The Cooper Companies, Inc.

Ladies and gentlemen, thank you for standing by. My name is Abby and I will be your conference operator today. At this time, I would like to welcome everyone to the Cooper Company's fourth quarter 2024 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 that time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one a second time. Thank you. And I would now like to turn the conference over to Kim Duncan, Vice President of Investor Relations and Risk Management. You may begin.

Good afternoon and welcome to Cooper Company's fourth quarter and full year 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 collaborations and acquisitions, market and economic 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 employees on a fantastic fiscal 2024. This was a tremendous year with all-time record revenues of $3.9 billion, including both Cooper Vision and Cooper Surgical reporting record revenues. Within this, Q4 also closed with record revenues and improving margins that drove record non-GAAP quarterly earnings. We've now entered fiscal 2025 with a focus on taking share, driving profitability, and executing on our strategic priorities, including increasing the availability of our innovative products, expanding our state-of-the-art manufacturing capacity, optimizing our technology investments, developing and launching new products, and investing in our people. Before getting into the details, let me provide some high-level comments on Q4 and fiscal 2025. For Q4, Coopervision had a solid quarter, led by strength in silicone hydrogel dailies and our full suite of Torex and multifocals, with the main offset being unexpected softness at the end of the quarter. Coopersurgical also had a solid Q4, led by double-digit growth in fertility, offset by a greater decline in Paragard than expected. Our P&L improved with prior investment activity driving margin improvements and strong earnings growth. Moving into fiscal 2025, we forecast the contact lens market growing 5% to 7% in constant currency, with us taking share growing 6.5% to 8.5%. Price should offset inflation, supporting around one-third of the growth, with the rest coming from a variety of items, including the ongoing trade-up to dailies, growth in torques and multifocals, growth in wearers, and for us, growth in myopia management. For Cooper Surgical, we expect organic growth in the mid-single digits, with fertility reporting high single-digit growth and the remainder of the business posting low single-digit growth. Moving to Q4 details, consolidated revenues were $1.018 billion, up 10% year-over-year, or up 7% organically. Cooper Vision reported quarterly revenues of $676 million, up 9% or 8% organically, led by strength throughout our market-leading product portfolio. Cooper Surgical posted quarterly revenues of $342 million, up 12% or up 5% organically, including fertility taking significant share growing 15% or 13% organically. Non-gap earnings per share grew 19% to $1.04. For Coopervision, we extended our position as the number one contact lens company in the world in terms of wearers, with our new fit data remaining very healthy. We also gained share in a revenue basis driven by strength in dailies, torques, and multifocals, with the Americas growing 6%, EMEA 11%, and Asia-Pac 7%. Within categories, TORX and multifocals grew 9%, and SPHERES grew 7%. Within modalities, our daily silicone hydrogel lenses, MyDay and Clarity, grew 14%, and our silicone hydrogel FRP lenses, BioAffinity and Avera, grew 8%. And our myopia management business grew 7%, with MySight up 24%. Turning to daily silicone hydrogel lenses, we posted another great quarter. MyDay, our premium daily silicone hydrogel lens, led the way with strong growth across its full portfolio of spheres, torques, and multifocals. In particular, MyDay Energist drove growth in the U.S., and we look forward to that trend continuing. MyDay Energist offers an innovative digital boost technology designed specifically for today's digital lifestyle, and patients love it. Meanwhile, our MiDay Tor parameter expansion across North America and Europe is performing nicely with its market-leading design and industry-leading SKU range, and our MiDay Multifocal continues to do well with its unique combination of an advanced design paired with an easy-fitting system that has resulted in very high satisfaction levels, including a 98% fit success rate in two pairs or less. For all these products, the future remains bright as demand is strong and improving capacity will allow us to expand availability. Moving to clarity, we had another solid quarter. These lenses are known for their comfort, easy handling, and affordability, and this is resulting in strength in fitting new wearers and upgrading legacy hydrogel wearers. We've also seen momentum with the launch of our upgraded multifocal, which brings our highly successful My Day multifocal design into the clarity material. This lens is being received well in the U.S. and will be launching it around the rest of the world during this year. Speaking from personal experience, both of these multifocals are terrific products. If you're presbyopic and not wearing multifocal contact lenses yet, you're missing out. For me, I didn't need any visual correction until I got into my 50s and then it hit me. Getting clear, crisp vision without reaching for reading glasses has been a game changer, so I'm really happy that we now offer several outstanding multifocals to choose from. Moving to our frequent replacement silicone hydrogel lenses, BioAuthentity and Avera had another strong quarter in Q4. We continue to see consistent growth from both of these franchises, and our innovative manufacturing platforms and market-leading lens designs have created an effective moat, especially with respect to extended ranges and made-order products. We expect this performance to continue given our momentum. Moving to myopia management. MySite fitting activity remained strong in the quarter, and October was our second highest revenue month ever, benefiting from back-to-school momentum. That being said, U.S. inventory contraction in October depressed results. Regardless, given the positive fitting trends that we're seeing around the world, we remain comfortable that MySite will grow around 40% in fiscal 2025, similar to what it did this year. Regarding activity, We just concluded national media campaigns in the U.S. and targeted Asia Pacific markets, educating parents about myopia and the benefits of proactive treatment. These campaigns were very successful and resulted in a significant number of children being fit in my site. We also showcased our global scientific leadership and extensive clinical evidence at the 2024 International Myopia Conference in China. and at our annual Asia-Pacific Myopia Management Symposium in Korea, partnering with the Korean Association of Pediatric Ophthalmology to deliver insights on gold standard clinical interventions. In the U.S., our myopia collective partnership with the American Optometric Association continues to gain momentum, creating considerable visibility through media interviews, seminars, and presentations at conferences. Moving to Cooper Surgical, we reported revenues of $342 million, up 12%, or up 5% organically. Within this, fertility posted quarterly revenues of $139 million, up 15%, or up 13% organically. Fertility continues to be driven by our leading portfolio of innovative products and services, including consumables, capital equipment, reproductive genetic testing, and donor activities. and we're continuing to drive our portfolio forward with innovation. This was highlighted at the recent American Society of Reproductive Medicine conference, which featured meetings and presentations on our leading genomics capabilities. As the forefront fertility company offering genetic testing built on statistical machine learning and artificial intelligence methods, We were excited to present updates to our suite of tests being developed that will detect variations in the DNA at an embryo level, providing further insights to improve the likelihood of having a healthy baby. We also announced a groundbreaking collaboration with ASRM and the Society for Reproductive Biologists and Technologists for a newly formed clinical embryology learning lab, a first-of-its-kind national training program to support the growing need for more highly trained professionals in the fertility space. Regarding the broader fertility industry, the global market continues to expand, driven by strong underlying macro growth trends. These include women delaying childbirth, improving access to treatment, increasing patient awareness, increasing benefits coverage, and improving technology. The World Health Organization estimates that one in six people worldwide will experience infertility at some point in their lives due to a variety of health factors. So this is a large industry that offers significant long-term growth potential. As a leader in the space, we remain deeply committed to supporting patients and clinics by driving innovation, improving access to care, and addressing the critical global challenges of declining birth rates. Our focus on offering the most advanced solutions is continuing into 2025, where we'll be launching new products and services, providing extensive clinical training, and expanding geographically and advancing our R&D efforts. Moving to office and surgical, we posted sales at $203 million, up 11% year-over-year, driven by the successful strategic acquisitions of certain Cooke Medical assets at the beginning of the year, and more recently, OBP Surgical. Excluding these deals, office and surgical sales were flat organically. Our medical devices delivered solid growth led by our minimally invasive gynecological surgical devices, such as our ally uterine manipulator portfolio and our labor and delivery portfolio products, but this was offset by a 10% decline in Paragard, which was weaker than expected as we continue to feel the pressure from other birth control options. To wrap up on Cooper Surgical, we had some challenges this year with the Q2 upgrade of our US IT system, But that system is now stable and puts us in a much better position to continue our great growth trajectory. With our diversified portfolio of products and services, we expect solid revenue growth and margin improvements this coming year as we launch new products, leverage prior investment activity, and reap the benefits of successful integration work. Before I turn the call over to Brian, let me say this was a great year for Cooper. We reported record revenues and made significant advancements throughout our organization, investing in capacity expansion, operational improvements, and employee development. As we enter fiscal 2025, we're continuing to execute on our long-range strategic objectives and looking forward to reporting another strong year. And with that, I'll turn the call over to Brian.