The Cooper Companies, Inc.

Thank you for standing by and welcome to the Q4 2023 Cooper Companies Earnings Conference Call. I would now like to welcome Kim Duncan, VP Investor Relations and Risk Management to begin the call. Kim, over to you.

Awesome, thank you. Good afternoon and welcome to Cooper Companies fourth quarter and full year 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 revenue, EPS, operating income, tax rate, and other financial guidance, a pending stock split, expected revenue growth and accretion related to a recent acquisition, strategic and operational initiatives, market and regulatory conditions and trends, and product launches and demand. 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 coopercodes.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 under 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 materials. 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 2023 Fiscal Fourth Quarter and Year-End Conference Call. This was a fantastic year for Cooper as we finished with all-time record revenues of almost $3.6 billion, and we closed the year on a really positive note with Cooper Vision posting its 11th consecutive quarter of double-digit organic growth and Cooper Surgical posting record quarterly revenues driven by our fertility business posting its 12th. consecutive quarter of double digit organic growth. Truly tremendous accomplishments by phenomenal teams. We've now entered fiscal 2024 with a lot of excitement and focus on executing on our long range strategic objectives, including gaining market share, driving profitability, launching innovative products and services, and maintaining our fantastic Cooper culture. Moving to the quarterly numbers, consolidated revenues were $927 million, up 9% organically year over year. Cooper Vision posted revenues of $623 million, up 11% organically, and Cooper Surgical posted revenues of $304 million, up 7% organically. Cooper Vision's growth was led by strength in our daily silicone hydrogel portfolio, and Cooper Surgical's growth was led by a very strong quarter in our fertility business. Margins improved and profits were solid, with non-GAAP earnings per share of $3.47, up 26%. For Coopervision, and reporting all percentages on an organic basis, revenue growth was strong and diversified. The Americas grew 12%, EMEA grew 9%, and Asia-Pac grew 10%, with all three regions having success with our innovative products, market-leading flexibility, and growth in key accounts. Within categories, Torx grew 15%, multifocals grew 18%, single-use sphere grew 7%, and non-single-use sphere other grew 4%. Within modalities, daily silicone hydrogel lenses grew 19%, and our silicone hydrogel monthly and two-week lenses BioAffinity and Avera Vitality grew 8%. Turning to products and starting with our high-growth daily silicone hydrogel portfolio, We continue to outperform expectations with MyDay. We just passed the two-year anniversary of the MyDay multifocal launch, and the pace of growth on this product remains outstanding. The unique combination of an advanced multifocal design paired with an easy-fitting system has resulted in very high satisfaction levels, including a 98% fit success rate in two pairs or less. This makes it a win for the doctor and the patient, and it shows in our results and momentum. From a personal perspective, as I shared last quarter, I now wear my day multifocals and I continue to be amazed at how easy the lenses are to insert and remove and how fantastic my distance and near vision are. And I put these lenses in as soon as I wake up and I don't take them out until bedtime. I may be biased, but I truly believe these are the best multifocal lenses on the market and our sales growth certainly supports that. Moving to MyDay Toric, demand remains very strong following the rollout of our parameter expansion across North America and Europe. This success is due to the product's market-leading Toric design, which mirrors BioAffinity's design, and our industry-leading SKU range. In MyDay Energist, our most recent launch continues to impress eye care practitioners and patients with its innovative digital boost technology designed specifically for today's digital lifestyles. The lenses deliver fantastic comfort and sales are exceeding our expectations. And I'm proud to say that My Day Energist was recently voted the most innovative product of 2023 by US eye care practitioners, an awesome accomplishment and a great recognition for our team. With the success of these My Day products, we certainly look forward to rolling them out in additional markets around the world as soon as capacity allows. And while My Day continues to be our key growth driver in the daily silicone segment, We're continuing to have success with Clarity, which offers a full family of spheres, torix, and multifocals at a great price point. The initial comfort, excellent handling, and price positioning have led Clarity to be a lens of choice for new wearers. Outside of dailies, demand for our BioAffinity family of products remains healthy, led by torix and multifocals. And I'm excited to announce we'll be launching our highly successful BioAffinity TORIC multifocal to several new markets in the coming year in response to extremely strong demand. Avera also had a nice quarter led by TORICs. Moving to Myopia Management, we posted revenues of $35 million, up 41%, with MySite up 46%. This was another excellent quarter for MySite, powered by growth in the Americas and EMEA, while Asia-Pac was flat due to challenges in China. As we enter fiscal 2024, we're expecting excellent growth with the positive trends in the Americas and EMEA continuing and Asia-Pac returning to growth as the region has hurtled past stocking orders and is already showing improving trends. Additionally, we're continuing to see high retention rates, growing momentum in key accounts, and a nice halo effect on our other products. All this adds up to over 250,000 children around the world wearing MySite and momentum being very strong. MySight remains the first and only FDA-approved contact lens for myopia control, and it's backed by extensive clinical data. This is a crucial 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 risks of long-term eye health problems associated with myopia, such as cataracts, retinal detachment, and macular degeneration. Meanwhile, our Ortho K franchise had a nice rebound quarter, growing 37% year-over-year. To finish on Cupervision, the contact lens market grew roughly 7% in calendar Q3, with Cupervision taking share, growing 10%. We expect the market to remain healthy, growing 5% to 7% this coming year, supported by the long-term macro growth trend of more people needing vision correction. It's estimated that 50% of the global population will have myopia by the year 2050, up from roughly 34% today. This is driven by kids spending more time indoors and the related greater 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 and higher pricing, we expect many years of solid growth for the industry. Within this, we expect to remain a leader with our innovation robust product portfolio, ongoing product launches, strength in premium toric and multifocal products, our fast-growing myopia management business, and our leading new fit data. Moving to Cooper Surgical, we posted record revenues of $304 million, up 7% organically. This included fertility sales of $121 million, up 15% organically, which was our 12th consecutive quarter of double-digit organic growth. Within this, we saw share gains around the world and throughout our portfolio, driven by our market-leading products and services, including consumables, capital equipment, and reproductive genetic testing. We also continued investing in geographic expansion, key accounts, and R&D. We're entering fiscal 24 as one of the fastest-growing and most innovative fertility companies in the world. We're developing and launching new products, opening new donor sites, providing extensive training through our Centers of Excellence, expanding in new and existing geographies, and we're well-positioned to continue delivering success given our great team, diverse portfolio, and global momentum. For the broader fertility market, the macro growth trends remain intact, starting with women delaying childbirth. Age is a key factor in contributing to the need for fertility assistance, and the median age of a woman's first birth in the U.S. and within several other developed countries is roughly 30 years old and moving higher. Other growth drivers include improving access to treatment, increasing patient awareness, increasing fertility benefits coverage, and technology improvements to address both male and female infertility challenges. The World Health Organization data highlights that one in six people globally are affected by infertility at some point in their lives. And given that one third of the underlying cause of infertility is women, one third is men, and one third is a combination of the two are unknown, this is an issue that impacts a lot of people and will continue to do so in the future. Moving to office and surgical, we posted sales of 183 million, up 3% organically, with medical devices growing 3% against a very challenging comp. Within this part of our business, we recently closed the acquisition of several highly strategic products from Cook Medical. Given the strength of our medical device team and the success we're having in the labor and delivery space where several of these acquired products reside, This will be a great deal for us, and I look forward to reporting future results on these products. Stem cell storage posted solid growth of 6%, and Paragard was flat as higher pricing offset declining unit sales. To conclude on Cooper Surgical, we take great pride being able to say that every minute somewhere around the world, a baby is born using Cooper Surgical products. We're making a difference in people's lives, and that's part of what makes this business really special for us. Moving to fiscal 2024, let me provide comments on revenue guidance, and Brian will cover the rest of the P&L. We expect Cooper Vision to post strong results and are guiding to 7% to 9% organic revenue growth for the year. The main limiter to this growth is capacity challenges from new wearer demand, especially for my day. We expect these capacity constraints to pressure revenues in fiscal Q1 to resulting growth of around 7% for the quarter. We are actively bringing additional capacity online, though, and expect to report high single-digit to double-digit growth as we move through the year. For Cooper Surgical, we're guiding a full-year organic revenue growth of 4% to 6%, which includes another year of strength and fertility, low to mid-single-digit growth in medical devices and stem cell storage, and flat to slightly down in Paragard due to declining volumes. To conclude, let me say this was a great year for Cooper, and we've entered fiscal 2024 with great momentum. But none of this is possible without the incredible hard work and dedication of our employees. So a big thank you to the entire global Cooper team for another incredible year. And now I'll turn the call over to Brian.