Release Date: May 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Record quarterly revenues of $943 million, up 8% year-over-year.
- CooperVision returned to double-digit revenue growth, driven by silicone hydrogel lenses.
- Margins improved due to leveraging prior investment activity.
- Strong performance in MyDay daily silicone hydrogel lenses, with 18% growth.
- MiSight myopia management portfolio grew 39%, showing strong demand.
Negative Points
- Unexpected challenges with system upgrades impacted U.S. distribution center.
- CooperSurgical's medical devices declined 6% due to shipping interruptions.
- Foreign exchange negatively impacted earnings by $0.07 in the quarter.
- Higher cost contact lens inventory expected to impact Q3 gross margin.
- PARAGARD expected to have a negative impact in Q3 due to destocking.
Q & A Highlights
Q: Congrats on a strong quarter. So I wanted to start with the CBI guidance. And the revised guidance for the year assumes growth is going to be similar in the second half to the first half despite tougher comps. So I guess the question is, what gives you the confidence that you can maintain that level of growth in the second half despite the comps? And any help on how to think about Q3 versus Q4 growth?
A: Yes, Craig, thanks. You're right. We do have harder comps. Q3 is a little bit harder even than Q4 in the back half of the year. On the flip side, we have good momentum right now as we enter the back half of the year. And we have improving capacity. And as you know, one of the things that's held us back a little bit has been some capacity constraints in certain products. So as some of those challenges start to reduce, right, we're able to put more product out. And I've mentioned this before, but we're a situation where we have demand exceeding supply, and we probably will for a while here. So we know that as we bring these new lines on and produce more product that we're going to sell that product. So I think it positions us well. So even in the face of tougher comps. I'm still feeling pretty optimistic about our ability to deliver some strong growth in the back half of the year.
Q: That's helpful. And then maybe just on the distribution, U.S. distribution center for the surgical business. Any way that you can quantify what that impact was in the quarter? And then how should we think about that impact impacting Q3 and Q4 basically the second half of the year?
A: Sure. I'm not going to quantify that. I don't like to go into that and say what would have happened if this wouldn't have happened and so forth and speculate around what those numbers are. But they clearly negatively impacted the quarter, right, because medical device does a great team, and they put up strong demand again and would have had a decent quarter without the shipping delays and same within fertility. Fertility what, 12, 13 quarters in a row of double digits and dipped down to 4% with some of those shipping issues. Having said that, we are proceeding better right now. I mean we're having a pretty good May. We're working through the backlog and so forth to get ourselves in a better position. So I'm optimistic as we work through this quarter that we can address most, if not all of that, and close the year out strong.
Q: Maybe just talk about the IVF market and your growth. Do you think you can get back to double-digit growth in that business, which we saw for quite a few quarters before this quarter?
A: Yes. Kind of following up maybe my commentary to Craig there, I would say the answer to that is yes. As a matter, I think we have a good chance to report a double-digit revenue growth quarter right here in Q3.
Q: Okay. Good to hear. And then on contact lenses out, what are you assuming for price for the market contact lens business this year?
A: Sure. For price, I would say we've seen almost everyone take price. Everyone has taken price earlier this year, either earlier this calendar year for us getting to our fiscal year. So pricing is kind of holding where it's at. I think from a price perspective, because is still very healthy, if you will. When we look at the contact lens market probably growing in mid upper single digits, you're talking about maybe 1/3 of that is coming from price. So very similar to what we talked about in the last few quarters.
Q: I first just wanted to touch upon the MiSight progress in U.S. and Europe kind of stocking there is this quarter. But I wanted to ask about the growth there and whether you're seeing I guess, a higher number of prescribers or prescribers essentially running more revenue per prescriber basically. And then your thoughts on potential competition in the soft contact lens market for MiSight? And then I have a follow-up.
A: Sure. So on activity, we are seeing both. We're actually seeing more bidders around the world, and we're seeing more bidding occurring with those practitioners who are currently bidding MiSight. So I'm really happy to say that now. If I break up those 2 a little bit. One of the things that's driving more bidders is because we're making progress with a lot of our key accounts. So some of the bigger names out there, the bigger optical chains and so forth that you would know are incorporating MiSight into their bidding activity. That's maybe moving a little slower than I was hoping because you're going through a lot of training and standardization within those big chains, but that's all moving forward, and we're seeing more bid activity out of that. If we look at the doctors who are currently bidding MiSight and how active they are bidding MiSight, it's essentially, universally increased bidding. And we're seeing that throughout the world right now. So I'm really happy where we are from a bidding perspective on that. We did have a little pull down in channel inventory a little bit here in like Americas and stuff. No surprise to me in anything that's going on. But I do think we're going to have a pretty strong back half of the year in Q3 and Q4 are going to be pretty good from my side. From a competition standpoint. I mean MiSight is, it's the first, it's the only product that's approved for myopia control. So there is, as of today, no competition in the market other than people using something off-label or people promoting something that doesn't have the clinical data or the approvals of an organization like the FDA.
Q: Okay. That's great. And then I just wanted to touch upon some of the areas of organic investment that you focused on, called out heightened R&D investments. perhaps across those divisions, if you could call out some particular areas you're looking at, anything that's exciting you in the pipeline at the moment.
A: Sure. Again, I mean, one within CooperVision is probably pretty clear and that's CapEx. We're investing a lot in manufacturing equipment right now to expand capacity as I was mentioning, as you know, like we have a lot of demand, especially for our MyDay products. We have a lot of things that we want to launch. We want to get out in the market and we want to expand into additional markets. So there's quite a bit of launch activity that's on hold as we increase our capacity. So CapEx investments would be a good example. Within CooperSurgical, I could think right off the top of my head on the R&D side of things, we got some cool R&D things going on within Surgical. I won't touch on the specifics behind that. but I look forward to some of those projects coming fruition. So between capital expansion and R&D and R&D within MiSight , also
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
