The Cooper Companies, Inc.

Good afternoon. My name is Emma and I will be your conference operator today. At this time, I would like to welcome everyone to the Cooper Company's second quarter 2023 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. We ask today that you limit yourself to one question and one follow-up. Thank you. Kim Duncan, VP of Investor Relations and Risk Management, you may begin your conference.

Good afternoon and welcome to Cooper Company's second quarter 2023 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. 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.

Great. Thank you, Kim, and welcome everyone to Cooper Company's second quarter fiscal 2023 conference call. This was another strong quarter with Cooper Vision and Cooper Surgical both outperforming expectations. For Cooper Vision, we reported record quarterly revenues and our ninth consecutive quarter of double-digit organic revenue growth. For Cooper Surgical, we reported record quarterly revenues and our fertility business reported its 10th consecutive quarter of double-digit organic revenue growth. and earnings exceeded expectations. Our teams are delivering impressive, consistent growth, and we're seeing nice momentum, so we remain very positive about the future. Moving to the numbers, consolidated revenue reached a record quarterly high of $877 million. Coopervision posted revenues of $589 million, up 10% organically, and Coopersurgical posted revenues of $288 million, up 5% organically. Cooper Vision's growth continues to be led by our daily silicone hydrogel and myopia management portfolios, and Cooper Surgical's growth was led by our fertility and OBGYN medical device portfolios. Non-GAAP earnings per share were $3.08. For the quarter, and reporting all percentages on an organic basis, Cooper Vision's revenue growth was strong and diversified. By geography, the Americas grew 6%, EMEA grew 7%, and Asia-Pac grew 19%. Results were driven by new product launches, expanded product ranges, market-leading flexibility, and growth in key accounts. Within categories, torques and multifocals remain especially healthy with both posting growth of 15%. Within modalities, daily silicone hydrogel lenses grew 17% with especially strong performance from my day. Daily silicone hydrogel lenses continue to be the main driver of growth for the contact lens industry, and we offer the broadest portfolio with MyDay and Clarity available in a wide range of spheres, torques, and multifocals. And lastly, our silicone hydrogel monthly and two-week lenses, BioAffinity and Avera Vitality, reported growth of 5%. Turning to products, the U.S. rollout of our latest innovative offering, MyDay Energis, is going exceptionally well. This premium lens caters to the demands of today's lifestyles by incorporating digital boost technology to alleviate the impacts of digital eye strain. Interestingly, we've been receiving a lot of positive feedback that patients in their 20s and 30s really like this lens, which is great news as the original BioAffinity Energist has been more heavily used by patients in their 40s. Given almost all of us are spending considerably more time on screens, which reduces blinking and causes eyes to dry out and become uncomfortable, It's not surprising that wearers of all ages are appreciating the digital boost in their MyDay energies. Meanwhile, MyDay multifocal sales remain robust, and we're seeing great momentum in new geographies as the lens becomes more readily available in EMEA and AsiaPAC. I'm happy to report these launches are proceeding better than expected, with feedback from customers and practitioners remaining very positive. Our MiDay Toric parameter expansion rollout in North America is also continuing successfully, and our recent launch in EMEA is ahead of schedule. Given the success of this product, we'll be increasing availability throughout EMEA, and we're looking forward to launching an Asia pack in the near future. With almost 4,000 SKUs, MiDay Toric has set the industry standard with the widest daily Toric range in the market by a wide margin. With this broad range, it's providing many two-week and monthly toric wearers the option to enjoy the freedom of wearing a daily contact lens for the first time in their lives. To conclude on my day, this technologically superior product family is performing exceptionally well and momentum is strong. And lastly, within the daily segment, our clarity family of lenses continues to perform well by offering a high-quality option at a mass market price point. Outside of dailies, demand for BioAffinity remains healthy, led by Torex multifocals and extended range offerings. We still have some capacity challenges, but with new production continuing to come online, we remain in good shape to meet ongoing demand. Moving to myopia management, we posted revenues of $30 million, up 36%, with my site up 49%. This slightly exceeded expectations and keeps us well on track to reach our goal of $120 to $130 million this year. MySite and Ortho K sales were strong around the world, except China, where we didn't see a rebound until late in the quarter. Regarding MySite specifically, we're seeing improving performance as we increase availability in key accounts, target practices with higher levels of pediatric patient flow, and integrate the sales process into our regular sales channel. All this bodes well for MySite, but also for our other products, as there's a nice halo effect with my site practitioners accelerating their use of other Cooper Vision lenses. It's important to remember that my site is the first and only FDA approved contact lens for myopia control and the product is backed by extensive clinical data. This is a critical differentiator as the proactive management of myopia becomes standard of care within the eye care community to help reduce the progression of myopia in children along with reducing the risk of long-term eye health problems associated with myopia, such as cataracts, retinal detachment, and macular degeneration. To finish on CupraVision, the contact lens market grew 12% in calendar Q1, with CupraVision growing faster at 14%. We expect the market to remain healthy, supported by the macro growth trend and more people needing vision correction. It's estimated that 50% of the global population will have myopia or near-sightedness by the year 2050, up from roughly 34% today. This is driven by the increasing use of digital screens, among other factors. When you combine this with the ongoing shift to silicone hydrogel dailies, the increasing focus on higher-value products such as torques and multifocals, and higher pricing, we expect many years of solid growth for the industry. Within this, we expect Cooper Vision to remain a leader with its robust product portfolio, ongoing product launches, fast-growing myopia management business, and leading new fit data. Moving to Cooper Surgical, this was another strong quarter. Our fertility business posted sales of $125 million, up 11% organically for its 10th consecutive quarter of double-digit organic growth. Success was seen throughout the product portfolio as the team executed exceptionally well with our diverse offerings within consumables, capital equipment, reproductive genetic testing, and donor activity. Regionally, the Americas and EMEA continue to lead growth, and the future is bright as we have solid momentum in both regions. Asia-Pac is also performing well, and we're excited about the potential of that region. With the uncertainty of the Cook transaction, we do have work to do in that region to build out our footprint, and we'll do that. In this light, we're currently doing target investment activity while also exploring ways we can advance efforts more quickly. Overall, though, we're well positioned to maintain success given our strong team, diverse portfolio, and global momentum. Regarding the broader fertility market, we compete in a segment that's now over $2 billion in annual sales, and we expect strong growth for many years to come. This industry is unique in that it has multiple growth drivers, starting with women delaying childbirth. The average age of a woman's first birth in the U.S. and within several other developed countries now stands at 30 years old, and age is a key factor in contributing to the need for fertility assistance. Other growth drivers include improving access to treatment, increasing patient awareness, increasing fertility benefits coverage, and technology improvements for both male and female infertility challenges. The World Health Organization just released updated data showing that the prevalence of infertility affects more people than we thought, with approximately one in six people having experienced infertility at some stage in their lives. So the macro trends clearly support this industry's growth. Moving to office and surgical products, which includes OBGYN medical devices, stem cell storage, and Paragard, we posted sales of $163 million, up 1% organically. Within this, OBGYN medical devices reported excellent results, growing 11%, driven by positive trends in patient activity and strength in several core products. In particular, our labor and delivery group continued performing really well. Our stem cell storage business grew 3%, in line with expectations. Our current educational campaign, which is starring Chrissy Teigen, highlights the importance of preserving newborn stem cells And we're really happy with the positive feedback, and we're looking forward to that effort gaining more traction. Meanwhile, Paragard declined 15%, primarily due to buy-in activity from the price increase in Q1. Our IUD revenues remain a challenge, and we're continuing to not expect any unit growth in Paragard this year. So any growth we do see will be driven by price. To conclude on Cooper Surgical, it's with great pride that we say that every minute, somewhere around the world, a baby is born using Cooper Surgical products. Our business makes a difference in people's lives, and we love that. We're also operating in several markets that have fantastic long-term sustainable growth characteristics, such as fertility, so we feel good about where we're positioned and what the future holds. Before turning the call over to Brian, let me summarize by saying this quarter really highlights the stability and consistency of our businesses. Cooper Vision posted its ninth consecutive quarter of double-digit growth, and Cooper Surgical's fertility business posted its 10th consecutive quarter of double-digit growth, and both businesses reported record quarterly revenue. Our momentum is strong, our investments are yielding solid returns, and our management team is fully engaged in executing at a high level. And lastly, I hope everyone has had a chance to read our recent ESG report, which highlights a lot of accomplishments. Advancing our ESG efforts is an important part of Cooper's culture, and I'm proud of the success we've had and excited about what we'll be accomplishing in the future. And with that, let me turn the call over to Brian.