing uplift? How much is geographic expansion? How much of that is from the shift of overall product mix in daily SiHis?

Albert White -- President and Chief Executive Officer

Yeah, you're exactly right. The market is stronger. There are different dynamics that are driving that strength by competitors. If you look at someone like J&J as an example, they're in a fantastic position. I think those guys are doing a great job right now trading wearers up. I think they have a long road in front of them of success there because I think they have a good team that's smart doing a good job on that.

I would envision they continue to be successful driven by product trade up. I've obviously talked about our situation of focusing on winning some new wearers and capitalizing on our product portfolio, which includes the high-end and the more mass-market silicone. But that is the driver of the market. That shift to dailies that we're talking about is the driver of the market. Pricing frankly at the end of the day is relatively flat.

You can look at list pricing and pricing out there and say, "Is it increasing?" Yes, I would say it is increasing, but we've seen rebate activity also. We're starting to annualize that rebate activity but rebate activity offsetting that so pricing would be relative neutral.

The other component is geography. There is still some geographic expansion. The established markets are relatively flat from a wearer perspective but when you go into Eastern Europe and you go into China and certain markets, emerging markets around the world there's definitely still wearer expansion there. So, I wouldn't put a big part of the growth attributable to that, but that's certainly a consistent underlying driver of growth.

Christian -- JPMorgan -- Analyst

Thanks. Then maybe focusing on the dailies side, you have Bausch + Lomb launching their product into the space in 4Q. What do you expect that to do? Obviously, you've seen accelerating results there. Do you see that as a benefit for all players in the market to help accelerate utilization there or could pricing get worse? Just kind of your high-level thoughts there.

Albert White -- President and Chief Executive Officer

Unfortunately, I don't have much to say on that. I don't want to speculate on when Bausch is going to launch their product or how or where or at what price they're going to launch it. When information comes out on that, I'm happy to comment on it, but for now I'd say I'm not in a position to speculate or guess what's going to happen there.

Christian -- JPMorgan -- Analyst

Okay. Maybe one last one on the geographic perspective -- I know last quarter you mentioned that getting some of the grey market activity under control, you expected a deceleration in Europe going into the back half of the year, but we actually saw acceleration across geographies in the quarter. Do you see that trend continuing into 4Q and then any commentary on if and what type of grey market activity you're still seeing? Thanks.

Albert White -- President and Chief Executive Officer

Yeah, they grey market activity, the team has done a really nice job of working through that. There's not a lot to discuss on that. I would say that Europe had a good quarter, a very challenge comp. They certainly had a nice quarter. They have good momentum there. Mark Harty runs that business over there. He's doing a really nice job over there. I would expect that to continue.

There's been a heavy focus there, as I mentioned in the prepared remarks, on key accounts and success around key accounts. We have good traction there. That's a region that links perfectly into the discussion we've been having on key accounts and why we're investing. So, I would envision that continues in Q4.

Operator

Thank you. Our next question comes from the line of Anthony Petrone with Jefferies. Your line is now open.

Anthony Petrone -- Jefferies -- Analyst

Thanks. Maybe, Al, just to jump back to key accounts, is there a way to maybe quantify what percent of the global market actually runs through key accounts? Your 23% globally, as you invest in that part of the channel, what is the upside potential maybe in share points or dollars over time once perhaps returns start coming in from these investments? I have a couple follow-ups. Thanks.

Albert White -- President and Chief Executive Officer

They key account discussion is a tough one. It's a pretty long discussion. One of the issues that you have is key accounts are not all the same. You have some large retailers, some very large retailers, where the optometrist is essentially an independent optometrist. They're not an employee of the retailer. They're renting space from the retailer. Then you go to the other extreme where the optometrist is employed by the retailer themselves. Now, as you can imagine, if it's an employee relationship, there's a lot more influence by the corporate office than if there is an independent relationship. Then you also have buying groups and so forth.

But a large portion of the market is going to be related in some form to key accounts. I would say that's especially true because of buying groups. When you get into places like the US and you talk about independent practitioners, there are not nearly as many true independent practitioners as there have been historically. So, the market is moving. That's why I talk about a long-term sustainable trend. The market is definitely moving to these nine groups and allowing people to work together and buy on volume, take advantage of store brands and special packaging and offering and so forth, anything they can do to help lock down their customer.

So, I guess just the high-end answer would be key accounts are a pretty sizable part of the market, but again, much more complex than just a generic term.

Anthony Petrone -- Jefferies -- Analyst

Yeah. A follow-up would be just from time to time, the business has seen various different ebbs and flows within the distributor channel and it seems like this is certainly a channel that's linked closely to distributors and different stocking levels and the like. So, is there anything we should be looking out for as it relates to the level of stocking quarter in and quarter out as this process takes hold?

Then lastly, just your comments, Al, as you're looking at 2019, high-level competitively J&J, obviously, if their analyst day has an aggressive launch plan and then Alcon Ciba should be spun at some point next year, so just any thoughts there. Thanks again.

Albert White -- President and Chief Executive Officer

Yeah. We have not seen anything in terms of stocking levels. I know there's been some discussion in prior quarters, prior years certainly with us and prior quarters in terms of some stocking, some ups and downs associated with channel inventory levels. We haven't really seen anything on that. Ours have been fairly consistent here. So, I wouldn't attribute anything either way to kind of channel inventory for us on a go-forward basis.

The way that we're handling these relationships, I would envision, will not have situations where you get inventory or stocking levels moving up or down to a material level. If they do, we'll obviously communicate that as being part of the positive if it is or part of the detriment if it goes the other way. We're pretty open and transparent on that and continue to be.

From a competitive standpoint, it's another one like I said on Bausch -- it's a little tough on Alcon. I know there are rumblings out there about them launching a new product and about them spinning into their own stand-alone company and Novartis doing that. I'm not going to speculate on that one either. You guys probably have as much, if not more color, than I do on some of that. J&J has been pretty public about wanting to grow this business. I think that's been fantastic. I think they're going to continue to grow the business and I think they're going to continue to put up good numbers. That's good. That's good for the entire industry.

Anthony Petrone -- Jefferies -- Analyst

Thanks.

Operator

Thank you. Our next question comes from the line of Steve Willoughby with Cleveland Research. Your line is now open.

Steve Willoughby -- Cleveland Research -- Analyst

Hi, good evening. Two questions for you -- I guess first, just regarding Brian's comments regarding 2019 in terms of low double-digit operating income growth excluding FX, I guess Al or Brian, just when I'm looking at it, tax rate going from 8% to 14% and then given current FX rates, I'm looking at about an 8.5% headwind to EPS growth, which would then put potential earnings growth next year in kind of the low single-digit range versus the 7% current consensus. So, I was just wondering if you had any comments on that and then I have a follow-up.

Albert White -- President and Chief Executive Officer

Yeah, Steve. I don't think you're too far off on that at the end of the day. This is always a tough one because currency moves and a significant part of our business is offshore, unlike some other medical device companies and so forth here. We have a large part of our business offshore and it's growing nicely. So, we do get hit more by FX than other companies. Then we're in a little unique position because of our fiscal year that we do get hit by that tax rate. We'll obviously update for currency. We'll see how that stands in December. But I think generally speaking, you're in the ballpark. Yeah.

Steve Willoughby -- Cleveland Research -- Analyst

Thanks, Al. A second question, a couple-parter here -- given the conversation around key accounts and Joanne's comment that it's never really come up before. It seems like from my stance, key accounts has been a focus of the company for much of the last decade. I'm just wondering where new key account wins can come from, particularly given that you're really the only company that does private label in the space. And then I wanted to be clear -- you're not really assuming any impact from any potential competitive launches, whether it's 1-800-Contacts, Bausch, or Alcon, etc.? Thanks, guys.

Albert White -- President and Chief Executive Officer

Yeah. Competitive launches -- for respect to this guidance, we're basically a month in. There are no launches out there. We have two more months. There's really nothing in there for competitive launches other than what we know as of today. So, I'm not quite sure what to add outside of that. I know there are a lot of questions out there on a competitive standpoint, but we're working with what we have.

When you look at key accounts, Steve, yeah, we talk about key accounts in the context of buying groups, in the context of working with some retailers, you talk about some that we've discussed here in terms of Costco in terms of private label opportunities. Where things have changed for us is our opportunity to go into these folks, some of whom we have a relationship with and some of whom we have not had a relationship with and being able to go in and say we have market-leading daily silicone hydrogel products.

We have capacity to be able to be able to supply them. We have the logistics to be able to get them to you. We have the packaging and the labeling to be able to do something unique for you, and we now have a sales team in efforts where we can promote and work with you to ensure the success of those. That is a different animal than what we've had in the past.

Now, I know we won't own soft line for a few years. It's taken us a little while to get everything behind us. It's taken us a little bit to get all of our distribution stuff cleaned up, going in the right direction, manufacturing, sales and marketing teams within key accounts and so forth, but we're in that position and we're doing really well and we're investing there and we're starting to reap the rewards of all that work.

Steve Willoughby -- Cleveland Research -- Analyst

Okay. Thanks. That makes sense, Al. Appreciate it.

Operator

Thank you. As a reminder, ladies and gentlemen, that's * then 1 to ask a question. Our next question comes from the line of Steven Lichtman with Oppenheimer. Your line is now open.

Steven Lichtman -- Oppenheimer -- Analyst

Thank you, guys. Al, you mentioned that the independent practitioner remained important even as you increased investment on key accounts. I'm just wondering relative to investment dollars, is any of the work you're doing on key accounts coming from spend previously earmarked toward independent practitioners and you're shifting some resources or is this all incremental investment?

Albert White -- President and Chief Executive Officer

That's a great question. It would be incremental investments. When you look at the independent channel, we are continuing to invest there. I mentioned EyeCare Prime as an example. If people aren't aware of that, I would encourage you to go look at the website for EyeCare Prime. That's a relationship management and marketing software tool that we offer to optometrists right now. We have it in 12 countries. We have over 45 million patients that we work with through that tool.

That's kind of a unique offering and we have other things like that. We are continuing to invest and be active with respect to independent practitioners. They're a core part of our business and they remain a core part of our business. I would not want anybody to think in any way we're not going to support our independent practitioner friends.

Steven Lichtman -- Oppenheimer -- Analyst

Got it. Al, you also mentioned potentially some tuck-in deals. Is it fair to say that M&A likely remains focused on the surgical side of the business? What generally are your areas of focus as you look for some portfolio ads there?

Albert White -- President and Chief Executive Officer

I'd say that with respect to M&A, we'll see if we can find stuff. I would say it's going to be smaller tuck-in stuff. Whether that's vision or surgical, we've done some tuck-ins on both sides of those. We'll see if we can make something work there. If not, I don't mind paying down debt right now. That would be OK to do to earmark dollars in share buyback is something else I'm comfortable with. I think we're in a raising rate environment when you start looking at things a little different, utilization of cash, historically. That makes a little bit of sense.

Steven Lichtman -- Oppenheimer -- Analyst

Got it. Thanks, Al.

Operator

Thank you. I'm not showing any further questions at this time. I would now like to turn the call back over to Albert White, President and CEO for any closing remarks.

Albert White -- President and Chief Executive Officer

Great. Thank you. Thank you, everyone. Appreciate it. Obviously, if you have any questions or comments or anything, reach out to us through our investor relations group. We'd be happy to connect on that. I look forward to catching up with everybody again in equity conferences and so forth and on our December earnings call. With that, we'll go ahead and end the call, Operator. Thank you.

Operator

Thank you. Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program and you may all disconnect. Everyone have a wonderful day.

Duration: 64 minutes

Call participants:

Kim Duncan -- Vice President of Investor Relations and Administration

Albert White -- President and Chief Executive Officer

Brian Andrews -- Chief Financial Officer and Treasurer

Jeffrey Johnson -- Robert W. Baird -- Managing Director

Larry Biegelsen -- Wells Fargo -- Analyst

Lawrence Keusch -- Raymond James -- Managing Director

John Block -- Stifel Financial Corp. -- Managing Director

Brian Weinstein -- William Blair -- Analyst

Joanne Wuensch -- BMO Capital Markets -- Managing Director

Isaac Ro -- Goldman Sachs -- Analyst

Matthew O'Brien -- Piper Jaffray -- Analyst

Matthew Mishan -- KeyBanc Capital Markets -- Analyst

Christian -- JPMorgan -- Analyst

Anthony Petrone -- Jefferies -- Analyst

Steve Willoughby -- Cleveland Research -- Analyst

Steven Lichtman -- Oppenheimer -- Analyst

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