The Cooper Companies, Inc.

Good afternoon and welcome to Cooper Company's fourth quarter 2022 earnings conference call. All participants are in a listen-only mode. After the speaker's presentation, we will conduct a question and answer session. To ask a question, you'll need to press star followed by the number one on your telephone keypad. As a reminder, this conference call is being recorded. I would now like to turn the call over to Kim Duncan, Vice President of Investor Relations and Risk Management. Please go ahead, Ms. Duncan.

Good afternoon. And welcome to the Cooper Company's fourth quarter and full year 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 are 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 fourth quarter and fiscal 2022 year-end conference call. We finished this year with Cooper Vision reporting its seventh consecutive quarter of double-digit organic revenue growth and Cooper Surgical posting an eighth consecutive quarter of double-digit organic revenue growth within its fertility business. Demand for our products and services was very strong in Q4, and we're seeing that continue into fiscal 2023. I'm extremely proud of the dedication of our Cooper employees and the hard work It took to post another year of record revenues in fiscal 2022, and I look forward to another record-setting year in fiscal 2023. Moving to the numbers, consolidated quarterly revenues reached an all-time high of $848 million, and we closed the fiscal year with record revenues of $3.31 billion. Cooper Vision posted quarterly revenues of $562 million, up 11% organically, and and reached a new record high of $2.24 billion in fiscal year revenues. Cooper Surgical posted record quarterly revenues of $286 million, up 15% organically, and reached new record fiscal year revenues of $1.07 billion. For the quarter, Cooper Vision's growth was led by our daily silicone hydrogel portfolio and myopia management products, while Cooper Surgical's growth was broad-based with strength in Paragard, fertility, and our broader medical device portfolio. Non-GAAP earnings per share were $2.75. This was lower than we were forecasting, primarily due to commercial spending tied to product launches and elevated distribution costs, and Brian will cover this later in the call. For Cooper Vision and Q4, and reporting all percentages on an organic basis, Revenue growth was strong and diversified in all geographic regions and across all product categories, spheres, torques, and multifocals. The Americas grew 5%, EMEA was up 13%, and Asia-Pac grew 16%. This performance was driven by new product launches, expanded product ranges, market-leading flexibility through our customized offerings, and growth in key accounts. Regarding product details, daily silicone hydrogel lenses grew 20%, with especially strong growth from MyDay and from Clarity in the Asia-Pac region. 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 MyDay and Clarity available in a broad range of spheres, torques, and multifocals. Our silicone hydrogel FRP lenses, BioAffinity and Avera, reported another solid quarter of 6% growth. Regarding product launches, we remain extremely active. The MyDay multifocal launch is going incredibly well, and the feedback from customers and practitioners remains outstanding. In the meantime, the MyDay Toric parameter expansion launch has been overwhelmingly positive in the U.S. and Canada. With over 4,000 SKUs, we now match our standard BioAffinity Toric range and have the widest daily Toric range in the market by a wide margin. Not only does this expand the daily Toric category for everyone, But for many FRP torque wearers, this is their first opportunity to enjoy the freedom of a daily contact lens. We'll be rolling out these expanded parameters in additional markets as we move through fiscal 2023 and look forward to continued success. And lastly on MyDay, we're excited to be bringing MyDay Energist to the market. This lens uses the same innovative technology as BioAffinity Energist to alleviate digital eye strain, and eye care practitioners are excited to be getting this technology in a premium daily offering. We've started seeding the U.S. market, and a full national rollout is scheduled for early spring. Combining all this MiDay activity truly exemplifies Cooper Vision's leadership in the daily silicone hydrogel space and our focus on offering practitioners a wide variety of market-leading, technologically superior products. Outside of MiDay, demand for biofinity remains especially strong to the point where we're somewhat capacity-constrained. We've increased price and production, especially in the extremely high demand made to order extended range torques and torque multifocals, and we'll continue to focus on increasing capacity on a broader scale moving forward. Moving to myopia management, we posted revenues of $26 million, up 29%, including my site, up 88%. For the full fiscal year, we reported myopia management revenues of $93 million, which was impressive given the negative impact of currency and ongoing COVID restrictions in China. For MySight, we're rolling out an expanded parameter range and launching in new countries, and I'm happy to report that MySight is now available in 41 countries. Within this, we're seeing increased fitting activity from both independent optometrists and key accounts, and we're continuing to see a positive halo effect with our MySight customers accelerating their use of other Cooper Vision lenses. All this is a good sign and points to a strong fiscal 2023, where we expect myopia management revenue of $120 to $130 million, up roughly 35% at the midpoint in constant currency. As a reminder, my site contact lenses are the first and only FDA-approved soft contact lens proven to slow the progression of myopia in children aged 8 to 12 at the initiation of treatment. The product is backed by extensive clinical data. It remains a shining example of Cooper Vision's leadership in the contact lens industry. Moving to sight glass, we've been making progress with these myopia-controlled glasses as part of our great joint venture with Esslor Luxottica. This includes selling in China and pilot programs in Canada, the Netherlands, the UK, and Israel. In the U.S., the JV submitted an FDA application to be the first spectacle lens product to receive FDA approval for myopia control, and we hope to receive a positive response by calendar year-end. And to conclude on the importance of myopia management and why it needs to become standard of care, the risk of visual impairment and eye complications such as glaucoma grows exponentially with vision loss, so preventing higher levels of myopia is critically important for the long-term health of our children's eyes. To finish on Coopervision, the contact lens market is performing exceptionally well with growth of roughly 9% in calendar Q3. There are still COVID-related challenges, especially with respect to staffing shortages and optometry offices negatively impacting patient flow, but progress is being made. Meanwhile, the long-term growth drivers of the industry remain intact. This starts with a macro growth trend and more people needing vision correction, with an estimated 50% of the global population expected to have myopia, or nearsightedness by 2050, up from roughly 34% of the population today. This is driven by a variety of factors, including greater levels of screen time and less time outdoors, especially among children. Other industry drivers include the market's continuing shift to silicone hydrogel dailies, the increasing focus on higher value products such as Torx and multifocals, and higher pricing, which is running ahead of historical trends. We expect global growth to remain healthy and believe we'll remain a leader with our robust product portfolio, ongoing product launches, fast-growing myopia management business, and leading new fit data. Moving to Cooper Surgical, we posted a great quarter with growth throughout our portfolio. Fertility reported sales of 109 million, up 15% organically. It's eight consecutive quarter of double-digit organic growth. Success was seen throughout the product portfolio and around the world. Given our momentum as we enter fiscal 2023, we're continuing to invest in our team and in our fantastic product portfolio, which includes leading consumables, capital equipment, and genomics. Demand remains very strong, especially among our key accounts, so we need to keep building infrastructure, investing in our people, and delivering the products and services required in this high-growth market. Regarding the overall fertility market, the future looks bright. There are several industry growth drivers with one of the key factors being women delaying childbirth. The average age of a woman's first birth in the U.S. and several other developed countries now stands at a record high of 30 years old, and age is one of the key factors in needing fertility assistance. Additionally, factors such as improving access to treatment, increasing patient awareness, improved product offerings such as cryopreservation, increasing fertility benefits coverage, and technology improvements for both male and female infertility are driving the industry forward. In total, it's estimated that roughly 15% of reproductive age couples have fertility challenges and that over 750,000 babies are born annually through fertility-assisted measures, and these numbers are growing. Regarding Cooper Surgical's market positioning, we compete in a portion of the market that's roughly $2 billion in annual sales, and we forecast growth of 5% to 10% for many years to come. Within this, we're well-positioned to continue delivering strong results with the broadest portfolio in the industry, a market-leading commercial footprint, and strengthening key accounts. Moving to office and surgical products, which includes OBGYN medical devices, Paragard, and stem cell storage, we posted sales of $178 million, up 58%, and up 15% organically. Within this, Paragard grew 19%, and office and surgical medical devices were up 13%. Paragard posted strong results, rebounding from several tough quarters, and our OBGYN medical devices benefited from strong demand, especially for surgical products, combined with clearing some backlog. Lastly, our stem cell storage business grew 2%, in line with expectations against the difficult come. To conclude on Cooper Surgical, we made a ton of progress this year. Our fertility business continues to post great results. Our office and surgical products closed the year strong, and we completed an incredible amount of integration activity associated with several acquisitions, including the Generate deal. Before I turn the caller to Brian, let me say this was a great fiscal year for Cooper. We reported record revenues and made significant advancements throughout our organization. As we enter fiscal 2023, demand remains strong, supported by stable consumer activity and price increases. Our investment activities, including new product launches and capacity expansion, are going well. Our employees are highly engaged, and we're continuing to execute on our long-range strategic objectives. Having said that, we are aware of global inflation, geopolitical risks, and other factors that could cause a global recession, and we're thus managing our investment activity with prudent cost controls and will continue to be vigilant in our operations. With that, let me turn the call over to Brian.