The Cooper Companies, Inc. (NYSE: COO ) Q4 2022 Income Call Records December 8, 2022

The particular Cooper Businesses, Inc. misses on earnings expectations. Reported EPS is $2. 75 EPS, expectations were $3. 11.

Operator: Good afternoon, and welcome to Cooper Companies Fourth Quarter 2022 Revenue Conference Call.. I would now like to turn the call over to Kim Duncan, Vice President of Investor Relations and Risk Management. Please go ahead, Ms. Duncan.

Betty Duncan: Great afternoon, plus welcome in order to The Cooper Companies fourth quarter and full year 2022 income conference call. During today’s call, we will discuss the results and guidance included in the revenue release plus then use the remaining time for questions. Our presenters on this call are Al White, President and Chief Executive Officer; plus Brian Andrews, Chief Financial Officer and Treasurer. Before we begin, I’d like to remind you that this conference contact contains forward-looking statements, including all revenue and profits per share guidance and other statements regarding anticipated results of operations, market or regulatory conditions or trends, product launches, operational initiatives, regulating submissions plus closing or even integration associated with any acquisitions or their anticipated benefits.

Photo by Austin Distel on Unsplash

Forward-looking statements depend on assumptions, data or methods that may be incorrect or imprecise and are usually 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, which includes Cooper’s Form 10-K plus 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 in order to our GAAP information. We encourage you to consider our results under GAAP as well as non-GAAP and refer to the reconciliations provided inside our cash flow release, which is available upon the Investor Relations section of our own website under quarterly outcomes.

Should you have any additional questions following the call, please e-mail [email protected] com. And now I’ll change the call over to AL for his opening remarks.

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Albert White: Thank you, Ellie, and welcome, everyone, in order to Cooper Businesses Fourth One fourth and Fiscal 2022 Year-end Conference Contact. We finished this 12 months with CooperVision reporting its seventh consecutive quarter of double-digit organic revenue growth and CooperSurgical, posting an eighth consecutive quarter associated with double-digit natural revenue development within the fertility business. Demand for our products and services was very strong within Q4, and we’re seeing that continue into fiscal 2023. I’m extremely proud of the dedication of the Cooper employees and the hard work it took to post another year of record revenues in financial 2022, plus I look forward to another record-setting year in fiscal 2023. Moving to the numbers. Consolidated quarterly income reached a good all-time high of $848 million, and all of us closed the particular fiscal yr with record revenues associated with $3. 31 billion.

CooperVision posted quarterly revenues of $562 mil, up 11% organically and reached the new report high associated with $2. 24 billion in fiscal season revenues. CooperSurgical posted record quarterly profits of $286 million, up 15% organically and reached new record fiscal calendar year revenues of $1. 07 billion. For the quarter, CooperVision’s growth was led by our daily silicone hydrogel portfolio and myopia management products, while CooperSurgical’s growth was broad-based with strength inside PARAGARD fertility and our own broader medical device profile. Non-GAAP salary per share were $2. 75. This was lower than we were forecasting primarily due to commercial spending tied to product launches and elevated distribution costs and Brian will cover this later in the contact.

For CooperVision in Q4 and reporting all percentages on an organic basis, income growth was strong plus diversified within all geographic regions and across all product categories, spheres, torics and multifocals. The Americas grew 5%, EMEA has been up 13% and Asia Pac arrived at 16%. This performance has been driven simply by new item launches, expanded product ranges, market-leading flexibility through the customized offerings and growth in key accounts. Regarding product details, daily silicon hydrogel lenses grew 20% with especially strong development from MyDay and from clariti in the Asian countries Pac region. Daily silicones continue in order to be the main driver associated with growth for the contact lens industry, plus we offer the broadest portfolio in the market along with MyDay and clariti available on a broad range of spheres, towards plus multifocals.

Our silicone hydrogel FRP lens, Biofinity and Avaira, reported another solid quarter of 6% growth. Regarding product launches, we all remain extremely active. The MyDay multifocal launch will be going incredibly well, as well as the feedback through customers plus practitioners remains outstanding. In the meantime, the MyDay toric parameter expansion launch has been overwhelmingly positive within the U. S. and Canada. With over 4, 000 SKUs, we now match our standard Biofinity toric range plus have the particular widest daily toric range in the market by a wide margin. Not only does this expand the particular daily toric category with regard to everyone but for many FRP toric wears, this is their first opportunity to enjoy the freedom of a daily contact lens. We’ll be rolling out these expanded parameters in additional markets as we move through fiscal 2023 and look forward to continued success.

And lastly, on MyDay, we’re excited to be bringing MyDay Energies towards the marketplace. This zoom lens uses the same innovative technology as Biofinity Energys to alleviate digital eye strain, and eye care practitioners are usually excited to be getting this particular technology in a premium regular offering. All of us started seeding the U. S. market and the full national rollout is usually scheduled regarding early spring. Combining all this MyDay activity, truly exemplifies CooperVision’s leadership within the daily silicone hydrogel space plus our focus on offering practitioners a wide variety associated with market-leading technologically superior items. Outside of MyDay, demand intended for Biofinity continues to be especially strong to the point where we’re somewhat capacity constrained. We’ve increased price and production, specifically in the particular extremely high demand made-to-order extended variety torts plus tour multifocals, and we’ll continue in order to concentrate on increasing capacity upon a broader scale moving forward.

Moving to myopia management. We posted revenues of $26 million, up 29%, including MiSight up 88%. For the full fiscal year, we reported myopia management earnings of $93 million, which was impressive given the particular negative impact of currency and ongoing COVID restrictions in China. For MiSight, we’re moving out an expanded unbekannte range and launching in new countries and I am happy in order to report that will MiSight will be now available in 41 nations. Within this, we’re seeing increased fitting activity from both independent optometrists plus key accounts and we are going to continuing to see a positive halo effect with our MiSight customers accelerating their use of other CooperVision lenses. All this is a good sign and points in order to a strong fiscal 2023, where all of us expect myopia management revenue of $120 million to $130 mil, up roughly 35% at the midpoint in constant foreign currency.

As the reminder, MiSight contact lenses are the first and only FDA-approved soft get in touch with lens proven to slow the progression associated with myopia within children aged 8 in order to 12 in the initiation of treatment. The product is backed by extensive clinical data plus remains a shining example of CooperVision’s leadership in the contact lens industry. Moving to SightGlass. We’ve been making progress along with these myopia control glasses as part of our great joint venture with EssilorLuxottica. This includes selling in China and pilot programs in Canada, the Netherlands, the particular U. K. and Israel. In the Oughout. S., the JV submitted an FDA application to be the particular first spectacle lens item to receive FOOD AND DRUG ADMINISTRATION approval to get myopia control, and we hope to receive a positive response by calendar year-end.

And to conclude on the importance associated with myopia administration and why it needs in order to become regular of treatment, the risk of visual impairment plus eye complications such because glaucoma, grows exponentially with vision loss. So preventing higher levels of myopia is critically important pertaining to the long-term health of our children’s eyes. To finish on CooperVision, the contact lens market is definitely performing exceptionally well along with growth associated with roughly 9% in calendar Q3. There are still COVID-related challenges, especially with respect to staffing shortages in optometry offices negatively impacting patient flow, but progress is being made. Meanwhile, the extensive growth drivers of the industry remain intact. This particular starts with a macro growth trend and more people needing vision correction with an estimated 50% of the global population expected to have myopia or nearsightedness by 2050, up through roughly 34% of the particular population today.

This is driven by a variety of factors, including greater levels associated with screen time and less time outdoors, especially among children. Other industry motorists include the market’s continuing shift to silicone hydrogel dailies, the particular increasing focus on higher-value products such as torics and multifocals plus higher pricing, which can be running ahead of historical trends. We all expect worldwide growth to remain healthy and believe we’re going remain a leader with our own robust product portfolio, continuing product releases, fast-growing myopia management company and leading New Fit Data. Shifting to CooperSurgical. We published a great one fourth with development throughout the portfolio. Fertility reported sales of $109 million, upward 15% naturally, its eighth consecutive quarter of double-digit organic growth.

success we’ve seen throughout the item portfolio and around the world. Plus given our momentum once we enter financial 2023, wish continuing to invest in our team and in our own fantastic product portfolio which includes top consumables, capital equipment plus genomics. Demand remains quite strong, especially amongst our important accounts, so we need in order to keep building infrastructure, investing in the people and delivering the products and services required in this high-growth marketplace. Regarding the overall male fertility market, the particular future looks bright. There are several industry development drivers, yet one of the key factors being women delaying childbirth. The average age associated with a women’s first birth within the Circumstance. S. plus several other developed countries now stands at the record higher of 30 years old and age is one of the key aspects in meeting fertility assistance.

Additionally, elements such as improving access to treatment, increasing patient awareness, improved product products such since cryopreservation, growing fertility advantages coverage plus technology improvements for both male and female plus fertility are driving the industry ahead. In total, it’s estimated that approximately 15% of reproductive age couples have fertility difficulties and that more than 750, 000 babies are usually born annually through virility assisted measures, and these numbers are growing. Regarding CooperSurgical’s market positioning, we compete in a portion of the market that’s roughly $2 billion in annual sales, and forecast growth of 5% to 10% for many years to come. Within this particular, we’re well positioned to continue delivering strong results with the particular broadest profile in the industry, a market-leading commercial footprint and strike inside key balances.

Moving in order to office plus surgical products, which includes OB/GYN Medical Devices, PARAGARD and stem cell storage. We posted product sales of $178 million, up 58% plus up 15% organically. Within this, PARAGARD grew 19% and office plus surgical clinical devices were up 13%. PARAGARD posted strong outcomes rebounding from several tough quarters, and our OB/GYN medical devices benefited through strong demand, especially meant for surgical items combined with clearing and backlog. Lastly, our stem cellular storage business grew 2%, in line with expectations against the difficult comp. To conclude on CooperSurgical, we all made a ton of progress this year. Our fertility business continues to post great results. Our own office plus surgical products closed the year strong, and we completed an incredible amount associated with integration activity associated with several acquisitions, including the Generate deal.

Prior to I switch the call to John, let me say this was the great fiscal year designed for Cooper. All of us reported report revenues and made significant advancements all through our organization. As we enter fiscal 2023, demand remains strong, supported by stable consumer exercise and price increases, our own investment activities, including new product starts and capacity expansion are going well. The employees are highly engaged, and jooxie is continuing to execute on this long-range strategic objectives. Having said that, we are usually aware of global inflation, geopolitical risks plus other factors that could cause a global recession, and we’re thus managing the investment action with prudent cost controls and will carry on to be vigilant within our operations. With that, allow me to convert the phone call over to Brian.

John Andrews: Thank you, AL, plus good afternoon, everyone. Most of my commentary will become on a non-GAAP basis, so please refer to our earnings launch for a reconciliation of GAAP in order to non-GAAP results. Fourth one fourth consolidated revenues were $848 million, upward 12% while reported and organically. Combined gross margin was 65%, down 250 basis points from last year, primarily due to currency plus higher expenses associated along with supply chain challenges. Operating expenses increased 12% and were 42. 8% associated with revenues, mainly as a result of the acquisition of Produce. Consolidated operating margin was 22. 2%, down from 24. 9% last year, primarily due to currency. Before moving on, let me say our own Q4 operating income did not meet anticipation.

The primary drivers had been commercial spending associated with item launches a good elevated distribution costs tied to shipping and inefficiencies related to capacity expansion and automation efforts. Some of this activity will keep on in financial 2023, plus I’ll touch on that will in assistance. Below — moving below operating income. Interest expense was $23 million with higher rates and debt balances driving the increase. The effective tax rate was 14. 2% and non-GAAP EPS was $2. 75, along with roughly 49. 6 million average shares outstanding. Concerning earnings, FX negatively impacted the quarter by $0. 75, which was $0. 11 more compared to we had built into the guidance upon our September earnings contact. A large component of the particular $0. 11 was attributable to the remeasurement of foreign currency-based intercompany trade receivables, which includes exposures through before we begin mitigating certain balances.

Free cash flow was $36 mil, including CapEx of $95 million tied to capability expansion plus net financial debt reduced simply by $31 million to $2. 61 billion dollars. Moving in order to fiscal 2023 guidance. We are assuming the modest recession, ongoing inflation and rising interest prices. For the year, we’re guiding to consolidated revenues associated with $3. 455 billion to $3. 515 billion, up 6% in order to 8% organically, with CooperVision revenues of $2. 325 billion to $2. 365 billion, upward 7% in order to 9% naturally. And CooperSurgical revenues associated with $1. 13 billion to $1. 15 billion, up 4% in order to 6% organically. Non-GAAP EPS is expected to be in the range of $12. 30 to $12. 60 based on $106 million of interest expense and a 15% efficient tax rate. For interest, we’re assuming a 50 basis point rate boost from the Fed in December, an additional 50 basis point increase in February and then an additional 25 basis stage increase in March.

For that tax rate, all of us are assuming no discrete items. For foreign currency, we’re using yesterday’s rates with a little conservatism given the particular FX volatility. This outcomes in year-over-year FX headwind of approximately 2. 5% to revenues while becoming neutral in order to EPS. From a quarterly gating perspective, all of us expect combined Q1 income and pay to end up being slightly much less than Q4 with currency continuing to have a significant negative impact. After Q1, presuming rates hold steady, the currency effect will lessen and ultimately turn good towards the particular middle of the fiscal year. Relocating to the full 12 months P& L. Let me contact around the information that will drive our financial results. During Q4, we all ramped upward investment exercise and expect that to continue. As an example, we accelerated work on roughly doubling our You. S. CooperVision distribution center to get the building shell done before winter, and right now expect to end up being utilizing this additional 150, 000 square feet associated with space this particular coming summer.

We have been furthermore expanding some other distribution and manufacturing locations at CooperVision and CooperSurgical and implementing substantial software. Additionally , you’re adding substantial capacity in order to our lens manufacturing footprint. We saw some of this action in Q4 with CapEx of $95 million, plus we anticipate it to continue with CapEx being around $400 mil this financial year. Near-term demand is certainly strong and long-term development trends are very positive. So this activity is needed to support our growth initiatives. Having carried out this type of growth work in the past, we know we will get this done plus probably ahead of schedule, but it does create inefficiencies. When you’re dealing with an already strained worldwide supply string, it makes things even more difficult.

We all built anticipations around this inefficiency into our own guidance, along with pumpiing assumptions and believe coming from sufficiently captured everything. In total, for fiscal 2023, this means strong income growth, slightly improving gross margin backed by cost increases plus higher than normal OpEx, resulting in the operating perimeter being up slightly year-over-year. To conclude upon guidance, note that this does not include the pending purchase of Cook Medical’s reproductive health business, but does are the acquisition associated with synergized the small specialty contact zoom lens business all of us closed on November 1. Regarding Coke, we’re exploring options to get regulatory approval, including the potential sale of certain Cook assets and are hoping in order to close by June 30, 2023.

And with that, I’ll hand it back to the operator for queries.

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