The Cooper Companies, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the first quarter 2021 Cooper Company's earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Ms. Kim Duncan, VP Investor Relations and Risk Management. Thank you. Please go ahead, ma'am.

Good afternoon, and welcome to the Cooper Company's first quarter 2021 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 the 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 coopercodes.com. Should you have any additional questions following the call, please call our investor line at 925-460-3663 or email ir at coopercode.com. And now I'll turn the call over to Al for his opening remarks.

Thank you, Kim, and welcome, everyone, to Cooper's fiscal first quarter conference call. We started this year off on a positive note, and we're excited about our momentum. We took share in the contact lens market with strength in our silicone hydrogel portfolio, led by MyDay and BioAffinity. Our myopia management portfolio continued to strengthen, including MySite growing 82% to 3 million, and Cooper Surgical posted a very strong quarter, with Paragard growing 16% and Fertility 10%. With both businesses outperforming, we delivered robust earnings and cash flow and expect continued strong performance moving forward. Regarding the quarter and reporting all percentages on a constant currency basis, even with continuing COVID challenges, we posted consolidated revenues of $681 million, with Cooper Vision revenues of $507 million, up 1%, and Cooper Surgical revenues of $174 million, up 7%. Non-GAAP earnings per share were $3.17. For Coopervision, we saw strength in our daily silicone hydrogel portfolio and in our BioAffinity franchise, along with general strength in Torix and multifocals. By geography, the Americas grew 6%, led by strength in BioAffinity and daily silicones, including nice growth from both Clarity and MyDay. EMEA was down 4% as several countries continued managing through stringent COVID-related restrictions, We did see growth in our daily silicones and biofinity, though, so that bodes well for the future. Asia pack was up 3%, led by strength in MyDay, especially in Japan. Overall, sales exceeded expectations and we're well-positioned to continue growing and taking share with current and future product launches driving momentum. Moving to some additional quarterly numbers, our silicone hydrogel dailies grew 8%, with both MyDay and Clarity growing. Particular strength was noted in MyDay and especially MyDay Torque as we continue rolling that product out around the world. Overall, daily silicones are leading the market right now as health and wellness trends drive adoption, and we believe that will continue as there's still $2.4 billion in annual global sales of older hydrogels that need to be traded up. Moving to our FRP portfolio, bioaffinity grew 6%, with strength noted in bioaffinity energis and bioaffinity torque multifocal. I've mentioned these products before, but as a reminder, Energist is a truly unique and innovative lens that uses digital zone optics to help alleviate eye fatigue from excessive screen time. In today's world, this product has the ability to perform well, and we're seeing that. And our Biofinity Tour Multifocal was launched last year and is doing extremely well. This is a made-to-order product and part of our extensive offering of unique products that differentiate our business. Regarding product launches, we remain incredibly active. We now have regulatory approval to launch Clarity in Japan, and we'll be doing that shortly. And that's in addition to our ongoing successful launch of a second base curve for My Day Sphere in that market. We're also continuing to launch and relaunch My Day Sphere in Toric and many other markets around the world. We're continuing to roll out a BioAffinity Toric multifocal, including launching in Europe shortly. And we're rolling out extended Toric ranges for Clarity and BioAffinity. Additionally, our pipeline is strong, and we expect to remain very active going forward. And lastly, we're incredibly busy with our myopia management portfolio of MySight and OrthoK lenses, which grew 46% for the quarter to $12 million. Within this, MySight grew 82% to $3 million, and OrthoK grew 37%, including $1 million of revenue from our acquisition of GP specialists from August of last year. With respect to MySite, we now have over 30,000 kids around the world wearing the lens, including over 2,000 in the U.S., and our momentum is accelerating. Our launch activity continues to go extremely well, and we expect similar success in new markets such as South Korea, where we'll be launching in the next few months. We've also made advancements in discussions with several large retailers and buying groups regarding MySite, and even moved into a test phase with one large retailer for roughly 70 stores. We've also received several awards recently, including from Contact Lens Spectrum and Popular Science, and we're making advancements with multiple professional associations, helping to get myopia management recognized as standard of care. And we've made great progress with several universities, supporting the training and education of their optometry students, as many schools are now adding myopia management training courses to their curriculums. From a fitting perspective, if we look at US data, The average age for a new MySight wearer remains 11 years old, and in a positive sign, it's trending younger. Comparing this to the average age of a regular new contact lens wearer of 17 shows we're bringing kids into contacts at a much younger age, which is fantastic. This is all extremely exciting and supports our goal of reaching or exceeding 25 million of MySight sales this fiscal year and over 50 million next year. Moving to myopia management spectacles, I want to touch on our recent acquisition of Cyclas Vision and our partnership with Essilor Luxottica. Cyclas Vision has developed innovative spectacles to reduce the progression of myopia in children, and our joint venture with Essilor Luxottica will leverage our shared expertise and global leadership in myopia management to accelerate the commercialization of these spectacles around the world. We're now working through the typical regulatory requirements to form the JV, and we started developing launch plans in certain markets as we await the two-year clinical data, which will be out in the next couple of months. The sight glass technology is a great complement to our existing myopia management portfolio contact lenses, and working with a great partner like Essilor Luxottica will accelerate growth of the entire pediatric vision marketplace. More to follow on this exciting opportunity as we continue making progress. To wrap up on myopia management, we're at the forefront of an extremely exciting global pediatric opportunity. This market is in its infancy, but the growth is exciting, and having the only FDA-approved product in my site has been a game changer. We're continuing to invest in sales and marketing programs, in new launches, regulatory approvals, and R&D to keep driving adoption on a global basis. Proactively addressing the progression of myopia in pediatric patients offers immediate visual correction, along with many long-term health benefits, such as reducing the risk of serious eye disease later in life, such as retinal detachment, cataracts, and glaucoma. So this effort is important, and it's why so many eye care professionals are getting involved and strongly supporting this activity. To conclude our vision, let me add that the continuing rollout of vaccines will definitely benefit us, given the consumer nature of our business. In the near term, we expect better foot traffic and retail outlets, especially malls, along with increasing service capacity and better staffing attendance in optometry offices. We also expect a strong back-to-school season as in-person learning returns around the world. On a longer-term basis, our growth drivers remain strong and are likely improving with the macro trend of people spending more time on electronic devices. It's estimated that roughly one-third of the world is currently myopic, and that's expected to increase to 50% by 2050. Combining this trend with the continuing shift to daily silicones, geographic expansion, and growth in torques and multifocals, our industry has a very bright future. For Cooper Vision, our robust product portfolio Active product launch activity, momentum with myopia management, and strong new fit data puts us in a great position for long-term sustainable growth. Moving to Cooper Surgical. We had a very strong quarter led by Paragard and Fertility. Overall revenues were $174 million, up a healthy 7% as markets rebounded and we took share. I'm really excited about the state of Cooper Surgical right now under the fantastic leadership of Holly and her team. and the future looks extremely bright. Starting with fertility, revenues grew 10% year over year to $70 million, with strength seen around the world and throughout our product portfolio. We're taking share, and we're well-positioned for future gains with improving traction in our key accounts. One of the strengths of our fertility business is our broad product portfolio, which essentially covers the full spectrum of fertility clinics' needs outside of pharma products. We've done a great job cross-selling and building relationships with the larger clinics around the world, and this has resulted in solid growth in areas ranging from consumable products like pipettes, media, and RI Witness, our RFID lab-based management system that I discussed last quarter, to equipment such as incubators and workstations, to genetic testing. From a market perspective, COVID is still negatively impacting patient flow, and some important countries like India are still significantly hampered, but we're definitely seeing a pickup in activity. In the meantime, we're taking market share, and we expect that to continue. Overall, the fertility market has extremely positive long-term macro growth trends, and we're well-positioned to capitalize on these trends to drive growth. Within our office and surgical unit, we were up 5%, led by Paragard's growth of 16%. Paragard performed better than expected as patient activity remained strong, driven by the positive health and wellness trends we're seeing in the U.S. As the only 100% hormone-free IUD on the U.S. market, the product offers a fantastic, long-lasting birth control option that addresses the needs and interests of women looking for a healthy alternative. We're very bullish on Paragard right now and believe we'll continue posting solid growth this year. Elsewhere, we've seen deferred elective procedures steadily rescheduled, and our medical device sales have improved. Several of our focus products grew in the quarter, including EndoC Advanced, our direct visualization system for evaluation of the endometrium, Insorb, our patented surgical skin closure device, and our portfolio of uterine manipulators. Before I turn it over to Brian, let me close by mentioning our efforts to further enhance our strong focus on environmental matters, corporate responsibility, and good governance. We've made great progress over the past several years, and we have a lot of exciting things happening today. We just completed an ESG materiality assessment to ensure we stay focused on the right areas, and my passion and commitment to this type of work remains very strong. If anyone has any questions or interest in our ESG efforts, please reach out and let's connect. And with that, I'll turn the call over to Brian.