The Cooper Companies, Inc.

Ladies and gentlemen, thank you for standing by. My name is Desiree, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q1 2025 Cooper Companies 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. 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 first quarter 2025 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, margins, cash flows, and other financial guidance, expectations and targets, 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 uncertainty. 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 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 fiscal Q1 earnings call. We're off to a strong start this year reporting record Q1 revenues and earnings. We met our expectations for revenues and exceeded expectations for margins, earnings, and free cash flow, and this included hurtling the negative impact of currency. We're also outperforming our operational plans at Cooper Vision and have increased availability and accelerated product launch activity. This includes moving up international launch dates for MyDay Energist, increasing availability of our MyDay multifocal and extended torque ranges, and starting early stage launch planning for MyDay MySite outside the U.S. We've also increased our private label availability as that part of our business has started accelerating. We'll discuss all this during the call, but let me say we're in excellent shape driven by strong operational execution. Moving to the quarterly numbers, consolidated revenues were $965 million, up 4% year-over-year and up 5% organically. Cooper Vision reported quarterly revenues of $646 million, up 4% and up 6% organically. Cooper Surgical posted quarterly revenues of $319 million, up 3% and up 2% organically. Margins improved nicely, and non-GAAP earnings per share were $0.92. For Cooper Vision, the Americas grew 8%, EMEA 6%, and AsiaPak 3%. Within categories, Torx and multifocals grew 10%, and Spears were up 3%. Within modalities, our daily silicone hydrogel lenses, MyDay and Clarity, grew 9%, and our silicone hydrogel FRP lenses, BioAuthentity and Avera, were up 9%. Our myopia management portfolio grew 20%, with MySight up 27%. As we discussed on our last earnings call, the quarter started soft with some channel inventory contraction, but quickly returned to normal. The only area that continued to see struggles was China, where our business declined year over year. Turning to product details and starting with our premium daily silicone hydrogel lenses, my day is seeing healthy demand with Torex, Multifocals, and Energis all performing really well. MyDay Toric continues to see success with our parameter expansion rollout being received extremely well in new markets around the world, and we're also increasing availability in existing accounts where demand remains very high. The fantastic design of this Toric lens, which mirrors BioAuthentity's design, combined with the widest Toric SKU range in the market, gives us a great competitive advantage, and we believe we have a long runway of success in front of us. Mighty Multifocal also had a strong quarter, driven by the unique combination of its advanced design paired with an easy fitting system that is delivering very high satisfaction levels, driven by an incredible 98% fit success rate in two pairs or less. That's critical for busy eye care practitioners who want to optimize chair time while capitalizing on the large, lucrative, and growing presbyopic segment of the market. And My Day Energist continues to grow nicely with ECPs and patients loving its innovative digital boost technology designed specifically for today's digital lifestyle. We'll be launching this lens in additional markets soon and believe it will be extremely well received. Wrapping up on My Day, our investments in capacity expansion are running ahead of schedule, allowing us to be more aggressive with all our My Day activity, which is obviously great to see given the strong demand. Turning to our Clarity portfolio, we continue posting nice growth with a very high-quality alternative to MyDay at a lower price point. We're receiving fantastic feedback from customers in the U.S. and Canada on our redesigned Clarity multifocal, and we're launching an APAC later this month with more markets to follow. This upgraded multifocal mirrors the MyDay design, providing wearers Optimal comfort and vision while giving ECPs confidence they'll have the same fitting success they currently enjoy with the MyDay multifocal. Moving to frequent replacement lenses, BioAffinity continues to deliver great results led by the strong performance of our Torx, multifocals, and industry-leading extended range offerings. BioAffinity remains the number one lens in the world with more people wearing it than any other contact lens, and the reason is simple. It's an incredibly comfortable lens It has market-leading technology. It offers more prescription options than any other lens, and it's sold at a great price point. Turning to myopia management, after a soft start to the quarter, we saw a significant pickup in activity, particularly in the U.S. MySite led the way, and we continue forecasting MySite growth of around 40% for the year. Supporting this growth is a recent realignment of our U.S. sales force to double account coverage, additional sales resources in key European markets, expanded digital marketing and CRM programs, and increasing activity around key account private label deals. In parallel, we're reinforcing Coopervision's leadership in this category with investments in R&D and clinical study activity, and with advocacy groups supporting the industry's continuing move to making myopia control standard of care. I'm also happy to report that our capacity improvements in MyDay have allowed us to start planning for the launch of MyDay MySite outside the U.S. It'll take a little while to get launched, but it's now on the radar, and we expect a combination of the market-leading comfort and design of MyDay combined with the technology of MySite to make MyDay MySite a truly exciting entry into this market. Lastly in this area, we're seeing tremendous growth with SightGlass in China, which is part of our joint venture with Essilor Luxottica, and we're seeing improving traction with OrthoK, which was up 9% globally. For the broader contact lens industry, we forecast market growth of 5% to 7% this year in constant currency with us taking share. This fall is last year where the market grew 7% and Cooper Vision grew 8%. Factors driving the market remain largely the same, including the ongoing trade-up to dailies, growth in torques and multifocals, growth in wearers, improved pricing, and for us, growth in myopia management. To conclude on Cooper Vision, we received some questions around our private label business, so let me address those. To start, we have not changed our private label strategy. It's around one-third of our revenues, and it's a core part of our long-range strategic growth plan. A few points to note. Contact lens manufacturers produce lenses using different materials and different lens features, such as a lens thickness, size, and design, so you can't replace them without patients noticing, especially with torques and multifocals. Also, for private label, packaging, label, and distribution is more complex as you need tremendous flexibility within your logistics platforms to meet customer demands. And lastly, our private label portfolio is very diverse, with a significant number of long-term contracts tied to a wide variety of brands, including at times different brands within the same customer. Moving to Cooper Surgical, we reported revenues of $319 million, up 3% or up 2% organically. This was actually slightly ahead of our internal expectations, remembering that we implemented an important IT system upgrade in fiscal 2024, which resulted in buy-in activity in Q1 and shipping disruptions in Q2 of last year. This meant a tough comp for Q1, but it's an easier comp for Q2. We also had strong capital equipment sales and fertility in Q4 of last year, which made for a tough quarter sequentially. Regardless, this was all expected and we remain comfortable with our full year guidance of 4% to 6% organic growth. Moving to the details, Fertility posted quarterly revenues of $120 million, up 1%. This was an unusual quarter for us in terms of revenue growth, but it was due to the unique items I mentioned earlier. The important takeaway is that this was a blip, and we expect fertility to return to high single-digit to low double-digit growth for the remainder of the year. During the quarter, we saw a strong demand for our leading portfolio of innovative products and services, including within consumables, reproductive genetic testing, and donor activity. And our pipeline of planned equipment installations strengthened nicely during the quarter. We're also continuing to see exciting activity with new innovation, including within our reproductive genetic testing business, where our cutting-edge AI-based testing methodologies are advancing efforts at detecting genetic variations at the DNA level in embryos. And our integration activity from prior acquisitions is driving efficiencies such as the recent consolidation of our donor egg and sperm storage into a centralized location. 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 delivering innovation, launching new products and services, providing extensive clinical training, expanding geographically, and advancing our R&D efforts. Moving to our office and surgical products and services, we posted sales of $199 million, up 4% or up 2% organically. Per my earlier comments, we had a tough comp in Q1, but expect much stronger performance in Q2, and we're already off to a good start. This performance will continue to be driven by strength in targeted minimally invasive gynecological surgical devices, such as our Ally Uterine Manipulator Portfolio. and within labor and delivery with products such as fetal pillow and our cervical ripening balloon. We also saw strength in Q1 from Paragard, which grew 12%, although this was primarily tied to channel fill associated with our new single hand insert or upgrade and a price increase. With that, let me conclude by saying that our focus remains on execution taking share, driving profitability, and delivering 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. With that, I'll turn the call over to Brian.