The Cooper Companies, Inc.

Hello, and thank you for standing by. Welcome to the second quarter 2021 Cooper Companies Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker 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. It is now my pleasure to introduce Vice President, Investor Relations and Risk Management, Kim Duncan.

Good afternoon and welcome to the Cooper Company's second quarter 2021 earnings conference call. During today's call, we will discuss the results and guidance 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 cooperco.com. Should you have any additional questions following the call, please call our investor line at 925-460-3663 or email ir at cooperco.com. And now I'll turn the call over to Al for his opening remarks.

Great. Thank you, Kim. And welcome, everyone, to Cooper Company's fiscal second quarter conference call. I'm happy to report that Cooper Vision and Cooper Surgical both posted all-time record quarterly revenues, which drove record quarterly earnings. Our businesses have rebounded nicely from the COVID lows with silicone hydrogel lenses and myopia management leading Cooper Vision and fertility and Paragard driving Cooper Surgical. For the quarter, and reporting all percentages on a constant currency basis, consolidated revenues were $720 million, with Cooper Vision at $523 million, up 25%, and Cooper Surgical at $197 million, up 58%. Non-GAAP earnings per share were $3.38. For Cooper Vision, the Americas grew 38%, with Clarity, MyDay, and BioAffinity leading the way. The U.S. was the strongest part of the region, and it allowed us to rebound quickly and strongly, offsetting challenges from markets such as Canada, which are still facing significant COVID restrictions. We're still seeing nice momentum in the U.S., and we're looking forward to the back-to-school season. EMEA grew 15% in the quarter, led by strength in MyDay and BioAffinity. We're the number one contact lens company in EMEA, so we're obviously over-indexed in this region, and the impact from COVID did temper the market's performance. But we're executing at a very high level and taking share, which is offsetting the challenges. This is a region where we've been a leader for quite some time, and we're getting stronger due to success with key accounts, so we're really looking forward to a rebound in consumer activity as that will definitely benefit us. Lastly, AsiaPAC was up 19% led by strength and clarity in my day. AsiaPAC is making progress rebounding from COVID, but it's slow in many countries, including Japan, where we have a strong presence. Nevertheless, similar to EMEA, our teams are executing at a very high level and taking share, which is helping offset the market challenges. Overall, given our geographic mix, I'm extremely happy with our performance and expect it to remain healthy as vaccines roll out around the world and consumer activity improves. Moving into some details, silicone hydrogel dailies grew 31%, with My Day and Clarity both posting strong results. MyDay in particular is taking share led by approving availability, especially for MyDay Toric. From a market perspective, there's still roughly $2.4 billion in annual global sales of older daily hydrogels that we expect to be traded up to silicones in the coming years. This tailwind is a significant positive for us as we're under-indexed in dailies but are seeing great performance from Clarity and MyDay. Moving to our FRP portfolio, we saw solid growth around the world led by BioAffinity. In particular, BioAffinity Energists are a unique and innovative lens that uses digital zone optics to help alleviate eye fatigue from excessive screen time, and our market-leading BioAffinity Torque Multifocal posted extremely strong results. We also just announced that we've doubled the number of prescription options for BioAffinity Torque, and to provide context on how significant this is, BioAffinity TORIC is the most prescribed TORIC lens in the world and is now available in over 33,000 prescriptions. That's more options than all other monthly silicone hydrogel TORIC lenses combined. Regarding product launches, we remain incredibly active. Clarity and the MyDay Second Base Curve Sphere are being rolled out in Japan, and MyDay TORIC, BioAffinity TORIC Multifocal, and our extended toric ranges for clarity and bioaffinity continue rolling out around the world. And I'm happy to now add MyDay Multifocal to this launch list. We'll start seeding select countries in the coming months with a full launch plan for late this calendar year. As part of our pre-launch activity, we completed product testing in eight countries with thousands of patients, and I'm excited to say the responses have been absolutely fantastic. That's not a huge surprise given the extremely strong clinical data and the success of MyDay Sphere and Torque, but it's still great to see. The multifocal category is roughly 10% of the 8.5 billion global contact lens market, and roughly half of that is in dailies. Given we're currently under-indexed in the daily segment at roughly a 16% share, we believe the MyDay multifocal will be very successful. Moving to myopia management, Our portfolio grew 122% this quarter to $14 million. Within this, MySight grew 152% to $4 million, and OrthoK grew 112% to $10 million. As a global leader in the myopia management space, our portfolio is the broadest in the industry, comprised of MySight, the only FDA-approved myopia control product, a broad range of market-leading OrthoK lenses, and our innovative SightGlass vision spectacles. Given the strength we're seeing, we now expect this portfolio to reach 65 million in sales this year and exceed 100 million next year. Regarding my site, we've made fantastic progress with our key accounts and have entered into multiple new pilot programs with retailers and buying groups around the world. Our momentum has been accelerating, including in the U.S., where sales grew sequentially from 100,000 to 700,000, and we're about to launch in South Korea, which should be a great market. only thing holding us back from growing my site even faster is coveted restrictions in several important countries such as canada spain taiwan and singapore regardless we're making tremendous progress and expect very strong growth moving forward from a fitting perspective the average age of a new my site wearer remains 11 compared to a regular new contact lens wearer of 17 showing this treatment is bringing kids into contact lenses at a much younger age additionally Multiple professional associations are now recommending myopia management as standard of care, including the World Council of Optometry, and more universities are adding educational training courses to their curriculums. Regarding OrthoK, we had a great quarter driven by our broad product portfolio and from the halo effect we started seeing from my site. As the myopia management market develops, we're seeing the value of offering multiple options to eye care professionals, and this is helping our OrthoK franchise. We also believe it will benefit our sight glass myopia management spectacles, which are scheduled to be launched in multiple European markets prior to calendar year-end. With respect to sight glass, we just received two-year clinical data and are in the process of submitting it to the FDA for approval as a myopia management treatment. It took three-year data to get my sight approval, but we're hoping to receive approval faster for sight glass, given the strong data and that these are glasses rather than contact lenses. In the meantime, we're finishing the legal and regulatory work to close our joint venture with us, Laura Luxatica, and remain very excited about the potential of that partnership. To wrap up on myopia management, we're actively investing in sales and marketing, new launches, regulatory approvals, and R&D to keep driving success. Our focus remains on leading with clinical data and providing the best and broadest portfolio on the market. To conclude on vision, the rollout of vaccines is definitely benefiting us, given the consumer nature of our business. We're seeing plenty of opportunity heading into what should be a strong back to school season, and we're gearing up for some great presentations and meetings at several upcoming iCare conferences. On a longer term basis, the macro growth trends remain solid, with roughly one third of the world being myopic today, and that number expected to increase to 50% by 2050. Given our robust portfolio, new product launches, Momentum with myopia management and strong new fit data were in great shape for long-term sustainable growth. Moving to Cooper Surgical, this was an outstanding quarter with record revenues of $197 million in all three focus areas, fertility, Paragard, and office and surgical medical devices outperforming. Starting with fertility, revenues grew 53% year-over-year to $84 million, easily becoming the best fertility quarter we've ever had. Strike was seen around the world and throughout the product portfolio. We're taking share, and we're well positioned for future gains with improving traction in several markets. Our key account strategy is creating opportunities, capitalizing on our market-leading portfolio of products and services, which cover this full spectrum of clinics' needs outside of pharma offerings. We're seeing strong growth from consumable products like media and our eyewitness, our proprietary automated lab management system that clinics implement to maximize safety and security by optimizing their lab practices. And we're benefiting from increased utilization of our artificial intelligence-based genetic testing platform, which increases a doctor's ability to select the best embryos for transfer, and also from our capital equipment business with growth in products like incubators. From a market perspective, COVID is still negatively impacting patient flow in many countries, but the combination of share gains and healthy patient flow in the U.S. and parts of Europe is driving our results. Overall, increasing vaccination activity will continue supporting the recovery of the IVF industry as more patients are able to return to clinics. And increasing maternal age and better access to IVF treatments are trends that will continue supporting strong growth for many years to come. Within our office and surgical unit, we grew 62%, with ParaGard up 103%, and office and surgical medical devices up 41%. ParaGard performed really well as positive health and wellness trends continue driving patient activity. As the only 100% hormone-free IUD on the U.S. market, the product offers fantastic, long-lasting birth control that addresses the needs and interests of women looking for a healthy alternative. Within medical devices, several products perform well, including EndoC Advance, our direct visualization system for evaluation of the endometrium, and our portfolio of uterine manipulators. To conclude our Cooper Surgical, this was an excellent quarter. Some of it was tied to reopening activity and capital equipment sales, which are tough to forecast, but you'll note in our guidance that we expect to continue delivering strong results. Similar to vision, we have powerful macro trends supporting our growth, and our exposure to consumer activity is benefiting us as economies around the world reopen. To finish, let me add that we'll be releasing our new ESG report in a few weeks. For those of you, like me, who are passionate about environmental sustainability, social responsibility, and good governance, you'll see a great summary of where we stand today and insights into our future efforts. We're in an excellent ESG position, and I look forward to continuing advancements and providing additional updates in the future. And with that, I'll turn the call over to Brian.