The Cooper Companies, Inc.

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 statements relating to revenues, EPS, cash flows, interest, FX and tax rates, tariffs, and other financial guidance and expectations, strategic and operational initiatives, market 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 we'll turn the call over to Al for his opening remarks.

Thank you, Kim, and welcome everyone to today's earnings call. I'll start by highlighting three key strategic priorities and then move into our quarterly results and guidance. Our first priority is to deliver consistent market share gains for Cooper Vision. We've accelerated the global rollout of our MyDay Premium Daily Silicone Hydrogel Lens portfolio, and we're seeing momentum build. We're executing on numerous global private label contracts and winning new ones. and we're strengthening branded sales, especially among independent optometrists. We're also looking forward to several upcoming product launches to further strengthen our positioning and ensure Cooper Vision delivers steady revenue growth throughout fiscal 2026 with the strongest performance expected in Q3 and Q4 as MyDay achieves full traction. Second is our continuing commitment to earnings and free cash flow. This quarter marked our eighth consecutive quarter of beating consensus earnings expectations, and our fiscal 2026 earnings guidance exceeds current consensus expectations driven by significant cost savings from our recent reorganization. Additionally, for the past two years, we've reported double-digit earnings growth, and we're targeting making it three years in a row. And importantly, these earnings are turning into cash, with $150 million of free cash flow delivered in Q4 beating expectations. I'm also pleased to announce this momentum is continuing, and we're raising our fiscal 2026 to 2028 free cash flow target to more than $2.2 billion. Our entire organization is aligned behind these efforts as free cash flow became a bonus metric in 2024, alongside revenue and earnings. Third is our attention to returning capital to shareholders. We repurchased nearly $200 million of stock in fiscal Q4, bringing our total fiscal year repurchases to almost $300 million, or roughly two-thirds of our 2025 free cash flow. For fiscal 2026, we expect to allocate a similar percentage to share repurchases, with the remaining portion targeted to debt paydown. To support this effort and to reinforce our commitment to share repurchases being a core component of our long-term capital allocation strategy, the board authorized an increase in our share repurchase plan to $2 billion in September. Before moving into the quarterly details, I want to emphasize that our board and management team remain highly focused on driving long-term shareholder value. We've accelerated share repurchases, insiders have bought stock, We've completed significant reorg and integration activity to increase profitability and cash flow, and we've been winning new contracts and solidifying long-term customer partnerships at Cooper Vision and Cooper Surgical. Additionally, we initiated an evaluation of strategic alternatives earlier this year and presented our initial findings to our board in October, alongside ongoing governance discussions around the timing of our chair's transition to retirement. Today, we have taken the next step by issuing a press release announcing a formal strategic review to ensure that we explore every opportunity to unlock long-term shareholder value. We also announced the transition of our chair role from Bob Weiss to independent board member Colleen Jay. And finally, we're adding total shareholder return to our executive performance share plans to further align leadership incentives to our stock's performance. With that, let's move to the Q4 results. Consolidated revenues were up 4.6% year-over-year or up 3.4% organically to a quarterly record $1.065 billion. Operating margins improved meaningfully and non-GAAP earnings grew 11% to $1.15. For Cooper Vision, we reported revenue of $710 million up 4.9% or up 3.2% organically. These results were consistent with our guidance, driven by improved global availability of MyDay, partially offset by market softness in China and certain areas in EMEA. Overall, the global contact lens market continues to trend toward premium offerings, which is a positive for our MyDay portfolio, including our premium private label MyDay business, but it does create headwinds for clarity in our older hydrogel lenses. On an organic basis, by category, Torx and multifocals grew 5%, and spheres grew 2%. By modality, daily silicone hydrogel lenses grew 5%, with double-digit growth in my day and declines in clarity. Our silicone hydrogel FRP lenses by Affinity and Avera grew 2%, and my site delivered strong growth of 37%. Regionally, the Americas grew 5%, led by strength in daily silicone hydrogel lenses. EMEA grew 3%, strengthening our number one market position, led by MyDay and BioAffinity. This was slightly below expectations due to market weakness in a few countries, but this doesn't appear to be tied to consumer activity, and we've already seen a pickup this quarter. Asia-Pac was flat as growth in MyDay was offset primarily by a 28% decline in China, driven by continued weakness in low-margin e-commerce channels, where we're not chasing aggressive pricing activity. Moving to products, MyDay delivered a strong quarter led by Torix and Energis. We're continuing to execute on the private label deals we won in Q3, and I'm pleased to report that we won quite a few more contracts in Q4, several of which are in the U.S. and Europe, so you'll see those in the coming months. Momentum is robust, and we're seeing increasing fitting activity with especially strong interest in our premium comfort MyDay Energist lens, featuring our innovative digital boost technology, which we expect to launch in Europe in Q2 of this year, from our MyDay Multifocal, which continues to roll in the APAC region, and from our MyDay Toric parameter expansion, which is expanding around the world. We'll also be launching MyDay MySight and MyDay Toric Multifocal in 2026, and we expect those offerings to be received incredibly well. For Clarity, we're progressing with repositioning the product family in Asia-Pac, and we're seeing early positive signs with products such as Clarity's new three-add multifocal launch, which delivered double-digit growth in the Americas. Regarding FRPs, BioAffinity delivered solid performance in the Americas and EMEA, led by multifocals, energists, and our innovative made-to-order lenses, but remains soft in Asia-Pac, especially outside of Japan. This was similar to last quarter, with continued weakness in markets such as China. Turning to myopia control, MySite delivered strong growth of 37%, driven by robust performance in the Americas and another record-setting quarter in EMEA. Our back-to-school campaigns boosted fitting activity, while customer engagement initiatives and new pricing models supported higher purchase volumes. We expect this momentum to continue into fiscal 2026, with the upcoming launches of MySite in Japan, and MyDay MySite across Europe, both scheduled for fiscal Q2. Private label programs in Europe and other select markets are also proving highly successful, and we expect more deals to be signed this year. With MySite growing 30% in fiscal 2025, reaching $104 million in sales, we expect growth of at least 20% to 25% for fiscal 2026, with further strength in 2027 as product launches gain traction. To conclude on vision, let me share details of our performance relative to the market. This is calendar quarter data, so it's apples to apples with our competitors. In calendar Q3, we grew 5% in line with the market. And on a year-to-date basis for the three calendar quarters of 2025, we've grown 4%, also in line with the market. Cooper Vision has gained share for 17 straight years, and we remain focused on achieving that goal for an 18th consecutive year in calendar 2025. Turning to Cooper Surgical, we deliver quarterly revenue of $356 million, up 4% or up 3.9% organically. This was at the high end of our guidance range, driven by solid execution. With infertility, revenues were $141 million, up 1%, in line with expectations given last year's 13% comp. Growth was driven by market share gains in EMEA and strong global genomics performance, partially offset by softness in the U.S. As we enter fiscal 2026, we're optimistic that this will be a stronger year. We're seeing encouraging traction with new RFP wins from some major fertility clinics and We're receiving significant interest and witness, our automated lab tracking system, and our genomics portfolio is seeing an uptick in momentum following the recent launch of several new tests. For the overall fertility market, consumer spending remains tight, especially in Asia-Pac, and clinics are continuing to manage spending carefully, but we're seeing some early positive signs, including improving psychoactivity in the U.S. and growing global clinic interest in new technology. We remain highly optimistic about the long-term outlook for fertility, given the underlying fundamentals supported by the estimate that one in six people globally are expected to experience infertility at some point in their lives, underscoring the long-term significance and resilience of this market. Moving to office and surgical, sales were 215 million, up 6% and up 6% organically. Paragard grew 16%. following a softer Q3 driven by strong demand for our single hand inserter upgrade that was launched earlier this year. Medical devices grew 3% led by double digit growth in our labor and delivery portfolio and a 35% increase in our OBP surgical line of innovative single use lighted cordless surgical retractors. These gains were partially offset by softness and legacy products. Moving to fiscal revenue guidance, For Cooper Vision, we're guiding fiscal Q1 to 3.5% to 4.5% organic growth as we continue stair-stepping higher with execution around ongoing contract wins. For the full year, we're guiding to 4.5% to 5.5%, assuming the market grows 4% to 5%. Our expectation is that current momentum will result in strong share gains in Q3 and Q4, but we're maintaining conservatism to avoid having guidance be too back-end loaded. For Cooper Surgical, we're guiding Q1 to 2% to 3% growth and full year to 4% to 5% growth. Within this, we're forecasting only a modest improvement in fertility, which we're optimistic will prove conservative given some of the recent market trends along with much easier comps. Before turning the call over to Brian, I want to thank the entire Cooper team for their outstanding execution this quarter. Delivering strong results during a period of significant organizational change reflects our team's commitment to building a more streamlined and efficient company, and it speaks volumes to the company's dedication to excellence. And with that, I'll turn the call over to Brian.

Thank you, Alan. Good afternoon, everyone. Most of my commentary will be on a non-GAAP basis, so please refer to the earnings release for a reconciliation of GAAP to non-GAAP results. For the fourth fiscal quarter, consolidated revenues were $1.065 billion, up 4.6%, and up 3.4% organically. Gross margin declined marginally, as expected, to 66.2%, driven by tariffs and product mix, partially offset by positive foreign exchange. Operating expenses were flat, reflecting disciplined cost management and operating income increased a healthy 9% to a 27% margin. Interest expense was 23.7 million, and the effective tax rate was 14.2%. Non-GAAP EPS grew 11% to $1.15, with 198 million average shares outstanding. Free cash flow was strong, at $150 million with capex of $98 million. And that debt was $2.4 billion, improving our bank-defined leverage ratio to 1.76 times. Lastly, we repurchased 2.9 million shares for $197.3 million, leaving approximately $1 billion of availability under our $2 billion repurchase plan. Before moving to guidance, let me recap the reorganization and integration work we completed in Q4. We began executing this effort in early Q3 and moved quickly with a clear focus on improving operational efficiency and reducing back office costs. By leveraging prior IT investments supported by AI capabilities, we integrated key support functions and are unlocking meaningful productivity gains. At the same time, we completed significant acquisition-related integration work. From a financial perspective, we recorded approximately $89 million in charges associated with all of this activity and expect annual pre-tax savings to be roughly $50 million or 19 cents starting in fiscal 2026. Beyond operating margin expansion and free cash flow benefits, these savings strengthen our ability to invest in high return opportunities, repurchase stock, and pay down debt, fully aligned with our commitment to long-term value creation. Moving to guidance and starting with Q1, we're guiding to consolidated revenues of $1.019 to $1.03 billion. representing roughly 3% to 4% consolidated organic growth. Coopervision's revenue is expected to be in the range of $693 to $700 million, up 3.5% to 4.5% organically. And Coopersurgical's revenue is projected to be $327 to $330 million, up 2% to 3% organically. For earnings, were guiding to non-GAAP EPS of $1.02 to $1.04, with improving operating margins from strong operational leverage offset by lower gross margins due to tariffs and mix. Interest expense is expected to be around $24 million, and the effective tax rate to be in the range of 15 to 16%. For the full year, fiscal 2026, we're guiding to consolidated revenues of roughly 4.3 to 4.34 billion, reflecting 4.5 to 5.5% organic growth. Cooper Vision is expected to be in the range of 2.9 to 2.925 billion, up 4.5 to 5.5% organically. And Cooper Surgical is expected to be in the range of 1.4 to $1.413 billion, up 4% to 5% organically. For earnings, we're guiding to non-GAAP EPS of $4.45 to $4.60. This assumes another year of strong operating margin improvement driven by operating expense leverage offset by lower gross margins due to tariffs and mix. Interest expense is expected to be around $85 million, assuming no share repurchases or changes in Fed policy. Note that if the Fed does lower rates next week by a quarter point, interest expense would be reduced by roughly $2 million in fiscal 2026. The effective tax rate is expected to be in the range of 15% to 16%. Free cash flow for fiscal 2026 is expected to improve to $575 to $625 million, driven by stronger operating cash flow from higher profits, working capital improvements, and lower one-time costs. CapEx will also decline on an absolute basis as Cooper Vision's investment cycle winds down. These positives will temporarily be somewhat offset by roughly $70 million tied to our reorg and final payments on building activity, including our new Cooper Vision R&D facility. From fiscal 2026 through 2028, we expect to generate over $2.2 billion in free cash flow. This outlook reflects two key drivers. First, consistent improvements in operating cash flow from higher profits, lower one-time items, and tighter working capital management, supported by a streamlined and AI-enabled operating structure. And second, CapEx normalizing in fiscal 2027 to roughly 5% of revenues, covering both maintenance and growth investments. Lastly, on cash flow, at the divisional level, Cooper Surgical generates more free cash flow per revenue dollar than Cooper Vision. But we expect that gap to narrow materially in 2027 as Cooper Vision's CapEx declines and free cash flow accelerates. From a capital deployment standpoint, we remain committed to investing in growth and innovation, repurchasing stock, and reducing debt. Lastly, as you'll see in our 10K tomorrow, We have successfully remediated the material weakness related to certain IT general control failures from fiscal 2024. And with that, I will turn it back to the operator for questions.