Pam, the conference operator, welcomes everyone to the third quarter 2024 Cooper Companies Earnings Conference Call. Kim Duncan, VP of Investor Relations and Risk Management, introduces Al White, President and CEO, and Brian Andrews, CFO and Treasurer, as the presenters. The call will include forward-looking statements and non-GAAP financial information, which are subject to risks and uncertainties. These statements and information are outlined in the earnings release and SEC filings.

The company encourages consideration of both GAAP and non-GAAP results and provides reconciliations on their website. The CEO congratulates employees for achieving a record revenue quarter and announces that both CooperVision and CooperSurgical reported record revenues and improved margins. The company's growth strategy in the daily contact lens and fertility industries has led to increased revenue and leverage through the P&L. The company's focus on innovation and customer expansion has been successful in both segments.

The company has invested strategically in various aspects of the organization, leading to record quarterly revenues and a 14% increase in non-GAAP earnings per share. CooperVision remains the most innovative company in the contact lens industry and has the broadest portfolio of lenses, leading to consistent results and making them the number one contact lens company in the world. In the third quarter, they gained market share in all regions and saw growth in various categories and modalities, including their daily silicone hydrogel lenses and their Myopia management portfolio. The company's high-performing daily portfolio, including MyDay, continues to see strong growth and momentum in all categories.

The company is experiencing strong growth in their innovative product areas, such as MyDay Energys with DigitalBoost technology, toric lenses, and multifocals. They have received positive feedback from eye care practitioners and customers and are expanding manufacturing capacity to meet high demand. They have also launched an upgraded version of their clariti multifocal lens and continue to see success with their Biofinity and Avaira lenses. These lenses use advanced manufacturing technologies and offer a wide range of prescriptions, making them ideal for patients with complex vision needs. The company is also focused on myopia management.

The company MiSight has seen record revenues in all regions and is experiencing strong momentum. They have launched successful campaigns in multiple countries and are proud of the positive impact they are having on children's lives. They continue to work with the global optical industry to expand usage of MiSight and establish it as the standard of care. They have also showcased their research on MiSight at various conferences and events. CooperVision, a contact lens market, has seen a 7% growth in Q2 with Cooper gaining 10% market share. The market is expected to continue growing due to long-term macro trends. CooperSurgical has also seen record revenues, with fertility sales increasing by 10%.

The fertility business remains a strong source of revenue for the company, with a wide range of products and services and a focus on innovation and global expansion. There is high demand for fertility treatments and the company is investing in new technologies and training to improve outcomes for patients. The broader industry is also experiencing growth, with increasing awareness of infertility and a need for improved access to treatment. In the office and surgical sector, sales have also increased.

The company's Medical Devices segment saw growth, particularly in minimally evasive gynecological surgical products and labor and delivery products. Stem cell storage had a solid quarter and PARAGARD slightly declined. The company received approval for a new single-handed inserter for PARAGARD. Consolidated revenues were up 8%, with gross margin and operating margin improving. Non-GAAP EPS increased by 14% and free cash flow was $118 million. Net debt decreased to $2.5 billion.

In the third quarter, CooperVision reported strong organic revenue growth and passed the $1 billion mark in quarterly revenues for the first time. Despite currency headwinds, gross and operating margins improved significantly, resulting in double-digit earnings growth. The company also made two tuck-in acquisitions, which are expected to contribute to revenue growth and earnings. For fiscal 2024, the company has increased its revenue and earnings per share guidance due to continued operational strength. The consolidated revenue is expected to be between $3.89 billion to $3.91 billion, with CooperVision's revenue increasing by 9% to 9.5% organically and CooperSurgical's revenue increasing by 5.5% to 6.5% organically. The company also expects interest expense of approximately $109 million for the fiscal year.

The company expects a slightly over 14% effective tax rate for the full year and non-GAAP EPS to increase by 14% to 15%. The company also provides guidance for fiscal 2025 and is focused on delivering strong operational performance and double-digit operating income growth. The company has made significant investments to position itself for higher sustainable revenue growth and is now seeing the payoff. There is chatter about end market activity, but the company's numbers suggest that the market is holding up well.

The contact lens market is holding up well globally, with growth in mid- and higher-end products. There was a recall of culture media last year, but the company is back to double-digit growth and is working through any potential litigation. The fertility team is focused on doing what's best for patients and customers.

The speaker discusses the success of their team in addressing an issue and getting back on track, leading to double-digit growth. They also mention the strong performance of their Americas CVI and attribute it to increasing capacity and demand for certain products. The speaker is optimistic about the future as they continue to expand their capabilities.

Brian Andrews, responding to a question about the company's leverage and operating expenses, stated that the strong results in the third quarter were expected due to investments made in previous quarters. He also mentioned that the company is seeing positive returns and efficiencies from these investments and expects to continue to see this in the next quarter and into next year. On the next question regarding fiscal 2025, the company provided guidance for low double digit operating income growth, but did not comment on the top line or other factors such as interest rate and tax rate.

The speaker is hesitant to give specific guidance for the company's performance in the future, but mentions that both the contact lens and fertility markets are currently healthy. They remain optimistic about the strength of these markets in the upcoming year. The speaker also hints at potential growth in revenue and decrease in debt, as well as potential benefits from favorable exchange rates and taxes. However, they refrain from giving any specific details until December.

The unidentified analyst asks about price increases in CVI and the company's plans for fiscal 2025. The CEO states that they took price in fiscal Q1 and anticipate taking price again in fiscal Q1 of the next year to offset inflation. They also discuss the impact of a distributor issue on sales in the previous quarter and the expected growth in CooperSurgical for the rest of the year. The analyst also asks about the company's progress in meeting demand in the APAC region.

The speaker discusses the slower growth rate in the Asia Pacific region and attributes it to a need for more product. They are working on increasing capacity and plan to give more details in December. They also mention the success of their myopia management products, with MiSight surpassing ortho-k in sales. They believe they are still in the early stages of this market.

The speaker discusses the increasing interest in Myopia control among the eye care community and the success of products such as Stellest and SightGlass. They express optimism for the potential of the market and mention the approval of MiSight in the US and the hope for glasses to be approved in the future. They also mention positive growth and traction in the market, with a 50% growth in MiSight. The speaker acknowledges that the market is not as big as they would like it to be, but it is moving in the right direction. They also confirm that the projected low double-digit operating income growth and positive FX will translate to EPS growth in fiscal 2025.

The speaker agrees with Brian's assessment of the FX and interest expense, and believes that the company will generate decent free cash flow and pay down debt. They also mention that the Fed lowering rates and higher taxes may result in good EPS. The speaker then discusses the strong gross margins and operating margins, which are being offset by price and efficiency gains. They also mention improvements in intercompany shipping and mix, and expect dailies thigh high to be a headwind.

The speaker discusses the potential for continued growth in gross margins through capacity increases and continuous improvement activities. They then address questions about pricing dynamics and visibility on pricing, noting the complexity of the contact lens market and the potential for 2-3% support for market growth.

The company attributes the growth of the market to the increase in sales of toric and multifocal lenses, as well as other specialty products such as Energys. These products have a different margin profile, with lower margins during the launch phase but potentially higher margins once fully established in the market. The company focuses on operating margins rather than gross margins. In terms of competition for their copper IUD, PARAGARD, the company is confident in their market position and highlights the long and rigorous regulatory process for IUDs. They also mention the recent approval of a single hand inserter for PARAGARD.

The speaker discusses the success of their product in the market and the positive feedback they have received. They also mention a good back-to-school season and a strong demand for their products. They are optimistic about the future and do not see any risk of share loss for their toric lenses.

The speaker, Albert White, is not worried about losing patients to competitors due to a recent decision to cut some SKUs. He believes their toric contact lenses are some of the best on the market and once patients are fitted with them, they do not switch to other brands. A question is asked about the uneven results seen in the contact lens market, and White attributes it to various factors such as shipping and supply issues.

The speaker discusses the company's business model and portfolio, emphasizing their strong position in the market and consistent performance. They mention the market's shift towards silicone hydrogel dailies and their efforts to expand their capabilities in this area. They also mention their focus on myopia management and the progress of their product SightGlass through the FDA approval process.

The company has a strong partnership with EssilorLuxottica in promoting Myopia care, and their product SightGlass is doing well in China. They are also seeing growth in ortho-K and MiSight, with the exception of China where they struggle. The company expects to see continued success outside of China in Myopia management.

The speaker acknowledges the potential for growth in China with MiSight and ortho-k, but notes that progress has been slow. They mention making progress with insurance coverage and the need to establish myopic control as the standard of care in optometry practices. In regards to CooperSurgical, PARAGARD is expected to be slightly up and STEM showed organic growth of around 4%.

The company has not made any acquisitions recently and has only done two small ones. The PARAGARD product line is expected to see a decline in the next quarter due to a declining market for non-hormonal IUDs. However, the company is not overly concerned as PARAGARD only makes up a small portion of their revenue. The company plans to focus on continuous improvement activities in order to moderate their CapEx spending.

The speaker clarifies that they were not giving guidance for next year and expects a big CapEx number. They also mention that they are still capacity constrained and are adding capacity every month. The speaker reiterates that free cash flow will be better next year than this year. They then answer a question about PARAGARD's performance in the third quarter and mention that Biofinity and Avaira had strong growth. They state that there is not much to read into the growth of these products this quarter.

The company had a strong quarter due to the success of their daily contact lens products, but there will be fluctuations in future quarters. There is still a lot of room for growth in the daily contact lens market, as less than half of people currently wear them. The trend towards daily silicone hydrogels and toric lenses is expected to continue, especially with the introduction of new products like MyDay multifocal. The company believes there is still a lot of potential for growth in this market.

During the conference call, Albert White, President and CEO of the company, addressed questions from analysts. One question was about the progress of CVI and whether there is enough visibility to resume launch activities in the near future. Another question was about the single hand inserter for PARAGARD and whether it is a differentiator compared to upcoming competition. White stated that the single hand inserter puts them on par with the market, but he cannot speculate on what the competition will do. He also mentioned that they are making good progress on capacity and are actively evaluating additional launch opportunities. In his closing remarks, White emphasized their focus on delivering results in the short and long term.

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