The Cooper Companies, Inc.

mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, again, press the star one. Thank you. I'd now like to turn the call over to Kim Duncan, Vice President of Investor Relations and Risk Management. You may begin.

Good afternoon, and welcome to Cooper Company's second quarter 2024 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 will contain forward-looking statements, including revenues, EPS, operating income, tax rate, FX, and other financial guidance and expectations, 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 10Q filings, all of which are available on our website at coopercoes.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 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 today's call. I'm pleased to report record quarterly revenues and great operational progress throughout our organization. Cooper Vision returned a double-digit revenue growth driven by our portfolio of leading silicone hydrogel lenses, And Cooper Surgical posted a solid quarter despite some unexpected challenges with the system upgrade impacting our U.S. distribution center. Margins improved as we leveraged prior investment activity and we delivered excellent earnings growth. As we move forward, we're increasing our revenue and earnings guidance by incorporating this past quarter and the momentum we're seeing in our markets. Moving to the details and reporting all percentages on an organic basis, consolidated quarterly revenues were a record $943 million, up 8% year-over-year. Cooper Vision posted record quarterly revenues of $636 million, up 11%, led by strength in our daily silicone hydrogel portfolio. And Cooper Surgical posted revenues of $307 million, up 4%. Margins improved, and non-GAAP earnings per share were $0.85. For Cooper Vision, the Americas grew 10%, EMEA 14%, and AsiaPAC 7%. All three regions were led by our innovative product portfolios, market-leading flexibility, and strength in key accounts. Within categories, torques and multifocals combined to grow 12%, and spheres were up 9%. Within modalities, our daily silicone hydrogel lenses, My Day and Clarity, grew 18%, and our silicone hydrogel FRP lenses, Biofinity and Avera, combined to grow 10%. And our myopia management portfolio was up 17%, with my site growing 39%. All in, a very nice quarter with strength around the world and throughout our focused product portfolio. Turning to product details and starting with our high-growth daily silicone hydrogel portfolio, we had another fantastic quarter with My Day leading the way, delivering outstanding results. My Day is growing in every market and every category. with particular success in our innovative toric and multifocal products. Our ongoing toric parameter expansion launch across North America and Europe is enabling eye care professionals, or ECPs, to fit more wearers in our market-leading design and industry-leading SKU range, which is by far the widest toric range in the daily market. And MyDay Multifocal's 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. We continue to receive very positive feedback on this fantastic lens, and I continue to count myself as an ecstatic wearer of what is, without a doubt, the best multifocal contact lens in the market. We've also seen success with our MyDay Spheres, especially with our Energist product, which is showing very strong growth. EnerGist is driven by its innovative digital boost technology designed specifically for today's digital lifestyle, and this meaningful technological improvement is important to contact lens wearers and to ECPs. Given the strong performance of this lens in the U.S., we're excited to launch it in additional markets in the near future. Moving to clarity, our other complete family of silicone hydrogel daily lenses also remains a growth driver. ECPs love this product for its comfort, easy handling, and affordability, which makes it an especially good choice for new wearers. It continues to be an important driver in expanding our daily wearer base, with noted success in upgrading legacy hydrogel wearers. Outside of dailies, demand for BioAffinity and Avera remains very healthy. The BioAffinity portfolio has continued expanding beyond the traditional ranges of spheres, torques, and multifocals into expanded ranges, made-to-order lenses, torque multifocals, and energists, It now provides ECPs the ability to fit an amazing 99.9% of patient prescriptions. This is an incredible manufacturing accomplishment and a fantastic benefit to those patients who require the most complex types of vision correction. This is a true differentiator in any office and one of the reasons BioAffinity remains so successful. With new state-of-the-art manufacturing lines now in service, we'll be expanding availability of these lenses in existing markets and launching in new markets in the near future. Moving to myopia management, my site continues to gain traction powered by healthy demand. Asia Pac posted a record quarter, EMEA was strong, and the Americas reported a record month in April. Although revenues were negatively impacted by a reduction in channel inventory during the quarter. Our back-to-school promotional campaigns are starting soon, and we expect robust results based on the success we saw last year, so we're expecting strong results in the back half of this year. In the meantime, we're marking a milestone anniversary for MySite with 2024 being the 10-year anniversary of the pivotal MySite one-day clinical trial, which led to MySite becoming the first and still the only FDA-approved optical intervention for myopia control. This study remains a gold standard in clinical trial study design and duration for myopia control and the longest-running study of contact lens wear in children. Cooper Vision's commitment to establishing myopia control as standard of care continues and can be seen via two important initiatives launched this quarter. First, as part of the continuation of our exclusive partnership with the World Council of Optometry, we've launched a digital myopia management navigator tool available to ECPs around the world. This interactive toolkit provides practical tips and resources to help offices integrate myopia management into their practices. Second, Cooper Vision and the American Optometric Association have partnered on a groundbreaking initiative, the Myopia Collective, to rally U.S. ECPs to adopt myopia management as the standard of care for their pediatric patients. The program is currently recruiting 51 ECPs representing each state plus the District of Columbia who will work proactively to with the AOA and Cooper vision to advocate for community and policy change. To conclude our contact lenses, the market grew roughly 5% in calendar Q1, with Cooper taking share up 7%. We continue to expect a robust market moving forward driven by several positive long-term macro growth trends. And within this, we expect to remain a leader with our innovation robust product portfolio, ongoing product launches, strength in premium products, fast-growing myopia management business, and leading new fit data. Moving to Cooper Surgical. We posted quarterly revenues of $307 million, up 4%. Demand was strong, but a systems upgrade caused shipping interruptions in our U.S. distribution center for our medical device and fertility products. We were largely able to overcome this with strength in Paragard, but not entirely. Having said that, we've made a lot of progress and we're comfortable we'll manage the backlog and reach our full-year organic revenue guidance range, which remains unchanged. Implementing IT infrastructure upgrades can certainly be challenging, but this type of work is critical to our long-term success as it supports efficient growth, creates a better customer experience, and makes internal operations more effective with improved real-time data. Moving to fertility, sales were 124 million, up 4%. We continue seeing strong demand around the world with our leading products and services continuing to position us well with fertility clinics as they open new facilities, upgrade existing locations, and look for opportunities to improve outcomes and optimize their operations. We're also investing for the future, opening new donor sites, providing extensive training in our centers of excellence, expanding geographically, and accelerating innovations. Our focus on investing and delivering the most innovative and advanced solutions to fertility clinics and patients remains unmatched. This includes the first and only European approval for a uniquely formulated one-step media. This specialized culture and transfer media reinforces embryo-endometrial communication for improved embryo development, sustained implantation, and pregnancy. Similar to the advances we're making in fertility-based genetic testing, the science is complex, but the goal is straightforward, providing innovative, market-leading technologies to improve the journey to parenthood. Developing and delivering these types of innovations is why we're a leader in this space, and it's our commitment to continue this type of work. Regarding the broader fertility industry, this dynamic market is supported by several positive macro growth trends, including women delaying childbirth, increasing patient awareness, greater benefits coverage, technology advancements, and improving access to treatment. The World Health Organization highlights that one in six people will be affected by infertility at some point in their lives, so this is an issue that impacts a lot of people and will do so in the future. As a leader in this space, we remain incredibly committed to advancing the industry by delivering innovative products, standing in support of patients and clinics, and improving access to treatment on a global basis. Moving to office and surgical, we posted sales of 183 million, up 4%, with medical devices declining 6% due to the previously mentioned shipping challenges. SEM cell storage was up 5%, and Paragard up 22%. Within medical devices, demand was healthy, driven by our minimally invasive gynecological surgical products led by our Ally Uterine Manipulator Portfolio. And our labor and delivery portfolio is now arguably the most comprehensive obstetrics portfolio of medical devices, ensuring the safety of mothers and babies and demand remains strong. Our stem cell business had a solid quarter and Paragard outperformed expectations with the benefit of stocking related to a mid single digit price increase. This stocking will naturally offset itself largely in fiscal Q3. To conclude on Coopersurgical, With our expanding obstetrics portfolio of products and services, we can now update our impact to the global community and say that roughly every 30 seconds, somewhere around the world, a baby is born using Cooper Surgical products. We're making a difference in people's lives, and that makes this business very special. To wrap up, let me add that we just released our latest ESG report, which highlights our efforts around environmental sustainability, corporate social responsibility, and strong corporate governance. It's on our website and well worth reading when you have a chance. We are passionate about sustainability, and I'm thankful to our employees around the world for their commitment to doing things the right way. So with that, let me say thank you to our 15,000 plus employees for their continuing hard work and dedication as they drive our success.