The Cooper Companies, Inc.

Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the first quarter 2026 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. Please limit questions to one and one follow-up. To ask a question, simply press star one on your telephone keypad. To withdraw your question, press star one again. It is now my pleasure to turn the call over to Kim Duncan, Vice President of Investor Relations and Risk Management. Please go ahead.

Good afternoon and welcome to Cooper Company's first quarter 2026 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 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 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. We're pleased to report a strong start to the fiscal year highlighted by product launches, outstanding profitability, and robust cash flow. These results reflect our disciplined execution combined with the significant synergies we're realizing from last year's reorganization. For today's call, I'll begin with an update on the three key strategic priorities we outlined in December. and then move to Q1 results and guidance. First, we remain focused on delivering consistent market share gains for Cooper Vision. In calendar 2025, we gained share for an 18th consecutive year, and we enter 2026 with the intention of doing so once again. In our first fiscal quarter, we made meaningful progress with a global rollout of our premium MyDay daily silicone hydrogel portfolio, growing branded sales and executing on private label contracts. Regionally, the Americas and EMEA strengthen and have excellent commercial momentum. Japan weighed on our Asia pack results, but we're executing on product launches and investing to restore growth in the region. We're also incredibly excited about the early adoption of our MyDay MySite launches in EMEA and MySite in Japan. At Cooper Surgical, we're encouraged by improving trends in our fertility business and look forward to positive momentum continuing. Second, our commitment to delivering strong earnings and free cash flow through operational excellence was clearly evident this quarter. The organizational changes and IT implementations we completed last year are generating meaningful synergies, providing us with the opportunity to invest in sales and marketing initiatives while still delivering outstanding financial performance. Q1 earnings exceeded the top end of our guidance range, and those earnings translated into a healthy $159 million in free cash flow. Given our strong start to the year, we're raising guidance for both earnings and free cash flow. Third, we continue to maintain a disciplined approach to capital allocation. We've entered a multi-year period of consistent earnings and free cash flow growth, and we're deploying capital to high return opportunities. This starts with prioritizing internal investments that drive revenue growth, which we did this past quarter by increasing sales and marketing spend at Cooper Vision and Cooper Surgical in support of product launches and key strategic initiatives across both businesses. We also repurchased $92 million in stock during the quarter, reinforcing our commitment to consistent share repurchases as a core part of our long-term strategy to drive shareholder value. and the remainder of our cash was used to reduce debt. Before reviewing the quarterly details, I want to address the strategic review we announced in December. We understand there are strong investor interest in this process. While we're not in a position to provide an update today, given where we are in the process, the review is progressing as planned with active engagement from our board and advisors. We will communicate outcomes if we have something definitive to share or when the process is complete. In the meantime, our board and management remain highly focused on maximizing long-term shareholder value. This includes driving organic growth by winning new contracts and strengthening customer relationships, delivering strong earnings and cash flow by leveraging our infrastructure, and deploying a consistent capital allocation strategy that includes share buybacks and debt paydown. With that, let's move to the Q1 results. Consolidated revenues were $1.024 billion, up 6.2%, or up 2.9% organically. Cooper Vision reported revenue of $695 million, up 7.6%, or up 3.3% organically. And Cooper Surgical delivered revenue of $329 million, up 3.3%, or up 2.2% organically. Operating margins improved meaningfully, and non-gap earnings grew 20% to $1.10. For Cooper Vision, on an organic basis, torques and multifocals grew 6%, and spheres grew 1%. Daily silicone hydrogel lenses grew 7%, led by double-digit growth in my day, while clarity was up slightly. Biofinity and Avera grew a combined 3%, and my site continued its strong growth up 23%. Regionally, the Americas grew 6%, led by strength in daily silicone hydrogel lenses, and EMEA grew 4%, strengthening our number one market position in that region. Asia-Pac declined 4% as execution on new product launches was more than offset by softness in Japan, primarily tied to lower margin older hydrogel products. To accelerate APAC performance, we've upgraded several leadership roles, increased marketing investments, and are ramping up our new regional distribution center, which is already enhancing customer service with faster fulfillment. We've also recently launched MyDay Toric in Taiwan, MySite in Japan, MyDay MySite in Australia and New Zealand, and we're increasing regional availability of MyDay Multifocal and MyDay Toric Expanded Range. We also have private label launches underway in multiple markets, and in Japan, we'll be launching the full Clarity family later this year with the addition of both a torque and multifocal, providing a competitively priced full family silicone hydrogel upgrade path for the large base of hydrogel wearers in that market. While we expect AsiaPac to remain down in Q2 due to declining legacy hydrogel sales, we are confident the region will return to growth in fiscal Q3 given all of our launch activity. Turning to products, our daily silicone hydrogel portfolio continues to perform well, with MyDay leading the way through expanding customer partnerships, broader availability, and ongoing launches. Our premium-priced offerings delivered the strongest performance, led by MyDay Multifocal, Energist, and Torex, all growing over 15%. Particular strength was seen with MyDay Multifocal as its rollout continues to gain momentum. Our premium MyDay Energist also posted strong growth driven by its innovative digital boost technology designed to provide maximum comfort in today's heavy digital world. This product will be launched shortly in Europe, and we look forward to the boost it will provide in that region. MyDay Toric, which offers the broadest SKU range in the category and is powered by the same leading Toric design in our BioAuthentity Toric, continued delivering exceptional growth. We also closed additional MyDay key customer contracts and private label partnerships this past quarter across all three regions. For the Clarity product family, it grew modestly led by the ongoing launch of our new multifocal in the Americas. This multifocal has the same next generation optical design as MyDay, meaning an easy fit lens with consistent performance across different lighting conditions, distances, and patient profiles. so we expect strong performance as we launch across EMEA and APAC later this year. Turning to myopia control, my site grew 23% to $28 million. Momentum is building with our latest innovation, MyDay MySite, launching in EMEA in January to an extremely positive reception thanks to the combination of proven myopia control efficacy and the all-day comfort of a premium silicone hydrogel lens. We also launched MySite in Japan in February and are seeing a similar enthusiastic response. Japan is one of the world's most significant vision care markets, and with an estimated 77% of elementary school children being myopic, it represents a substantial opportunity for MySite. We're supporting these launches with our most comprehensive professional engagement programs to date, highlighted by major conference engagement, high-impact regional launch events, extensive KOL education, and media initiatives, initiatives reaching tens of thousands of eye care professionals. These efforts are driving very strong clinician activation rates, reinforcing our confidence that our early momentum will continue as My Day MySight expands in EMEA, across Asia-Pac, and into Canada. MySight remains the only FDA-approved contact lens for myopia control and the first and only lens approved for myopia control in both Japan and China. We're also continuing to invest heavy in myopia control R&D and have several exciting breakthrough innovations underway, which further supports our confidence in my site's ability to deliver consistent, long-term, robust growth. To conclude our Cooper vision, let me highlight our performance relative to market. This is calendar quarter data, so apples to apples with our competitors. In calendar Q4, we grew 10%, and the market grew 6%. For the full calendar year 2025, this translated into 6% Cooper Vision growth versus the market at 5%, marking our 18th consecutive year of market share gains. Turning to Cooper Surgical, we delivered quarterly revenue of $329 million, up 3% or up 2.2% organically. Fertility revenues were $127 million, up 3% organically. Growth was driven by strong global genomics performance supported by continued commercial and operational execution across product launches, new clinical wins, and expansions within existing accounts. We also saw solid results in consumables led by Media, Zymote, our sperm separation device that helps optimize fertility procedures, and Witness, our automated lab tracking system. These gains were partially offset by softness in the Middle East, and lower equipment installations. Importantly, we are now seeing early but clear signs of recovery in the fertility market. As we move through the first quarter, results steadily improved, supported by solid execution on contract wins and new product launches, as well as strengthening underlying market trends. This momentum positions us well for continued improvement through the remainder of the year, though developments in the Middle East, where we hold a leading market position, remain a source of uncertainty. For the fertility market overall, the product and services segments that we operate in had delivered strong growth for many years before slowing in late 2024. While several factors contributed to the deceleration, the industry is now recovering, driven by renewed clinic interest in adopting new technologies, along with improving cycles in the US and several European countries. Although a rapid rebound is unlikely, we anticipate steady improvement as we annualize last year's pressures and underlying activity normalizes. Moving to office and surgical, sales were $202 million, up 2% organically. Medical devices grew 6%, driven by strong performance in our surgical OBGYN portfolio, led by our uterine manipulators and related products, and continued momentum in our specialty surgical products, including our innovative single-use lighted cordless surgical retractors. This was partially offset by softness and some legacy medical devices, and ParaGuard declining 7%, which was expected against a difficult comp tied primarily to last year's launch of the new single-hand inserter. To conclude, I want to recognize and thank our Cooper team for their dedication to operational excellence, investing in sales and marketing, to drive organic growth while maintaining disciplined cost control and continuing to build a streamlined and technologically efficient company is no easy task. So thank you to the entire team. And with that, I'll turn the call over to Brian.

Thank you, Al, and good afternoon, everyone. Most of my commentary will be on a non-GAAP basis, so please refer to today's earnings release for a reconciliation of GAAP to non-GAAP results. For our first fiscal quarter, consolidated revenue was $1.024 billion. up 6.2% year-over-year and up 2.9% organically. Gross margin was 68.1%, exceeding expectations driven primarily by a lighter mix of low-margin Asia-Pac revenue at Cooper Vision. Excluding the impact of tariffs, gross margin would have been essentially flat. Operating expenses rose only modestly and improved as a percentage of sales declining from 43.6% to 41.2% year-over-year, reflecting the benefits of the reorganization executed in fiscal Q4 of last year. These efficiencies stem from the structural changes we've made as we transition to a smaller, more efficient organization that leverages technology, including AI, to automate work and optimize shared services. The impact of these efforts was particularly evident at Cooper Surgical, where expenses decreased year over year. Operating income increased a healthy 13.9%, resulting in a 26.9% margin. Interest expense was $22.4 million, and the effective tax rate was 15.1%. Non-GAAP EPS grew 20% to $1.10, with roughly 197 million average shares outstanding. Free cash flow was very strong at 159 million with capex of 102 million. We deployed this cash by repurchasing 1.1 million shares of stock for $92 million, making the final $50 million payment related to our 2023 Cook acquisition and applying the remaining balance towards reducing net debt to $2.4 billion. Lastly, in February, we addressed our $1.5 billion term loan maturing in December 2026 by amending and extending $950 million for another five years to February 2031. The remaining $550 million will be repaid in December 2026 when it matures using our strong free cash flow and ample revolver available capacity. Moving to full year fiscal 2026 guidance. Our revenue expectations are essentially unchanged with consolidated revenues of roughly 4.3 to 4.35 billion, reflecting organic growth of roughly four and a half to five and a half percent. Cooper Vision revenue is expected to be in the range of 2.9 to 2.93 billion, up 4.5 to 5.5% organically. And Cooper Surgical is expected to be in the range of 1.4 to 1.41 billion, up 4 to 5% organically. For earnings, we're raising guidance to $4.58 to $4.66, reflecting our Q1 beat and stronger expected operational performance. Regarding tariffs, our estimate of approximately $24 million remains the same for the year. Our expectations on interest expense and tax remain unchanged, with interest expense around $85 million and the effective tax rate between 15% and 16%. Turning to cash flow, our cash conversion rate continues to improve. and we're increasing our fiscal 2026 free cash flow outlook to 600 to 625 million. For fiscal 26 through 2028, we continue to expect to generate more than 2.2 billion of free cash flow, driven by higher operating profits, improving working capital performance, and lower CapEx. From a capital deployment standpoint, our priorities remain unchanged. We're investing in growth and innovation, repurchasing shares, and reducing debt. To conclude, I'm proud of the operational excellence we're seeing across the organization. We're optimizing and leveraging prior investments in numerous areas, including IT, distribution, HR, and finance. And we're increasingly applying AI-enabled tools to streamline areas such as marketing, planning, forecasting, and support functions. Our reorganization efforts are delivering meaningful synergies, and the results are evident. Looking ahead, we have additional opportunities to further optimize the way we work. With our multi-year CapEx cycle winding down, our manufacturing teams are now evaluating ways to capitalize on the next generation production improvements developed over the past several years. Early planning is underway, and while this work will take time, the results have the potential to be material. In the meantime, we'll continue driving efficiencies by leveraging technology while consistently investing in initiatives to support sustainable organic growth. And with that, I will turn the call over to the operator for questions.

Once again, to ask a question, please press star one on your telephone keypad. And as a reminder, we do ask that you limit questions to one and one follow-up. Our first question comes from the line of Jeff Johnson with Baird. Please go ahead.

Thank you, guys. Good afternoon. I guess with the first question, let me just kind of back out and go more higher level. Al, I mean, you reported a 10% calendar 4Q number. I think over the last three quarters, you've been about three, three and a half percent for CVI. So one, can you reconcile that 10% number versus the last few quarters at three? What's different in the number you're citing there versus what we see in your CVI organic growth results? And then one follow-up question. Thanks.

Sure. Yeah, I knew we were going to get that one. It's literally just a matter of the months and shipment of products. So we had had a week November and December of 2024, and we had a really strong January of 2025. So just when you comped against that, the way that the shipments worked, it resulted in a really strong calendar Q4 for us.

All right, fair enough. And I guess, again, maybe I'll zoom even further out. And apologies for the feedback. But, you know, you've been talking about kind of getting back to market growth, above market growth, at least as you report CVI. You know, how is that plan going so far? Maybe update us on the my day, you know, clarity to my day transition. Just in general, it still feels like your results are maybe lagging the market here a little bit relative to some of your peers. So how do you feel like you're doing in kind of getting back up and into above market over the next couple quarters? Thank you.

Yep, great question, Jeff. You know, I'll break that up a couple different ways. I mean, if I look at the Americas, we're doing well. The U.S. had a good quarter. We're gaining a lot of traction. We've got product launches and a lot of activity. The team's doing a fantastic job. So I would say we're in good shape with the Americas. When I look at EMEA, again, in good shape there. We took a step forward this quarter against last one, but we've won a number of contracts there. We have a number of product launches going on. And I would say we have better visibility for that market right now to improving sales. So I feel pretty good about the momentum that we have in the Americas and the momentum that we have in EMEA right now associated with MyDay and Clarity, frankly. And then I go to Asia-Pac is kind of the third one. And the results there, right, have been a little tough for us. And that's the area that we need to get figured out and get back to kind of our old traditional growth rates. And we'll be in fantastic shape. As I mentioned, we're doing a lot of stuff to drive growth at AsiaPAC. We did see success kind of in a number of areas where we've had problems. We've stabilized when it comes to a lot of the e-commerce stuff that we talked about. We've stabilized the China business. We had a changeover of some personnel, a number of leadership positions. So we're in good shape in a number of countries. The one that we kind of have left right now is Japan. And I can target that down to like Japan, older hydrogel products where some of our competitors are taking some share. We have not caved on price or anything along those lines. So I think we're going to continue to have a little bit of pressure in japan with traditional hydrogels again in next next quarter because i think that the region will probably be down because of it but then all of that success the stuff that i'm talking about all those product launches in asia pac um the success of executing on those private label contracts all of that kind of stuff the transition point on that happens in q3 and you're going to have Asia PAC growing again. So another one where I would say we had a number of points over the last year and just a lot better, a lot clearer visibility right now on where those challenges are and where the successes are going to come from. So I think Q2, fiscal Q2 ends up being a step up certainly from this quarter.

And then as I've said all along, like we'll be back to rolling in Q3 and Q4.

And from Wells Fargo, our next question comes from the line of Larry Bigglescombe. Please go ahead.

All right. That was a new pronunciation. Thanks for taking the question. Hey, Al, you know, we heard your comments about the Middle East and IVF. Maybe you could just level set us on what your exposure is there and how you're, you know, how you're thinking the war might impact your business. And I have one follow up.

Sure. Yeah, to put some numbers around that, kind of for us on a consolidated basis, the Middle East is about 2% of our sales. A lot of it is distributor, and obviously the Middle East is a very large region. So it won't have that much of an impact on us, other than it could impact fertility, because there's a decent amount of fertility business. We're number one in that region. We We have good strength there. So it's just a matter of us being able to get products there. I mean, women are obviously still going through fertility treatment and so forth there. We have to be able to get product in. So if that situation extends for a period of time, it'll be more challenging for us. Even with that, we have a lot of good momentum in fertility, and I think we'll still improve quarter over quarter. But that's kind of the one question mark. Otherwise, I'd even be more bullish on fertility.

Thanks. And Brian, the margins were really strong in Q1. Just remind us how we should think about the phasing for the year and how you're thinking about, I guess, the tariffs. You said no change, but in light of this recent Supreme Court ruling, if that stood, would there be upside on tariffs? Thanks for taking the question.

Sure, Larry. I'll start with the second part of your question, at least as it relates to tariffs. We've assumed $24 million in the year. That's what we assumed as the last guidance. We're going to sit tight. Obviously, we capitalized and released the impact of tariffs four months later, so any change to tariff rules or guidelines or whatever takes effect won't impact us until later in the year. But a 10% tariff makes very little impact. It's pretty similar to the $24 million, so I would assume that if it goes up to 15%, you know, that could be, you know, somewhere upwards of like $4 million. But for now, we're just, you know, the 10% is what it is, and that's what we factored in the guidance. As it relates to operating margins, yeah, I mean, it's the same story that we've been talking about from, you know, exiting last quarter. You know, we're getting really durable savings from the synergies and the elimination of fixed costs from the reorganization that we talked about in Q4. We're leveraging prior investment activity, and we're being really disciplined. You know, we're scrutinizing all non-revenue generating expenses, particularly, you know, the back office, and we're investing in sales and marketing. So the drop through in operating margins was good in Q1, and I would expect, you know, I would expect you're going to continue to see, you know, stronger operating performance, which is why, frankly, we raised our guidance, you know, 13 cents at the bottom end and 10 cents at the midpoint. based on stronger operating performance. But I'm not going to get into gating at this moment. All right. Thanks, Brian. Yep.

And for Piper Sendler, our next question comes from the line of Jason Bednar. Please go ahead.

Hey, good afternoon. Thanks for taking the questions. I actually want to pick up on the line of question that Jeff had. But, you know, as far as the competitive landscape as it stands today in your share position, Maybe talk about, Al, new fit activity across the quarter. Just what are you seeing in the data when you look at your performance versus peers, if you can break it down, dailies versus monthlies?

Sure. If I look at new fit activities, it probably hasn't really changed that much. At the end of the day right now, we're taking wearers, so the fit activity continues to put us in a good position. Now, you have a whole lot of other variables that go into it. I would say But if I narrowed down to just new bid activity, whether it's dailies or FRPs, we are taking wearers in both of those. We did this past quarter. So I feel good about that as kind of continuing to be a good indicator of the future.

Okay. All right. And then as a follow-up, it really seems like industry pricing dynamics have calmed down, at least relative to where we were last year.

Wow.

You know, it sounds like the latest round of increases here, you know, the last few months are sticking, should be good for all the players out there. How are you thinking about future list price increases and managing these discussions with wholesalers and docs? Especially as I think back, we went through multiple increases the past few years, usually like two increases a year. Do you think the market can absorb more than one price increase a year without negatively affecting demand here going forward?

Yeah, well, I do because of the technology that's coming out. I mean, we are launching as an industry. We're launching new products, really innovative products. We have some great ones ourselves. I mean, there's nothing more innovative in the contact lens industry today than MyDayMySight that's launching out there. The multifocals that we're launching are great products. Energist is a great product. I know some of our competitors have some products out there that they're launching at good price points. So consumers are willing to pay for that high quality. And contact lenses are not particularly expensive at the end of the day. So the positive pricing that you're picking up on in your comment is true. I'm happy about it. I feel positive about pricing in the marketplace right now. The only reason I put a little caveat on that is still in Asia-Pac. There's definitely markets in Asia-Pac where there's some pretty competitive pricing out there. But, yeah, generally speaking, I'd say pricing is positive right now, and it's appropriate given the technologies that are rolling into the marketplace.

All right. Fair enough. Thank you.

Our next question comes from the line of John Block. Please go ahead.

Great. Thanks, guys. Good evening. You know, the CBI number, I think I heard you at 3.3 percent. It was a bit below expectations. even the bottom end of the midpoint. We gave that guidance, call it, you know, first or second week in December. So maybe just talk to us, again, it was slightly below, but what deviated from expectations relative to when you gave it? And it would seem to suggest that maybe January was a little bit weaker than your expect. So can you give us any color on how things trended into February? And yeah, sorry for the awful feedback.

Yeah, no, you're right, John, because we were looking at Asia Pac being essentially flat for the quarter, kind of similar to what we did in Q4. And that would have meant Cooper Vision consolidated growth would have been like, you know, 4.3, something like that. And you're right, it was 3.3. So that delta was very specific and very targeted, if you will, to what happened in Japan on those legacy products. I mean, we started seeing it someday. in December, and then we definitely saw that activity in January. So that's what happened. That's where it picked up. I thought that, frankly, the momentum we had with all the product launches and activity and everything would overcome that. But, yeah, that was a decent hit for us as we rolled through December and January. You're right. And that's why I said I think AsianPAC will probably beat down one more quarter before all the positive energy that we have kind of overwhelms that, if you will.

Okay, fair enough. And second one, you know, I apologize in advance for sort of the boring question, but Brian, when I look at the ad backs in the quarter, almost half of the ad backs were from like a hit from natural causes and litigation, which is just a little uncommon and didn't seem to be the case prior quarter. So any color in what you can give around the add-backs, if you can elaborate a bit. Thank you.

John, I think you're talking about just in the other category where we break out, I think it was $6.7 million was related to other legal-related matters. I mean, we don't... our stance is not typically to talk about, you know, what legal matters are going on. We obviously have insurance for a number of things, but there are some things that we don't have insurance on where we're defending ourselves or we're, you know, we've got some legal-related matters that show up. So, you know, it's a little bit higher this quarter, but not too atypical from, you know, years past.

Okay. Fair enough. Thanks, guys.

Our next question is from Young Lee. Please go ahead.

All right, great. Thanks for taking the question. I guess to start, I was wondering if you could talk a little bit about, you know, there's an update on sort of how the supply dynamics have impacted your ability to win new customers in the quarter.

Supply dynamics. Supply dynamics?

For supply, you're probably referencing some of the by-day capacity. We don't have those issues anymore. So I would say that when it comes to supply constraints, manufacturing or supply constraints or logistic challenges, I am very happy to say those are in the rear view window now. We don't have those challenges anymore. So that's not impacting us.

Yeah, apologies for the sound quality. Don't think you heard the question fully, but I was just wondering if, you know, you were able to win more new contracts this quarter, just given the improvement in supply.

Oh, I got you. I got you. The answer to that is yes. Yes, we did win a number of new contracts. As a matter of fact, We won them in all three regions, and they were definitely My Day related. So we won a bunch kind of last year and as we were exiting last year, but we've continued to expand relationships and partnerships and win additional My Day business. So, yep, we have.

Okay, great, very helpful. And then I guess to follow up, I wanted to get a little bit of color and update on ParaGuard. You know, it's a high-margin business, although, you know, we know about the volume and pricing dynamics. Are there any incremental updates from the competitive front, just given the, you know, potential for impact on the profitability side?

I would say no updates. As far as I'm aware of that licensing agreement that you referenced on the competitive side had not closed. So I don't have any updates or any details on any of that. I think for us, Paragard was minus seven for the quarter. We're still expecting that to be flat to up a little bit for this fiscal year. And then we'll see how that plays, if that deal actually does happen. And then we'll get some color on their launch plans and so forth. But right now, I don't want to speculate on any of that.

Okay. Thank you.

And from Barclays, our next question is coming from the line of Matt Mixix. Please go ahead.

Great. Thanks so much. I hope this is coming through okay. But one question just following up on the market. You know, there was some kind of unusual trajectory during last year in terms of the market. Based on your best guess and what you saw, I guess, entering and exiting markets, Q4 on the calendar basis. Do you think that's improving now? Do you think we're stable? Any further color on what the ups and downs were from last year? I have one follow-up.

Yeah. I think I would say we're at least stable, if not improving a little bit. We did have, as a contact lens industry, a softer year last year, but the it's at least stable. The reason I say improving, as I sit here and think about it at the top of my head, right, is because of pricing that somebody asked about earlier. You know, I've kind of looked at the market and said, hey, about 1% is going to come from price, about 1% will come from wares, and then you'll have all the other stuff, the shift to dailies and so forth that's happening that'll drive it. That 1% that coming from price, I would certainly stand by that, and it could be potentially a little bit better than that. So, I do think the market is well-positioned for a decent year. That would be like a rebound of what it was years ago, but it's going to be a better year, I think, in 2025 than it was in 2024.

Got it. And then just a follow-up on some of the dynamics that they're trying to grow this next quarter and the quarter after. You mentioned Japan down this quarter, improving by the third fiscal quarter, I think. How should we think about the impact of some of the private label engagements that you announced and mentioned that you were able to do some more? Do we notice those coming in this year? Do they just kind of filter in and support sustainable growth? I mean, how do you think about it? Because it just seemed like there was quite a number of them that you signed, and I'm just wondering if that's something we're going to notice as we get into the middle of that half of this year. Thanks.

Yep, yep. Good question. Yes, we are executing on those private label contracts and a number of branded contracts that we won, and you will see those as we progress through the year. They got masked this quarter because of what happened in Japan, as I was saying. Otherwise, we would have been kind of 4-3, somewhere 4-4, somewhere around there. But we are executing and doing well on those contracts. So, The way I see it playing out is we continue to execute on those contracts and we have good visibility on that. That's going to result in a better Q2. But as I've said all along, it's going to be Q3 and Q4 is when all those contracts and those launches really start coming together for us. So I just think that we're kind of have one more quarter behind us of some of the challenges that we were dealing with. And we have one more quarter here in the quarter that we're in where we have some residual challenges in Asia-Pac. still putting up a step in the right direction in Q4, but then we get back to kind of the Cooper vision of old and the more consistent solid revenue growth rates in Q3 moving forward.

Great. Thank you.

Our next question comes from Bank of America from the line of Travis State. Please go ahead.

Hey, thanks for the question. I guess the first question I have is on kind of Q2 revenue, kind of where you want the street to shake out and kind of the cadence for revenue growth for total company and Cooper Vision and Cooper Surgical. We heard the comments on Japan, and if there's any other dynamics that you'd point to that we should model for Q2.

Well, I think, you know, if I looked at it that way, I'd say we'll probably have another good quarter, I would expect, in the Americas. I would expect EMEA to be a little bit better. than it was this quarter, and Asia-Pac is the question mark to me. It would be down a little bit in total. So I would assume that the Q2 results are a little bit better than what we did here. I would look at surgical pretty similar. Fertility should be a little bit better, even with some Middle East risk out there. And the rest of that business is humming along fairly well. So I would think Cooper Surgical will post a little bit better sequential quarter than what they did in Q1. Good.

Thank you. On the second question, I wanted to ask on the strategic review, you know, when do you expect that to be complete? You know, what's the goal for the outcome? Anything else you could kind of say on the strategic review would be helpful? Sure.

Sure, there's really not much else I can add on that. I mean, we announced that we were doing that kind of formally, if you will, beginning of December, went through the holidays and so forth. And we're very active on it right now with our advisors and the board and so forth. So I don't want to comment or say anything right now. It probably wouldn't be appropriate to go into any details until we get some concrete information. So I'll hold off on that one, but certainly provide updates when we can.

Okay, that's fair. Just wanted to ask. Thank you.

Our next question comes from a Mizuho group from the line of Anthony Petrone. Please go ahead.

Thanks, and good evening, everyone. Maybe one on private label and then one on My Day My Sites. On private label, I don't know if you can share this, Alan or Brian, but what was the percent of private label exiting last fiscal year? And with the addition of these new private label contracts, where can that increase to? And is that, you know, margin neutral? Is it a margin drag? Or can it be agreed up to margins? I'll have the one quick follow-up on my plate.

Yeah, so our private label was running for quite a while, about a third of our revenues. It's a little bit higher than that. We don't break out the specific numbers. It's a little bit higher than that. And it's still kind of trending along there. We actually had a pretty good quarter with branded sales, and we're seeing a little bit more success now winning some contracts and business around branded sales. So, I wouldn't highlight too much with respect to that one. Margin-wise, we have a tendency to look at things at an operating margin level, and I know the operating margin on those are fairly similar. So from that perspective, it doesn't make too big of a difference. It could make a little difference on gross margins. Those contracts come through, they'll put a little pressure on gross margins probably as we move to the back half of the year.

And then on My Day, My Site Japan, maybe can you size that in terms of the number of target practices you're going after, like how many sites are you looking to penetrate, and what is the market size and dollar for my site in Japan?

Yeah, so just to be clear on that one, the product that got launched in Japan was just my site, the regular my site, because it took us like three years to get regulatory approval on that. My day, my site is in multiple European countries right now. We just launched it like Australia, New Zealand, South Africa, I think. But Japan is the kind of the traditional, if you will, my site. Yeah, as I mentioned on the call, it's like 77% of kids are myopic. So there's still a big opportunity there. It's really hard to gauge the size of that market and to put numbers out associated with it. But I will say we are super aggressive there right now. And I'm crazy happy to say that the product's being received really well. That's an ophthalmology market rather than an optometrist. So you have a marketplace of doctors who look at clinical data and they understand clinical data. And when you have that kind of combination of a lot of myopic kids and professionals who understand clinical data, a product like MySite is going to do really well there. So I think that, you know, I talked about 20% to 25% growth from MySite this year, and we did 23%. And I would certainly be comfortable saying 20% to 25% again or higher based on the success that we're seeing early indications on MyDay, MySite, and MySite in Japan.

Thank you.

Our next question comes from the line of DNP from the line of . Please go ahead.

Hi. Good evening. Thanks for taking my questions. One on vision. If you could discuss my site, again, solid performance in light of the Stelest entering the market? And my second question is on the Cooper Surgical. Your fertility pure play peer had supportive market comments. So what are you seeing in IVF cycles across the U.S., EMEA, and APAC? Thank you.

Sure. I think that with – I'll touch on the first one, which was the Stelest activity here in the U.S. That is going to turn out to be a positive for us. There is a lot more interest in myopia control, pediatric myopia issues, and the education that's coming because of STLEST and the attention that the optical community is now putting on myopia control is quite a bit more than it was when it was just us pushing it. So there's going to be some push and pull from that because obviously younger kids are going to move into glasses much quicker. But when you look at especially 11 and 12-year-olds who are in sports or any activities or anything else concerned about their looks or whatever, we're seeing an increasing amount of fit activity when it comes to kids in that 10 to 12 age in the U.S. market. So I think at the end of the day, that's going to be a positive for us long term. And I even think this year it's not going to be detrimental to us where I thought that it might be at one point. So I'm happy that product's in the market. I'm happy with what they're doing. And I'm happy with the promotional activity that's out there educating the marketplace. On the fertility side of things, yeah, as I mentioned, you know, I think the risk of the downside that was there and kind of that market continuing to trend down, I would take that off the table. Because we are seeing positives in the fertility industry now. We're seeing improving IVF cycles in the U.S. We're seeing improving IVF cycles in some of the European countries. We're seeing fertility clinics starting to look at upgrades and so forth as new technology comes out, new equipment comes out. So I would say that we're going to continue to see the fertility industry get a little bit better. I don't see like a fast, huge ramp up or something like that. But I would say the downside is kind of taken off the table, and I would say stabilization to improvement is what we're seeing right now.

Thanks for the comment.

Yep. And from William Blair, our next question comes from the line of Stephen Littman. Please go ahead.

Thank you. Hi, guys. Al, you mentioned reinvestment in myopia control, and it sounds like on the R&D side. Can you talk about the opportunities you see to build on the MySight platform from an innovation perspective? And then I have a quick follow-up on pre-cash flow.

Sure. There's some really exciting stuff there. I mean, one is that we need to get a MyDay MySight Toric out into the marketplace. That is one of the products that the optical community really wants. So we're doing a lot of work on that right now. That's a positive. We have kind of like a MySite 2, if you will, that we're working on to even get better efficacy. We've also got some really cool, exciting stuff when you look at like combinations with atropine and so forth that have the potential to really, really help kids that are not reacting to kind of regular or traditional treatment. So, yeah, you're right. We're spending a decent amount of money in R&D on my site right now or my opiate control in general, and we're going to continue to spend that because this is a great market. I mean, we have opportunity to have that product continuing to grow a solid 20% plus for, like, years and years and years and years. So, yeah, we're investing in that pretty decently.

Great. Thanks, Alan. And Brian, the upside you're seeing on free cash flow this year and the raised guidance, is that coming from higher operating margin, better working capital management, maybe all the above? What's exceeding your initial expectations heading into the fiscal year?

Hi, Steve. Yeah, thanks for the question. Really, all the above. We're seeing stronger operating performance, and I touched on that earlier. But we're collecting better. You know, we're building inventory more smartly. I guess smartly, that's a word. But we're building inventory in a more efficient manner. And, you know, FX is helping a little bit. But it's really just a combination of the operating performance and better working capital. Obviously, the lower CapEx helps, too.

Great. Thanks, guys.

Our next question comes from the line of Joanne Wushu. Sorry. from Citibank. Please go ahead.

I was fascinated to hear how my last name was going to be pronounced. Good evening and thanks for taking the question. A fundamental one and a bigger picture one, please. Foreign exchange, what are you dialing in with all of the shifting U.S. dollar given the macro environment? And then my second question, I'll just put it on right up front. How are you thinking about CSI revenue improving throughout the year? What are the drivers or levers that we can pull on that one, or we can see you pull? Thank you.

I'll answer the second one, and I'll let Brian answer the first one. So on the CSI side of things, we'll have like Paragard, which is down seven, will finish the year kind of flat to up a little bit. So I think Q2 will be another year because, or another quarter because of the comp, where It'll probably be down a little bit, but then we'll have a good back half of the year with that product. When I think about the medical devices, boy, our specialty surgical team is killer. Those guys just do a fantastic job. I think we'll continue to have strike there. Then, as I was mentioning on fertility, just better visibility, more comfort, and that that market is at least stabilized and arguably trending up is going to put some improving growth rates on that. I think Q2 is better. I think, frankly, Q3 is better than Q2 for Cooper Surgical. So just kind of progressing along with improvements, probably somewhat similar to vision, where the best quarter will be Q3, Q4. Hi, Joanne.

So I'll take the FX question. As we were exiting last week, we were sitting more favorable relative to last guidance on FX, but obviously with the Middle East conflict, you know, the dollar strengthened. And so as we thought about and as we set the guidance ranges for this earnings call, we took up the revenue ranges by $6 million in vision and $1 million in surgical reflecting, you know, FX. But, you know, really we kept the rates pretty similar to the rates from last earnings call. You know, it's a little bit conservative. So, you know, really we're looking at a headwind or, sorry, a tailwind to revenues of roughly 1%. and also a tailwind to EPS of roughly 1%, so very, very similar to the last call.

Thank you.

Our next question comes from JP Morgan from the line of Robbie Marcus. Please go ahead.

Oh, great. Thanks for taking the questions. Two for me. First, Al, wanted to get your thoughts. First quarter organic growth missed on CVI Guide and overall. And it sounds like second quarter will still be maybe a little weaker than original expectations due to Asia-Pac. You talked about third and fourth quarter and a lot of the private label tribe in fourth quarter, and you didn't flow that all through in the original guidance. How are you thinking about sort of the conservatism of the guide now with the slower start to the year? And does the slower start maybe take some of the upside off the table as you left the guidance the same?

I would characterize it, honestly, the exact same, because where we had that softness in Japan that I talked about, I mean, I can pinpoint that softness and talk about what happened there. And we have good, good, good visibility around what happened and how we're correcting that. But we have more strength in the Americas and more strength in EMEA than I would have said back in December. So I guess, I mean, I'd net that out and say, yeah, we came in below... our range and where we wanted to come in in fiscal Q1. But I would say that America's stronger than when we gave that guidance in December. EMEA's stronger than when we gave that guidance in December. Asia-Pac probably pretty similar to where we gave that guidance because of a net positive of contract execution and product launches and wins offset by kind of the negative of the stuff I talked about. So net-net, I would I would put the odds of us being able to post a good year and so forth and success in the back half pretty similar to what we had in December.

Great. I wanted to go back to the question on the PowerGuard competitor. I realize the deal hasn't closed yet and you're not ready to talk about the competitiveness here, but I'm guessing that wasn't included in the guidance. So, you know, Did you include any competitive threats like that in the guidance for the year? I guess that's the question as we think about it. Thanks a lot.

Yeah, so when we gave initial guidance, I can't remember, I thought I mentioned it on the December call, but when we gave the initial guidance, we assumed a negative impact because of the competitive launch and that it would happen at the end of this year. It's probably more likely that we will not have a negative impact, meaning that was a little conservative. But we'll see. I don't know. I mean, that thing hasn't closed and we're in March already of our year. So we're working, obviously, you know, well into our year at this point in time. So we'll see. But to confirm, yes, we had included that in the initial guidance of assuming kind of flat up just a little bit.

Perfect. I appreciate you taking the questions.

Yep. From KeyBank Capital Markets, our next question is from Brett Fishbin, please go ahead.

Brett Fishbin All right. Thank you for fitting me in. Hopefully, there's not too much feedback. Just wanted to circle back on the 1Q operating margin performance, which I think you noted in the press release was better than expected and obviously is a top priority this year. We're just hoping you could unpack a little bit in terms of what went better than you thought and why you were able to call the operating margins as exceeding expectations this quarter.

All the financial details, of course.

A big part of that was just good, solid execution. I mean, we did all that work in Q4, and we knew the team was going to do a good job with it, and they have. Like, organizationally, we just did a really nice job. I would kind of highlight AI, and I hate to sound like one more person talking about it, but the reality is that our organization has embraced it. And this isn't our organization like all of a sudden right now getting on and training and everyone's going to train on it and so forth. Our organization embraced it last summer. And we started implementing that stuff as we were going through the year. And we're seeing the positives come out of that type of work. The technology advancements at Cooper are fantastic. I'm super happy. And we have a lot more to do. This isn't a one-quarter thing. So we saw some of it certainly in Q4. We're seeing those improvements in Q1. And we're going to continue to see the use of technology and AI advancements being positive to us on our operating margins as we move through this year.

Yeah, I guess not much to add to what Al just said. I mean, we talked about, you know, in Q4, we grew OpEx. It was basically flat year over year. And then here again in Q1, OpEx was roughly flat year over year. So, you know, there's a lot that we're doing to drive, you know, synergies and efficiencies, leveraging prior investment activity. And we're just really being, you know, very disciplined about, you know, fixed costs in the back office. And so we want to leverage IT. We're doing that much, much more than ever before, as Al talked about. And, you know, this is just great operational execution. Al talked about it and I talked about it in our prepared remarks, and I expect that to continue through the year.

All right, great. And then most of my questions were asked. Maybe I'll just ask one more on some of the new product launches. You mentioned several incremental launches that are really phased throughout this year, including MySite in Japan, MyDay MySite in Europe and in Asia, Energist, the TORIC multifocal. Are there one or two of these that you would call out as maybe the most exciting to you in terms of just what they can do for company growth over the next year or two as they ramp? Thank you.

You could kind of hear my excitement on my day in Japan and my day at my site. I mean, I still believe that there is a fantastic market out there in pediatric optometry and treating kids' myopia progression. And we've had that product. We got to a little slower start than I would have liked on that. And China has turned out to be pretty small in the grand scheme of things. But the rest of the world is gaining traction and doing well. And And my site is back and it is doing well. And with my name, my site and the products that we have and the stuff in R and D and so forth, it's going to continue to do well for a number of years. So that's, I'm really excited about that on the, The my day side, it's execution. I mean, that's what it is. Like I said, we got full product availability last summer. We finally got out there. We're executing on contract wins, branded, private label. We're getting product launches done. All that stuff probably takes a little bit longer than you want it to take, but it's execution and that's what we're doing right now.

Our next question comes from

Nephron Research from the line of Chris Pasquale. Please go ahead.

Thank you. And that was that was excellent pronunciation on that one. You nailed it. I had a couple of questions, one on fertility. You talked about improving cycles in the US and Europe. You didn't mention China, which I think was a big piece of the weakness last year. So what are you seeing in that market? And are you still confident that it can bounce back to where it was historically?

I highlighted kind of the Americas and Europe, but Asia-Pac and China in particular is still continuing to be not the greatest market in the world. It's not, I wouldn't say it's getting worse, but it's not. We're not seeing improvements that we are in other markets around the world.

Okay. And then just on the capital allocation front, you know, your debt leverage ratio is lower now than it's been in a few years. it's going to go down even further when you repay that portion of the term loan. As you think about your priorities and the pace of buybacks, is there a target leverage ratio that you think is appropriate for the business that would dictate how quickly you go? You've still got getting close to a billion dollars in authorization available.

Well, share buybacks are a high priority of ours right now, given where our stock is trading. So I would envision us to continue to do share buybacks, and depending upon what happens with the stock price over, you know, after this and the next quarter and so forth, especially with our belief and our visibility in the back half of the year, I think you could see us get quite a bit more aggressive on stock buybacks.

Thanks, Alan.

From Redburn, our next question comes from the line of Izzy Kirby. Please go ahead.

Hi, thanks so much for squeezing me in. You made an interesting comment at the end around looking at sort of next generation manufacturing and production. Obviously, I appreciate it's early, but would love any more color around that. Do you think this puts you really ahead of your peers in terms of manufacturing capabilities? And then is this factored in, I guess, to the CapEx and free cash flow guidance over the next few years?

Thanks.

just world class. I mean, they're best in class.

They've been spending a lot of time and energy, especially at Cooper Vision over the last number of years, expanding facilities, starting new lines up and so forth. To be able to now take a breather and work with our great R&D team to look at next generation work and deploying that and optimizing our infrastructure and so forth, there's a lot of exciting stuff that we can do there. It takes time. But there's a lot of exciting stuff that we can do there as our CapEx comes down. And I think I'll turn to Brian because I think that's all factored in on how he looked at free cash flow.

Yeah, certainly. I mean, we have a three-year, five-year, ten-year view on things. And so when we gave the free cash flow commentary and we reiterated again today over $2.2 billion, that factors that in. But we've talked about over the years as we're building, building, building, building to support more supply and capacity it's hard for us to work on continuous improvement and these optimization things. And now we've got a breather and we can do that. But there's lots of great ideas and lots of opportunities to drive success into the future.

Great. Thank you. And then just really quickly, if I may, on SiteGlass and the FDA approval. Any updates there? I know it seems to be performing well with Essilor in Asia. So I would just love to hear thoughts on SiteGlass.

Yeah, it's performing well in Asia. You're exactly right. We still love that product, and it's doing really well in Asia and a number of other markets around the world. So we love it, and we think it's going to do fantastic long-term. No update, though, on an FDA approval.

Our final question comes from Goldman Sachs from the line of David Roman. Please go ahead.

Thank you. Good afternoon. I'll keep it to one here, given where we are in the time of the call. Maybe, I think in your prepared remarks, you talked about some of the specifics you were seeing on OPEX efficiency, and I think you called out operating expense declines in CSI, which I know we'll see when the queue comes out here. But can you maybe just help us think through how you are reflecting on some of the G&A savings that you're realizing here from the restructuring you announced last year and To what extent you're contemplating reinvesting that and whether that is showing up in the P&L now? And then in a scenario you did go down a path of reinvestment, where would you be looking to deploy those resources?

I mean, we are doing that. We're doing that already. I was talking about how aggressively we're doing that, certainly on the MySite side of things, and we certainly saw that in Q1. That's just putting dollars back into sales and marketing. That's where it's going. So leverage G&A, put dollars into sales and marketing, and we're getting enough savings through all of our work that we're able to do those reinvestments and still put up stronger earnings than people were expecting. So the combination has kind of come together very, very nicely for us.

Okay, thank you.

And with no further questions in queue, I will turn the call back over to Al White for closing remarks.

Great. Thank you, Operator, and thank you, everyone, for taking the time on today's call. We look forward to talking to everybody in three months and continuing to make progress and having a good call then. So thank you, and have a good night.

Thank you again for joining us today. This does conclude today's conference call. You may now disconnect.