The operator welcomes listeners to The Cooper Companies' second quarter 2024 earnings conference call and introduces the presenters. The call will include forward-looking statements and non-GAAP financial information. Listeners are reminded to refer to Cooper's SEC filings for more information.

The company encourages consideration of their results under both GAAP and non-GAAP and provides reconciliations on their website. They had a record quarter with double-digit revenue growth in CooperVision and solid performance in CooperSurgical. Margins improved and non-GAAP earnings per share were $0.85. CooperVision saw growth in all regions and categories, with daily silicone hydrogel lenses and myopia management portfolio showing strong growth.

The company had a successful quarter with strong results in all markets and product categories. MyDay, a daily silicone hydrogel lens, had great success with its toric and multifocal designs. The company also received positive feedback for MyDay multifocal, which has a 98% fit success rate. MyDay Energys, designed for digital lifestyles, showed strong growth in the US and will be launched in other markets soon. Clariti, another silicone hydrogel daily lens, is also a growth driver due to its comfort, affordability, and appeal to new wearers. Additionally, demand for Biofinity and Avaira lenses remains high.

The Biofinity portfolio has expanded to include a wide range of lenses, making it possible to fit 99.9% of patient prescriptions. The success of Biofinity is also due to the increasing demand for MiSight, a myopia management lens. The company is celebrating the 10-year anniversary of the pivotal MiSight 1 day clinical trial, which led to its FDA approval. CooperVision is committed to establishing myopia control as standard of care and has launched a digital tool for ECPs in partnership with the World Council of Optometry.

The toolkit and partnership between CooperVision and the American Optometric Association aims to promote myopia management as a standard of care for pediatric patients. The Myopia Collective program is recruiting ECPs from each state to advocate for community and policy change. CooperVision expects continued growth in the contact lens market, driven by macro trends and their own innovative products. CooperSurgical saw a 4% increase in quarterly revenues, but faced shipping interruptions due to IT infrastructure upgrades. However, the company remains confident in reaching their full year revenue guidance. Fertility sales were also up 4%.

The company is experiencing strong demand for its products and services in the global fertility industry. They are investing in new facilities, training, and innovation to provide the most advanced solutions to fertility clinics and patients. The company is also focused on improving the journey to parenthood through innovations in genetic testing and embryo-endometrial communication. The fertility industry is supported by positive growth trends and the company is committed to advancing the industry and improving access to treatment on a global scale.

In the seventh paragraph of the article, the company reports on their sales for office and surgical products, which saw a 4% increase. Medical devices declined 6%, but stem cell storage and PARAGARD saw growth. The company's minimally invasive gynecological surgical products and labor and delivery portfolio are in high demand. The company's stem cell business had a solid quarter and PARAGARD exceeded expectations due to a price increase. The company's expanding obstetrics portfolio is making a positive impact globally. The company also released their latest ESG report and is committed to sustainability. The CEO thanks their employees for their hard work and dedication. The following commentary will be on a non-GAAP basis.

In the second quarter, the company saw a 7% increase in consolidated revenues, with a 8% increase organically. Gross margin also improved, driven by efficiency gains in price. Operating expenses grew in line with revenues, with SG&A showing leverage and R&D increasing faster. The company is investing in several exciting areas to remain a technological leader. Operating margin improved slightly, with interest expense at $27.5 million and an effective tax rate of 13.5%. Non-GAAP EPS increased by 10% and free cash flow was $37 million. The company is increasing its full year guidance for revenues and earnings based on strong performance in the second quarter and momentum for the rest of the fiscal year.

CooperVision is increasing their guidance for the year, with a projected organic revenue growth of 8.5% to 9.5%. CooperSurgical's organic revenue guidance remains unchanged. Interest expense and tax rates are also expected to remain steady. Non-GAAP EPS guidance has been increased by $0.04 on the bottom and $0.02 on the top, despite a negative impact from currency exchange. The company is focused on strong revenue growth and operational performance, with improving capacity and a focus on organic investments. Momentum remains healthy and the call is now open for questions.

During the earnings call, Al White from the company addressed a question from Craig Bijou about the company's CVI guidance for the year. Despite tougher comps in the second half of the year, White expressed confidence in maintaining growth due to improving capacity and high demand for their products. When asked about the impact of the US distribution center for the surgical business, White declined to provide a specific quantification but mentioned that it had affected the quarter and could potentially impact the second half of the year.

The speaker discusses how shipping delays have negatively impacted the quarter for the medical device and infertility teams, causing a dip in growth. However, they are optimistic about addressing the issues and potentially achieving double-digit growth in the IVF market in the upcoming quarter. They also mention that the contact lens market has seen price increases, with the overall market expected to grow in the mid-upper single digits, with a third of that growth coming from price.

The speaker discusses the progress of MiSight in the US and Europe, noting an increase in both the number of prescribers and the amount of revenue per prescriber. They also mention potential competition in the soft contact lens market for myopia. The speaker is pleased with the progress and expects a strong second half of the year.

Al White, the CEO of CooperCompanies, believes that the third and fourth quarters will be successful for their product, MiSight. He notes that there is currently no competition in the market for myopia control, making MiSight the only approved product. In terms of organic investment, CooperVision is focused on increasing capacity through manufacturing equipment for their MyDay products and launching new products in different markets. CooperSurgical also has exciting R&D projects in the works. Overall, there is a lot of investment going into expanding capacity and developing new products for both divisions of CooperCompanies.

The speaker discusses the company's market and growth projections for the first quarter, noting that April was a strong month for the industry. They also mention that inventory levels may be tighter due to higher interest rates, but this is not a major concern. The speaker also addresses the performance in the Asia Pacific region, stating that the delay in getting a product back into Japan did not have a significant impact on the company's overall performance.

Al White, CEO of a company, stated that most of their customers have reduced their inventory levels and there is no real risk associated with it. The Asia Pacific market is facing a capacity issue, but the team is capable and willing to sell more products if they were available. The distribution center challenges have caused some sales to be pushed, but it is not expected to result in significant lost sales. The company's CVI segment has seen good growth in April and May, with a 10% increase in syhi FRP sales.

Al White, CEO of a company, was asked about any changes in consumer behavior and he mentioned that Biofinity and Avaira products had a strong quarter. He explained that the company has been expanding its product offerings and has been capacity constrained, but they now have new manufacturing lines to meet the demand. During a conference call, Brian Andrews, a member of management, spoke about the company's operating and gross margin beats in the quarter, despite a warehouse ramp issue. He attributed this success to the company's investment in distribution, IT, and Envision, which is starting to show leverage.

The company has seen improvements in their cost of moving products and shipping to customers, which has led to operating margin expansion. They have been successful in offsetting the negative impact of currency through their hedging program, and are continuing to focus on driving both top-line and bottom-line growth. The company has also made progress in EMEA.

The speaker discusses the strong performance in the EMEA region at CVI and attributes it to the excellent leadership and team, key account wins, and new product offerings. They express confidence in maintaining this level of growth, but acknowledge it may be difficult to sustain quarter after quarter. They also clarify that the backlog in CSI revenue is being cleared.

The speaker discusses the potential impact of PARAGARD on CSI revenue in the current quarter and mentions that it may offset the losses. They also mention that PARAGARD has higher margins but it should not cause any issues. In terms of capacity for contact lenses, the speaker states that they are likely in similar shape to their competitors and that the current CapEx growth cycle for manufacturing capacity expansion will continue for a period of time.

The company has been investing in capacity and lines to meet the strong demand for contact lenses. This has led to increased operating margins, which is a result of previous investments in distribution centers and other areas. The company expects this trend to continue for many years.

The speaker explains that the company has been performing well in the EMEA and CVI regions due to a strong team, great products, and good relationships with key accounts. They expect to continue seeing growth in these regions, but it may become more challenging to maintain the same level of growth in the future.

Al White, the speaker, is asked about capital allocation and the expectations for PARAGARD. He mentions that the company is focused on internal investments and paying down debt, but they are also open to smaller acquisitions. When asked about PARAGARD sales, he predicts that they will be flat to slightly up for the full year, depending on competitor launches.

The speaker discusses the company's financial performance in the second quarter, specifically mentioning a revenue of $46 million and a sequential decrease in the third quarter. The question then shifts to the tax rate, with the speaker asking about the decrease from 15% to 14% and potential future rates. The speaker then asks for clarification on the PARAGARD product and its pricing contribution to the 22% growth in the second quarter.

The speaker asks for elaboration on the expected sudden change in the back half of the year for PARAGARD, and the speaker is told that there is always lumpiness in PARAGARD due to channel inventory and price changes. The market is struggling from a unit perspective and growth is coming from price rather than units. The speaker also asks about the 12% organic growth in toric and multifocal categories, and it is revealed that they were both similar. Another participant asks about CVI ortho-k.

The company's weak performance in the ortho-k market was primarily driven by China, but they anticipate growth in the back half of the year. The operating margins have been negatively affected by FX, but there are no structural limitations preventing a return to previous levels. The company is focused on leveraging investments and executing well to drive margin improvements.

In the conference call, Navann Ty from BNP Paribas asks when the competitor's low copper IUD will be approved and if it could impact the company's guidance for the year. The speaker, Al White, says he has no idea and won't speculate on their approvals. Another question is asked by Steve Lichtman from Oppenheimer & Company about gross margins in the second half compared to the first half. Brian Andrews responds that they will be similar to last year and there will be higher costs in Q3 due to inventory and production levels.

The speaker discusses the impact of foreign exchange on gross profit in the third quarter, which is worse than in the second and fourth quarters. They also mention a decrease in gross margins in the second half compared to the first half. The speaker then addresses free cash flow and expects it to be higher than last year, but notes that taxes, interest, and foreign exchange are limiting factors. They conclude by thanking listeners and expressing optimism for the third quarter.

This summary was generated with AI and may contain some inaccuracies.