The Cooper Companies Inc. (NYSE:COO) Q4 2018 Earnings Conference Call Transcript

Dec 06, 2018 • 05:00 pm ET

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The Cooper Companies Inc. (NYSE:COO) Q4 2018 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Q4 2018 The Cooper Companies Earnings Conference Call. At this time, all participants are in a listen-only-mode. Following managements prepared remarks we will host a question-and-answer session and our instructions will follow at that time. (Operator Instructions) As a reminder, this conference call is being recorded for replay purposes.

It is now my pleasure to hand the conference over to Ms. Kim Duncan, VP, IR and Administration. Ma'am, you may begin.

Executive
Kim Duncan

Good afternoon, and welcome to The Cooper Companies' Fourth Quarter and Full-Year 2018 Earnings Conference Call. During today's call, we will discuss the results included in the earnings release along with our 2019 guidance and then use the remaining time for Q&A. Our presenters on today's call are Al White, President and CEO; and Brian Andrews, CFO and Treasurer.

(Forward-Looking Cautionary Statements) And now I'll turn the call over to Al for his opening remarks.

Executive
Al White

Thank you, Kim, and good afternoon, everyone. Welcome to our Fourth Quarter 2018 Earnings Conference Call. This was a year of record revenues, earnings per share, and free cash flow. I'm proud of our team for everything we accomplished and believe we're extremely well-positioned with our growth strategies firmly intact and momentum on our side as we enter fiscal 2019.

The fourth quarter was a continuation of what we've been discussing regarding capitalizing on current market conditions through incremental sales and marketing investments to win new fits within CooperVision and driving strong performance of PARAGARD within CooperSurgical. Overall, our strategic investments are paying off and I'm happy with our revenue growth rates and momentum.

Having said that, gross margins at CooperVision did come in below expectations this quarter and, at a high level, there were two reasons. The first relates to our desire to maintain extremely high customer service shipping levels in the fact of our significant distribution center upgrade activity. The redundancies we've added to accomplish this have resulted in higher costs butt I strongly believe the importance of maintaining premium customer service is more important than the negative short-term impact. Second, the rapid growth in our daily silicone hydrogel franchise resulted in incremental charges against legacy hydrogel products due to things like product discontinuations and lower production volumes. Brian will cover this in more detail but these items reduced EPS this quarter by $0.14.

Regarding revenues, we remain focused on driving success by capitalizing on our strong product portfolio and accelerating investments within both businesses. This activity helped support a very strong fourth quarter, with consolidated revenues of $652 million, up 16% year-over-year. Within this, CooperVision reported quarterly revenue of $481 million, up 9% or 10% pro forma, with a noticeable uptick in our daily silicone hydrogel lenses, showing pro forma growth of 50%, driven by accelerating growth in both Clariti and MyDay. CooperSurgical reported record revenue of $171 million, up 40% or up 5% pro forma, led by PARAGARD growing a healthy 20%.

Moving to the details, CooperVision