Q1 2024 Haemonetics Corp Earnings Call

August 8, 2023

Good morning, and thank you for standing by welcome to the first quarter 2020 for human Medics Corporation's earnings Conference call.

At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the session you'll need to press star one on your telephone you will then hear an automated message advising you. Your hand is raised to withdraw your question. Please press star one again.

Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today.

Oh, good Guy yet senior director Investor Relations Treasury. Please go ahead.

Good morning, everyone and thank you for joining us for human genetics first quarter fiscal 'twenty four conference call and webcast.

Joined today by Chris Simon, our CEO and James to record our CFO .

This morning, we posted our first quarter fiscal 'twenty four results, our Investor Relations website, along with our updated fiscal 'twenty for guidance.

Before we begin just a quick reminder, that all revenue growth rates discussed today are organic and exclude the impact of currency fluctuations.

Well also referred to other non-GAAP financial measures to help investors understand human that exist ongoing business performance.

Please note that these metrics exclude certain charges and income items.

For a full list of excluded items reconciliations to our GAAP results and comparisons with the prior year periods. Please refer to our first quarter of fiscal 'twenty four it earnings release available on our website.

Our remarks today include forward looking statements and our actual results may differ materially from anticipated results.

Factors that may cause our results to differ include those referenced in the safe Harbor statement in today's release.

And in our other SEC filings.

We do not undertake any obligation to update these forward looking statements.

And now I'd like to turn it over to Chris.

Thanks, Olga good morning, and thank you all for joining US today, we reported first quarter organic revenue growth of 21% and adjusted earnings per diluted share of $1, 581% growth over prior year.

It was a particularly strong start to the year with market, leading performance across our businesses delivering revenue growth and adjusted operating margin expansion.

While advancing meaningful innovation and commercial milestones.

Our operational excellence program improves productivity and strengthen risk management, enabling us to fulfill customer's demands expand our margins and invest in opportunities for further growth and value creation.

We are pleased that Diane Brian has joined <unk> Board of directors. She brings more than 30 years of leadership experience with top global technology organizations, including Google Intel and Nova signal, we welcome her counsel and expertise and technology solutions and healthcare information management.

Turning now to our business unit results.

Plasma revenue grew at 35% in the first quarter North America Disposables grew 41% disproportionately driven by strong momentum in U S collections and price. Additionally, our first quarter plasma revenue growth rate benefited from unfavorable order timing in the first quarter of fiscal 'twenty three.

In the U S. This was the seventh consecutive quarter of volume growth exceeding historical seasonality.

We also saw strong high single digit collections growth in Europe .

Our Nexus plasma collection system stands apart for offering 9% to 12% additional plasma yield impactful safety connectivity and a superior donor experience backed by real world evidence from tens of millions of collections.

We are bringing powerful innovation with FDA clearance of our redesigned bowl and the express plus software to shorten average collection time optimized plasma center efficiency and reduce cost per liter.

This technology is expected to enable an average procedure time of 33 to 38 minutes approximately a 20% reduction from the current procedure times on the Nexus PCF system.

Is additive to the existing 16 minute reduction in door to door time with a significant portion of this improvement occurring pre and post procedure enabled by the seamless bidirectional communication between the Nexus PCM device and our next linked Dms software.

The launch of these new enhancements has been met with great enthusiasm from customers and we are working with them on a timely rollout, while ensuring no interruption to plasma center operations.

We are encouraged by our first quarter results and we are well positioned to capitalize on positive macroeconomic trends that support Verizon collection volumes, we are increasing our full year plasma organic revenue growth guidance from 3% to 6% up to 8% to 11%.

Moving to hospital revenue increased 14% in the first quarter North America performance was particularly strong supported by improved procedure volume and staffing levels at U S hospitals.

Vascular closure revenue grew 27% in the first quarter with a disproportionate contribution from new account openings, both in electrophysiology and interventional cardiology.

We also continue to see higher utilization rates driven by our clinical efforts and increased procedure volumes in U S hospitals.

Commercial efforts remain focused on increasing our share of the approximately $2 $5 billion global Tam, we are making significant progress establishing our leadership in the top 600 U S. EP hospitals responsible for nearly 90% of procedures.

International expansion is on track and this quarter, we received approval for vast gade MVP in Japan, and initiate a clinical use of our vascular closure products in key accounts in Germany and Italy.

Early feedback is very positive and confirms the important role our products play in improving the standards of care.

Hemostasis management grew 14% in the quarter North America, our largest market grew 23% driven by increased utilization of tag benefits from pricing and strong capital sales.

International growth was mixed but all of our key markets in Europe delivered strong double digit growth in the quarter.

Strong performance in transfusion management was driven by market share gains in North America, and Europe with the help of our recent agreement with epic to offer safe trace TX to their global network of hospital customers.

Cell salvage also had a strong quarter in North America as we capitalized on increased utilization in U S. Hospitals. These benefits were more than offset by unfavorable order timing among distributors outside the U S.

We are pleased with hospitals performance. We are ahead of schedule on our regulatory and commercial milestones and capitalizing on improving trends in hospitals worldwide to drive additional growth.

With the launch of our vascular closure products in Europe , and Japan, we are establishing new foundations for growth in the coming years, we affirm our fiscal 'twenty for organic revenue growth guidance in the range of 16% to 18%.

Blood Center revenue grew 6% in the first quarter <unk> revenue grew 7% driven by strong collections, particularly in plasma coupled with favorable order timing among distributors capital was down slightly due to prior year share gains in Egypt, as we partnered with a global plasma customer to expand our network of collection.

Centers with Nexus Bcs devices.

Whole blood revenue grew 4% in the quarter as we benefited from the opportunity to serve competitors' customers in need.

We are pleased with the first quarter results of our blood Center business. However, near term, we face a difficult external environment, a voluntary product recall in our whole blood business and the timing of some commercial opportunities that may take longer to realize.

We now anticipate an organic revenue decline of minus two to minus 6% compared with our previous guidance of zero to minus 2%.

In summary momentum continues to build as we increased contribution and scale of higher growth higher margin products, we are delivering sustained transformational growth and advancing our market leadership. Accordingly, we are raising our fiscal 2024 total company organic.

Revenue growth guidance from 5% to 8% up to 7% to 10%.

I'll now turn the call over to James to discuss the rest of our fiscal first quarter results and FY 'twenty four guidance James.

Thank you, Chris and good morning, everyone.

In the first quarter of fiscal 'twenty four our business demonstrated continued strength.

First quarter adjusted gross margin was 54, 2% 100 basis points lower than in the same period of the prior year.

Our adjusted gross margins benefited from price volume and favorable geographic and product mix as we continued to experience strong momentum in plasma and hospital, particularly in the U S and benefited from favorable order timing in blood Center.

These benefits were more than offset by a $3 $4 million inventory reserve due to a voluntary product recall in our whole blood business upfront investments and operations to meet the unprecedented demand for our products and higher depreciation expense.

Adjusted operating expenses in the first quarter were $98 5 million.

Flat compared with the first quarter of the prior year.

We benefited from additional savings from the operational excellence program and improving logistics costs that fully funded additional growth investments in the quarter.

As a percentage of revenue adjusted operating expenses were 31, 7% in the first quarter of fiscal 'twenty four compared with 38, 1% in the same period of the prior year.

Our first quarter adjusted operating income was $70 2 million, an increase of $25 million or 56%.

As a percentage of revenue adjusted operating margin was 22, 6% in the first quarter.

540 basis points compared with the same period in fiscal 'twenty three the.

The expansion in the adjusted operating margin was driven by higher operating leverage from our business and improving macroeconomic trends.

The operating leverage we experienced in our quarter was ahead of our expectations, particularly due to stronger than anticipated momentum in plasma favorable order timing in blood center and improved logistics costs as.

As we look at the remainder of the year, we acknowledge the challenging macro environment and anticipated impact from changes in geographic and product mix.

We affirm our adjusted operating margin guidance in the range of 20% to 21%.

Our adjusted operating margin guidance also includes $20 million in target gross savings from the operational excellence program that are expected to drop through at approximately 30% to our adjusted operating income generating additional efficiency across our business.

Yes.

In the first quarter of fiscal 'twenty for the adjusted income tax rate was 21% down from 24% in the first quarter of fiscal 'twenty three.

Our first quarter fiscal 'twenty four adjusted income tax rate benefited from share vesting and option exercises that were larger than the corresponding benefits recognized in the first quarter of the prior year.

Share vesting and option exercises are usually front end loaded and our expectation for the fiscal 'twenty four adjusted income tax rate remains unchanged at approximately 23%.

First quarter adjusted net income was $53 7 million up $24 million or 78%.

And adjusted earnings per diluted share was $1 five.

Up 81% when compared with the first quarter of fiscal 'twenty three.

Changes in the adjusted income tax rate interest expense and share count resulted in an approximately <unk> <unk> benefit to our adjusted earnings per diluted share, which was partially offset by approximately <unk> <unk> negative impact from FX.

We updated our fiscal 'twenty four adjusted earnings per diluted share guidance to be in the range of $3 60.

$103 and 90.

The midpoint of our updated guidance includes an additional <unk> <unk> headwind from fluctuations related to foreign exchange.

Moving now to balance sheet and cash flow.

Cash on hand at the end of the first quarter was $285 $7 million.

Up $1 3 million since the end of last fiscal year.

Free cash flow before restructuring and restructuring related cost was $12 million compared with $5 million in the first quarter of fiscal 'twenty three.

The main drivers are significantly higher net income, partially offset by increased inventory due to a ramp up in the production of nexis Tcs devices in the U S to support plasma customer growth requirements.

We expect these trends to continue for the remainder of the year and update our guidance for free cash flow before restructuring and restructuring related costs for fiscal 'twenty four to be in the range of $85 million to $105 billion.

Compared with $80 million to a $100 million.

Previously.

In summary, I would like to highlight a few key messages that I hope you take away from today's call.

Our first quarter results were a strong start to our fiscal 'twenty four with all of our businesses contributing to growth and margin expansion.

And plasma we continued to benefit from the strong collections momentum and technology that stands apart for yield efficiency and cost per liter improvements unmatched in the plasma industry.

The benefits of our new ball and express plus technology are largely additive to the 16 minute reduction in door to door time on average further optimizing plasma center efficiency and reducing cost to collect.

And hospital, we are ahead of schedule with our commercial milestones driving additional leverage in our business and capitalizing on improving trends in hospitals across the world with.

With the launch of our vascular closure products in Europe , and Japan, we are establishing a new foundation for growth in the coming years.

The expansion in adjusted operating margins in the first quarter provides a glimpse of what we can continue to deliver with the ongoing transformation of our product portfolio.

Increased efficiencies in the hospital business and additional relief from macroeconomic pressures.

There is more work to do we feel confident in our ability to further expand our margins in the coming years.

And lastly, we remain committed to value creation for all our stakeholders as our capital capacity continues to grow we plan to put it to good use throughout our long range plan to accelerate top and bottom line growth through M&A additional organic growth investments.

And opportunistic share buybacks.

Thank you and now I would like to open the line for Q&A.

Thank you as a reminder to ask a question. Please press star one on your telephone.

And wait for your name to be announced to withdraw your question. Please press star one again, please standby, while we compile the Q&A roster.

Our first question comes from Anthony Petrone with Mizuho America's Your line is open.

Alright, Thanks, and good morning, everyone. Congratulations on a strong start to the fiscal year.

A couple for me.

Chris on plasma and then I'll follow up with Jim on margins, maybe Chris just kind of the experience in the quarter. Here. You mentioned, obviously volumes are still running ahead of the historical <unk>.

Collection trend, but maybe just where do you think we are in the inventory.

<unk> replenishment cycle amongst the fractionator.

And then maybe a couple of follow ups on express plus taxes, just maybe a little bit on what is the upgrade path is it a pure software upgrade or is there a capital component to that as well and then I'll have the follow up for Jim.

Good morning, Anthony Thanks for joining and thanks for the question. Yes. This is our seventh consecutive quarter, where the actual demand for plasma plasma collections has outpaced the historical growth.

Clearly our best first quarter for plasma on records, usually thats, our softest quarter for the year, just due to some seasonal factors and we'll see how that plays out over the course of the year. We think we're still in the early stages of this recovery.

When we do our back of the envelope estimates around inventory levels. We think there is a meaningful way to go to get to pre pandemic levels, which should be safe and given given the challenges that our customers experienced meeting customer needs and the criticality of meeting those needs. We think that the robustness that we're seeing will continue which is what gave us.

Confidence to raise our guidance for the year and plasma after only one quarter, but we do.

Feel quite good about it we think that from conversations we're having with customers.

We think this trend will continue strongly in.

In terms of the the.

The new enhancements.

Really excited by able to get this together and get the approval the release from FDA. It is a combination of software in the device itself.

Change in the disposables and then some engineering around that it's not a particularly complicated upgrade with regards to capital or the outlay is meaningful for the centers that will require some change in sop and given the speed with which we are now moving we wanted to be thoughtful about this so we're talking about a limited.

Market release, working hand in hand, with a small group of customers collect some real world data further validate the claims were making.

Then move to full market release later this fiscal year, but we're going to do so without disruption, we're going to do so jointly with our customers and as always we will go as fast as they are prepared to go on this.

That's helpful and then Jim maybe just a little bit on the gross margin.

Sequentially, how much of that was run off of higher cost inventories.

And price was mentioned a few times here in the press release prepared remarks, just maybe a recap of where price is coming in these days.

And again congratulations on the quarter.

Yeah. Thanks, Thanks Anthony.

So yes price did help us.

And I am comparing now to the first quarter.

Of 23 that was a nice bump up for us as well as <unk>.

Mix really helped us on the on the gross margin line everything seemed to go in the right direction for Us mix wise, we sold more in the U S.

And that bumped up our.

Gross margin, but taking us back the other way you saw that we had the filter recall and we still have some of those lingering inefficiencies.

That I spoke about quite often last fiscal year from from the run up in volumes.

We will start to see those peel away as.

As the as the year continues but overall, it's a very good okay.

Start for us.

Why isn't as those gross margin goes.

It drops down to the operating margin for us as well and that's why you saw such a an excellent print there this quarter.

Thanks again.

Thank you one moment for our next question.

Our next question will come from Mike Matson with Needham <unk> Company. Your line is open.

Yes. Thanks.

Great quarter, obviously, but I guess I'm, just wondering why you're not raising the guidance more I mean, you beat consensus by <unk> <unk> I know you don't give quarterly guidance, but.

Massive EPS growth versus last year, we are raising the guidance range by about 15.

We've had tremendous operating leverage.

Or is there something there that.

You expect to continue for the rest of the year.

Michael Let me start Chris Let me start on revenue and then I'll ask James to comment on the margin expansion. So I think the first point I'd make is our first quarter was really a complete effort probably our best quarter to date and we do think it's a preview of things to come as we actualize our LLP.

We benefited significantly from strong volume in the U S from really the triple hit of Nexus with persona those customers outpaced the rest of the field and grew disproportionately in the quarter.

Tag, which had.

High <unk> growth in the quarter, which was outstanding and then vast gave which was right there as well so that drag effect that helps us a lot. We do expect international growth going forward. Some of that will come at a lower gross margin, we need to be mindful of that.

We've talked about the macro trends we benefited.

From from some lower cost, but also from reduced expediting as we had a better handle on our forecast and they felt better ability to meet demand and there are some below the line tailwind said I'll, let Jamie speak to it isn't that there is anything.

Ominous pending for the remainder of the year. It is our first quarter, we want to be thoughtful about that.

There are some things that we called out in our prepared remarks for example around blood Center order timing.

The uncertainty with the newly updated Russian sanctions and our whole blood filter recall that we just need to be mindful of and then.

As we've talked in the past, we do expect some customer transition in the second half of the year and plasma that we need to be mindful of very difficult to anticipate the exact timing or the extent of that and therefore, we're just going to be cautious as we forecast forward.

James Yes, so yes, it's Mike.

Kind of early so it's the first quarter end and I Echo Chris's comment on.

Big Big somewhat cautious before we would've let all that dropdown in terms of the over performance dropped down through on the quarter. We also have some.

Additional.

Headwinds coming in from FX, we expect that to.

Assuming the current rates stay where they are that's another 10 for the rest of the year and then also if you noticed our tax rate in the first quarter was a bit lower for the reasons I mentioned earlier and that that will flip around on us for the back part of the year.

Here, we will get back up to our normal recurring right.

So when you factor all those things together.

That's why.

The earnings Guide is is what you see this quarter.

Okay, I understand and then express parks.

I would assume that you are.

Turning a premium for that but I wanted to make sure.

Correct.

Potentially could drive another kind of vehicles of price uplift as customers adopt it or.

Express plus and the speed enhancements on the procedure, Mike are really part of a holistic plan that we have to further advance <unk>.

Nexus platform leadership in the market right. We're the only ones that have the persona noma Gram, which as we've talked about 9% to 12% yield enhancement, which is unrivaled.

We did already speed up the door to door time would a donor ultimately cares about and this is a this is a battle for donor right and so donors care about it as I showed up at one time and I left that another and so if we can shave.

15 to 20 minutes off the door to door time, that's meaningful for the donor express plus speeds up the procedure portion of that and as additive so.

It absolutely increases our value proposition as does the bidirectional connectivity as does.

Sweet of donor apps that.

I have been really well received we start rolling those out during the pandemic and have only accelerated into that we think about pricing holistically and you see that.

And our results and you see that in our guidance going forward, we're not going to talk about the individual components for competitive reasons, but we.

We feel we have an ability to continue to command a premium for what is a superior offering in express buses clearly part of that.

Okay got it thank you.

Thank you.

Okay.

Our next question.

One moment.

Comes from Andrew Cooper with Raymond James Your line is open.

Hi, everybody. Thanks for the question.

Maybe just first I know don't necessarily want to get into a ton of detail on it but when we think back to the prior plasma guide the commentary was for sort of mid teens ex <unk> I was wondering if you could just give an update there as to sort of.

The impact on whether their contribution is still sort of proportionately the same as it was prior and then I have one more follow up as well.

Yes, I think the base demand.

Particularly those customers who've adopted nexus and doubly so those who are on nexus with persona are leading the charge here, Andrew and straight numbers, we guided to the mid teens, we would now say for those customers. We're looking at high teens through the remainder of the year. They have clearly accelerated into this.

Opportunity as they see a bit of a benefit from some of the macroeconomic trends donors are showing up in large volumes and they're capitalizing on that opportunity. We don't expect that to slow down anytime soon.

Okay, Great and then kind of sticking with a similar similar angle here you mentioned demand for Nexus devices is a reason for building inventory I guess is that coming from new centers with existing customers.

Is it competitive wins, where they had been using other offerings can you just give us a little bit of context, there on sort of the nature of it as well as maybe the magnitude.

New center openings, if that is the case for sort of the traditional historical patterns that we've seen before.

Yes, it's predominantly new center openings Andrew.

We have share gains as well, but.

Built into our plans, but it's predominantly new center openings to meet this.

This uptick in demand.

Okay, and new centers continue to behave kind of as they have pre pandemic in terms of ramp I know that's been a topic we've talked about before.

Yes.

<unk>.

Embedded in our guidance is very.

Historical.

Take across the new centers that were opened three years ago and those that are open today and everything in between.

We are also seeing.

Some improvement in the mature centers.

That's been on again off again in the fourth quarter of last year, we saw some meaningful inroads. That's continued through the first quarter of this year, that's a bit harder to predict but but our customers are working hard to get all of their centers full and that includes the mature centers that have made meaningful improvements here in the first quarter.

Great I'll stop there. Thank you.

Thank you.

Our next question.

Comes from Joanne Wuensch with Citi. Your line is open.

Good morning, and nice quarter.

A couple of questions SG&A as a percentage of revenue came down a lot year over year.

And I'm just curious if this is a new go forward run rate. If there was something in there that helped that metric or how to think about that.

Yeah, Joanne I'll start and then offered James when it adds more to it.

We continue to make investments we are quite disciplined about breaking out our opex into really multiple categories. We look at sales and marketing separate from G&A separate from R&D and separate from freight which is a bit of an artifact but.

What we saw in the quarter, we continued to invest meaningfully building out our particularly our sales capabilities as we take vast gate global.

So youre going to see that but we do that with the demand for operating leverage we've largely held the inherent G&A cost flat, which is part of our <unk> and part of the margin expansion you see the meaningful drop off in the first quarter that just an artifact of paying our annual bonus.

And monies that were accrued for that and then it kind of washes through.

Given the outperformance that we experienced last year, we paid at the very upper end of our pay for performance programs and we have a good forecast going into the year. So the accruals just at a different level, that's really the bulk of the change.

Thank you and then go.

Alright.

The freight costs as well.

Beneficial as those have come down.

But I think the first quarter.

I wouldn't say that it will be a new normal I think it will.

Rise from here as we go throughout the year.

Okay.

Thank you My second question has to do with the current Dana launches outside the United States.

Can you just sort of give us an update on state of the Union. If you will on where you are in Europe and Japan.

Yes.

So in Europe , we had gotten the approval almost a year ago now.

A good bit ahead of schedule.

That enabled us to really accelerate our launch plans. We are building that out it's a hybrid model, we're going to go direct where the economics of those markets and the demand clearly support that and we will go through distribution elsewhere and I think the nice thing about the vast scale <unk> family of products initial.

Initially at least it can be supported by third party distributors right, we'll lean in heavily in terms of <unk>.

Training and development and work directly with the various clinicians to get them signed on.

<unk> already begun in places like Germany, which is a direct market for us, Italy, which will be more of a hybrid that's the early uptake we saw customer feedback in collision and their staff has been outstanding. So we're excited there and we're going to accelerate into that as the plan progresses the approval.

And Japan is a positive development, we need to now secure reimbursement, we think that'll happen here this quarter with any luck and will move with a hybrid model in Japan, we've already entered into a distributor arrangement.

With someone who we think is a good partner to work with long term for the Japanese market and again, we think the vast <unk> family of products right, they're highly efficacious, but theyre also quite safe.

And we know they lower the cost of care by getting patients home. The same day and frequently so we think it's a very good fit for the European and the Japanese market. The Tam there is less but but.

But it's a good opportunity it's a good chance for us to globalize our efforts, although that does require investment and that's what you see flowing through our P&L.

If I can sneak one more in.

Can you quantify of the timing of the order.

Unfavorable order that you called out.

The unfavorable O U S order.

Okay.

Can you quantify the order timing I guess I have an unfavorable nobody else has.

You had some onetime timing.

Benefit.

So yes, there are two factors to im sorry for the confusion on our end so.

We felt like the plasma, particularly the U S plasma comp year over year was a relatively.

Easier comp because.

One of our large customers in the U S did a large one time buy in the fourth quarter of fiscal 'twenty. Two so there was less ordering in fiscal 'twenty, three which is why you see such a robust quarter on quarter growth rate.

Outside the U S and blood center, we've kind of had the opposite occur right and so while we had a very good first quarter in blood center, particularly in a pheresis. We don't expect that to continue particularly in our second quarter and some of that is just the normal order timing that business tends to be lumpy, but.

Another part of it is quite important for that business at least is Russia and with.

With the sanctions being rolled out we got some preorders, particularly for platelet apheresis that we were able to meet.

It's a good margin business and plasma are good margin business and blood center that probably won't repeat throughout the year and we're working hard to get our licenses. We think it's important to take our products to those markets, but we're working obviously within the sanctions to get that sorted and it's just too early to tell how it's going to play forward.

Thank you.

One moment for our next question.

It comes from.

Michael <unk> with Barrington Research your line is open.

Hey, good morning.

I don't think this was addressed but I just wanted to ask.

And forgive me if it was but.

Was there any aspect of the plasma number in Q1 sort of augmented by maybe.

The cadence of CSL order.

Sort of being front end loaded.

No just literally the only effect was that order timing, Mike, which we had mentioned.

And that was a fiscal 'twenty two order that lowered the fiscal 'twenty three first quarter demand.

There was no order timing for this year. So just on a comparative basis. This first quarters.

The last of the easy comps I guess as they say.

Okay, Alright, and then I just wanted to.

Yes.

Sort of switch over real quick to Cardiome.

Is there any way for you guys too.

How much of the $27 two was Europe or is it just completely immaterial that that figure.

It's really immaterial Mike at this stage.

We have bold plans, but at this stage it was really immaterial, but the reality is and I think this is one of the things that's important to highlight on the strength of the first quarter and why we think it's.

Sneak peak, if you will of the AARP to come both vast gate and tag will crest $150 million in annualized revenue this year.

In the first quarter both of them grew in the <unk> in the low to mid Twenty's in aggregate and the high Twenty's and so we'll see how that plays out but that was disproportionately driven by the U S which for US. It is for most medical device companies is our highest.

Gross margin business so that.

The <unk> combination in the hospital business.

It was really powerful and drove both margin and total revenue growth for us and we're excited about that we are demanding that our international business.

Liver its fair share in that May have a dilutive effect on margins as the year progresses, but we really benefited by it in the first quarter and I think thats evidence of what those two workhorse product families can do for this company.

And then just one tiny a clarification I just want to make sure I understand when you talk about hybrid in Italy, and then in the future.

Japan, or you're talking about using both distributors and direct sales or are you just talking about using distributors in those in those markets for some products, yes, Mike that's exactly right.

Yes.

We'll grow where really nascent in those markets today and so I think we will look at this and look at opportunities to scale. The business. It is one of the biggest drivers of our.

Operating leverage in our margin expansion over time is getting to scale in those markets. If we can use distributors to help.

Either on a permanent basis or on a transitional basis, that's what's built into the plan.

Sorry, Chris let me just be slowing the uptake. So are you using any direct sales in Italy or no.

Yes, small small team, where we have privileged account relationships. Okay perfect. Thanks, great quarter. Thank you.

Thank you Mike.

Thank you.

Our next question will come from Larry Solow.

Flow from C. J F Securities. Your line is open.

Great. Thanks, Good morning, guys and echo the congrats on the good start to the year.

Any thoughts Chris I'm not sure if it touches and I missed the beginning of the call you probably haven't touched on it but just your thoughts or commentary.

CRM receptive space, obviously, some data early on.

I guess in July on CVP, any just thoughts on that and how that could impact overall plasma growth, obviously not near term, but as we look out over the mid to long term.

Yeah, Larry Thanks for the question, we have not talked about it so the anti F CRM add.

Entre into more broadly into the.

Autoimmune space is something we're watching closely.

Caveat that we don't have proprietary insight right, we talked to all of our customers who are in these end markets. We talk to key opinion leaders, we read everything that.

He has written about it but we don't have proprietary insight I would echo, which I think you are hearing from our customers, which is with the adhere trial readout.

Congratulations to our <unk>. It was it was a successful trial that's a good thing for patients, particularly given the inherent growth in demand for IAG across primary secondary and autoimmune diseases. So we'll watch this carefully.

Don't believe at this time that Theres any reason to change the underlying forecast for growth in demand for IAG given there are 8000.

Based trials underway for those indications so.

We think it will clearly play a role.

But it's unlikely to meaningfully.

Cannibalize or compressed the ultimate demand.

Certainly in the near to intermediate term, but we'll watch and we'll update as we learn more but from this point, we think it was useful to get the adhere data out there congratulations for that accomplishment is good thing for patients, but we don't think it's going to have a disruptive effect on our trajectory.

Got it great and then just a question just for James.

So it sounds like certainly the.

The lower SG&A certainly benefited from some timing.

And I know you don't maybe guide.

On gross margin specifically, but.

A pretty nice sequential improvement I know it was down year over year.

This.

We view this number is a good starting point as.

If you look out the rest of the year any color on that would be great. Thanks again.

Yes, I would say I would say, it's a fair it's a fair starting point I think we had a lot of ins and outs as well. It was also affected by.

Recall that we spoke about.

We have the lingering temp.

Temporary inefficiencies, which I had previously talking about but offsetting that we had some very favorable mix and some improvement in price. So we had a lot of ins and outs, but I think it's a pretty pretty fair representation.

For the year.

Great. Thanks, guys I appreciate it.

Thank you.

Our next question.

It comes from Dave <unk> with JMP Securities. Your line is open.

Hey, good morning, and congrats.

To follow up on the hemostasis. Thank you mentioned price in there.

Recall that in the past but.

I know you had success.

But is there anything new there or is there anything coming that we should be looking for.

I guess color around the pricing comment would be great. Thank you.

Hey, Dave Thanks.

With regards to Hemostasis management, particularly here in the U S. We have a robust.

Portfolio of additional indications additional cartridges.

Tap into that broader total addressable market and so you see some of that benefit coming through the first quarter was both equipment and disposables, but disproportionately disposables clearly our margins on disposables are more favorable so thats part of the pricing benefit and then we will continue to introduce.

We will have more to say as the year progresses, new cartridges and new indications to broaden.

Our leadership in that area, that's an area that we enjoy.

Clear leadership market share and we intend to build and expand upon it it will help price, but it will also help overall volume too.

Thank you.

And there are no other questions in the queue. This does conclude today's conference call. Thank you for participating you may now disconnect.

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Good morning, and thank you for standing by and welcome to the first quarter 2020 for <unk> Corporation's earnings Conference call.

At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During this session you will need to press star one on your telephone you will then hear an automated message advisory you. Your hand is raised to withdraw your question. Please press star one again.

Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today.

<unk> Senior director Investor Relations Treasury. Please go ahead.

Good morning, everyone and thank you for joining us for human genetics first quarter fiscal 'twenty four conference call and webcast.

And today by Chris Simon, our CEO and James <unk>, our CFO .

This morning, we posted our first quarter fiscal 'twenty four results to our Investor Relations website, along with our updated fiscal 'twenty for guidance.

Before we begin just a quick reminder, that all revenue growth rates discussed today are organic and exclude the impact of currency fluctuation.

Well also refer to other non-GAAP financial measures to help investors understand human genetics with ongoing business performance.

Please note that these measures exclude certain charges and income items.

A full list of excluded items reconciliations to our GAAP results and comparisons with the prior year period. Please refer to our first quarter fiscal 'twenty four earnings release available on our website.

Our remarks today include forward looking statements and our actual results may differ materially from anticipated results.

Factors that may cause our results to differ include those referenced in the safe Harbor statement in today's release and in <unk>.

<unk> other SEC filings.

We do not undertake any obligation to update these forward looking statements.

And now I'd like to turn it over to Chris.

Thanks, Olga good morning, and thank you all for joining today, we reported first quarter organic revenue growth of 21% and adjusted earnings per diluted share of $1, 581% growth over prior year.

It was a particularly strong start to the year with market, leading performance across our businesses delivering revenue growth and adjusted operating margin expansion, while advancing meaningful innovation and commercial milestones.

We are pleased that Diane Brian has joined <unk> Board of directors. She brings more than 30 years of leadership experience with top global technology organizations, including Google Intel and Nova signal, we welcome her counsel and expertise in technology solutions and healthcare information management.

Turning now to our business unit results.

Plasma revenue grew 35% in the first quarter North America Disposables grew 41% disproportionately driven by strong momentum in U S collections and price. Additionally, our first quarter plasma revenue growth rate benefited from unfavorable order timing in the first quarter of fiscal 'twenty three.

<unk>.

In the U S. This was the seventh consecutive quarter of volume growth exceeding historical seasonality.

We also saw strong high single digit collections growth in Europe .

This technology is expected to enable an average procedure time of 33 to 38 minutes approximately a 20% reduction from the current procedure times on the Nexus PCF system.

The launch of these new enhancements has been met with great enthusiasm from customers and we are working with them on a timely rollout, while ensuring no interruption to plasma center operations.

Moving to hospital revenue increased 14% in the first quarter North America performance was particularly strong supported by improved procedure volume and staffing levels at U S hospitals vascular closure revenue grew 27% in the first quarter with a disproportionate contribution.

New account openings, both in electrophysiology and interventional cardiology. We also continue to see higher utilization rates driven by our clinical efforts and increased procedure volumes in U S hospitals.

International expansion is on track and this quarter, we received approval for vast gate MVP in Japan, and initiate a clinical use of our vascular closure products in key accounts in Germany and Italy.

The early feedback is very positive and confirms the important role our products play in improving the standards of care.

Hemostasis management grew 14% in the quarter North America, our largest market grew 23% driven by increased utilization of TEG benefits from pricing and strong capital sales.

International growth was mixed but all of our key markets in Europe delivered strong double digit growth in the quarter.

We are pleased with hospitals performance. We are ahead of schedule on our regulatory and commercial milestones and capitalizing on improving trends in hospitals worldwide to drive additional growth.

Centers with Nexus Bcs devices.

Whole blood revenue grew 4% in the quarter as we benefited from the opportunity to serve competitors' customers in need.

We are pleased with our first quarter results of our blood Center business. However, near term, we face a difficult external environment, a voluntary product recall in our whole blood business and the timing of some commercial opportunities that may take longer to realize.

We now anticipate.

Organic revenue decline of minus two to minus 6% compared with our previous guidance of zero to minus 2%.

Revenue growth guidance from 5% to 8% up to 7% to 10%.

I'll now turn the call over to James to discuss the rest of our fiscal first quarter results and FY 'twenty four guidance James.

Thank you, Chris and good morning, everyone.

In the first quarter of fiscal 'twenty four our business demonstrated continued strength.

First quarter adjusted gross margin was 54, 2% 100 basis points lower than in the same period of the prior year.

Adjusted operating expenses in the first quarter were $98 5 million.

Flat compared with the first quarter of the prior year.

We benefited from additional savings from the operational excellence program and improving logistics costs that fully funded additional growth investments in the quarter.

As a percentage of revenue adjusted operating expenses were 31, 7% in the first quarter of fiscal 'twenty four compared with 38, 1% in the same period of the prior year.

Our first quarter adjusted operating income was $70 2 million, an increase of $25 million or 56%.

As a percentage of revenue adjusted operating margin was 22, 6% in the first quarter.

540 basis points compared with the same period in fiscal 2003 the.

The expansion in the adjusted operating margin was driven by higher operating leverage from our business and improving macroeconomic trends.

As we look at the remainder of the year, we acknowledge the challenging macro environment and anticipated impact from changes in geographic and product mix.

We affirm our adjusted operating margin guidance in the range of 20% to 21%.

In the first quarter of fiscal 'twenty for the adjusted income tax rate was 21% down from 24% in the first quarter of fiscal 'twenty three.

Share vesting and option exercises are usually front end loaded and our expectation for the fiscal 'twenty four adjusted income tax rate remains unchanged at approximately 23%.

First quarter adjusted net income was $53 7 million.

Up $24 million or 78%.

And adjusted earnings per diluted share was $1 five.

81% when compared with the first quarter of fiscal 'twenty three.

Negative impact from FX.

We updated our fiscal 'twenty four adjusted earnings per diluted share guidance to be in the range of $3 60.

<unk> to $3 90.

The midpoint of our updated guidance includes an additional <unk> <unk> headwind from fluctuations related to foreign exchange.

Moving now to balance sheet and cash flow.

Cash on hand at the end of the first quarter was $285 $7 million.

Up $1 3 million since the end of last fiscal year.

Free cash flow before restructuring and restructuring related costs was $12 million compared with $5 million in the first quarter of fiscal 'twenty three.

Compared with 80 million to $100 million previously.

In summary, I would like to highlight a few key messages that I hope you take away from today's call.

Our first quarter results were a strong start to our fiscal 'twenty four with all of our businesses contributing to growth and margin expansion.

And plasma we continued to benefit from the strong collections momentum and technology that stands apart for yield efficiency and cost per liter improvements unmatched in the plasma industry.

And hospital, we are ahead of schedule with our commercial milestones driving additional leverage in our business and capitalizing on improving trends in hospitals across the world.

With the launch of our vascular closure products in Europe , and Japan, we are establishing a new foundation for growth in the coming years.

The expansion in adjusted operating margins in the first quarter provides a glimpse of what we can continue to deliver with the ongoing transformation of our product portfolio increased efficiencies in the hospital business and additional relief from macroeconomic pressures.

While there is more work to do we feel confident in our ability to further expand our margins in the coming years.

And opportunistic share buybacks.

Thank you and now I would like to open the line for Q&A.

Thank you as a reminder to ask a question. Please press star one one on your telephone.

And wait for your name to be announced to withdraw your question. Please press star one again, please standby, while we compile the Q&A roster.

Our.

Question comes from Anthony Petrone with Mizuho America's Your line is open.

Alright, Thanks, and good morning, everyone. Congratulations on a strong start to the fiscal year, maybe a couple for Chris on plasma and then I'll follow up with Jim on margins, maybe Chris just kind of the experience in the quarter. Here. You mentioned, obviously volumes are still running ahead of the historical.

<unk>.

Collection trend, but maybe just where do you think we are in the inventory replenishment cycle amongst the fractionator is.

Clearly our best first quarter for plasma on record usually thats, our softest quarter for the year, just due to some seasonal factors and we'll see how that plays out over the course of the year. We think we're still in the early stages of this recovery when we do our back of the envelope estimates around inventory levels. We think there is a meaningful way.

To go to get to pre pandemic levels, which should be safe and given given the challenges that our customers experienced meeting customer needs and the criticality of meeting those needs. We think that the robustness that we're seeing will continue which is what gave us confidence to raise our guidance for the year and plasma after only one quarter.

We feel quite good about it we think that from conversations we're having with customers.

We think this trend will continue strongly.

In terms of the the.

The new enhancements.

Really excited by able to get this together and get the approval the release from FDA. It is a combination of software in the device itself.

Market release, working hand in hand, with a small group of customers collect some real world data further validate the claims were making.

That's helpful and then Jim maybe just a little bit on the gross margin.

Sequentially, how much of that was run off of higher cost inventories.

And price was mentioned a few times here in the press release prepared remarks, just maybe a recap of where price is coming in these days.

And again congratulations on the quarter.

Yeah. Thanks, Thanks Anthony.

So yes price did help us.

And I am comparing now to the first quarter of.

Of 23 that was a nice bump up for us as well.

Mix.

<unk> helped us on the on the gross margin line everything seemed to go in the right direction for Us mix wise, we sold more in the U S.

And that bumped up our.

Gross margin, but taking us back the other way you saw that we had the filter recall and we still have some of those lingering inefficiencies.

That I spoke about quite often last fiscal year from from the run up in volumes.

We will start to see those peel away as.

As the as the year continues but overall, it's a very good.

A good start for us.

Margin wise.

As those gross margin goes.

It drops down to the operating margin for us as well and that's why you saw such a an excellent print there this quarter.

Thanks again.

Okay.

Thank you one moment for our next question.

Our next question will come from Mike Matson with Needham <unk> Company. Your line is open.

Yeah. Thanks, Tom.

Great quarter, obviously, but I guess I'm, just wondering why why you're not raising the guidance more I mean, if you beat consensus by <unk> <unk> I know you don't give quarterly guidance, but.

The EPS growth versus last year, while raising the guidance range by about 15%.

You had tremendous operating leverage is there was there something there that you would expect to continue for the rest of the year.

And Mike Let me start.

Chris Let me start on revenue and then I'll ask James to comment on the margin expansion. So I think the first point I'd make is our first quarter was really a complete effort probably our best quarter to date and we do think it's a preview of things to come as we actualize our LLP.

We benefited significantly from strong volume in the U S from really the triple hit of <unk>.

<unk> with persona those customers outpaced the rest of the field and grew disproportionately in the quarter.

<unk>, which had.

Hi, <unk> growth in the quarter, which was outstanding and then vast Gabe which was right there as well so that dry effect that helps us a lot.

Do expect international growth going forward some of that will come at a lower gross margin, we need to be mindful of that.

We talked about the macro trends we benefited.

From some lower cost, but also from reduced expediting as we had a better handle on our forecast and a better ability to meet demand and there are some below the line tailwind said I'll, let Jamie speak to it isn't that theres anything.

Ominous pending for the remainder of the year. It is our first quarter, we want to be thoughtful about that there.

There are some things that we called out in our prepared remarks for example around blood Center order timing.

The uncertainty with the newly updated Russian sanctions and our whole blood filter recall that we just need to be mindful of and then.

James Yes, so yes, it's Mike.

Kind of early so it's the first quarter end and I Echo Chris's comment on.

Big Big somewhat cautious before we would've let all that dropdown in terms of the over performance dropdown through on the quarter. We also have some.

Additional.

Headwinds coming in from FX, we expect that to.

Assuming the current rates stay where they are that's another 10 cents for the for the rest of the year and then also if you noticed our tax rate in the first quarter was a bit lower for the reasons I mentioned earlier and that that will flip around on us for the back part of the year.

Year, we'll get back up to our normal recurring right.

So when you factor all those things together.

That's why.

The earnings Guide is is what you see this quarter.

Okay, I understand and then express clerks.

I would assume that you are.

Charging a premium for that but I want to make sure.

Correct.

Potentially could drive another kind of a price uplift as customers adopt it or.

Express plus and the speed enhancements on the procedure, Mike are really part of a holistic plan that we have to further advance <unk>.

Nexus platform leadership in the market right. We're the only ones that have the persona noma Gram, which as we've talked about 9% to 12% yield enhancement, which is unrivaled.

We did already speed up the door to door time, what a donor ultimately cares about and this is a.

This is a.

Battle for donor right and so donors care about it as I showed up at one time and I laughed at another and so if we can shave 15 to 20 minutes off the door to door time, that's meaningful for the donor express plus speeds up the procedure portion of that and as additive so.

It absolutely increases our value proposition as does the bidirectional connectivity as does.

Our suite of donor apps that.

I have been really well received we start rolling those out during the pandemic and have only accelerated into that we think about pricing holistically and you see that.

And our results and you see that in our guidance going forward, we're not going to talk about the individual components for competitive reasons, but we feel we have an ability to continue to command a premium for what is a superior offering in express buses clearly part of that.

Okay got it thank you.

Thank you.

Sure.

Our next question.

One moment.

Comes from Andrew Cooper with Raymond James Your line is open.

Hi, everybody. Thanks for the question.

Maybe just first I know don't necessarily want to get into a ton of detail, but when we think back to the prior plasma guide and the commentary was for sort of mid teens ex <unk> I was wondering if you could just give an update there as to sort of.

The impact and whether their contribution is still sort of proportionately the same as it was prior and then I have one more follow up as well.

Yes, I think the base demand.

Particularly those customers, who have adopted <unk> and doubly so those who are on nexus with persona are leading the charge here, Andrew and straight numbers, we guided to the mid teens, we would now say for those customers. We're looking at high teens through the remainder of the year, they've clearly accelerated into.

This opportunity is they see a bit of a benefit from some of the macroeconomic trends donors are showing up in large volumes and they're capitalizing on that opportunity. We don't expect that to slow down anytime soon.

Okay, Great and then kind of sticking with the similar similar angle here you mentioned demand for Nexus devices is a reason for building inventory I guess is that coming from new centers with existing customers.

Is it competitive wins, where they had been using other offerings can you just give us a little bit of context, there on sort of the nature of it as well as maybe the magnitude.

Yes.

New center openings, if that is the case for sort of the traditional historical patterns that we've seen before.

Yes, it's predominantly new center openings Andrew.

We have share gains as well, but.

Into our plans, but it's predominantly new center openings to meet this.

This uptick in demand.

Okay, and new centers continue to behave kind of as they have pre pandemic in terms of ramp I know that's been a topic we've talked about before.

Yes, I think whats embedded in our guidance is very high.

Historical uptake across the new centers, though is that we're open three years ago and those that are open today and everything in between.

We are also seeing.

Some improvement in the mature centers.

Great I'll stop there. Thank you.

Thank you.

Our next question.

Yes.

Comes from Joanne Wuensch with Citi. Your line is open.

Good morning, and nice quarter.

A couple of questions on SG&A as a percentage of revenue came down a lot year over year.

And I'm just curious if this is a new go forward run rate. If there was something in there that helped that metric or how to think about that.

Yes, Joe I'll start and then offered with James you want to add more to it.

What we saw in the quarter, we continued to invest meaningfully building out our particularly our sales capabilities as we take vast gate global.

So youre going to see that but we do that with their demand for operating leverage we've largely held the inherent in G&A cost flat, which is part of our <unk> and part of the margin expansion you see the meaningful drop off in the first quarter that just an artifact of paying our annual bonus.

And monies that were accrued for that and then it kind of washes through.

Given the outperformance that we experienced last year, we paid at the very upper end of our pay for performance programs.

And we have a good forecast going into the year. So the accruals just at a different level, that's really the bulk of the change.

Thank you.

Go ahead Frank.

The freight costs as well.

Were beneficial as those have come down.

But I think the first quarter.

I wouldn't say that it will be a new normal I think it will.

Rise from here as we go throughout the year.

Thank you My second question has to do with the Cortina launches outside the United States can.

Can you just sort of give us an update our state of the Union. If you will on where you are in Europe and Japan. Thanks, Yes. Thanks, Ron So in Europe , we had gotten the approval almost a year ago now a good bit ahead of schedule that enabled us to really accelerate our launch plans. We are building that out it's a hybrid model.

To go direct.

The economics of those markets and the demand.

Clearly support that and we will go through distribution elsewhere, and I think the nice thing about the vast scale <unk> family of products.

Initially at least it can be supported by third party distributors right, we'll lean in heavily in terms of <unk>.

Training and development and work directly with the various clinicians to get them signed on Thats already begun in places like Germany, which is a direct market for us in Italy, which will be more of a hybrid that's the early uptake we saw customer feedback in collision and their staff has been outstanding So thats where <unk>.

There and we're going to accelerate into that as the plan progresses. The approval in Japan is a positive development, we need to now secure reimbursement, we think that'll happen here this quarter with any luck and will move with a hybrid model in Japan, we've already entered into a distributor arrangement.

With someone who we think is a good partner to work with long term for the Japanese market and again, we think the vast gade family of products right. They are highly efficacious, but theyre also quite safe.

And we know they lower the cost of care by getting patients home. The same day and frequently so we think it's a very good fit for the European and the Japanese market. The Tam there is less but.

But it's a good opportunity is a good chance for us to globalize our efforts, although that does require investment and that's what you see flowing through our P&L.

If I can sneak one more in.

Can you quantify of the timing of the order the unfavorable order that you called out.

The unfavorable O U S order.

Okay.

Did you quantify the order timing I guess I have an unfavorable net dialysis.

You had some onetime timing.

Benefit.

Yes, there are two factors to I'm, sorry for the confusion on our end so.

We felt like the plasma, particularly the U S plasma comp year over year was a relatively.

Easier comp because.

Another part of it thats quite important for that business at least is Russia and.

With the sanctions being rolled out we got some preorders, particularly for platelet apheresis that we were able to meet it.

It's a good margin business and plasma are good margin business and blood center that probably won't repeat throughout the year and we're working hard to get our licenses. We think it's important to take our products to those markets, but we're working obviously within the sanctions to get that sorted out. It's just too early to tell how it's going to play forward.

Thank you.

One moment for our next question.

It comes from.

Michael <unk> with Barrington Research your line is open.

Hey, good morning.

I don't think this was addressed but I just wanted to ask.

Give me if it was but.

With any aspect of the plasma number in Q1 sort of augmented by maybe the cadence of CSL order.

It's sort of being front end loaded.

Yes.

No.

The only effect was that order timing, Mike, which we had mentioned.

And that was a fiscal 'twenty two order that.

<unk> lowered the fiscal 'twenty three first quarter demand.

There is no order timing for this year. So just on a comparative basis. This first quarters.

The last of the easy comps I guess as they say.

Okay, Alright, and then I just wanted to.

Yes.

Switch over real quick to Cardica is there any way for you guys to quad.

Quantify how much of the $27 two with Europe or is it just completely immaterial that that figure.

It's really immaterial Mike at this stage.

We have bold plans, but at this stage it was really immaterial, but the reality is and I think this is one of the things thats important to highlight on the strength of the first quarter and why we think it's.

Sneak peak, if you will of the AARP to come both vast gate and tag will crest $150 million in annualized revenue this year.

In the first quarter both of them grow in the <unk> in the low to mid <unk> in aggregate and the high Twenty's and so we'll see how that plays out but that was disproportionately driven by the U S which for US. It is for most medical device companies is our highest.

Gross margin business, so that the <unk> combination in the hospital business.

Was really powerful and drove both margin and total revenue growth for us and we're excited about that we are demanding that our international business deliver its fair share in that may have a dilutive effect on margins as the year progresses, but we really benefited by it in the first quarter and I think thats evidence of.

What those two workhorse product families can do for this company.

And then just one tiny clarification I just want to make sure I understand when you talk about hybrid in Italy, and then in the future in Japan are you talking about using both distributors and direct sales or are you just talking about using distributors in those in those markets for some products, yes, Mike that's exactly right.

Yes.

We'll grow where really nascent in those markets today and so I think we will look at this and look at opportunities to scale. The business. It is one of the biggest drivers of our.

Operating leverage in our margin expansion over time is getting to scale in those markets. If we can use distributors to help.

Either on a permanent basis or on a transitional basis, that's what's built into the plan.

Sorry, Chris let me just be slightly uptake. So are you using any direct sales in Italy are now.

Yes, small small team, where we have privileged account relationships.

Perfect. Thanks, great quarter. Thank you.

Thank you Mike.

Thank you.

Our next question will come from Larry Solow.

Flow from C. J F Securities. Your line is open.

Great. Thanks, Good morning, guys and Echo.

<unk> on the good start to the year.

Just any thoughts Chris I'm not sure if it touches and I missed the beginning of the call you probably haven't touched on it but just your thoughts or commentary.

CRM receptive space. Some obviously some data early on I.

I guess in July on CVP, any just thoughts on that and how that could impact overall plasma growth, obviously not near term, but as we look out over the mid to long term.

Yeah, Larry Thanks for the question, we have not talked about it so the anti F CRM add ons.

Entre into more broadly into the.

Autoimmune space is something we're watching closely.

Caveat that we don't have proprietary insight right, we talked to all of our customers who are in these end markets. We talk to key opinion leaders, we read everything that.

He has written about it but we don't have proprietary insight I would echo what I think you are hearing from our customers, which is with the adhere trial readout.

Congratulations to our <unk> it was.

It was a successful trial, that's a good thing for patients, particularly given the inherent growth in demand for IAG across primary secondary and autoimmune diseases. So we will watch this carefully.

Don't believe at this time that Theres any reason to change the underlying forecast for growth in demand for IAG given there are 8000.

Based trials underway for those indications so.

We think it will clearly play a role.

But it's unlikely to meaningfully.

Cannibalize or compressed the ultimate demand.

Got it great and then just a question for James.

So it sounds like certainly the.

The lower SG&A certainly benefited from some timing.

And I know you don't maybe guide.

On gross margin specifically, but.

A pretty nice sequential improvement I know it was down year over year.

<unk>.

Yes.

So we view this number is.

Good starting point as we look out the rest of the year any color on that would be great. Thank you guys.

Yes, I would say I would say, it's a fair it's a fair starting point I think we had a lot of ins and outs as well. It was also affected by the recall that we spoke about.

We have the lingering.

For the year.

Great. Thanks, guys I appreciate it.

Thank you.

Our next question.

Comes from Dave <unk> with JMP Securities. Your line is open.

Hey, good morning, and congrats.

And to follow up on the Hemostasis I think you mentioned price in there.

Recall that in the past.

No you had success.

Device, but is there anything new there or is there anything coming that we should be looking for.

And I guess color around the pricing comment would be great. Thank you.

Hey, Dave Thanks.

With regards to Hemostasis management, particularly here in the U S. We have a robust.

Folio of additional indications additional cartridges to really tap into that broader total addressable market and so you see some of that benefit coming through the first quarter was both equipment and disposables, but disproportionately disposables clearly our margins on this.

<unk> are more favorable so thats part of the pricing benefit and then we will continue to introduce and we'll have more to say as the year progresses, new cartridges and new indications to broaden our leadership in that area. That's an area that we enjoy.

Clear leadership market share and we intend to build and expand upon it it will help price, but it will also help overall volume too.

Thank you.

And there are no other questions in the queue. This does conclude today's conference call. Thank you for participating you may now disconnect.

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