The Cooper Companies, Inc.

Thank you for standing by. My name is Pam and I will be your conference operator today. At this time, I would like to welcome everyone to the third quarter 2024 Cooper Company's 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'd like to withdraw your question, press star 1 again. I would now like to turn the conference over to Kim Duncan, VP of Investor Relations and Risk Management. You may begin.

Good afternoon and welcome to Cooper Company's third 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, interest expense, operating income, tax rate, FX, and other financial guidance and expectations, strategic and operational initiatives, expectations for recent acquisitions, 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 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 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 earnings call. I'd like to start by congratulating our 15,000-plus employees for delivering Cooper's first-ever billion-dollar revenue quarter. We couldn't have reached this milestone without the hard work and dedication of our amazing employees, so a big thank you to the entire Cooper team. I'm also proud to announce that both Cooper Vision and Cooper Surgical reported record revenues and that margins improved nicely, driving double-digit earnings growth and record non-GAAP quarterly earnings. This performance highlights the strength of our business as our multi-year growth strategy to become a leader in the daily contact lens space and a leader in the global fertility industry moves into a stage of healthy revenue growth combined with leverage through the P&L. To expand on that, at Cooper Vision, we've taken our highly successful monthly lens strategy, built on innovation and flexibility, and taken it to the daily space where we're expanding the segment and gaining share. At Cooper Surgical, we've expanded our global fertility capabilities while continuing to provide clinics with premium products and services that support every step of the fertility journey. And in both cases, we've crafted our portfolios to expand our customers' businesses and improve patient outcomes. We've accomplished this by strategically investing throughout the organization, including installing state-of-the-art manufacturing capabilities, implementing technological advancements in packaging and distribution, developing and launching numerous new products, completing significant IT upgrades, and providing extensive employee training. This activity is paying off, and I'm proud of our success and excited about what the future holds. Moving to the details and reporting all percentages on an organic basis, consolidated quarterly revenues were slightly over $1 billion, up 8% year-over-year. Cooper Vision posted record quarterly revenues of $676 million, up 10%, led by strength throughout our broad-based product portfolio. And Cooper Surgical posted record quarterly revenues of $327 million, up 5%, including fertility returning to double-digit growth. Non-GAAP earnings per share grew 14% to 96 cents. For Cooper Vision, we continue to be the most innovative company in the $10 billion-plus contact lens industry with the broadest portfolio of lenses, the only FDA-approved product for myopia control, arguably the most active product launch schedule, and a fantastic R&D pipeline. This has led to the consistency of our results. and is why Cooper Vision is the number one contact lens company in the world in terms of wearers. For the third quarter, we once again took share, with the Americas growing 13%, EMEA 7%, and Asia-Pac 7%. Within categories, Torx and multifocals grew 12%, and spheres grew 8%. Within modalities, our daily silicone hydrogel lenses, MyDay and Clarity grew 13%, And our silico and hydrogel FRP lenses BioAffinity and Avera grew 11%. And our myopia management portfolio posed a growth of 29%, with MySight up 50%. All in, a very nice quarter against a tough comp from last year. Turning to products and starting with our high-performing daily portfolio, we continue to see strong growth and healthy momentum with MyDay in every category, spheres, torques, and multifocals. In particular, we're seeing extremely strong growth in our most innovative product areas led by MyDay Energist with its digital boost technology, with our industry-leading Toric range, and with our easy-to-fit multifocals, which, as everyone knows, is a personal favorite of mine. This product family has been extremely well-received by eye care practitioners and customers, and we have more upside to our growth as we continue bringing manufacturing capacity online to meet the significant demand. This is particularly true of our market-leading TOREC, where there is considerable new wearer opportunity, along with upgrade potential given the decade-plus success of BioAffinity TOREC, which shares the same design. Moving to our mass market daily silicone hydrogel product family, Clarity, I'm excited to report that we recently launched an upgraded Clarity multifocal in the U.S. this past quarter. The lens design matches our MyDay multifocal design, featuring next-generation enhancements that provide better vision and comfort for presbyopic patients, as well as an easy-fitting experience for eye care professionals. The Clarity family as a whole is known for its comfort, easy handling, and affordability, and patients appreciate the price point where we're continuing to successfully upgrade legacy hydrogel wearers. Moving to frequent replacement silicone hydrogel lenses, Both BioAffinity and Avera continue performing exceptionally well. For BioAffinity, we're seeing nice growth across the entire portfolio with BioAffinity energists and our made-to-order products, such as extended-range Torex and Torex multifocals leading the way. These lenses are made using some of our most innovative manufacturing technologies, and this allows us to provide the widest range of prescriptions in the market, something that is especially important in fitting patients with the most complex vision needs. Turning to myopia management, my site posted record quarterly revenues across all regions, and our momentum is strong. We're in the middle of our U.S. back-to-school campaign, and early results indicate we'll see a significant increase in consumption through the end of this year. And we've taken the learnings from our successful U.S. programs, and we're running similar programs in other key markets, such as Spain, the U.K., and Korea. We're incredibly proud of the number of children's lives we're meaningfully impacting through the growing adoption of my site and we continue to demonstrate leadership in driving global awareness of opium management, working closely with the entire global optical industry to expand usage and establish it as standard of care. In this spirit, in July, at the World Congress of Pediatric Ophthalmology, the Cooper Vision professional affairs team showcased the long duration of MySightScience, which now spans 10 years. With multiple additional studies underway in the U.S. and China, MySight is the most thoroughly researched contact lens for children, and the clinical data is excellent. We will showcase more data this quarter at the upcoming International Myopia Conference in China, as well as in Korea, at our Asia-Pacific Myopia Management Symposium, which has become a premier annual event for practitioners and researchers across the region. To conclude on CoupraVision, the contact lens market grew roughly 7% in calendar Q2, with Cooper continuing to take share up 10%. The market remains very healthy, and that should continue, supported by several long-term macro growth trends. And within this, we're leading with innovation, a broad 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 record quarterly revenues of $327 million, up 5%. Within this, fertility sales were 129 million, up 10%. Fertility continues to be a great business for us, and the future is bright as we're taking share and expanding our leadership position globally. Our broad portfolio of products and services, including consumables, capital equipment, reproductive genetic testing, and donor activity continues to lead the market, and we're investing by launching new products, accelerating innovation in R&D, opening new donor sites, providing extensive training in our centers of excellence, and expanding geographically. Our focus on delivering the most advanced fertility solutions remains unmatched, and our dedication to improving fertility outcomes for patients remains a guiding principle. Meanwhile, we're seeing strong demand in our focus markets with fertility clinics increasing patient activity, upgrading to new technologies, and opening and expanding facilities in several markets. Regarding current activity, we just had one of the busiest global fertility events we've ever had at a large European conference in July. Excitement was high for the industry and for our products and services. In particular, there was a lot of excitement around our new culture and transfer media, which just launched in Europe, around our new fast-track genomics testing, which is now launched globally, and around embryo options, our premier cryo-management software, which recently launched in targeted European countries. Regarding the broader fertility industry, the macro trends supporting growth remain intact, with the World Health Organization highlighting that one in six people globally will be affected by infertility at some point in their lives due to a variety of factors, including women delaying childbirth. As a leader in the space, we remain incredibly committed to advancing the industry by 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 $198 million, up 2%. Medical devices grew nicely, led by our minimally invasive gynecological surgical products, including our Ally uterine manipulator portfolio and our labor and delivery portfolio, led by FetalPillow, a balloon device used in C-sections to elevate the fetal head and facilitate ease of delivery of the baby. Stem cell storage had a solid quarter, and Paragard slightly declined as expected after last quarter's strong results. One quick note on Paragard, we recently received approval for a new single-handed inserter, which makes placing the IUD easier, and we are now in the process of launching this improvement. And with that, I'll turn the call over to Brian.