The Cooper Companies, Inc. Q2 FY2026 earnings call

### Core Financial Performance - Delivered record Q2 revenue and non-GAAP EPS, with 26% non-GAAP EPS growth to $1.21, marking the 10th consecutive quarter of beating consensus earnings expectations. - Generated $96 million in free cash flow, with operating income up 19% year-over-year and a 27.5% operating margin, driven by back office consolidation and efficiency initiatives that delivered significant operating leverage, especially at CooperSurgical. - Gross margin came in at 68.1% (flat year-over-year), as positive currency impact offset higher costs including tariffs.

### Strategic Review Update - Initiated a strategic review to unlock long-term shareholder value, which was paused pending resolution of litigation related to the December 2023 CooperSurgical embryo culture media recall. - Settlements have been reached with over 95% of claimants, clearing the way to actively advance discussions with multiple parties that submitted indications of interest for CooperSurgical. - Received robust interest in both the entire CooperSurgical business and individual segments; management is currently focused on evaluating the entire business, as there is sufficient high-quality interest for a full transaction to maximize shareholder value, and expects to provide a definitive update soon.

### Capital Allocation Strategy - Core priorities remain investing in high-return organic growth opportunities, maintaining balance sheet flexibility, and share repurchases. - Share buybacks were limited in Q2 due to temporary restrictions tied to the strategic review process; management expects to be significantly more active in share repurchases going forward, and would use the vast majority of proceeds from any CooperSurgical sale for additional share buybacks.

### Product & Operational Highlights - CooperVision remains the global number one contact lens company, with ~33% market share, and is positioned to drive growth as consumers transition to daily silicone hydrogel lenses; ongoing innovation and new product launches are scheduled across regions, including next-generation multifocal and Toric lenses in Japan. - CooperSurgical fertility growth is supported by favorable long-term demographic trends: increasing average maternal age, growing insurance coverage for IVF, and clinic investments in new technology. - Implemented an AI-enhanced inventory control system that is enabling reduced inventory levels, which creates near-term gross margin pressure but improves long-term free cash flow.

Consolidated revenue for Q2 2026 was $1.08 billion, an 8% year-over-year increase (5% organic growth).

1. CooperVision: Total Q2 revenue was $724 million, representing 67% of total company revenue, with 8% reported growth (4% organic growth). Performance varied by region: the Americas grew 7%, EMEA grew 6%, while Asia-Pacific revenue declined 6% due to broader market softness (especially in Japan) and ongoing legacy hydrogel product portfolio rationalization. By product line: daily silicone hydrogel lenses grew 8% (flagship MyDay brand delivered double-digit growth), BioFinAID FRP grew 5% organically, and MySight myopia control grew 24% to $32 million, with strong momentum in Japan and the newly launched MyDay MySight in Europe.

2. CooperSurgical: Total Q2 revenue was $358 million, representing 33% of total company revenue, with 8% reported growth (6% organic growth). Within CooperSurgical, the fertility segment grew 10% organically to $144 million, driven by strong U.S. capital equipment sales, distributor restocking in the Middle East after airspace reopening, and adoption of the WITNESS automated lab tracking system. The office and surgical products segment reached $214 million in revenue (up 4% year-over-year), with medical devices growing 6% and Paragard delivering better-than-expected flat revenue.

- Full year 2026 consolidated revenue guidance is updated to $4.28–$4.32 billion, representing 5% to 6% reported growth (3.5% to 4.5% organic growth). - CooperVision full year organic growth guidance is 3.5% to 4.5%, with revenue expected to be $2.88–$2.91 billion (5% to 6% reported growth). The guidance reduction reflects ongoing softness in the Asia-Pacific market, which is expected to remain negative through Q3 2026. - CooperSurgical full year organic growth guidance is unchanged at 4% to 5%, with revenue expected to be $1.4–$1.41 billion. - Full year 2026 non-GAAP EPS guidance is maintained at $4.58 to $4.66. - Full year 2026 free cash flow guidance is increased to ~$650 million (excluding litigation settlement payouts; the $2.2 billion 2026–2028 cumulative free cash flow target includes expected litigation payouts). - Expected Q3 2026 gross margin is ~66%, pressured by lower production volumes from inventory reduction, higher tariffs and freight costs. Guidance assumes $22 million in annual tariff costs, and does not include up to $15 million in potential future tariff refunds, which would provide upside to results. - Expected full year interest expense is ~$85 million, with an expected effective tax rate of ~15.5%.

- Ongoing consumer demand weakness in the Asia-Pacific region (especially Japan and China) is creating greater-than-expected headwinds for CooperVision revenue, and portfolio rationalization of legacy hydrogel products will continue to pressure results through at least 2027. - Unfavorable foreign exchange impact is expected in the second half of 2026, offsetting first half FX tailwinds. - Higher input, tariff and freight costs continue to pressure gross margins. - Any potential transaction for CooperSurgical carries inherent transition and dis-synergy risks, including back office separation costs and tax impacts from a standalone structure.

Q: With four consecutive quarters of Asia-Pacific declines, why will it stay negative even against an easier comp, and when will CooperVision return to market-aligned growth? / A: The sustained decline is driven by broader unexpected consumer softness in Japan and China that did not exist when the portfolio rationalization process began. While rationalization of legacy hydrogels will continue through 2027, the impact of these cuts is shrinking. Management expects CooperVision will grow in line with the Asia-Pacific market by Q4 2026, and remain in line through 2027.

Q: Why is full year EPS guidance maintained despite beating consensus expectations this quarter, after raising guidance after last quarter's beat? / A: The first half EPS beat is largely due to stronger-than-expected FX tailwinds that already occurred, while the second half of 2026 is expected to see unfavorable FX that was already baked into full year guidance. The guidance is set prudently to account for ongoing Asia-Pacific demand uncertainty and cost pressures, and reflects strong underlying operational performance balanced by known headwinds.

Q: What changed to make management open to selling CooperSurgical, after previously preferring to keep the two segments combined? / A: Management still values the back office synergy and cash flow diversification benefits of the combined structure, but notes Cooper Company's current public valuation is below what management believes is fair value. There is strong market interest from private investors who are willing to pay a premium to public market valuations for high-quality medical assets like CooperSurgical. Management will pursue whatever outcome maximizes shareholder value.

Q: Is the CooperVision revenue guidance cut fully attributable to Asia-Pacific market weakness, and what is driving the new softness? / A: The entire downward revision is from Asia-Pacific, driven entirely by broader consumer weakness in the region, particularly in Japan. Contact lenses are more of a discretionary consumer purchase in most Asian markets, and soft consumer spending is reducing demand. Execution of the company's portfolio repositioning is on track, so the slowdown is entirely market-driven.