The Cooper Companies, Inc. Common Stock 2026 Q3 Earnings Call

Please go ahead. Good afternoon, and welcome to The Cooper Companies' third quarter 2026 earnings conference call.

During today's call, we will discuss the results and guidance, the conclusion of the strategic review, and current corporate developments. We will then use the remaining time for questions. Our presenters on today's call are Al White, President and Chief Executive Officer, and Brian Andrews, Chief Financial Officer. Before we begin, I'd like to remind you that this conference call will contain forward-looking statements, including statements relating to revenue, EPS, cash flow, interest, FX and tax rates, tariffs, and other financial guidance and expectations. Also strategic and operational initiatives, market conditions and trends, and product launches and demand. Forward-looking statements depend on assumptions, data, or methods that may be incorrect or imprecise and are 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, including The Cooper Companies' Form 10-K and 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 to our GAAP information. We encourage you to consider our results under GAAP as well as non-GAAP and refer to the reconciliations provided in our earnings release, which is available on the investor relations section of our website under quarterly materials. Should you have any additional questions following the call, please email ir@coopercos.com. Now I'll turn the call over to Al for his opening remarks.

Thank you, Kim, and welcome everyone to our Q3 earnings call. This quarter included a number of notable developments, including earnings exceeding expectations, record free cash flow, solid fertility growth at CooperSurgical, and the favorable completion of a significant tax matter. At CooperVision, however, we proactively reduced U.S. channel inventory that weighed on our results and will continue to impact Q4. Importantly, our underlying demand in the U.S. remained healthy throughout the quarter, with consumption increasing at a mid-single-digit rate. We're now positioned to enter fiscal 2027 with a healthier channel and stronger foundation. We're also taking additional steps to strengthen CooperVision revenue performance, and I'll speak to these in a moment, but first I want to address the completion of the strategic review, which we announced in a separate press release today. Following a comprehensive evaluation of alternatives, the board has concluded the strategic review.

As part of the process, we conducted a thorough assessment of CooperSurgical, including a potential sale of the business, where we received significant interest and engaged with numerous parties. Ultimately, however, the board unanimously determined that shareholders are better served by continued ownership than by pursuing a transaction at this time. The board and our advisors believe several temporary factors influenced valuations late in the process, including developments related to a competitive entrant in the non-hormonal IUD market and the impact of our fertility litigation settlement. These factors contributed to what we believe was a temporary disconnect between CooperSurgical's intrinsic value and the offers received, resulting in proposals that did not adequately reflect the full value and long-term potential of the business. While the formal strategic review has concluded, our commitment to enhancing shareholder value has not changed.

We gained valuable insights through the process and will intensify our focus on profitable organic growth and disciplined capital allocation, including share repurchases. The board and management will also continue to evaluate opportunities to maximize long-term shareholder value and remain open to strategic alternatives that appropriately recognize the value of our operations. Turning to the quarter, CooperVision reported revenue of $717 million, essentially flat year-over-year. EMEA and Asia-Pac performed largely in line with our expectations, while the results in the Americas reflected CooperVision's U.S. channel inventory reductions. Moving forward, we see opportunities to strengthen our growth globally through improved execution of our contract wins and product launches. To support this effort, we're investing in expanded sales coverage, increased customer marketing programs, and enhanced commercial execution capabilities, including AI-driven targeting and analytics tools.

These initiatives are already gaining traction in Asia-Pac, where our new commercial leadership team is fully in place, and in the U.S., where we're actively expanding our salesforce organization. These efforts are driving stronger customer engagement, including within our private label business, where new account wins and SKU introductions are expanding our customer footprint and deepening penetration within existing accounts. We're also continuing to invest in our distribution infrastructure, including a new packaging facility in Puerto Rico that will expand direct-to-consumer and direct-to-customer fulfillment capabilities, enhancing service levels and supporting long-term growth. All these actions are well underway and position us to drive greater revenue growth in fiscal 2027 and beyond. Turning to products. Our flagship MyDay franchise continues to perform well, highlighted by double-digit growth in EMEA and double-digit consumption growth in the Americas.

This performance was driven by strong customer partnerships, ongoing expansion in high-value categories such as torics and multifocals, growing adoption of our premium MyDay Energys offering, and the successful launch of MyDay MiSight. MyDay Toric delivered another quarter of double-digit growth, supported by the industry's broadest daily parameter range and the same market-leading Toric design as Biofinity. MyDay Toric maintains a meaningful competitive advantage, offering approximately 30% more prescription options than any other daily Toric lens. MyDay Multifocal also delivered another quarter of double-digit growth, supported by its advanced optical design and easy-to-fit platform. With favorable demographic trends and significant room for category expansion, we continue to view multifocals as one of the most attractive growth opportunities in contact lenses. To build on this, we are preparing to launch MyDay Toric Multifocal, extending our leadership in optics, parameter range, and clinical performance.

Finally, MyDay Energys delivered another quarter of double-digit growth, reflecting increasing recognition among eye care professionals and wearers of its differentiated combination of premium optics and advanced material technology. For clariti, performance varied by region, with growth in EMEA offset by softer performance in our other two regions. However, our next generation clariti Multifocal continues to gain momentum, supported by the same proven fitting design as Biofinity and MyDay. We also recently completed the clariti family launch in Japan, and initial customer response has been encouraging. Turning to Biofinity, strength in EMEA and within our market-leading made-to-order portfolio, including Toric multifocals and extended ranges, was offset by the inventory moves in the U.S., resulting in a flat quarter. Regarding myopia management, MiSight delivered another strong quarter with 20% organic growth. EMEA and the Americas led performance, while softness in China weighed on Asia PAC.

Although this was partially offset by growing momentum in Japan following our MiSight launch earlier this year. In EMEA, growth was supported by the ongoing launch of MyDay MiSight with back-to-school campaigns highlighting the benefits of a silicone hydrogel offering. Canada also launched MyDay MiSight in August, and customer feedback has been excellent. Importantly, in these markets that have MyDay MiSight, the MyDay platform now supports patients across every stage of life, from myopia management in children through spherical, Toric, multifocal, and premium lifestyle offerings in adulthood. Looking ahead, we expect MiSight growth to be in the low teens in Q4 against a difficult prior year comparison, resulting in roughly 20% growth for this full year and setting the stage for a promising 2027, supported by continued momentum in existing markets and the upcoming launch of MyDay MiSight Toric.

Lastly, on Vision, we're accelerating programs tied to new product development, and that ties nicely in with the opening of our global vision center in the U.K. later this month. This state-of-the-art facility brings together R&D, our next-gen technical manufacturing teams, and our commercial teams in a single integrated environment. The investment will accelerate innovation, enhance collaboration, and enable greater speed to market as we capitalize on one standardized manufacturing platform for all future product development. Turning to CooperSurgical, revenue was $349 million, up 3% organically. Within this, fertility delivered another solid quarter, growing 5% to $141 million. By product category, fertility growth was driven by broad-based strength across our leading global portfolio of products and services, partially offset by softer capital equipment sales following a very strong prior quarter.

Genomics was a notable contributor, driven by robust global demand along with continued adoption of RI Witness, our automated laboratory management platform. Performance was further supported by new clinic wins, expansion within existing accounts, and increasing uptake of recently launched products and services, all resulting in continued global market share gains. Geographically, growth was led by the Americas, where we continue to gain share, while EMEA and Asia PAC remain mixed, as strength across several markets was offset by macro headwinds in the Middle East and China. Stepping back, the long-term fundamentals of the global fertility market remain compelling. Delayed family formation, expanding access to care, increasing treatment utilization, and continued investments by fertility clinics supports durable long-term growth. Government support for family building also remains favorable. Earlier this year, Denmark expanded publicly funded fertility coverage from three cycles to six.

Japan's reimbursement framework continues to improve access and affordability for assisted reproductive technologies. In the Middle East, investments in reproductive healthcare infrastructure continue to support growth in the UAE fertility market. In California, large group health plans are now required to provide coverage for IVF and certain infertility treatments, representing another meaningful step towards expanding patient access. To conclude on fertility, we expect continued strength, including a solid fourth quarter, supported by healthy market trends and growing momentum across our innovation pipeline, particularly in genomics. Turning to office and surgical, revenue was $208 million, up 2%. Medical devices grew 4%, driven by continued strength in our surgical OBGYN and specialty device portfolios, while Paragard revenue was flat. Finally, CooperSurgical delivered another quarter of strong operating leverage, reflecting the improved profitability and cash generation of our streamlined business model.