COOPER COMPANIES, INC. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Q4 Performance: CooperVision had a solid quarter with strength in silicone hydrogel dailies but end-of-quarter softness. CooperSurgical had solid Q4 with fertility growth offset by PARAGARD decline. P&L improved with margin improvements.
• Fiscal 2025 Focus: Contact lens market expected to grow 5%-7% in constant currency, CooperVision to take 6.5%-8.5% share. CooperSurgical expects organic growth mid-single digits. Focus on increasing product availability, expanding manufacturing, optimizing tech, new products, and people.
• CooperVision Details: Record revenues, #1 in wearers, growth in Americas, EMEA, APAC. Torics and multifocals grew 9%, spheres 7%. MyDay, clariti, Biofinity/Avaira performed well. Myopia management strong with MiSight.
• CooperSurgical Details: Fertility strong with genomics and donor activity. Office and surgical sales boosted by acquisitions but PARAGARD declined. IT system upgrade stabilized.

Segment Performance

• CooperVision: Q4 revenues were $676 million, up 9% or 8% organically, contributing ~66.3% to consolidated revenues. Strength in silicone hydrogel dailies, torics, and multifocals. MyDay and clariti daily silicone hydrogel lenses grew, with MyDay Energys driving US growth. MyDay toric expanded in North America and Europe, and MyDay multifocal had a 98% fit success rate. Myopia management grew 7% with MiSight up 24%.
• CooperSurgical: Q4 revenues were $342 million, up 12% or 5% organically. Fertility had double-digit growth (15% or 13% organically), offset by a greater decline in PARAGARD than expected. Office and surgical sales were $203 million, up 11% Y/Y, but PARAGARD declined 10% due to competition. IT system upgrade in Q2 stabilized.

Guidance

• Consolidated: Fiscal 2025 revenues projected at $4.08 billion to $4.158 billion, up ~6%-8% organically. CooperVision: $2.733 billion to $2.786 billion, up 6.5%-8.5% organically. CooperSurgical: $1.347 billion to $1.372 billion, up 4%-6% organically.
• P&L: Expect improving gross margins, 10%-12% constant currency operating income growth. Interest expense ~$90 million, effective tax rate ~15%, non-GAAP EPS $3.92-$4.02. FX headwind ~1.5% to revenues, ~4% to earnings.

Risks

• Market Softness: Unexpected softness in US and some global markets in Q4.
• PARAGARD Pressure: Decline in PARAGARD due to competition from other birth control options.
• Supply Chain: Demand for MyDay exceeds manufacturing capacity, impacting growth in some regions.
• FX Impact: Negative FX impact on revenues as expected.

Question and Answer

• Q: What was the cause of unexpected softness at the end of the quarter? A: Softness was seen in the US and some markets like China, and it resolved by early November.
• Q: Why is the CVI guide lower? A: Market growth is 5%-7%, CVI is guiding 6.5%-8.5%, still growing faster than the market, but demand for MyDay exceeds manufacturing capacity.
• Q: What is the outlook for PARAGARD? A: PARAGARD declined 10% in Q4 due to competition, expected to be down a bit in 2025.
• Q: What caused MiSight inventory contraction? A: Inventory contraction was due to distributor inventory tightening, a seasonal pattern.
• Q: What about the pricing environment for contact lenses? **A: Pricing is expected to offset inflation, with the industry passing along inflationary pressures.