Q4 2022 Haemonetics Corp Earnings Call
Good morning, ladies and gentlemen, thank you for standing by and welcome to Human Medics Corporation fourth quarter fiscal 'twenty to 'twenty two earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation there will be.
A question answer session to ask a question. During this session you will need to press. The Star then the one key on your Touchtone telephone. Please be advised that today's conference is being recorded.
If he was on offer assistance. Please press Star then zero.
I would now like to hand, the conference over to your speaker host for today Olga.
Diet senior director of Investor Relations and Treasury. Please go ahead.
Good morning, everyone. Thank you for joining us for human <unk> fourth quarter fiscal 'twenty two conference call and webcast I'm joined today by Chris Simon our CEO and James <unk> our CFO .
This morning, we posted our fourth quarter fiscal 'twenty results to our Investor Relations website, along with our fiscal 'twenty three guidance and analytical tables with the information that we'll refer to on this call.
Additionally, we provided a complete P&L balance sheet summary statement of cash flows as well as reconciliations of our GAAP to non-GAAP financial results and guidance.
Before we get started unless otherwise noted all revenue growth rates discussed today are on an organic basis and exclude the impact of currency fluctuation strategic product lines.
And divestitures and that you thought through the 53rd week in fiscal 'twenty one.
As in the past well refer to non-GAAP financial measures through the school to help investors understand human ethics ongoing business performance.
Please note that these measures exclude certain charges and income items cause you refer to this morning's earnings release for details and excluded items, including comparisons with the same periods of fiscal 'twenty, one and a reconciliation to our GAAP results.
Our remarks today include forward looking statements and our actual results may differ materially from the anticipated results.
<unk> cautions that these forward looking statements are subject to risks and uncertainties, including the potential impact from the pandemic on our results and other factors referenced in the Safe Harbor statement in our earnings release, and our filings with the SEC we.
We do not undertake any obligation to update these forward looking statements.
And now I'd like to turn it over to Chris.
And thank you all for joining our earnings call today, we reported organic revenue growth of 19% in the fourth quarter and 7% in fiscal 'twenty, two and an adjusted earnings per diluted share of <unk> 65 in the fourth quarter and $2 58 in fiscal 'twenty two.
An increase of 41% versus the prior year fourth quarter, an increase of 10% versus the prior fiscal year.
The past year was a challenging one but we are proud of how our people have responded.
Our fourth quarter performance reflects our resilience and our commitment to meet the needs of our customers and deliver on our purpose of improving standards of care.
Our agility and perseverance helped us achieved growth in all businesses and we continue to distinguish human ethics for the meaningful value, we are creating across our markets as the industry leader, we delivered integrated solutions to help our plasma customers realize much needed growth in the volume of collections.
In the face of unprecedented blood shortages, our blood center products helped maximize the impact of donations and attract and retain donors.
Hospital, including vascular closure continue to exceed expectations and was our fastest growing business in fiscal 'twenty, two helping customers improve patient care and outcomes at less cost.
As we evolve our portfolio and we expand our reach and relevance hospital will increasingly drive our growth and diversification.
Our operational excellence program prove fundamental to our resilience and ability to quickly address supply chain disruptions can serve all who depend on us.
It will continue to play a critical role in sustaining our success, enabling us to be a more agile efficient and productive company, creating lasting costs cost savings and free resources to fund investments.
Turning now to our business unit results.
Plasma revenue increased 31% in the fourth quarter, driven by a 12% increase in U S plasma volume price benefits and a $6 million stocking order, excluding the stocking water U S plasma volume declined 4% sequentially, which compares favorably to a typical seasonal decline.
About 7% in the fourth quarter and last year's fourth quarter decline of 13%.
In fiscal 'twenty, two plasma revenue grew 10% driven by growth in volume.
We remain committed to enabling our customers to improve donor satisfaction maximize plasma volume and lower cost per liter collected.
Our technology and ongoing product development are essential to helping our customers meet these critical needs.
Nearly all of our major customers in the U S are now experiencing the full value of our technology through a network of bi directionally connected Nexus Tcs devices with next length of DNS and donor 360 apps.
Working closely with our customers. We have design next is to streamline the collection process. These advances have proven especially important at a time when our customers are facing unprecedented staffing challenges.
Our fully integrated system plays a vital role in a positive donor experience and collection center productivity.
From instant check then upon arrival through streamlined donation and expedited payment Nexus contributes to a demonstrated 16 minute reduction in average donor door to door times improve compliance, including a 98% elimination of documentation errors and increased donor satisfaction.
Our customers are also collecting an additional 9% to 12% of plasma yield on average on nexus with persona, enabling them to both increased plasma supply and <unk>.
The average cost per liter.
We are leveraging extensive customer experience and real world data from nearly 30 million Nexus collections to focus our ongoing innovation agenda.
Our product development efforts continue to help customers improve center operations by driving growth in collections and improving plasma volume output, while increasing donor retention and satisfaction.
We look forward to sharing more about these programs at our Investor day in June .
The patient need for plasma derived pharmaceuticals has never been greater we continue to see long term plasma market collections demand of 8% to 10% and we expect to see volume growth in excess of that as fractionator strive to replenish depleted plasma inventories.
Moving to hospital revenue increased 19% in the fourth quarter and 16% in fiscal 'twenty two.
All four of our product lines grew this year, despite the challenges posed by the Omicron Berry outbreaks.
Hospital staffing shortages and COVID-19 related Lockdowns in China.
Hemostasis management delivered 12% revenue growth in the quarter and 20% revenue growth in fiscal 'twenty two.
In the U S. Our largest market tag delivered robust growth both in the quarter and in fiscal 'twenty. Two we also benefited from strong growth in Europe , primarily driven by successful market penetration with our clock pro so elastic diagnostic device, which was acquired in April 2020.
Growth in the U S and Europe was partially offset by weaker sales in China.
As you will hear during our Investor day, we remain enthusiastic about our ability to grow organically and Inorganically and what we estimate is a $700 million global market.
Transfusion management revenue grew 18% in the fourth quarter and 11% in fiscal 'twenty, two and was equally strong for blood track and for safe trace TX as we completed a series of new account installations, our fourth quarter results also benefited from a catch up in <unk>.
<unk> implementations in the U S. After a few months of delay due to Amazon.
Cell salvage revenue increased 17% in the quarter and 8% in fiscal 'twenty, two driven by procedure recovery and strong capital sales growth in the quarter also benefited from backwater relief from the temporary supply chain constraints, we experienced in the third quarter.
Vascular closure continues to excel delivering a record $27 million of revenue in the fourth quarter and $94 million in fiscal 'twenty two.
With the integration of this business essentially complete our focus is on accelerating accelerating our penetration into the $2 8 billion dollar underpenetrated market, while advancing our product portfolio to continue strengthening the role of our hospital business as a growth engine for human medics.
Loved center revenue grew 7% in the fourth quarter and declined 1% in fiscal 'twenty two.
<unk> revenue declined 1% in the quarter and fiscal 'twenty. Two is the strong recovery in platelet collections in Japan was offset by lower revenue from convalescent plasma and.
And staffing shortages that affected collection center customers collection centers across the U S.
Whole blood grew 26% in the quarter driven by favorable order timing among distributors in the EMEA and additional opportunities in North America, our supply chain resilience enabled us to serve customers in need for the full year whole blood revenue declined 3% driven by blood center staffing shortages in <unk>.
Previously discontinued customer contracts in North America.
To carry our momentum into fiscal 'twenty, three and beyond <unk> is set for robust transformational growth propelled by investments in the advancement of our technologies and expansion of our global commercial capabilities. We look forward to sharing our updated long range plans key business <unk>.
<unk> innovation agenda, and revised financial outlook at our Investor Day on Wednesday June 29 at 10, a M. Eastern time, and we invite you to join us either in person in Boston or virtually.
I'll now turn the call over to James to wrap up and take this opportunity to welcome him as our new Executive Vice President and Chief Financial Officer, James Springs to human ethics substantial experience and financial leadership from prominent global health care organizations, and I look forward to working together to support our.
These growth resort at resource allocation and long term value creation James.
James.
Thank you, Chris and good morning, everyone.
I'd like to begin by saying how excited I am to be part of him and ethics tomorrow.
Tomorrow will mark one month since I joined the company and as I onboard I'm incredibly impressed with our people our leadership and the exciting possibilities ahead of us I very much look forward to being part of this journey and applying my experience towards growth and value creation.
Now, let's discuss our business results in fiscal 'twenty three guidance.
Our results for the fourth quarter and fiscal 'twenty to show continued resilience across the business Chris already discussed our revenue results. So I will focus on the rest of the financials.
Our adjusted gross margin was 53, 6% in the fourth quarter and 53, 9% in fiscal 'twenty two.
An increase of 360 basis points, when compared with the same periods of the prior year.
The adjusted gross margin expansion was driven by the addition of the vascular closure business.
Benefits from the operational excellence program.
These benefits were partially offset by inflationary pressures in our supply chain and manufacturing, including freight labor and raw material costs as well as higher depreciation costs, primarily related to the increasing installed base of our nexus devices in the U S.
Price had a positive impact on the fourth quarter results had a limited impact on our fiscal 'twenty two since price adjustments in our plasma business in the first nine months of the year, largely offset price benefits from nexis and persona conversions in the second half of fiscal 'twenty two.
As a reminder, these price adjustments were related to the expiration of fixed term pricing on historical P. C. S. Two technology and more fully annualized at the end of the third quarter of fiscal 'twenty two.
Adjusted operating expenses in the fourth quarter were 95 $4 million, an increase of $13 $4 million or 16% compared with fourth quarter of the prior year.
As a percentage of revenue adjusted operating expenses decreased by 40 basis points to 36%.
Adjusted operating expenses in the fourth quarter included a ramp up in investments that were delayed earlier in fiscal 'twenty two.
Adjusted operating expenses for fiscal 'twenty, two or $348 $6 million, an increase of $65 $6 million or 23% compared with the prior year.
As a percentage of revenue adjusted operating expenses increased by 260 basis points to 35, 1%.
Vascular closure had the largest impact on adjusted operating expenses in the quarter ended fiscal 'twenty two.
Additionally, we had higher investments.
Outbound freight costs and increases in other expenses associated with a return to normal spending levels.
Contributions from our productivity savings.
Lower variable compensation and the impact of the 50 <unk> week in fiscal 'twenty, one helped offset some of the cost increases both in the quarter and in fiscal 'twenty two.
As a result of changes in our adjusted gross margin and adjusted operating expenses fourth quarter. Adjusted operating income was $46 6 million, an increase of $16 1 million or 53% and.
And adjusted operating income for fiscal 'twenty, two was $187 1 million, an increase of $32 $6 million or 21% compared with the prior year.
As a percentage of revenue adjusted operating income margin was 17, 6% in the fourth quarter and 18, 8% in fiscal 'twenty, two up 410 basis points, and 100 basis points, respectively, compared with the same periods in fiscal 'twenty one.
The macro economic driven inflationary environment continues to be challenging the impacts in fiscal 'twenty, two had been broadbased, including freight raw materials and labor.
We estimate an approximately 300 basis point impact from inflationary pressures on our adjusted operating income margin.
Our operational excellence program is an important lever and making us more efficient and agile, especially during periods of high macro economic uncertainty.
In our fiscal 'twenty two this program delivered $37 million of gross savings freeing up resources to fund additional investments.
Since the inception of this program, we have generated $71 million in cumulative gross savings slightly ahead of our plan.
We also had positive contributions from vascular closure.
This business continues to exceed our expectations and within the first year of our ownership of this business. It has delivered a robust revenue growth and positive contribution to our adjusted earnings per diluted share compared with 15 to 20 cents dilution. We had originally guided to in the first year following the acquisition.
We are excited about the opportunities in vascular closure and we will continue to allocate investments to fund its growth.
The adjusted income tax rate was 22%.
For both the fourth quarter and fiscal 'twenty, two compared with 12% and 14% respectively for the same periods of the prior year.
The adjusted income tax rate in fiscal 'twenty, one was lower than fiscal 'twenty, two due to the benefit of higher share vesting and option exercises in fiscal 'twenty, one which did not recur in fiscal 'twenty two.
Fourth quarter, adjusted net income was $33 $5 million up $9.6 million or 40% and adjusted earnings per diluted share was <unk> 65.
Up 41% when compared with the fourth quarter of fiscal 'twenty one.
Adjusted net income for fiscal 'twenty, two was $132 $6 million up $11.9 million or 10% and adjusted earnings per diluted share was $2 58.
Up 10% when compared with the prior year.
Changes in the adjusted income tax rate higher interest expense and FX had a negative 10 cents impact on the fourth quarter and a negative 31 cents impact on the full year adjusted earnings per diluted share when compared with the prior year.
Cash on hand at the end of the fourth quarter was $259 million up $67 million since the beginning of the year.
Free cash flow before restructuring and restructuring related cost was $117 million compared with $99 million at the end of the last fiscal year.
The higher free cash flow before restructuring and restructuring related costs in fiscal 'twenty. Two was mainly due to lower accounts payable largely due to a $54 million payment for our compensation related liability as part of the car Diva medical acquisition in fiscal 'twenty one.
We also had higher accounts receivable as revenue continued to recover from the effects of the pandemic and higher capital expenses, primarily related to nexis upgrades and the operational excellence program, partially offset by a decrease in inventory.
We have enough Nexis P. C S devices in the U S inventory to convert the remainder of our major customers with no impact to future cash flow.
Our current debt structure includes a $700 million credit facility that matures in June 2023, with balloon payments starting in September 2022.
At the end of the fourth quarter total debt outstanding under the facility was $284 million with no borrowings outstanding under the $350 million revolving credit line at the end of fiscal 'twenty two.
We plan to refinance our credit facility before the balloon payments are due.
Additionally, we have $500 million in convertible notes that expire in March of 2026.
Our EBITDA leverage ratio as calculated in accordance with the terms set forth in the company's existing credit agreement was three point O eight at the end of fiscal 'twenty two.
Now, let's move onto our guidance.
We expect total organic revenue growth of 6% to 10% in fiscal 'twenty three.
We remain confident in our plasma business and expect plasma revenue to grow 7% to 12% in fiscal 'twenty, three with price and volume both contributing meaningfully. Additionally.
Additionally, our guidance includes an 88 million dollar minimum purchase commitment from C. S L compared with $102 million of revenue in fiscal 'twenty two.
We are excited about the opportunity in our hospital business. Our go to market strategies are working and we're looking forward to another year of strong commercial performance in fiscal 'twenty. Three we expect the hospital business to deliver revenue growth of 16% to 19% driven by continued robust growth.
And hemostasis management and vascular closure.
Our blood center revenue guidance is a year over year decline of 4% to 7%.
And the flex additional geopolitical risk and an unfavorable impact from distributor order timing when compared with fiscal 'twenty two.
We expect fiscal 'twenty three adjusted operating margins in the range of 18% to 19%.
Our adjusted operating margin guidance includes higher operating expenses driven by continuous investment into our business as we broaden our product portfolio to strengthen our technology and expand our commercial footprint and a return to normalized spending levels. Our adjusted operating income margin also include.
<unk> about 250 basis points of additional headwinds due to inflation and geopolitical risk.
We expect our operational excellence program to deliver additional gross savings of approximately $22 million with total cumulative savings, reaching $93 million by the end of our fiscal 'twenty three.
About half of these savings will be in cost of goods sold with the rest and operating expenses, helping us generate additional efficiency across our business.
Our adjusted earnings per diluted share guidance for fiscal 'twenty three is a range of $2 50 to.
The $2 and 90.
The midpoint of our adjusted earnings per diluted share guidance includes about nine cents headwind from FX and share count. Additionally.
Additionally, consistent with our fiscal 'twenty two results, we expect our adjusted earnings per diluted share to be higher in the second half of fiscal 'twenty three.
And lastly, our free cash flow before restructuring and turnaround expenses in fiscal 'twenty three is expected to be $100 million to $130 million, our capital allocation priorities remain unchanged and we will continue to allocate capital to prioritize organic investments followed by inorganic.
<unk> opportunities and share repurchases.
Before we open the call up for Q&A I wanted to reiterate the key points that we hope you take away from today's call.
First we continued to strengthen and grow our business. Despite the continued challenges caused by the pandemic.
The end market demand, particularly for our plasma and hospital products is strong and we're focused on maintaining an uninterrupted supply of our products.
Second our product portfolio continues to evolve and increase our reach within large underserved and fast growing markets.
The acquisition of car D. The medical was an important step in our transformational growth journey, we remain focused on further optimizing our portfolio and accelerating our growth.
Third our operational excellence program improves our operating performance, enabling us to respond quickly to supply chain disruptions.
We made significant progress by achieving more than half of the target program gross savings by the end of fiscal 'twenty, two while managing through a series of macroeconomic driven headwinds.
We plan to achieve the remaining $44 million to $54 million in target savings by the end of fiscal 'twenty five.
This program is essential for our ongoing transformation and once the macro environment stabilizes. These efficiency benefits will continue to expand our margins.
And finally, we remain committed to driving value for our customers and our shareholders. We are proud of the work we've done to meet the challenges over the past few years. We recognize more challenges are ahead, and we remain committed to taking action implementing necessary changes and mitigating impacts.
Without compromising growth of our business.
We look forward to sharing more detail about our plans to deliver value at our Investor day.
Thank you and now I would like to open the line for Q&A.
Ladies and gentlemen, you'd like to ask a question at this time you will need to press. The Star then the one key on your Touchtone telephone.
Please standby.
Okay.
No first question coming from the line of Larry Solow with.
C. J S Securities Your line is open.
Good morning, and welcome James Schematics.
First question I guess, just on the on the guidance range.
It's a fairly wide range just trying to decide for the major disparities sort of not everything right, probably a long list, but sort of the puts and the low end and the high end do you know how would you sort of get to that 290.
Versus at 250.
Hey, it's Chris let me, maybe you've got to start now by James to comment as well.
First and foremost it has to do with revenue right and we.
We were dependent upon our customers who are doing everything within their power to drive both donations and procedures, we saw meaningful recovery in the fourth quarter of our fiscal year, we expect that to continue through the year, but.
As you can appreciate.
The last eight quarters, particularly in plasma and blood center have been difficult to forecast. So we want to be cautious there.
Also a series of macro challenges that James had highlighted in the prepared remarks, we look at combination of inflation and supply chain disruption potentially.
And then geopolitical risk, particularly in markets like China, and Russia as potential headwinds in the overlay FX and some other factors.
As a turbulent environment and we just want to be mindful of that and reflect that with a wider range that we obviously will look forward to narrowing as we get further in the year and some of these externalities play out.
Okay.
And just in terms of your operating margin.
Looks like relatively flat year over year.
Right.
Can we just speaks for that.
The moving parts to that a couple of questions here gross margin is that.
Then trending upwards it doesn't sound like you're you're losing a lot of this to CSL revenue this year.
Maybe I'll have to absorb that next year.
So how do you view sort of gross margin I know, there's a lot of.
Moving parts inflation, maybe getting a little bit worse for you guys.
And then you also mentioned just part to that question on the operational Excellence program 22 million in savings.
Going back into gross margin are you spending the other half in operating expenses is that what I heard or was some of that actually flowed to the bottom line.
Thanks.
Yeah. Thanks, Thanks, Larry so.
Yeah and on the <unk> on the gross margins.
We do expect those.
You have to have improved slightly.
Benefiting them I think you brought it up as price.
And mix of course.
Two to car Diva.
As well as our <unk>.
Operational excellence programs, what takes us back the other way however, but not as much is depreciation from the Nexus systems.
As well as.
The inflationary headwinds that we've we've spoken about along with some negative FX in there. So those would be sort of the levers that were.
That we're looking at.
Two.
Affect gross margins and then you know that obviously has an impact on.
On operating margin as well.
Yeah, So you're right on the on the 22 million, it's roughly half to two.
Cost of goods savings the other half going to.
To opex.
In terms of.
We'll be making some investments next year.
N M line and the R&D line. So so not all of that drop through and we're also keeping a careful eye on the geopolitical risk as well as inflation. So I think once you get once you net through all of that.
That's how the operating margins are essentially flat and it could skew either way based on.
What were the.
We know where the world turns as we go through the remainder of 'twenty to enter into 'twenty three.
Yeah got you, there's certainly a lot of moving parts. Okay. Great I appreciate all that color guys. Thank you.
And our next question coming from the lineup.
<unk> with Morgan Stanley Your line is open.
Oh, hi, Thanks, Chris Thanks for taking the question.
Maybe just first on on basket, you've had the asset for a year now just curious how you're thinking about maybe the growth opportunity here in front of you. If you could lay out a number I mean, it looks like hospital.
Free basketball might've been growing high single digits. So is the right way to think about the best case is adding maybe 10 points to.
Your hospital growth just any help would be appreciated. Thank you.
Yes I appreciate the question. We're we're excited by what hospital as a business is contributing and we will continue to contribute right.
As a business, we're forecasting high teens, 16% to 19%, which is a continuation of where the combined business was in FY 'twenty. Two obviously, the two big drivers there our hemostasis management TEG franchise and basket as you highlight we expect.
Hemostasis management performance to rival what it did in 'twenty two which.
Which is great given the larger base and then vast scale.
It's exciting right. We will continue to focus primarily on the U S market, we're building out our plans for international expansion both.
Clinically from a regulatory perspective in our sales presence, but this year FY 'twenty three again will be defined by further penetration into those top five or 600 electrophysiology hospitals here in the U S.
Got it. Thank you and then just.
Maybe on plasma recovery can you give a little bit more details on what you're seeing in the market. Just those customers are trying to work through cost for donor fees, just maybe what you're seeing.
And then with just the CSL revenue I think I heard you say 88 million for fiscal 2023, just curious about the cadence there should that be kind of a ratable basis across the quarters or is there.
Any weighting that we should be thinking about thanks for taking the questions.
Yeah. Thanks, Jim So clearly plasma is in recovery.
It's been long coming but I think you hear that from our customers as they are speaking publicly about this we're certainly saw that in our fourth quarter.
Typically the fiscal fourth quarter is the weakest quarter of the year.
Total collection volumes, just given a bunch of some seasonality we expect to build from that and that's what's reflected in our guidance essentially building throughout the course of the year.
Culminating with the winter holidays.
We feel good about that clearly it looks different than it has historically more coming from new center openings.
A disproportionate share of that growth and that's a testament to the hard work that our customers are doing they they haven't backed off their pace of new center openings as fast as it has ever been and they continue to do what they can to recruit and retain their donor base. So we stand ready to serve and the great News is we have the devices that are ready to go and we're well on track.
For our conversions.
To Nexus and.
Persona, so we feel quite good about it obviously theres factors that FY.
FY 'twenty two was challenging in that regard, we think 'twenty three you'll be different and better, but we want to be cautious, which I know you can appreciate after eight quarters of trying to forecast this probably caution.
If term here.
And our next question coming from the line of Andrew Cooper with Raymond James Your line is open.
Alright, thanks for the questions everybody.
Maybe first I just want to get a better sense of when we think about the flat guide can you give us a little bit more flavor.
Give me how the comment on the fractionator is time to make up some of that safety stock and maybe growing volumes faster than 10% of.
Whats really reflected in the guidance there.
I'd be the first one and then ill.
Yes.
Yes, Andrew it's Chris So what we experienced in our fiscal 'twenty two was essentially 10% growth across the network, maybe a touch higher than that in North America.
Below that and outside the U S. So if you think about that 10% growth in volume.
We expect 'twenty three we will at the high end of our range, we'll we'll replicate that.
There's things that can be done above and beyond that we made comments in my prepared remarks, we still see the underlying demand for IAG at unprecedented levels. So think 6% to 8% demand for IAG that translates due to a number of factors we've outlined in the past, 8% to 10% long term growth in collections.
And we know that our customers and we are committed to helping them.
Gain inventory to get off of this incredibly low base that they are operating at today. So we would expect double digit growth on top of that and we just need for it.
Various economic and societal factors to lineup to enable them to do that but we're in a good position to support it and we think it grows over the course of the year and.
We will look forward to.
Updating and focusing that guidance as we watch the recovery unfolds.
Okay helpful. And then maybe just to sneak two in together here, but can you give us a better sense for sort of where specifically you are in the rollout of Nexus and persona in terms of how many of the folks that are either have or are planning to add persona and how we should think about that and then lastly, you made a comment.
About broadening the portfolio.
Innovation. So anything you can kind of give us some hints towards as to where new products might be and what the poor.
Paul you might expand would be helpful.
Yeah, So as we think about.
You know kind of the build out and where we're going with.
Collection volumes.
It's something that we'll see unfold I think it's a combination as I've said before about new center openings and recovery hopefully in the existing centers.
That builds gradually over the course of the year for us.
We've got essentially everything contracted at this point and we still believe we will have completed the nexis PCF device rollout by the middle of our fiscal 'twenty three so end of summer or early fall.
In terms of persona, what's included in our guidance is the pricing benefits of everything that is already contracted so we're not.
Introducing any risk in terms of contracts beyond where we are obviously, it's a very powerful technology, 9% to 12% yield.
The only thing like it in the market today, and we think when we look at the early adopters of the Nexus platform. So they've got next link they have the BCS device and then they also have persona those customers in our fiscal fourth quarter collected more plasma than they had in any other prior.
Your quarter. So it's you know and then talk now back prior to the pandemic, it's a powerful enabler of what they're very keen to do in terms of accelerating their growth rates. So we think that'll build but it comes with some challenges at the larger bottle they have to make logistical changes some of our customers are feeling compelled to valid.
<unk> the protein concentration, which will work with them to do clinically.
And our regulatory filings. So it takes a bit of time and you know hopefully get more clarity as the year goes forward, but it's an exciting technology and we're seeing that in the marketplace.
You asked about portfolio evolution, I think as we've said right our capital allocation priorities really focused primarily on growth both organic and inorganic we've seen the additions we've made to the hospital portfolio. We now feel very good about our focus and cardiovascular specifically.
Allergy in interventional cardiology theres. Good convergence there, we think it's a target rich opportunity set for us and hope.
Hopefully you have a chance to talk more about it at the Investor Day in June where we'll outline our priorities and how we're pursuing it.
Okay. Thanks, I'll stop there.
And as a reminder, ladies and gentlemen, just a question. Please press star one.
Our next question coming from the line of Mike Matson with Needham <unk> Company. Your line is open.
Yes, I think thanks for taking my question.
So I appreciate you breaking out the CSL revenue that you're expecting in 'twenty three.
What what should we be assuming in if any in 'twenty four should we assume that it will.
<unk> done heading into fiscal 'twenty four.
Yeah, Mike we're not in it.
I think you know.
We've just given the guidance in the last hour and 23 I'm going to reserve comment on 2004 till we get a little closer.
But obviously, we stand ready to serve all of our customers. We did think that breakout is helpful.
You could see it 22 verses FY 'twenty, three but and then when we talk more at Investor day, we'll be very clear over the next four or five years, how that growth trend line continues and I think youll be.
Appropriately impressed with the organic capability of that business to scale and grow profitably.
Yeah, sorry, I guess I was I was talking specifically about CSL within the plasma business I mean, if you're not willing to answer I understand because of the it isn't more than a year away.
I think we'll as we get closer there's a bunch of things that we don't have visibility into or don't control, obviously will serve CSL and all of our customers to the best of our ability.
Within the existing agreements, which do go out in Gsl's case through December 23.
Okay Alright.
And then I wanted to ask about this debt refinancing.
You went through kind of quickly so I just want to make sure I understand the timing the amount and is there a risk here that that results in higher interest expense just given that rates are.
Surged lately.
Yes.
Yeah. So thanks, Mike.
Yeah.
The the debt will be will look to refinance the debt in some way.
Over the next.
A quarter or so.
I have taken a look at awful lot like at the end result of that look awful lot like it does.
Today.
With regards to interest rates, we do have.
Interest rate swap coverage on 70% of of the debt, which is now it's floating rate debt has been swapped to fixed and we're covered there.
4% all the way through June 23, so so at that point in time.
Which seems a long time away.
We'll see where the rates are and we will look to see whether or not we want to re up but at the moment, we are not forecasting any.
Increase in interest expense related to our refi activities.
Okay got it and then just on the.
Operational excellence savings of 37 million of gross savings I think that was for last fiscal year.
What would the net savings if it was 30 assembling growths.
Yes, so we are we.
We don't break out.
Gross versus <unk>.
<unk> net savings we've.
On the.
To get to those to just give you some color.
We started they had made some investments in the business plus.
You know there was some offsets during the year because of the inflationary headwinds, which which took back some of that.
And as we move forward I think we'll see we'll see some of the same things as we are.
Our guidance assumes.
An additional.
Savings next year, but then as I talked about earlier with regard to operating margins.
Some pieces that that that take it back as we.
You know make investments in <unk> and R&D as we move forward.
Okay got it thank you.
And our next question coming from the lineup.
From JMP Securities. Your line is open.
Great. Thanks, good morning.
I apologize I was jumping jumping on a couple of calls but criticized.
Chris I just wanted to see if you are did you guys make any comments about.
The to remote device I know, it's still very early I don't know if it's out anywhere but any.
Many of the features or you know obviously.
We see we know CSL is there, but I kind of looked at your device thinking Hey, you know you can't really.
You can't really collect too much more from somebody or do it faster. So I'd just love to get your thoughts on sort of what it is or if anyone has seen it or where you're kind of stands today.
Yes.
Dave I appreciate the question.
You know I think folks were a little surprised how little information is out there right. Obviously, we pay close attention to this.
My understanding having studied with our teams the publications on the Dot Gov site. They got the device approved with a trial size of 124 donations.
And kind of hard to draw a bunch of conclusions from that we did over 20000 donations to get for Soma approved two years ago.
They didn't publish anything on yield we kind of piece together the metrics.
We assume it's an assumption that it was approximately 830 <unk> milliliters per collection.
We're well above that rate and we've now got as we mentioned on the call you know $30 million.
Nearly a 30 million Nexus donations right, we stand behind the value proposition one of the integrated platform. It is easy to use and set up and that leads to a safe collection as evidenced by the 98% elimination of documentation errors and an impeccable safety record.
Owners like the device, they express and 93% of affinity for Nexus donor satisfaction leads to more frequent donations and greater retention, which is absolutely key to the recovery we've been talking about.
And then we've got good quantifiable evidence created with real world work with our existing customers that Nexus lowers the cost to collect a leader of plasma and that's a combination of the 9% to 12% yield coupled with speeding up door to door time 16 minutes on average in our work with Nexus in that base config.
Duration so.
It's a good value proposition, we are building on that value proposition I encourage you to come and talk to the team here in Boston when we do the Investor day in June because we're going to unveil additional aspects of our innovation agenda, where we will further improve upon every one of those dimensions going forward. So we're excited it's our platform and it's doing good things.
With customers to support their growth aspirations, so feel good about it.
I appreciate that and maybe just as a quick follow up I know a blood center certainly not.
Growth driver or Super important sort of part of probably.
Probably the future of human ethics, but a decent quarter I.
I'd love to just get your thoughts on does that bought them at some point is it something that strategically.
It's still an important part of sort of the go forward plans are.
Yeah.
Could it flatten out or I mean, I know your guidance is calling for another.
Whatever mid single digit decline, but does that stop at some point.
Dave we care deeply about our blood center business and the customers we serve there and yes. They had a very good quarter. In fact, they had a very good year overall relative to our initial expectations and in no small part that was because our teams were able to step up aided by our operational excellence program that we've talked about the gross.
Net savings and that's important we want to free up resources to reinvest in growth typically than in other franchises, but.
What we also get from that OAP program is meaningful agility and resilience.
Not to mention the highest possible levels of product quality, we benefited in the quarter and then the year and that blood Center business, we were able to step in and meet customer demands large stocking orders in some cases as contingency and other cases, where maybe their existing sources supply had let them down so we.
We were able to step in and fill that and that bodes well the guidance, we gave a fairly wide range and down again reflects disproportionately geopolitical risk.
And some potential headwinds and FX that businesses is concentrated outside the U S and we have some exposure there that would have to be mindful of.
But we think it's actually increasingly stable and a good source of.
Continued EBITDA for the company.
Thank you.
Yes.
Thank you and I'm not showing any one else in queue at this time, ladies and gentlemen that does conclude our conference for today. Thank you for your participation. You may now disconnect everyone have a great day.
Okay.
[music].
Yes.
[music].
Yes.
Okay.
[music].
Yes.
[music].
Yeah.
[music].
Okay.
Okay.
Yes.
[music].
Okay.
[music].
Yeah.
[music].
Right.
[music].
Yes.
[music].
Sure.
[music].
Yeah.
[music].
Yeah.
Hum.
[music].
Hum.
[music].
Okay.
[music].
Yeah.
[music].
Yes.
[music].