Q2 2024 Haemonetics Corp Earnings Call
Okay.
Good day, and thank you for standing by and welcome to the second quarter 2020 for Human Ethics Corporation earnings Conference call. At this time, all participants are in a listen only mode.
The speaker's presentation, there will be a question and answer session.
To ask a question during the session you will need to press star one one on your telephone you will then hear an automated message advising your hand is waste. Please be advised that today's conference is being recorded.
I would now like to hand, the conference over to your speaker today, Olga yet senior director Investor Relations and Treasury. Please go ahead.
Yeah.
Okay.
Good morning, everyone. Thank you for joining us for human genetics second quarter, and first half fiscal year 2024 conference call and webcast.
Joined today by Chris Simon our CEO, George strong President of our Global Hospital business and James Director our CFO.
This morning, we posted our second quarter and first half fiscal year 2024 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 fluctuations. We will also refer to other non-GAAP financial measures to help investors understand human <unk> ongoing business performance.
Please note that these measures exclude certain charges in 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 second quarter and first half fiscal year 2024 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 earnings 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.
Good morning, and thank you all for joining.
Today, we reported organic revenue growth of 8% in the second quarter and 14% in the first half of fiscal 2024 as our momentum continues to build and we advanced our leadership in plasma and hospital.
Adjusted earnings per diluted share in the second quarter was 99.
19% growth over prior year, we are raising our fiscal year 2024, total company organic revenue growth guidance from 7% to 10% to 8% to 10%, which represents an increase of 50 basis points at the midpoint of this updated range.
Our performance speaks to the transformative impact of our growth strategy focused on establishing leading positions in high growth markets to generate superior financial returns. We are delivering revenue and earnings growth ahead of our long range plan, while broadening our global presence and industry leadership by investing in <unk>.
Innovation, and taking impactful steps to support growth in our plasma and hospital businesses. Our operational Excellence program continues to drive our focus on efficiency and productivity contributing to improved operating leverage and margin expansion.
We continue to scale and rebalance our portfolio by investing in attractive growing markets, where we can add value through a unique.
<unk> solutions in October we announced a definitive agreement to acquire <unk>, Inc.
Medical device manufacturer of optic sensor technology for use primarily in interventional cardiology.
Expanding our hospital portfolio with op sensus products creates exciting growth and diversification opportunities, while providing immediately accretive financial benefits.
Additionally, as part of our growth strategy and in consideration of increased regulatory requirements. We have made the decision to rationalize parts of our portfolio, including the pro analyzer.
System and whole blood in line collection products and the associated manufacturing operations, we are committed to working closely with our customers through these transitions.
Plasma revenue grew 11% in the second quarter, and 22% year to date delivering another quarter of double digit growth on top of the 50% plus growth we experienced in the same periods last year.
North America Disposables grew 9% in the quarter and 23% year to date disproportionately driven by growth in volume and price amongst our customers on nexus with persona.
Software revenue grew 38% in the quarter and 32% in the first half due to additional upgrades to the latest next link software and market share gains as we advance our leadership as the only provider of end to end plasma collection solutions.
In the U S. The collections environment continued to be favorable notching, an eighth consecutive quarter of growth exceeding exceeding historical seasonality.
Volume growth was slightly below U S collection levels due to unanticipated supply interruptions with one of our vendors, resulting in enhanced inventory management measures necessary to support a strong rebound in plasma collections and our leading market share.
Our customers remain focused on attracting and retaining donors and achieving higher operational efficiencies Nexus is the industry standard helping them deliver against these priorities with over 21 million procedures on persona, we enable our customers to collect one 5 million liters of.
Additional plasma in just two years. This is equivalent to the average annual volume through 33 mature plasma centers, but without the real estate overhead staffing and other associated plasma center costs.
Limited market release of our New collection Bowl and express plus technology is underway. These enhancements increased procedure speed to further optimize door to door times, enabling higher plasma center throughput and improved donor satisfaction.
With multiple ongoing initiatives in our R&D pipeline, we are committed to providing our customers with the tools necessary to win in this competitive market.
Encouraged by the continued strong plasma market momentum, we are helping to enable and with confidence in our ability to work through temporary supply challenges. We are raising our organic plasma revenue growth guidance from the range of 8% to 11% to 10% to 12%.
Blood Center revenue declined 5% in the second quarter and was flat in the first half.
<unk> revenue grew 3% in the quarter and 4% in the first half driven by strong plasma and red cell collections, coupled with strong capital sales across the portfolio. We started to realize increased utilization benefits from the recent installation of Nexus plasma collection systems in Egypt, we are excited.
<unk> about the opportunity to collaborate with our blood center customers worldwide to boost the global plasma supply.
Whole blood revenue declined 25% in the quarter and 11% in the first half driven by the voluntary product recall, we announced last quarter and the strategic decision to rationalize parts of this portfolio.
In Blood Center, our focus remains on capitalizing on the growth opportunities within our <unk> portfolio and limiting margin and revenue growth dilution as a result of challenging market conditions in whole blood we.
We update our fiscal 'twenty four revenue got decline guidance for blood center from minus two to minus 6% to minus two to minus 4%.
Now over to Sue to discuss our hospital business.
Thanks, Chris and good morning, everyone I'm excited to join Chris and James to talk about our hospital business performance and our recent business development efforts, let me begin with our second quarter and first half hospital business results and fiscal 2020 for guidance.
Total hospital business revenue increased 14% in the second quarter and year to date disproportionately driven by our growth in vascular closure business.
Vascular closure grew 30% in the second quarter and 29% year to date, driven by new account openings, both in electrophysiology and interventional cardiology, we continued to see improving product utilization rates fueled by our clinical education efforts and by increased procedure volumes in the U S hospitals.
Internationally, our products are swiftly gaining recognition in Germany, and Italy, and we had a strong start to our commercial launch in Japan towards the end of the second quarter.
Hemostasis management revenue grew 8% in the quarter and 11% year to date growth in the quarter and year to date was driven by strong utilization of TEG disposables in the U S and benefits from price, partially offset by lower new capital deployment as we saw increased pressure from budgetary constraints and you.
As hospitals after some improvements in the first quarter.
As you heard from Chris as a part of our strategy to focus on products that are best positioned to sustained revenue growth and margin expansion. We have decided to end of life. Our pro analyzer system, we will work with our customers to offer our TEG <unk> system as an alternative to <unk>.
The rest of the hospital portfolio, which includes transfusion management and cell salvage grew 3% in the second quarter and was flat year to date strong performance in transfusion management was driven by continued market share gains in North America and Europe.
Cell salvage had a strong performance in the U S. As we continue to see increasing utilization in U S Hospital.
These benefits were diminished by differences in order timing among distributors outside the us.
As we look at the remainder of the fiscal year, we expect an acceleration of revenue growth in our second half, which will be driven by growth in hemostasis management and vascular closure.
For the full year, we expect our revenue growth to be consistent with the revenue growth, we delivered last year or in the range of 16% to 18%.
Now, let me add additional color about our plans to acquire options in interventional cardiology focused medical device company delivering innovative solutions based on its proprietary optical sensing technology.
This is a very exciting milestone for us as we continue to expand our hospital business with procedure, enabling technologies in high growth areas like interventional cardiology and electrophysiology with our total hospital addressable market of about $3 7 billion today ops and add about another one.
$1 billion in additional market opportunity, creating additional avenues for growth and diversification, while being relevant and synergistic to customers already using our vascular closure products.
<unk> core products include up to wider pressure guidewire that it aims to improve clinical outcomes by measuring fractional flow reserve and a vessel to aid clinicians in the diagnosis and treatment of patients with coronary artery disease and.
And Savi wire, the world's first and only sensor guided three in one guidewire that provides left ventricular pacing and pressure sensing during tab on our procedures in fact.
<unk> tended TCT in San Francisco last week, where two live cases, where broadcast featuring savvy wire and additional data was presented from the safe Tabby trial published in the journal of the American College of cardiology, highlighting the safe and effective use of savvy wire empowered procedures.
Additionally off since manufactures a range of fiber optic sensing solutions used in medical devices as part of their OEM business and other critical industrial applications.
In recent years, our focus has been on bolstering, our commercial and clinical teams and electrophysiology and interventional cardiology, resulting in a fourfold expansion of our commercial footprint.
And in strengthening of our R&D capabilities that will continue to enhance our products and expand our reach into more procedures and geographies.
With the commercial strategy set on targeting the top 600 U S hospitals, we've been steadily increasing our market share and strengthening our relationships with the top accounts performing about 90% of all procedures for EP more than 80% of all tab, our procedures and nearly 60% of PCI procedures.
We estimate by the end of our fiscal year 2024 will be in approximately 80% of these target hospitals and able to accelerate access to <unk> products in this group.
Outside of the U S. Our global reach combined with ops success internationally will allow us to create additional synergies including opportunities for cross portfolio pull through we plan to build on this acquisition and further expand our portfolio of enabling technologies within these markets.
The past several quarters, we've made strategic investments in other enabling technologies that would further complement our product portfolio and increase our reach and relevance. These investments include visscher medical a company that has developed a large bore vessel closure device called Perky seal, which is advantageous for procedures like <unk>.
And Eva.
Enrollment for the U S. IDE trial is underway with an estimated completion date by mid calendar year 2024.
Organically our business expansion efforts also include an extensive R&D pipeline focused on advancing our TEG success, Thrombose last geography system with new assays and expanding our vascular vascular closure portfolio to address new emerging intervention technologies and procedures requiring either.
<unk> or arterial access we're very excited about the future of our hospital business and the incredible opportunity we have to improve the standard of care with our procedure, enabling technologies now I'll turn things over to James to discuss the rest of our financial results and fiscal year 2024 guidance James.
Thank you Sue and good morning, everyone.
Second quarter.
Adjusted operating expenses in the second quarter or $103.6 million, an increase of $5 billion or 5% compared with the second quarter of the prior year.
As a percentage of revenue adjusted operating expenses decreased by 70 basis points to 32.6% when compared with the second quarter of the prior year.
Adjusted operating expenses, you to date, where $202.1 million, an increase of $4 million or about 2% compared with the prior year at 32.1% of revenue.
The increase in adjusted operating expenses in the quarter and year to date was related to hire organic growth investments, partially offset by lower freight expense and savings from the operational excellence program.
Adjusted operating income was $68.3 million in the second quarter and $138.6 million in the first half representing increases of $8 million and $33 million respectively.
As a percentage of revenue the adjusted operating margin was 21.5% in the second quarter and 22% in the first half up 110 basis points, and 310 basis points, respectively, when compared with the same periods in fiscal 2023.
We are enthusiastic about our first half results and the momentum we continued to experience in our business.
As we look at the second half of this fiscal year, we acknowledge a challenging macro environment volatility in foreign exchange and anticipated impact from changes in geographic and product mix.
We are updating our adjusted operating margin guidance to approximately 21% to better reflect higher leverage in our first half results.
Updated guidance also includes $20 million and target gross savings from the operational excellence program or about $6 million in net savings generating additional efficiency across our business.
The adjusted income tax rate was 23% in the second quarter, and 22% year to date compared with 22% in 2003% in the same periods of the prior year respectively.
We expect our fiscal 2024 adjusted income tax rate to be 23%.
Second quarter, adjusted net income was $57 million up $8 million or 19%.
Justin earnings per diluted share was 99 cents also up 19% when compared with the second quarter of fiscal 2023.
First have adjusted net income was $104.3 million up $31 million or 43% and adjusted earnings per diluted share was $2.03 up 44% when compared with the first half of fiscal 2023.
The combination of the adjusted income tax rate interest expense net of interest income changes in the share count and FX had a four cent favorable impact in the second quarter and a seven cent favorable impact year to date when compared with the prior year.
We're excited about our performance in the first six months of our fiscal year 2000, 2004, we are updating our fiscal 2024 adjusted earnings per diluted share guidance to be in the range of $3.75.
$3 95 or.
Or approximately 27% growth in our adjusted EPS at the midpoint of our guidance range, which includes a two cent negative impact from the below the line items I just discussed as we anticipate an unfavourable impact from foreign exchange and interest expense and our second half.
Now, let me add more detail about the portfolio initiatives that Chris discussed at the beginning of our call.
We are excited about our definitive agreement to acquire <unk> and expect this transaction to be immediately accretive to revenue growth adjusted gross margins and adjusted earnings per diluted share.
That said due to the expected close of this transaction by the end of January 2024, we expect minimal impact on our adjusted fiscal 2024 results.
Additionally, with our focus set on high growth high margin products, we are moving forward with several portfolio rationalization initiatives.
We have initiated the end of life process for our clock pro analyze our system.
And whole blood, we plan to rationalize the low margin whole blood inline collection products and keep the rest of the portfolio, including whole blood products for efficient cell processing and hospital bedside transfusions.
The rationalization of parts of the whole blood business will be executed over multiple years, as we right size or manufacturing footprint and work with our customers on transitioning them to alternative products.
Due to the size and timing of these portfolio changes, we don't envision them affecting our fiscal 2024 adjusted results.
Over time, we anticipate improvements in our gross and operating margins.
Turning now to select balance sheet and cash flow highlights cash.
Cash flow from operations for the six months was $118 million compared with $129 million last year, primarily attributed to higher Nexus P. C S inventory levels, which more than offset higher net income this fiscal year.
As a reminder, we continue to work on replenishing our inventory of Nexus P. C. S devices and expect our device inventory to continue to increase throughout the year.
Free cash flow for for restructuring and restructuring related costs with $89 million in the first half of this fiscal year compared with $66 million at the same time last year, primarily due to changes in working capital and less capital expenditures.
We are confident in our ability to generate free cash flow and we are increasing our guidance for free cash flow for for restructuring and restructuring related costs to a range of 172 $190 million to better reflect benefits from changes in our working capital and capital plans some of which were up.
Understated and our previously issued guidance.
Our financial position can you continues to provide us flexibility to operate our business and execute are disciplined capital allocation strategy.
At the end of our second quarter, we had $351 million of cash on hand up 67 million since the beginning of this fiscal year.
We also had $420 million of untapped revolving credit facility, providing additional liquidity to fund growth initiatives.
We plan to utilize the majority of our use cash balance potentially coupled with a small drawdown on the revolver to fund the acquisition of <unk> and expect our leverage ratio to be around 2.1 times adjusted EBITDA after the close allowing us to remain opportunistic with it.
<unk> M&A and organic investments both in the short term and in the long run.
To conclude I would like to summarize some key takeaways from today's call.
Our first half results were strong and we remain confident in our ability to deliver sustainable growth and margins expansion in the mid to long term, we are accelerating our momentum through additional portfolio transformation and growth focused investments throughout our business.
Plasma we are enthusiastic about continued plasma collections momentum we are taking the steps necessary to support the demand for our disposables and reinforce our market leading position with additional innovation that further reduces the cost for the year.
Our hospital portfolio is evolving and helping us create new opportunities for growth and diversification. We are committed to further augmenting our scale and broadening our presence and intervention cardiology, which will further accelerate our revenue growth and margin expansion.
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 additional M&A organic growth investments and opportunistic share buyback.
<unk>.
Thank you and now I would like to open the line for Q&A.
Thank you so much for centuries.
And gentlemen, as a reminder to ask a question you wanted to cash nine one line on your telephone.
Question 8911, okay. Thank.
Could you give me quick questions to one and only one empty.
Disarm by email.
Your first question comes from the line is antique attorney Oh can you hear me.
<unk>.
Your line is now okay.
The cooler here.
And also the recent nonsense acquisition maybe [noise].
Chris I could start with a little bit on plasma and.
And just some of the moving parts. There you did announce a few months ago, the rollout of a new system.
So wondering in terms of the drivers if he can maybe bucket between just discontinued.
Discontinued inventory catch up by the Fractionators being one driver we still have some persona upgrade opportunity. So how much did that contribute and then lastly was there any benefit from the rollout of the next generation plasma system and then I'll have a couple of follow ups.
Good morning, Anthony Thanks for the questions with regards to plasma we remain very bullish near intermediate and longer term right. This is yet.
Yet or a quarter of double digit growth above seasonality historical seasonality and the momentum continues there I think that's closely related to what the industry is estimating is potentially as much as $20 million loss collections through the pandemic that as robust as the collection.
<unk> is today or.
Estimates are that are in our fractionators are doing everything they can however, they're probably just keeping pace with and market demand that did not in any way slow through the pandemic. So there's a meaningful gap, they're keen to close that gap, we're doing our part particularly through.
Nexus with persona to help them close that gap and I think you see that in our results.
Year to date and certainly through the second quarter with regards to the enhancements we've may both the express plus and.
Upgrades to the device in the Bowl itself. We are now in limited market release, it's performing as advertised and we're really excited about the additional benefits in procedure time, and ultimately door to door time and the associated toner sat so on one plan, making good progress we are taking.
A step wise approach because it's a meaningful set of changes and we want to make sure that we're collaborating real time with our customers who are in the process of updating this at the <unk>.
Supply issues were a challenge and I'll elaborate on that just a moment, we we have multiple suppliers for them up here hold on her and she was on the corner, maybe just one on piano to the opportunity in your side.
I'm just wondering.
Provide an outlook on piano teal too versus the expectations in the market.
Large heads out there.
Anthony are you still think this is all.
Oh. Thank you. Thank you, Chris and then lastly, and I'll I'll hop in queue is do you have.
Any update you can provide just on CSL contribution in the quarter and as we look over the next couple of years, where where they may fit in the mix. Thanks again.
Yeah, let me pick up on a point that I was making earlier, which is the the challenges we had in the quarter were specifically related to supply for one of our ingredients and in that regard we have multiple suppliers one of them had a real issue it happens to be the largest of the suppliers that we rely on.
We've worked our way through that but it did require us to put in place a set of measures that included taking our inventory levels down and some of our customer inventory levels down as well. We don't believe we have lost any collection volume in aggregate. It's just a timing issue in the second quarter versus the second half of the year, probably more so than the fourth.
Quarters way, we estimate it but but that will come back in terms of CSL, they're doing their part to close. This gap is all of our customers are in their growth in our portfolio was proportionate.
To our other customers.
Mmm.
Thank you so much.
Your next question comes from the Lions, Arizona, a C. G M Securities you're right now okay.
Mmm.
We do go to for Larry This morning, and I will try not to ask any novartis questions.
Just two two quick ones.
Related to your margins I guess it sounds like you did a pretty good job.
Going through the reason for the margin decline in the second half versus the first half as imply that in your guidance. If I look out of a long term goals of getting to the high twenties margins can you help us bridge that gap through a combination of just the end of life stuff that you talked about and then the.
The addition of the acquisitions and some of the leveraged you're saying there.
Yeah sure it's James.
Yeah, so so overall you're right.
The longer term.
Play for Us really is.
Leverage I would say.
And that is.
You know just a simple our revenues are are operating income has to grow.
More quickly than our our revenue and.
It it's driven really I would say bye bye bye 361 is favorable mix towards the more profitable.
Hospital products and certainly <unk> is a.
A part of that moving forward in the future. The second part is continued focus on our cost of goods and improving.
Whether it's through volumes are through our operational excellence program or the.
The margins gross margins that we have you know we we have a target there to have a high fifties low sixties, so that will that will certainly help.
Drive it as we move forward in the third one really you know as the as the volumes being pushed through those three things combined is what gets you to the the higher twenties and yes. We're I'm glad you brought up options were excited about that one and suddenly that will that will help contribute as we move forward.
And then just looking at your new free cash flow guide, obviously nice increase there. It sounds like there was a little bit of conservatism on your part as it related to working capital, but can you can you kind of go through the the revised capex guidance and how much of that is just lower expenses versus timing and push up to the next year.
Yeah sure. So overall cash flow very strong for the quarter, we had $351 million in cash.
90, almost $90 million in free cash flow for the for the first half of the year. Our initial guidance was was I would say understated by the combined effect of having.
Too much capex, though and over estimate on Capex and then an underestimate on <unk>.
Some working capital sources of cash some benefits and so we took the opportunity to.
Correct that.
And update that here in our in our with our disclosures I think that was more I wouldn't say, there's anything really changing for us in terms of the underlying capital plan.
Longer term.
Our capex should remain fairly fairly consistent.
And I feel like the cash flow generation of the business is a real strength for us that will will utilise going forward.
Sounds great I'll hop back in the queue.
Thank you so much.
Next question comes from the line and you could play a feeling teams can you spell <unk>.
Thanks for the questions maybe.
Maybe first just.
Hoping you could give a little more contacts on sort of the supply disruption on plasma and maybe from a dollar basis, what that meant because like you mentioned optically. It does look like the revenue growth was a little bit slower than the typical seasonality, but you're calling out and markets that were a little bit better. So just if you could help us bridge the gap on a on a numbers basis that would be wonderful.
Yeah, and or what I would say about that is.
We we had advanced notice on part of this and some of it was just in the moment. Our response, what we were able to do is.
Ramp up production from other suppliers, which is what gives us confidence.
Very situational in very.
<unk>, we don't expect this to.
To be a problem in our second half or beyond so.
See that in our guidance and why we had confidence to raise guidance for plasma revenue specifically in terms of where we were we were required to take our inventory levels down we typically hold.
Something north of.
30 days inventory for that product, we are below that now.
In the field our customers don't have.
Real storage capacity across a 1200 collection sites that we serve so they typically have two to three weeks in many cases, we've cut that in half as a result of this and then we've got it into a <unk>.
Focus on micro focus on how to make sure.
That we don't turn those reductions into stock out so we're in the process of it at the end of the day.
I can sit here and tell you with confidence that we will ship every ball we make over the second half of the year to meet the growing demand third quarters, and then we forecast that this has always or almost most robust quarter of the year. If we get any reprieve from demand in the fourth quarter will use that to rebuild inventories first our customers and then our own.
So.
The effect the net effect to answer your question directly is reflected in our guidance and we have a lot of confidence that we can make up for it in the second half.
Okay that is that is super helpful. Maybe just one more sticking with plasma.
You mentioned in the prepared remarks and share gains on the software side wondering if you're seeing anything or or there's anything to report on.
The collection device side, as well anything you're hearing or or any potential to takes care, especially now that you'd go to market with at.
At least some talking points unexpressed class and eventually Apple roll out there just wondering if.
If anything changing in the competitive landscape from that perspective.
Yeah, we continue to be very bullish on our competitive advantage. We're absolutely convinced as I said in the prepared remarks that next is is the industry standard.
The fully integrated collection by directional communication.
Superior donor response to a quiet well functioning system and so we feel quite good about that the upgrades software were meaningful tailwind for us in the quarter and that's great in terms of the actual device placements actually when you go through our inventory in some regards we've slowed the pace of place.
Not because of any drop in demand back the opposite but with our customers are becoming very focused on fleet optimization getting more done with the existing devices. So we've got active programs. There so device counts not the right metric on this we continue to look at turn rates.
Which continue to go up, particularly and this is real driver for growth for us in the quarter, our customers with persona outperformed the rest of the field meaningfully driving our growth. So not only are they collecting more per donation, but they're actually kind of pushing the front edge of that and I think that's a reflection of our ability to recruit and retain donor so.
Again quite bullish on the system and with regards to the express plus and the speed up that's in the market. We purposely done a limited market release working with a handful of customers can make sure there's no disruption, but but it is in the market. The feedback to date has been outstanding.
Great I appreciate it I'll stop there.
So much.
Your next question comes from the line O nine Madison is can you tell me the.
Company. Your line is now open.
Good morning, just a few of the options deal. So I guess first or you.
More excited about their that's how far opportunity to visualize so far with off the wire or the savvy wire haver opportunity and then are you gonna sort of I assume they perhaps some sort of salesforce. So I guess that would be integrated with your existing cut off that for closure salesforce and you'd have a single group selling.
Both product lines.
Mike Thanks to the questions I'll start an island bites due to comment we are very optimistic about the deal has to recognize that we're in.
Interesting period, where.
They are in the process of soliciting shareholder approval. So it will be somewhat guarded and what we say just because we.
When will it be respectful of that process in terms of the of the assets right. We actually define it in three parts were very enthusiastic about savvy wire, we think what savvy wire can do in the tab or space and more broadly in intervention will is super exciting and we are in the very very early innings of that for sure.
After y or an opt to monitor the second piece.
Great Guidewire real real interesting potential and support there. So we intend to lean in let's do talk about that specifically to help make that product everything it can be there's a third piece, which is their OEM business, which.
We are typically not and OEM.
Manufacturer in this case, when you're talking about the blue chip companies that make up their customer base were inside it excited to lean in we're going to secure those relationships and build upon them, where we can we think it's a really attractive market in the underlying economics of that business do not look like your traditional OEM business. They look.
Much more like the core portfolio. So candidly all three aspects of options and what they have been able to achieve standalone basis are exciting to us and we think we can add add real leverage too.
Mike Thanks for the question.
Do I would just add that.
This really does for US is it really expands our portfolio and intervention cardiology.
Compliments the success that we're already having with the vascular closure portfolio. So there's some really nice called synergies there and you've heard us talk about it before we've targeted the top 600 centers across the U S that drive about almost 90% of all EEP procedures.
Equally concentrated in procedures like Tom where that top 600 also drives over 80% of all to have our procedures. So we think there's really nice synergies there an acquisition of options gives us sort of reach and relevance to leverage the sales force that we also have but also complement the team that they have.
As well so.
So we're really excited about it and really starts to underscore the commitment that we have to this space and the growth that we're looking forward to it.
Okay got it. Thank you and then just in the Plaza business with Express plus can you just remind me are you getting a price premium for that.
Technology.
So I'm like we haven't broken out specific expectations, there what I would say in general and I think we're living into this quite specifically and we have superior technology, we aspire to compete on innovation and we of course would expect a premium for that innovation in all cases, we translate.
To a specific benefit.
Not as features an attribute but an economic or sooner.
Don't our satisfaction benefit that manifest for our Senators Express buses certainly part of that but we haven't broken out any specific expectations there.
Okay got it thank you.
Thank you so much.
And your next question comes from the line of my <unk>.
A couple of questions I guess, the first starting with the expected acceleration in hospital is I guess first anything you can share in terms of attraction.
The vascular closure in Europe, and it is sort of a pick up there.
Material part of the acceleration you expect in the second half.
Oh, let's do take that directly thanks, Mike.
I would say Mike. Thanks for the question most of the material growth that we're going to see is going to continue to come out of the U S. We've launched as I said in my prepared remarks, we've launched in in Germany, and Italy, and we're starting to see accounts coming on board in those two countries and we also just add a launch but it started in.
Japan on September 28th we did our first cases in Japan, we got reimbursement in Japan, starting at the end of September. So we're really excited about what we're doing in Japan, but I would say for the year the material growth that's going to come from that portfolio is still driven.
Disproportionately by the U S.
And then.
Switching over to Plaza.
I'm just wondering so I think roughly a couple of quarters ago. You said, Hey, you know, we we think we have a minimum order commitment from CSL of slightly above $100 million for physical 24, and then I think he termed it a meaningful commitment for physical 25.
I guess my question is is the expectation you guys had a couple of quarters ago is that still the case or does that in any way shifted.
Mike Your recollections exactly right and there's been no additional developments there we're working collaboratively with CSL in all of our customers to meet their accelerated demand. So.
As I said earlier, they're participating fully in the growth that we're experiencing this year and we expect as we communicated before a substantial contribution again and our fiscal twenty-five but we'll have more to say about that when we guide for 25 in may.
Okay, Great and then just I.
Just wanted to clarify on the on the rationalization of the products and Blood Center and I guess, the hope for transition it do you.
Guys expect and I understand it's going to take place over over multiple years, but do you guys expect any sort of net revenue loss at the end of this I mean, how much how much revenue are we actually talking about in terms of current.
Current contribution.
Yeah, it's an interesting dynamic for us because we've taken a.
Micro look at this code by code skew by skew.
We are definitely influenced as we said in the prepared remarks by.
The product recall some challenges that have arisen as a result of that the increased regulatory burden that these products would face.
For CE, Mark and other approval via Emdr IBD are so we've kind of put at all in the mix and taken a hard look and said the best path for US is to end of life. Those specific codes so longer term not this year beyond what's in our guidance, but longer term there will be.
A dampening effect on the overall revenue from that portion of the portfolio. It's a modest portion of the blood center portfolio, which is the smallest of our three businesses as you know we.
We do not expect any negative effect on the overall contribution are actual margins and packed our our margin percent will increase as a result of delisting these products but.
More on that when we guide for 25.
Okay, great. Thanks, a lot of nice quarter.
Thank you so much.
And there are no further questions at this time.
<unk> today's conference call. Thank you for participating and you may now disconnect everyone you have a great day.
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