Q2 2023 Haemonetics Corp Earnings Call
Good day and welcome to the Human Ethics Corporation second quarter fiscal 2023 earnings call. At this time all participants are in listen only mode. After the speaker's presentation there'll be a question answer session and instructions will be given at that time.
As a reminder, this call may be recorded I.
I would now like to turn the call over to Olga Guyette Senior director of Investor Relations and Treasury you may begin.
Good morning, everyone. Thank you for joining us for human genetics second quarter fiscal 'twenty three conference call and webcast I'm joined today by Chris Simon our CEO .
Strong president and FERC Global hospital business and James to record our CFO .
This morning, we posted our second quarter and first half fiscal 'twenty three results to our Investor Relations website, along with updates to our fiscal 'twenty guidance and analytical tables with information that we'll refer to on this call.
Unless otherwise noted all revenue growth rates will discuss today are organic and exclude the impact of currency fluctuations strategic access a product line acquisition and divestitures.
Additionally to help investors understand human ethics ongoing business performance, we will refer to non-GAAP financial measures.
Measures exclude certain charges in income items.
For additional details about excluded item comparisons with the same theory is a fiscal 'twenty two and reconciliations to our GAAP results. Please refer to our second quarter and first half fiscal 'twenty three earnings release posted on our IR website.
Our remarks today will also include forward looking statements and our actual results may differ materially from anticipated results.
Please refer to the Safe Harbor statement in the earnings release and other filings with the S&P for a complete list of risk factors that may impact our results.
Additionally, in order to protect customer confidentiality, but will not be able to discuss any customer specific details except as disclosed previously.
And now I'd like to turn it over to Chris.
Thanks, Olga good morning, and thank you all for joining.
Today, we reported second quarter organic revenue growth of 27%.
And adjusted earnings per diluted share of 83 cents, an increase of 38% comp.
Compared to the second quarter of the prior year.
Our second quarter and year to date results are evidence of the accelerating momentum in our businesses.
The macroeconomic environment is challenging, but we have taken action and are well positioned to navigate the headwinds demand for our products and services has never been stronger.
We are helping fuel growth in the plasma industry by setting the standard for plasma collection, enabling our customers to collect record volumes to replenish depleted inventories the essential value over a hospital solutions combined with our investments are expanding our presence and accelerating growth.
Our operational excellence program is driving new efficiencies and enhanced processes to help counter inflationary pressures through our agile flexible global manufacturing network and resilient supply chain, we are consistently producing and delivering the products and technology our customers depend on.
We are pursuing the goals, we set in our long range plan for transformational growth diversification and sustainability.
In October we welcomed ROIC Alvin to human Alex as President Global plasma and Blood Center his leadership and vast experience in medical technology will help drive continued strong results and long term value creation.
Turning now to the business unit results and guidance.
Plasma revenue increased 58% in the second quarter and 52% year to date.
North American disposables represent 85% of total plasma revenue and increased 63% in the quarter and 56% year to date driven by strong growth in volume and price as a result of our technology upgrades.
We completed our technology upgrades ahead of schedule and the fully integrated bidirectional Nexus platform is now helping all of our long term customers achieve effective and efficient plasma center operations, while reducing their cost per liter of plasma.
Volume growth was pronounced across all center types and geographies in the U S volume growth was again, driven by both new and mature centers with 38% growth in the quarter and 39% year to date for our long term customers and is now trending above pre pandemic levels.
Similarly, Europe delivered another quarter of double digit growth.
Our plasma business is a powerful driver of revenue growth and margin expansion and our strong performance is a result of our market leadership with more than 10 million commercial collections and representing nearly half of all U S. Nexus collections today persona is playing a critical role in helping to drive plasma volte.
And recovery.
We are committed to providing our customers with the tools necessary to win in this competitive market and we continue to advance our innovation pipeline to further increase collection center efficiency and plasma yield while maintaining donor safety.
Encouraged by strong volume growth when the market momentum we are helping to enable we now expect our organic plasma revenue growth to increase from our previous guidance of 15% to 20% in fiscal twice rate to a range of 30% to 35%.
Moving to blood Center revenue grew 1% in the quarter and declined 3% and year to date.
<unk> revenue declined 1% in the quarter and 7% year to date in both periods. This business was impacted by unfavorable order timing lower revenue from convalescent plasma customer staffing and donor shortages that blood centers across the globe and geopolitical disruptions.
Our technology plays a critical role in improving access to noncommercial source plasma.
Consistent with our long range plan in the second quarter of fiscal 'twenty three we partnered with one of our global plasma customers to expand the network of plasma collection centers in Egypt.
With our Nexus tcf's devices as the opportunities continue to emerge like this we are in a strong position to advance our leadership in plasma collection around the globe.
Whole blood grew 7% both in the quarter and year to date due to favorable order timing among distributors in Asia Pacific and EMEA and additional opportunities in North America, as our resilient supply chain enabled us to serve customers in need.
We are confident in the continued durability of our blood center business, despite the challenging macroeconomic environment and reaffirm our expectation of 2% to 5% organic revenue decline in fiscal 'twenty three.
Now I'll turn the call over to Stuart strong to discuss hospital results and strategic milestones Stu.
Thanks, Craig and good morning, everyone I'm happy to be here today to discuss our hospital business unit results and the work we are doing to drive revenue growth and further strengthen our leadership position in the markets we serve.
Hospital revenue grew 22% in the quarter and has grown 18% year to date.
<unk> continued macroeconomic challenges, including staffing shortages.
Hospital capital budget constraints in the U S and Europe and continued geopolitical risks, we meaningfully grew our revenue and our market share.
Hemostasis management revenue grew 11% in the quarter and has grown 8% year to date, driven by strong adoption and utilization of our tech disposable products.
As a reminder, in the first half of our fiscal 'twenty. Two we won a large national European tender for clot crop the associated shipments of capital and stocking of disposables all took place in the first half of fiscal 'twenty, two which created a difficult year on year comp for this part of our business in the first half of <unk>.
23.
Vascular closure revenue grew 42% in the quarter and has grown 39% year to date, despite a more than typical adverse seasonality of this business during the summer months.
Growth in the second quarter was disproportionately driven by new electrophysiology accounts within the top 600 hospitals further increasing our U S penetration.
We're excited about the newly granted CE Mark certification for both basket and basket MVP that helped unlock additional attractive market opportunities outside the U S.
Theres still more work to do we plan to begin commercialization of our vascular closure device in Europe towards the end of this fiscal year.
Our product development efforts also include inorganic investments in vascular closure, particularly in solutions for large bore arterial closure necessary for procedures, such as Teva and Eva.
This is an attractive global market that we estimate to be approximately $300 million.
And growing in the low teens we.
We have made strategic investments of 30 million euros into a clinical stage startup in Galway, Ireland called Visscher medical with an option to acquire the company upon completion of certain milestones.
Literature Medical has developed a clinically differentiated percutaneous large board vessel closure device called Turkey steel.
Which utilizes a fully bio absorbable patch.
The 14% to 24, French arteriotomy from inside the vessel.
The perky seal system delivers the patch with a simple user friendly approach, while eliminating the pre procedure steps required for current large whole closure devices.
While still early stage clinical data showed an impeccable safety profile and we're excited about the long term potential of this innovative technology and the meaningful impact it may have on improving healthcare outcomes.
Moving onto transfusion management are transfusion management revenue grew 36% in the quarter and has grown 29% year to date.
Growth in the quarter was driven by new software implementation in the U S and in the UK.
We will continue to leverage our commercial channel in the U S and Europe to grow our market share strengthened by our recently announced agreement with epic software to offer our safe trace TX enhanced transfusion management software.
<unk> Global network of hospital customers.
And lastly, turning to cell salvage.
Cell salvage revenue grew 6% in the quarter and its grown 3% year to date benefiting from favorable order timing among EMEA distributors and partially offset by last year's strong capital sales.
Hospital is fully on track to become our largest and fastest growing business over the next few years or fiscal 'twenty three revenue growth guidance remains unchanged and we expect our hospital business delivered 19% to 22% organic revenue growth versus the prior year.
You for your time and now over to James to discuss the rest of our financial results and our guidance.
Thank you Sue and good morning, everyone.
Let's discuss our business results and some additional updates to our fiscal 'twenty three guidance.
Second quarter adjusted gross margin was 53, 7%.
An increase of 110 basis points compared with the second quarter of the prior year.
Adjusted gross margin year to date was 54, 4% an increase of 80 basis points compared with the first half of the prior year.
Adjusted gross margin both in the quarter and year to date benefited from volume and mix, particularly due to strong volume growth in plasma and hospital price and additional savings from our operational excellence program.
These adjusted gross margin benefits were partially offset by inflationary pressures.
Higher depreciation expense, primarily related to finishing the conversion of all U S customers to our Nexus devices and.
And some of the recent investments in our manufacturing and supply chain network.
Adjusted operating expenses in the second quarter were $99 million, an increase of $17 million or.
Or 20% compared with the second quarter of the prior year.
As a percentage of revenue.
Adjusted operating expenses decreased by 100 basis points and we're at 33, 3% when compared with the second quarter of fiscal 2002.
Adjusted operating expenses year to date were $198 5 million, an increase of $29 million or about 17% compared with the prior year.
The increase in adjusted operating expenses in both periods was primarily driven by increased freight volumes and costs continued growth investments, including research and development and sales and marketing.
A return to normal spending levels and higher performance based compensation, which was partially offset by savings from the operational excellence program.
Adjusted operating income was $66 million in the second quarter and $105 5 million in the first half representing increases of $17 million and $24 million respectively.
As a percentage of revenue adjusted operating margin was 24% in the second quarter and 18, 9% in the first half up 210 basis points, and 140 basis points, respectively, when compared with the same periods in fiscal 'twenty two.
Our operational excellence program is on track to deliver additional gross savings of approximately $26 million in fiscal 'twenty, three and total cumulative savings reaching $96 million by the end of this fiscal year.
We expect these savings to help generate additional efficiency in both cost of goods sold and operating expenses.
The macroeconomic environment remains challenging and continues to put downward pressure on adjusted gross and operating margins.
Both in the quarter and year to date inflation had the most pronounced effect on our financials followed by foreign exchange.
Additionally, due to the continued global supply disruptions combined with strong demand for our products. We have had to use less sufficient resources in some cases to ensure uninterrupted and timely supply, resulting in an adverse impact to our margins.
We remain confident in our ability to offset these pressures and reaffirm our adjusted operating margin guidance in the range of 18% to 19%.
The midpoint of our adjusted operating margin guidance includes higher performance based compensation and about 350 basis points of impact from macroeconomic headwinds.
The adjusted income tax rate was 22% in the second quarter and 23% year to date in fiscal 'twenty three in line with the adjusted income tax rate for the same periods in fiscal 2002.
We expect our fiscal 'twenty three adjusted income tax rate to be approximately 23%.
Second quarter adjusted net income was $42 7 million.
Up $12 million or 39% and adjusted earnings per diluted share was 83.
Up 38% when compared with the second quarter of fiscal 2002.
Year to date adjusted net income was $72 9 million.
Up $17 million or.
Or 30% and adjusted earnings per diluted share was $1 41.
Up 29% when compared with the first half of fiscal 'twenty two.
The combination of the adjusted income tax rate interest expense and FX had a negative three.
And <unk>.
Impact on adjusted earnings per diluted share in the second quarter and year to date, respectively, when compared with fiscal 2002.
We are updating our fiscal 'twenty three adjusted earnings per diluted share guidance to be in the range of $2 70.
Two to $3.
The midpoint of our adjusted earnings per diluted share guidance includes an approximate <unk> <unk> headwind from volatility in foreign exchange.
Higher interest expense and adjusted income tax.
Moving to balance sheet and cash flow.
In the second quarter of fiscal 'twenty, three we entered into an accelerated share repurchase agreement to buy back $75 million of common stock under our previously announced $300 million share repurchase authorization.
This share buyback help offset dilution from existing share based compensation programs in fiscal 'twenty three.
Additionally, as you heard from Stu, we made investment in <unk> medical.
Because of the timing of these investments they had minimal impact on our cash on hand in the first half of fiscal 'twenty three.
Cash on hand at the end of the second quarter was $241 $2 million down $18 million since the beginning of the fiscal year, primarily due to the $75 billion accelerated share repurchase program.
$32 million in earn out payments related to previous acquisitions, partially offset by a $50 million revolver drawdown that was fully paid off subsequent to the end of the second quarter.
Free cash flow before restructuring and restructuring related costs was $66 3 million.
Paired with $31 2 million in the first half of fiscal 'twenty two.
Higher free cash flow before restructuring and restructuring related costs was mainly due to higher cash flow from operating activities.
These include significantly higher net income lower inventory and higher accrued liabilities, including higher performance based compensation.
Partially offsetting these benefits was an increase in capital expenditures as we completed the conversion of our U S plasma customers to Nexus and continue to make improvements to our manufacturing and supply chain network as part of our operational excellence program.
We believe in our ability to generate strong cash flow and update our guidance for free cash flow before restructuring and restructuring related costs for fiscal 'twenty three to be in the range of $150 million to $180 million compared with our prior guidance of 100 to 130 million.
The updated guidance reflects higher net income and additional benefits from our net working capital in fiscal 'twenty three.
Our earnings and cash flow are exposed to interest rate risk.
As part of our risk management strategy, we used interest rate swaps to mitigate our exposure to volatility in interest rates, which we believe is especially prudent in this economic environment.
Our second quarter, we refinanced our existing credit facilities and entered into additional interest rate swap agreements that extend through mid June 2025. These.
These interest rates swaps secure an average blended fixed interest rate of 357%.
The applicable spread on 70% of the notional value of the unsecured term loan until mid June of 2023.
Thereafter, the average blended fixed interest rate increases to $4 one 2%.
Plus the applicable spread on 80% of the notional value until mid June of 2025.
Our net leverage ratio at the end of the second quarter was $2 seven.
In summary, I'd like to conclude with a few closing thoughts we.
We are excited about the opportunities ahead and remain focused on our short term and long term goals, including delivering robust revenue and adjusted EPS growth and strong free cash flow generation.
Our second quarter and first half results show continued strong demand for our products and resilience of our supply chain, despite the challenging macro environment.
And our collections business plasma and blood center.
Our technology is playing a vital role in helping our customers address critical blood shortages and depleted inventories.
And hospital in addition to delivering breakthrough results across all of our product lines, we continue to make organic and inorganic investments to further strengthen our leadership and expand our share.
The operational excellence program is fully on track and is expected to generate $115 million to $125 million in total gross savings by its completion in <unk>.
Fiscal 'twenty five.
And finally, our balance sheet remains strong with ample liquidity to support our short and long term capital allocation priorities.
Thank you.
And now I would like to open the line for Q&A.
Thank you if you would like to ask a question. Please press star one one.
Our first question comes from Anthony Petrone with Mizuho. Your line is open.
Great and congratulations on a very strong quarter here and I hope everyone's doing well.
First couple will be either for Chris or ROI on on plasma.
And just the numbers for the quarter, obviously, north American volumes.
Up substantially, but maybe just the optics of the overall number for this quarter. So.
How much was contributed by price versus volume that will be the first question and then when we think about the volume gains here, but maybe a little bit on the recession and inflation tailwind to the plasma business and when did the company start to see those come into the mix here and what would be the expectation for how long.
One of those tailwind could last and I'll have one quick one quick follow up.
Hey, Anthony it's Chris welcome back Great to have you in the mix.
In terms of plasma yes, it was.
We have now collected more in the quarter than we did in the equivalent quarter prior to the pandemic. So recovery is fully underway.
Performance in the quarter was a mix of both volume and price the price being associated with the completion ahead of schedule of our technology upgrades to Nexus and now fully.
Half of our collections happening on our persona technology. So volume was by far the major driver, but clearly our mix is helping as well.
In terms of what's happening in the macro environment as we said in our prepared remarks, all centers participate at mature and new alike. It's important to recognize that we have twice as many new centers as a percentage of our total <unk>.
<unk> at centers than we had pre pandemic and they're growing at exactly that historic rate. So it feels good.
Southern border is back.
Not towards pre pandemic levels, but the trajectory actually is more robust than we had anticipated at this point in the year. So really it feels like we're hitting on all cylinders I do think this is a bit of a contrarian story, regardless of what happens in the macro environment the combination of inflationary.
Inflationary pressures potential recession consumer sentiment being at all times low is really motivated.
Owners to return.
And our customers are doing everything in their power to take advantage of that and to grow I don't want you to meet current patient need but to replenish inventories for the ongoing growth that they see in it.
Based therapy. So it's a robust time for sure and we expect that tailwind to continue for the foreseeable future.
The follow ups would be there Chris just on the notion on inventory build fractionator is clearly.
Went through a period of record low levels of inventories out of the pandemic in any way to sort of estimate where they are in replenishing inventories and safety stock.
How long it may take for them to get back to a pre pandemic level and then the last question for Stuart just quickly on cardiac <unk>.
We received the CE Mark in September , but any color on the early launch days across Europe for car T, but that would be helpful. Congratulations again. Thanks.
Thanks, Anthony so on inventory levels with our customers.
Hold that close to the best as you can appreciate so we're going to respect and honor that as well, but I think in the current environment, where the demand for IAG based therapies is so strong the end market demand for their products.
Inventory winds up taking a lot of real strategic role allows customers to bid for contracts and tenders that they might not otherwise be able to and I think.
Inventory matters, a lot to all of our customers. They are at various stages of recovery I think all of them have aspirations to grow their inventory levels from where we sit in.
We'll watch closely a number of new center openings in donor remuneration, but we don't see any abatement near term for sure.
So, yes, hey, Anthony Thanks for the question.
We're excited about the CE Mark that we got we plan to begin commercialization in Europe .
Towards the end of this fiscal year.
Mark as you've heard from me before represents a huge opportunity for us, particularly in EP in Europe , it's about a $1 $3 billion Tam globally, Europe's a significant part of that so we're excited about about that launch right now we're going to target the markets that have the best conditions for launch.
Comes down to volume comes down to clinical and economic value in the country as well as pricing and reimbursement. So those are the countries are going to go after first but just like we did in the U S. We're going to take a very disciplined approach.
To the launch in Europe , and make sure we focus on areas that are most opportune for us to launch it.
Thanks, Dan.
As a reminder to ask a question. Please press star one one.
Our next question comes from drew Ranieri with Morgan Stanley . Your line is open.
Hi, Thanks for taking the questions.
Chris maybe for you and I know you don't necessarily want to get on specifics for pricing, but as youre thinking about the guidance raise and plasma could you just help us maybe parse out a bit of what the expectation is for for pricing now that Nexus has kind of fully rolled out earlier than expected.
I think you mentioned persona was now 50% of collections. So how should we maybe think about that being a benefit into the back half of the year.
And then I have a couple of follow ups. Thank you.
Yes, Thanks, Joe appreciate the questions.
Technology upgrade has gone exceptionally well.
There is clearly value to our customers from the combination of Nexus and Nexus with persona and Thats reflected in.
And the contracts that we've entered into there is an annualized <unk> and some of that is occurring as we speak but when you look at where we are year to date this fiscal year.
Halfway through both volume and price have been meaningful contributors, we think for showing us the answer across the board.
It is.
Originally we are targeting an enhanced safety profile by tailoring and more of a personalized medical way how we do the collections. In addition, you get a 10% to 12%.
Great gain in yield which is significant as all strive to replenish as we've talked about already on this call. So we will continue to lean into that there is a number of things that have to happen for our customers. The remaining customers to adopt that but we feel quite good as the year goes on the Nexus conversions one annualize.
We're cautiously optimistic that we'll see additional opportunities for persona over the next year and a half and as that comes to fruition, We'll guide accordingly.
Got it and then just with expectations actually for 2024 are you still confident of delivering topline and bottomline growth just in plasma kind of given all these tailwind that you now have at your back.
Would you see another 30% year.
Looking.
Looking ahead at next year and with vascular closure, just with the CE Mark.
How should we kind of think about that is supporting area enhancing.
The growth rate trajectory that Youre currently on thanks for taking the questions.
Yeah. Thanks, Thanks drew I know there is a lot of interest in our.
Our ability to continue to grow and I think earlier this year when our guidance was a little more modest I think there was a question about <unk>.
<unk> 22 versus FY 'twenty, three I think now with the revised guidance that James communicated. This morning, with a mid point, which suggests double digit growth off of 'twenty two within that we're guiding 30% to 35% revenue growth on plasma are long term customers are growing in excess of that closer to 40%.
So its coming together nicely and short while it's way too early to guide for FY 'twenty four we don't have any confidence about our ability to continue the growth trajectory that we're on and we'll continue to watch this macroeconomic factors loom large and.
And in the main they are a positive for us and I'm happy to break that down if it's if it's helpful. But.
There is also a cost side of that where our teams are battling inflation in supply chain and FX. As every company is they are doing an outstanding job of mitigating those factors, but its expensive and that's reflected in our guidance as well.
Our next question comes from Andrew Cooper with Raymond James Your line is open.
Great. Thanks for the questions.
Maybe first just starting with the investment in that share can you give us a little bit more of a sense of is that something that could be additive as with technology. When you think about bringing potentially.
Gain in that capability together.
Maybe a little bit around the thinking of why not acquire outright earlier, what's the structure of your.
Right to buy later is and just how synergistic that could be to add large bore to what you already have as well.
Yes. So so it is very synergistic to the basket platform Andrew So when.
When we think about purchase steel that will round out our closure portfolio and really complement vasquez in-basket MVP it'll give us a closure option for large bore that we currently do not have in the <unk> platform. Okay. So that's a key element to the purchase of this.
This company potentially.
It also adds to the Tam is.
Large bore closure is for to have R&D var, it's about a $300 million.
Global total addressable market. So it opens up more of an addressable market for us.
For four large foreclosure and then I would say.
As it relates to the option to purchase <unk>.
We can exercise that option as early as we'd like to.
However, we're choosing to wait until we see the results of their IV trial.
Before we move forward with the potential to exercise the option.
Okay, Great and maybe just one more.
Attempt to sort of slicing this just.
Trying to get a sense or maybe when some of the persona contracts went online and how we should think about.
The impact on growth moving forward in terms of the step up of getting everybody on that just getting everybody on persona.
When we think about the volume growth versus price just is there any other flavor you can give us for timing and how we should expect that to roll on in the back half of the fiscal year and I'll stop there. Thanks.
Andrew happy to do that and I'm going to add com.
Comment about.
Veeva show our question in M&A more broadly if I might as well in terms of persona Nexus, we have completed the nexis upgrade cycle, we got that done.
Mid August fully ahead of schedule.
Feel great about that so the process will play forward as we upgrade a center.
Missing follows so we feel good about the trajectory we're on as I said, it's included in our guidance for persona. We don't include anything in our guidance does not already fully contracted we're having discussions with all of our customers about the technology different customers are at different stages of assessment and we'll play that forward and be a support.
As we can for customers as they do that assessment and ready their supply chains and their organizations for the changes that are associated with that increased 10% to 12% yield.
No.
They tuned additional guidance, we're not going to breakdown is August at the outset for reasons of customer confidentiality, we're not going to talk specifically about price versus volume, but it will be included in our guidance. We will try to give you a sense for that you can certainly see it pass them through on our gross margin.
The point I would add to <unk> answer is we are really focused first and foremost about building out our presence and our relevance to the customers that we serve we're committed to programmatic M&A Viva <unk> as an example of that our general preferences real company with real revenues.
Substantially derisked. Unfortunately, that's everybody's priority. So in this case, we went earlier because we have a good sense for the potential of the technology and is that potential becomes reality.
We have the option to act we are strategic investors, who are not financial investors. So this is about building out our portfolio folio augmenting R&D with inorganic growth through M&A.
Yeah.
Great I appreciate the time, congrats on a nice quarter.
Thanks.
Our next question comes from David <unk> with JMP Securities. Your line is open.
Hey, good morning.
I'll give I'll give my shot here.
Just contribution so you said I think that Youre disposable North American volume was up 63% and.
And I think you called out 38%.
Volume.
And.
Mathematically if we take the difference there the 25 I mean is that sort.
A ballpark of what we're talking about a price contribution.
In terms of how it impacted the number in the quarter.
Yes, I think the difference, Dave and I realize we throw a lot out there in the prepared remarks, we are separating long term customers out and Thats thats what the breakdown. We gave you. So it's not as straightforward as the math Youre trying to do and as I said I, just don't want to get into that much more detail around it but I know there is ongoing.
Questions about robustness sustainability, given the steep trajectory that we're on and that's why we wanted to give you. The long term number in addition to the overall market number.
Got it and then just to clarify you made a comment about the new centers.
Maybe they're being twice as many from maybe pre pandemic.
Yeah.
I was wondering if you could give us any color on sort of the split there between the.
The mature versus the new how bigger each of those in terms of the total business today.
Yeah, so historically.
The mature centers reach a practical capacity and substantially all of the growth in the industry has been driven by new center openings. When there's a three to four year ramp depending on the company as those centers come up to speed, what we observed during the pandemic was the rate of New center openings was double what it was in the prior.
Years as customers leaned in and did what they could to reach more donors in more geographies in particular, we're seeing smaller centers in terms of the number of devices number of beds, but and then slightly smaller metropolitan areas and surrounding metropolitan areas. Today, there are roughly 250 new centers somewhere.
On that three to four year trajectory and Theyre performing at least equivalent to what new centers have always performed that in addition, as I said in the prepared remarks, we're seeing growth from mature centers, they're not back to pre pandemic levels. There is more opportunity there, but in totality because of the significant up step in new centers.
We actually collected more plasma in the second quarter than we did in the second quarter of 2020, which was our peak year prior to this.
Yeah.
Thank you.
Yes.
Again to ask a question. Please press star one one.
Okay.
Our next question comes from Mike Matson with Needham <unk> Company. Your line is open.
Yeah. Thanks, So just a few on the gross margin. So I know you gave guidance for reiterated the guidance for the operating margin, but looking at kind of where youre at.
In the.
September quarter here for the second half of the year or is it reasonable to assume the gross margin kind of being like the 53% to 54% sort of range.
Yeah. Thanks.
Thanks, Mike.
Yes.
We typically havent guided here.
<unk> gross margin.
But but yes, if we're going to we're going to hit our operating margin guidance. Those gross margins that you see will be will have to be in that that continued area.
Gross margin for us has.
Has improved because of mostly because of mix.
Yes.
Pricing gains that we've that we've had.
But the flip side of it has been what I spoke about in my remarks in that.
Because the volume growth has been much greater than we initially planned this year, it's caused some inefficiencies.
For us on in the supply chain so that it's.
Less timely it noticed to vendors.
More use of airfreight.
And.
Overall.
Less efficient utilization of resources like like sterilization capacity and so forth. So those all those kind of take you take you back a little bit but on balance, yes, youll youll see those gross margins I think hanging in there.
Okay and then.
Your Investor Day, you guided to I think like a high <unk> low 60% range for fiscal 'twenty six I know that that that's a ways off still but I'd imagine that some of these pressures probably continue into your fiscal 'twenty four or so do you still think you can reach those targets in 2006.
Yes, we deal with that.
<unk>.
That will come from.
Selling higher profitable products, that's going to continue no matter what.
As we go on here as we grow.
But also on the macro level, we are assuming that once we get out to 'twenty five and 26 that we do have some.
Using those inflationary pressures that we experienced so significantly during the early part of the pandemic here.
Okay. Thanks, and then I know you said you are not going to comment on specific customers, but I'll ask one on to sell any way you could you have quantified that in the past so is that still.
Are you still expecting them to do $88 million with U of sales this year or I mean, just given the tremendous demand at plasma alliance and second end up being higher than that or are they locked in at that amount.
Yes, Mike I appreciate the interest here and getting to the core of the sustainability of our outperformance the $88 million as a minimum contractual agreement that hasnt changed.
And all of our customers are experiencing robust growth as we've said across centers.
Mature and new alike, certainly CSL is doing their part in driving accordingly, and we're benefiting from that as well.
Okay. Thanks, sorry, I didn't realize that was a minimum alright, alright. Thank you.
Thank you.
There are no further questions at this time. This concludes our question and answer session.
Thank you for your participation in today's conference you May now disconnect everyone have a great day.
Okay.
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[music].
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