The Cooper Companies, Inc.

Thank you for standing by, and welcome to the Cooper Company's first quarter 2022 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star 1 on your telephone. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Kim Duncan, Vice President, Investor Relations and Risk Management.

Good afternoon, and welcome to the Cooper Company's first quarter 2022 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 questions. 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 acquisitions, integration of any acquisitions, or their anticipated benefits. Forward-looking statements depend on assumptions, data, or methods that may be incorrect or imprecise and are subject to risks and uncertainties. Events that could cause our actual results and future actions of the company to differ materially from those described in forward-looking statements are set forth under the caption forward-looking statements in today's earnings release, and are described in our SEC filings, including Cooper's Form 10-K and Form 10-Q filings, all of which are available on our website at coopercos.com. Should you have any additional questions following the call, please call our investor line at 925-460-3663 or 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 first quarter conference call. Before I turn to our business, let me say the escalation of the devastating crisis in Ukraine is top of mind. The events caused great concern for everyone in that region, including our employees, partners, and their families. Our thoughts are with everyone who is being affected, and we certainly hope peace prevails soon. Moving to our business, I'm pleased to report a strong start to the fiscal year, led by a fantastic quarter at Cooper Vision and another solid quarter at Cooper Surgical. Within Vision, our daily silicone hydrogel and myopia management portfolios continued posting strong results, leading to share gains around the world. Within Surgical, our fertility business posted great numbers and the integration of Generate Life Sciences is going really well with that business off to a fast start as part of Cooper. We also recently announced the pending acquisition of Cook Medical's reproductive health business, which will be a great addition to our Surgical franchise. Regarding first quarter financial results, consolidated revenues were $787 million, with Cooper Vision at $561 million, up 11%. And Cooper Surgical reaching a new all-time high of $226 million, up 30%. Non-GAAP earnings per share were $3.24. Moving to the details and reporting all percentages on an organic basis, Our Cooper Vision growth of 14% was strong and diversified. We grew nicely in all product categories, spheres, torques, and multifocals, and all three regions posted great results with the Americas up 8%, EMEA up 17%, and Asia-Pac up 19%. This resulted in nice share gains, and we remain well-positioned to capitalize on the reopening of economies around the world as COVID subsides. All this is driven by our multifaceted commercial strategy that we began deploying years ago, which has proven to be extremely successful. This includes a consistent cadence of launching new products and product extensions around the world, providing customers with market-leading flexibility through our customized solutions, executing on key account relationships, and delivering fantastic customer service. We're continuing these efforts while also enhancing our business through Salesforce expansions and targeted marketing and infrastructure investments. Regarding products, our daily silicone hydrogel lenses, My Day and Clarity, posted strong results, growing 25%. Daily silicones continue to lead the market, and we offer the broadest portfolio of products to meet customers' needs. This includes My Day, our premium offering, which is available in a sphere, toric, and most recently, a multifocal. And speaking of the multifocal, the launch is going incredibly well. The feedback from eye care practitioners regarding use of our breakthrough binocular progressive fitting system that simplifies the fit process while providing optimal visual acuity at all levels has been fantastic. And we're continuing to receive feedback from patients that MyDay provides the best multifocal they've ever worn for exceptional near, intermediate, and distant vision. This success is having a nice halo effect on our already successful MyDay torques and spheres, so we remain very optimistic about this brand. The other brand in our daily silicone hydrogel portfolio is Clarity. This lens is also available as a sphere, toric, and multifocal, and is sold as more of a mass market product. We've seen nice growth with this brand, especially in our Asia-Pac region, where we just posted an extremely strong quarter. For our FRPs, we reported another solid quarter of 10% growth for Avera and BioAffinity, our silicone hydrogel two-week and monthly lenses. This was led by improved product availability and our unique offerings, such as BioAffinity TORIC Multifocal and Energist, the most innovative product in the monthly space. To finish on products, we're continuing to see nice strength in TORICs and multifocals as we expand parameter ranges and increase availability around the world. When you combine this with the success we're having in key accounts, it's resulting in nice share gains, and we expect that to continue. Moving to myopia management, we posted revenues of $20 million. And within this, my site grew 172%. This growth rate was an acceleration from Q4, which is impressive given the general market challenges around new fits. Overall, as a global leader in the myopia management space, our portfolio is the broadest in the industry, comprised of my site, the only FDA-approved myopia control product, a broad range of market-leading ortho-K lenses, and our innovative sight glass vision glasses. From my side, we're continuing to make progress around the world, including in China, where we're preparing for a broader launch with our partner, Essilor. Our team in China is strong, and our advisory board of key opinion leaders that are affiliated with hospitals representing over 50% of myopia management contact lens volume in China has us positioned for success in a market where childhood myopia rates are estimated to be over 80%, and we're reducing myopia as a priority for the government. Lastly, on MySight, our industry-leading seven-year clinical data has been getting a lot of exposure, as it highlights that MySight works for nearly all myopic children. It cuts myopia progression by roughly 59% on average. It works at any age a child starts treatment. It works for as long as the child wears it, and there's no rebound if treatment is stopped. Moving to SightGlass myopia management glasses, following our co-launch in the Netherlands with Estelor in November, We started early launches in additional markets, including the UK and Canada. Within Canada, we've launched the product under the MySight name, which is an exciting step in combining our myopia management glasses and contact lenses under one brand name. We've also accelerated activity in China and plan to launch the product later this fiscal year. To conclude on myopia management, our momentum is strong and we're still targeting roughly 100 million in sales for this fiscal year. To wrap up on Coopervision, for calendar Q4, we estimate the global contact lens market grew 10%, with Coopervision growing 16%. Within this, COVID-related challenges did negatively impact optometry offices around the world, and combining this with heightened patient demand as myopia rates continue to rise is resulting in many eye care offices having full calendars of appointments. This demand is great, but it's still impacting fit activity, such as in the U.S., where new fits are still roughly 8% below pre-COVID levels. Having said that, progress is being made, and we expect to continue seeing positive trends as COVID subsides and economies around the world reopen, with people returning to the office and becoming more active in social settings. Meanwhile, long-term macro growth trends remain intact, with roughly one-third of the world being myopic today, and that expected to increase to 50% by 2050. For Cooper Vision, we have a robust product portfolio, ongoing product launches, a fast-growing myopia management business, and our fit data remains strong. So we remain very bullish on our business. Moving to Cooper Surgical, we're extremely busy integrating Generate, which we just closed in mid-December. In the meantime, we had another strong quarter with organic growth of 9%. Before getting into the details, let's cover Generate. We recognized roughly 34 million of revenues in the quarter, as this was a stub period with only roughly one and a half months of revenue. Of this, $23 million was in stem cell storage and $11 million in fertility. It's tough to get exact growth rates for a stub period, but growth for the business for the full equivalent fiscal quarter was 10%. Moving to our fertility business, we posted sales of $97 million, up a very healthy 27% when excluding generate and the small acquisition of embryo options from last January. Strength was seen on a global basis and throughout our product portfolio, including from consumables, capital equipment, and genomics. Within our office and surgical unit, we posted sales of $129 million, up 24% as reported, but down 3% when excluding Generate and other acquisitions. This was due to the negative impact of COVID-19 sales of Paragard, as well as certain surgical products. Having said that, we did see growth in many areas, such as our laparoscopic surgery closure products, and our acquired businesses grew nicely, especially fetal pillow in our labor and delivery area, which grew 160%. Based on current trends, we expect office and surgical sales to improve and show organic growth in Q2. To wrap up on Cooper Surgical, let me touch on some market information. For fertility, we're largely back to pre-COVID levels. Some markets, like the U.S., are stronger, while others outside the U.S. are still dealing with COVID-related challenges. But net-net, the market is in a good place. This industry continues to grow nicely, and we estimate our addressable market is approaching $2 billion with 5% to 10% long-term annual growth. It's estimated that one in eight couples has trouble getting pregnant due to a variety of factors, such as increasing maternal age, and that more than 100 million individuals worldwide suffer from infertility. Given the improving access to treatments, increasing patient awareness, greater comfort discussing IVF, and increasing global disposable income, we expect this industry to grow nicely for many years to come. Within office and surgical, as mentioned earlier, we expect growth to return in Q2 as the market fundamentals are improving. To summarize, this was a really strong start to our fiscal year. Coopervision posted a great quarter, and we're well positioned to continue delivering success with the best team in the industry and the broadest product portfolio on the market. Our fertility business is growing nicely and taking share, and the Generate business is integrating really well with some exciting potential as we incorporate stem cell storage into our labor and delivery product portfolio. And with that, I'll turn the call over to Brian.