The Cooper Companies, Inc.

and thank you for standing by. Welcome to Cooper Company's third quarter 2022 earnings conference call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during the session, you will need to press star 1-1 on your telephone. I would now like to hand the conference over to your speaker, Kim Duncan, Vice President, Investor Relations and Risk Management. You may begin.

Good afternoon, and welcome to the Cooper Company's third 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 or trends, product launches, operational initiatives, regulatory submissions, and closing or 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. Also, as a reminder, the non-GAAP financial information we will provide on this call is provided as a supplement to our GAAP information. We encourage you to consider our results under GAAP as well as non-GAAP and refer to the reconciliations provided in our earnings release which is available on the investor relations section of our website under quarterly results. Should you have any additional questions following the call, please email IR at cooperco.com. And now I'll turn the call over to Al for his opening remarks.

Thank you, Kim, and welcome everyone to Cooper Company's third quarter conference call. Let me start by highlighting that this was the sixth consecutive quarter of double digit organic revenue growth for Cooper Vision. and the seventh consecutive quarter of double-digit organic revenue for Cooper Surgical's fertility business. This impressive performance showcases the strength of our teams and the strong demand for our products and services. This momentum continued in August, and we're increasing the organic revenue guidance for both Cooper Vision and Cooper Surgical, incorporating our strong Q3 and the strength we're continuing to see. Overall, the challenging macro environment, including headwinds from currency, inflation, and supply chain challenges, has negatively impacted profitability, but has not reduced our ability to take share and drive sustainable top-line growth. Moving to the third quarter results, consolidated revenues reached an all-time high of $843 million, with Cooper Vision posting record revenues of $566 million, up 11% organically. and Cooper Surgical posting record revenues of $277 million, up 35% as reported, up 3% organically. Growth was led by our daily silicone hydrogel portfolio and myopia management products for Cooper Vision and Fertility for Cooper Surgical. Non-GAAP earnings per share were $3.19, and we posted record quarterly free cash flow of $217 million. For Coopervision and reporting all percentages on an organic basis, revenue growth was strong and diversified in all product categories, spheres, torques, and multifocals, and within all three geographic regions. The Americas was up 7%, EMEA grew 15%, and Asia-Pac grew 11%. This performance was driven by a number of factors, including new product launches, expanded product ranges, market-leading flexibility through our customized offerings, growth in key accounts, and strength in branded products. Regarding product details, daily silicone hydrogel lenses grew 24%, led by great results from both My Day and Clarity. Daily silicones continue to be the main driver of growth for the contact lens industry, and we offer the broadest portfolio in the market, with My Day and Clarity available in a broad range of spheres, torques, and multifocals. Within this, we're continuing to see especially strong growth from My Day. including from the very successful rollout of the MyDay multifocal, which is taking share in markets around the world. The feedback from patients remains fantastic and optometrists continue reporting that our breakthrough binocular progressive fitting system is allowing them to fit the lens quickly and accurately. This success is driving a positive halo effect on MyDay spheres and torques, and we remain very optimistic about the future of this brand. Clarity also posted a solid quarter, with particular strength noted in AsiaPac. And our silicone hydrogel FRP lenses, BioAffinity and Avera, reported another solid quarter of 8% growth. Regarding product launches, we remain very active. I'm excited to announce we'll be seeding the market with My Day EnerGIS over the next several months with a full launch scheduled for early calendar 2023. We've had a lot of requests for the Energist technology in a daily lens, and given the success we've had with BioAffinity Energist, we're really excited about this opportunity. MyDay Energist will use the same digital zone optics technology as BioAffinity Energist, providing wearers greater comfort when using digital devices, along with enhanced end-of-day comfort. This daily lens is a perfect product for today's digital world and another great example of Cooper Vision leading with innovation and manufacturing know-how. And building on this, we'll also be launching an expanded MyDay Toric parameter range in early fiscal 2023. MyDay already offers the most prescription options in the daily Toric market, and this expansion will essentially match the leading offerings in the FRP Toric segment, which will be a first for the contact lens industry. All this activity supports a fantastic MyDay brand and exemplifies Coopervision's focus on offering practitioners a wide variety of market-leading, technologically superior products. Meanwhile, we're expanding availability of Clarity around the world, which will further strengthen relationships with customers using store brands. And I'm also happy to report that we've recently increased production of BioAffinity, including made-to-order extended-range Torx and BioAffinity Torx multifocals. Demand continues to exceed supply on these products, which has caused supply disruptions, so adding capacity is great news. Overall, these products and technologies improve how eye care professionals deliver clinical care, and it's allowing us to lead in defining standard of care, a core component of our ongoing share gains. Moving to myopia management, another exciting area where we're a market leader. We posted revenues at $24 million. up 42%, including MySight up 109%. Our growth trajectory remains strong, with the main challenge being in China, where all contact lens sales, including MySight and OrthoK products, have experienced difficulties due to ongoing COVID restrictions. Outside of China, MySight is performing really well, backed by its extensive seven-year clinical data and FDA approval, and we're seeing strength with key accounts and private practitioners around the world. We're also seeing a positive halo effect with customers selling MySight, accelerating their use of other Cooper Vision lenses. For sight glass myopia management glasses, our JV relationship with Essilor Luxottica is going well and the team continues to make progress. In the U.S., we're finalizing the submission of the three-year clinical data and expect to submit it to the FDA in September. As a reminder, the only FDA-approved myopia management product on the market in the U.S. is MySight, So obtaining approval for glasses has the potential to really propel the myopia management field forward. To finish on CooperVision, the contact lens market continues to perform exceptionally well with estimated growth of 8% in calendar Q2. Although COVID-related challenges remain, including here in the U.S., where back-to-school eye exam demand is exceeding exam capacity, the many long-term growth drivers of the industry remain intact. This starts with a large macro growth trend that roughly one-third of the world is myopic today, and that is expected to increase to 50% by 2050. This is driven by heightened screen time, among other factors. Additionally, the shift to silicone hydrogel dailies remains strong. The penetration of higher-value products, such as torques and multifocals, is growing. The number of wearers is growing, and we're seeing price increases. Global growth to remain healthy and believed will remain a leader with our robust product portfolio, ongoing product launches, fast-growing myopia management business, and leading new fit data. And speaking of data, I'm proud to say Counter Q2 U.S. stats show Cooper Vision was the number one company for new wearers and the only manufacturer to grow share in all three daily categories, spheres, torques, and multifocals. Moving to Cooper Surgical, we posted a solid quarter led by fertility, which reported sales of $112 million, up 13% organically. As I mentioned earlier, this was the seventh consecutive quarter of double-digit organic growth, so a big congratulations to that team. Success was seen throughout the product portfolio and around the world, with particular strength noted in consumables, with products like media, pipettes, needles, and catheters doing well. Consumables are a core part of our fertility business and an excellent indicator of future growth, so we remain in great shape to continue delivering strong results. Regarding the broader fertility market, the fundamentals behind the industry's growth remain very healthy. There are many drivers, but women delaying childbirth is a primary factor as fertility challenges start increasing around the age of 30 with a more pronounced negative impact starting at 35. It's now estimated that roughly 15% of reproductive age couples worldwide have fertility challenges, and over 750,000 babies are born annually through fertility-assisted measures. And these numbers are growing. Regarding Cooper Surgical's positioning, we estimate the portion of the market we compete in is roughly $2 billion in annual sales, and that it will grow in the 5% to 10% range for many years to come. In addition to increasing maternal age, other drivers include improving access to treatment, increasing patient awareness, growth in the number of fertility clinics, improved product offerings such as donor activity and cryopreservation services, and technology improvements for both male and female infertility challenges. Given the momentum of the industry and the diversity of factors driving growth, fertility is certainly an exciting market to be in. Moving to office and surgical products, which includes OBGYN medical devices, ParaGuard, and stem cell storage, we posted sales of 165 million, up 36%, but down 3% organically. OBGYN medical device sales were negatively impacted by heightened back orders due to supply chain challenges. We've seen good demand and positive signs in our supply chain to start this quarter, so we expect healthy growth in fiscal Q4. Paragard was down 7% as expected due to a difficult comp with last year's price increase and related buy-in activity, but we expect nice growth in Q4 with an easier comp, improving patient flow, and an increasing patient focus on the most efficacious forms of birth control, including 99% effective IUDs such as Paragard. Lastly, our stem cell storage business that we entered with a generate acquisition this past December grew 1%. This was in line with expectations against a difficult comp from prior to our purchase of the business. To wrap up on Cooper Surgical, fertility remains strong, the other parts of the business are making progress, and the integration activity is going well. We expect a strong finish to this year and believe we're in an excellent position to deliver long-term, mid-single-digit growth. To conclude, we operate in recession-resistant industries with strong macro growth trends, but we're not immune to supply chain challenges and currency is having a material impact on our as-reported results. Having said that, our core business fundamentals are excellent. We're taking market share, we're leveraging where we can, we're taking price. We'll remain extremely focused on the challenges facing us, and we'll be proactive, and we'll proactively manage operations while maintaining a focus on delivering long-term shareholder value. And with that, I'll turn the call over to Brian to discuss financial results and guidance.