Q2 2025 Haemonetics Corp Earnings Call
Speaker Change: 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 you that your hand is raised to withdraw your question. Please press star one one again please.
Speaker Change: Please be advised that today's conference is being recorded I would now like to hand, the conference over to your first speaker.
Speaker Change: Oh, good Guy yet please go ahead.
Speaker Change: Good morning, everyone. Thank you for joining us for <unk> second quarter fiscal year, 2025 conference call and webcast.
I'm joined today by Chris Simon, our CEO and James <unk>, our CFO.
Speaker Change: This morning, we posted our second quarter of fiscal year, 'twenty 25 results to our Investor Relations website, along with our fiscal year 2025 guidance.
Speaker Change: Before we begin just a quick reminder, that all revenue growth rates discussed today, our organic unless specified otherwise and exclude the impact of currency fluctuation and acquisition.
Speaker Change: Our organic revenue growth guidance for fiscal year 2025 incorporates 15 weeks of revenue from opposite due to the acquisition closing date being in December 'twenty two 'twenty three.
Speaker Change: We will also refer to other non-GAAP financial measures to help investors understand human ethics ongoing business performance.
Speaker Change: 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 period.
Speaker Change: Please refer to our second quarter fiscal year 2025 earnings release available on our website.
Speaker Change: Our remarks today include forward looking statements and our actual results may differ materially from anticipated results factor.
Speaker Change: Factors that may cause our results to differ including those referenced in the safe Harbor statement in today's earnings release and in our usual SEC filings, we do not undertake any obligation to update these forward looking statements and now I'd like to turn over to Chris.
Chris Simon: Thanks, Olga good morning, and thank you all for joining.
Chris Simon: Today, we reported second quarter revenue of 346 million growth of 9% on a reported basis and 4% organically, primarily driven by our hospital business year to date revenue growth was 8% reported and 3% organic second quarter adjusted earnings per share were $1.
Speaker Change: 12, an increase of 13% from the prior year.
Speaker Change: Our growth and record financial performance speak to our agility and our progress executing our long range plan. We continue to set the standard in plasma collection accelerating center conversions and gaining share with our newest technologies, while we rapidly expand our presence.
Speaker Change: And successfully address emerging industry trends and attractive hospital markets.
Speaker Change: We have the tools and the resources necessary to achieve increasingly profitable growth in both the short and long term and to deliver significant value for our customers and stakeholders.
Speaker Change: We have momentum and we anticipate an even better performance going forward, we reaffirm our total revenue growth expectations for the fiscal year in the range of 5% to 8% and our raising our organic growth guidance to 1% to 4% up from flat to 3% previously.
Speaker Change: Turning now to our business unit results.
Speaker Change: <unk> revenue declined 3% in the second quarter and year to date after growing 11% and 22% respectively. In the same periods last year.
Speaker Change: North America disposables revenue declined 3% in the quarter and 4% year to date, primarily due to Csl's planned transition. Excluding CSL revenue grew as declines in volume were more than offset by premium pricing from technology upgrades.
Speaker Change: Software revenue was flat in the second quarter and grew 10% year to date driven by additional next link Dms upgrades, where as the only plasma collection platform provider offering an independent Dms, we have 80% share of the U S market.
Speaker Change: Europe continued to show strong collections momentum as well.
Speaker Change: We believe recent pressure on volumes is transitory as customers are readying to support additional fractionation capacity and fuel continued growth our enhanced nexus platform equips them with the tools to safely optimize center operations through increased yield and more efficient throughput.
Speaker Change: We are also using this opportunity to accelerate technology upgrades across the remaining U S. Nexus centers and expect to complete these upgrades this fiscal year.
Speaker Change: With more than $35 million persona collections to date and a strong body of real world evidence supporting the superiority of the enhanced Nexus platform, we are gaining market share in converting competitors centers. We expect the share gains will continue through the remainder of this year and into next year.
Speaker Change: Just on customer forecast, we foresee a return to more rapid collections in the near to intermediate term end market demand for ISG therapies remains strong and our large customers have plans to expand fractionation capacity over the next several years to meet this demand we reaffirm our full year fiscal 'twenty five plasma guidance.
Speaker Change: Of a 3% to 6% decline inclusive of an approximately $100 million contribution from CSL.
Speaker Change: Blood Center revenue declined 1% in the second quarter and year to date.
Speaker Change: <unk> revenue was flat in the second quarter and grew 1% in the first half of the year, primarily driven by continued plasma share gains globally and strength in the U S. Red cell collections, partially offset by fewer capital sales in the second quarter versus the prior year self sufficiency is driving international demand for source plasma and we our strength.
Speaker Change: Our global customer relationships to expand Nexus worldwide.
Speaker Change: Whole blood declined 3% in the second quarter and 10% in the first half of the year as we rationalize this franchise to expand margins based on strong performance. We are updating our fiscal 'twenty five blood center guidance range to a decline of 4% to 6% up from a decline of 5% to 7% previously.
Speaker Change: Moving to hospital revenue grew 31% on a reported basis in both the second quarter and year to date with organic growth of 16% and 15% respectively.
Speaker Change: Blood management technologies.
Speaker Change: Increased momentum growing 14% in the second quarter, and 12% year to date, driven by the U S and EMEA.
Speaker Change: In the quarter <unk> grew an impressive 35% in the U S driven by strong capital sales and a 20% improvement in device utilization.
Speaker Change: Much of this success is attributed to our new global Hemostasis Hepburn, a neutralization assay cartridge that AIDS clinicians in managing fully <unk> adult patients, particularly in CV surgery and liver transplant.
Speaker Change: We have initiated regulatory efforts to expand patient access to this product globally.
Speaker Change: Success in the U S was partially offset by continued market challenges in China.
Speaker Change: Transfusion management grew double digits in the quarter and year to date benefiting from new account openings and for safe trace TX and blood track in North America and EMEA.
Speaker Change: Cell salvage revenue declined as growth in disposables was more than offset by both capital order timing and a purposeful shift away from lower margin accounts.
Speaker Change: Interventional technologies grew 61% in the second quarter and 64% year to date on a reported basis with 20% organic growth in both periods.
Speaker Change: In vascular closure was largely driven by the successful launch of vast gate MVP XL halfway through our second quarter with a 58% larger collagen plug and workflow similar to our other vascular devices and <unk> is a game changer, enabling us to participate in the rapidly growing pulse.
Speaker Change: Field ablation market and increase adoption in procedures, such as such as left atrial appendage closures.
Speaker Change: In less than three months since full market release. This device has been introduced and nearly half of our existing accounts strengthening our leadership and enabling the treatment of atrial fibrillation across ablation technologies, while expanding our presence and left atrial appendage closures, where we had minimal use prior to this launch.
Speaker Change: With work underway to expand the label for <unk>.
Speaker Change: Current design of SK <unk> up to 14, French inner diameter, and 17, French outer diameter. We plan to further accelerate the adoption in the U S and internationally.
Speaker Change: We are seeing strong momentum in this business and expect growth for this product line to be in the high <unk> in the second half of this fiscal year driven by our success with MVP XL, improving utilization rates and an overall uptick in procedure volumes.
Speaker Change: Our newly acquired products delivered a total of $16 million in revenue in our second quarter and $34 million in revenue year to date we.
Speaker Change: We are making significant progress with the Enzo ATM esophageal, calling device, having opened 32 new centers in the second quarter. This device is now available across more than 200 accounts in line with our original expectations.
Speaker Change: We are also making progress with advancing our sensor guided technology.
Speaker Change: Savi wire is distinctly differentiate it with a high accuracy accuracy pressure sensor for instance, you hemodynamic measurements, providing crucial information to the physician in real time, and improving overall workflow for the tab or procedure.
Speaker Change: We remain confident in realizing the commercial and financial benefits of these acquisitions over time as we further expand our market share in electrophysiology and build a solid foundation in interventional cardiology and structural heart.
Speaker Change: We have meaningful market opportunities and expect growth to accelerate driven by the launches of MVP XL.
Speaker Change: TEG <unk> heparin neutralization cartridge, Enzo ATM and our sensor guided technologies in light of the growing momentum in our hospital business. We are raising our organic revenue growth guidance to a range of 14% to 17% up from the previous 13% to 16% while adjusting expectations.
Speaker Change: <unk> for the newly acquired products, resulting in a 100 basis points reduction at the midpoint of our reported revenue guidance of 26% to 31%.
Speaker Change: Before I hand over the call to James to discuss the rest of our financials and updates to our fiscal 'twenty five guidance I want to reaffirm our commitment to our L. RFP and is delivering value to our shareholders through sustainable profitable growth.
Speaker Change: <unk> product portfolio is increasingly well positioned to deliver on significant unmet needs and our commercial investments are strengthening our competitiveness. We are confident we will thrive in this dynamic environment and achieve our short and long term goals.
Speaker Change: We are navigating complex market challenges and adapting to emerging trends and opportunities. We're resilient, we find ways to deliver and we have a lot to be excited about.
James: James over to you.
James: Thank you, Chris and good morning, everyone Chris.
James: Chris has already discussed our revenue so I'll continue with the rest of our financial results and updates to our fiscal 'twenty five guidance.
James: Our portfolio evolution is having an increased impact on our business driving sustainable margin improvements in the second quarter. Adjusted gross margin reached 56, 7% up 270 basis points from second quarter fiscal 2004 with approximately 70% of this improve.
James: <unk> driven by volume and mix followed by additional contributions from price across all business units and manufacturing efficiencies.
James: These improvements were partially offset by approximately 130 basis points of headwind from foreign exchange.
James: Year to date trends reflect a similar story, having delivered an additional 140 basis point margin expansion sequentially. We finished the first six months of the fiscal year with an adjusted gross margin of 56% up 190 basis points when compared with the prior year.
James: Looking ahead, we expect further margin expansion in fiscal 'twenty, five primarily driven by an increase in momentum throughout our hospital business technology upgrades and overall higher margin business in plasma and incremental savings from our operational excellence program.
James: Okay.
James: Adjusted operating expenses in the second quarter were $112 3 million.
James: An increase of $8 7 million or 8% compared with the second quarter of the prior year.
James: As a percentage of revenue adjusted operating expenses were at 32, 5% flat when compared with the same period last year.
James: Adjusted operating expenses year to date were $227 2 million, an increase of $25 million or 12% compared with the prior year at 33, 3% of revenue.
James: The dollar increase in adjusted operating expenses in the quarter and year to date was primarily driven by the acquisitions of <unk>.
James: And attuned medical along with additional investments to support our growth momentum.
James: Adjusted operating income reached 83 $5 million in the second quarter up 15 million to 24, 2% of revenue, reflecting a 310 basis point sequential expansion from the prior quarter and a 270 basis point any.
James: <unk> year over year inclusive of an approximately 100 basis point headwind from foreign exchange.
James: Adjusted operating income in the first six months was $154 5 million.
James: Up $16 million at 22, 7% of revenue.
James: As we continue to move through fiscal 'twenty five the expansion in adjusted operating margin is becoming more pronounced reflecting impacts from our shifting portfolio mix improved operating efficiencies and disciplined capital allocation.
James: We reaffirm our fiscal year 'twenty five adjusted operating margin guidance in the range of 23% to 24%.
James: This guidance reflects our expectation of additional margin improvement in the second half of this fiscal year.
James: More than offsetting the anticipated increase in adjusted operating expenses due to the expansion of our clinical teams and investments into innovation.
James: This will help set the groundwork needed for continued margin increases into fiscal 2006, as we work towards achieving expected adjusted operating margins in the high <unk>.
James: The adjusted income tax rate was 25% in the second quarter, and 23% year to date, compared with 23% and 22% in the same periods of the prior year respectively.
James: We anticipate our third quarter tax rate to be similar to the second quarter and our full year tax rate at around 23, 5%.
James: Second quarter, adjusted net income was $67 $3 million up $7 million or 13% and adjusted earnings per diluted share was $1 12 also up 13% when compared with second quarter of fiscal 'twenty four.
James: First half adjusted net income was $109 6 million up.
James: Up $5 3 million or 5% and adjusted earnings per diluted share was $2 13.
James: Also up 5% when compared with the first half of fiscal 'twenty four.
James: The combination of the adjusted income tax rate interest expense net of interest income.
James: Changes in the share count.
James: FX had a 13th.
James: Unfavorable impact in the second quarter, and a <unk> <unk> unfavorable impact year to date when compared with the prior year.
James: We're enthusiastic about our performance in the first six months of fiscal 'twenty five despite modest changes in the revenue mix included with our updated guidance and reaffirm our fiscal 'twenty five adjusted earnings per diluted share guidance to be in the range of $4 45.
James: Two $4 75.
James: Before we move on to discuss our balance sheet and cash flow I have an additional update related to capital allocation.
James: And our second quarter, we entered into an accelerated share repurchase agreement to buy back $75 million of common stock under our previously announced $300 million share repurchase authorization.
James: This share buyback helped offset some dilution from existing share based compensation programs and return some capital to shareholders at an opportune time, given our growth expectations.
James: We have $150 million remaining under the existing share repurchase authorization and we will continue to be opportunistic with additional buybacks.
James: Moving on to balance sheet and cash flow.
James: In the first six months of fiscal 2005, we've recorded cash provided by operating activities of $21 4 million down from the $118 million in the same period last year and free cash flow of $24 million compared with $84 eight.
James: $8 million in fiscal 'twenty four while our cash flow has improved significantly since the first quarter working capital has also continued to increase offsetting an increase in net income.
James: The increase in working capital can be attributed to higher inventory levels, driven by several factors, including an overall improvement in the disposable inventory position in plasma compared to the previous year. When we were operating under critically low inventory levels.
James: The continued transition of our customers to the latest technology, which includes new bowls and bottles.
James: Additionally, nexus devices and inventory from recent acquisitions.
James: And finally, the timing of certain payments and receivables, including settlement of specific legal expenses and performance based bonus payments for fiscal 'twenty four both of which were paid out in our first quarter of fiscal 'twenty five.
James: We expect our working capital to improve in the second half of the year and reaffirm our expectation for fiscal 'twenty five free cash flow to be in the range of $130 million to $180 million.
James: Cash on hand at the end of the quarter was $299 3 million up $128 5 billion since the end of fiscal 'twenty four primarily due to our recently completed debt transactions and partially offset by our acquisition of a tune medical.
Speaker Change: And share buybacks.
Speaker Change: There are no further changes made to our debt capital structure. Following a series of refinancings that we completed earlier this fiscal year.
Speaker Change: Our debt tower consisted of $1 billion in convertible bonds are $248 million term loan a and no outstanding borrowings on the revolving credit facility, resulting in a net leverage ratio of approximately two seven times EBITDA as defined by our credit facility.
Speaker Change: Before opening the call for Q&A I'd like to provide some key takeaways from our remarks.
Speaker Change: First our long range plan financial targets remain intact, and we expect growth in the second half of this year to set a solid foundation for our final installment of the LR.
Speaker Change: As leverage and mixed benefits become increasingly more evident in our results.
Speaker Change: In plasma we are upgrading our remaining customers to the latest technology and continue to win share, allowing us to deliver meaningful growth in this business ex CSL. Despite short term impacts to collection volumes.
Speaker Change: As collections return to historical growth levels, we are well positioned to sustain our above market growth through ongoing innovation and expanded market share.
Speaker Change: Our hospital business is well positioned to sustain its outsized growth trajectory amid dynamic market trends, we are dedicated to accelerating the adoption of all our products and expanding our reach and relevance as we unlock new growth opportunities.
Speaker Change: <unk> and achieve operating leverage through scale.
Speaker Change: And finally, we will actively pursue opportunities to enhance shareholder returns with nearly $1 billion in available capacity today projected to grow up to one 6 billion by the end of fiscal 'twenty six we are well positioned to deploy additional capital for organic investments.
Speaker Change: M&A are.
Speaker Change: Opportunistic share buybacks and debt repayment.
Speaker Change: Maximizing outcomes for both the company.
Speaker Change: And its shareholders.
Speaker Change: Thank you.
Speaker Change: We are now ready to open the call for Q&A.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: At this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one one on your telephone and wait for your name to be announced.
Speaker Change: To withdraw your question. Please press star one one again, please standby, while we compile the Q&A roster.
Speaker Change: That's where our value proposition for the integrated platform on Nexus with persona and express plus and the software support is really front and center and it's enabled US now to have commitments such that we know we will complete the upgrade to our latest technology across all U S customers on the Nexus device by the end of <unk>.
Speaker Change: This fiscal year, if not sooner.
Speaker Change: As we upgrade customers are seeing the benefit faster throughput better plasma yields and thats driving share gains as well so excluding the CSL business, we actually grew that business, but not on collections. We grew it on on the pricing when the revenue which again.
Speaker Change: Just reflects the superiority of the platform and the demand for the product. So we remain very bullish those share gains are happening as we speak that will continue into our FY 'twenty six all of which is meaningfully margin accretive for that plasma business. So we feel quite good about our positioning and what we can get done here over the next four to six quarters.
Speaker Change: <unk>.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question comes from the line of Murray Thai baht.
Speaker Change: From D P I G.
Speaker Change: Your line is now open.
Speaker Change: Good morning, Thanks for taking the questions and congrats on Arlington fiscal second quarter.
Speaker Change: Wanted to start here can you talk a little bit more about the adjusted operating margin a really nice jump in that metric certainly more than we had expected.
Speaker Change: <unk> held the guide for the year can you help us think about some of the.
Speaker Change: Cost cutting you're doing I know, you're making some investments in clinical teams should we think about the increases you talked about rest of the year being more incremental certainly if we did.
Speaker Change: Larger jobs would be getting past the top end of your guidance will help us think a little bit about cadence and what's actually happening.
Speaker Change: Yeah, maybe I'll start and then I'll invite James to finish.
Speaker Change: Finish it out.
Speaker Change: As an absolute hotspot for us we were able to secure really favorable reimbursement at the time of market release, and you see that playing forward in the market. So that's that's a meaningful contributor well ahead of schedule. There Europe has been more build as we go there is a different base modality they use much.
Speaker Change: the sense it sounds like you have some visibility. So can you give a sense for the magnitude, whether it's number of centers or kind of where those are coming from and how we think about what that business can look like at CSL with this sort of share gain over the next call it handful of quarters?
Speaker Change: A C O P I O P I O P O P I O P I P I O P I O P I O P I O P
Speaker Change: Yeah, we'll move as fast as humanly possible based on our customer's willingness to accelerate. And so I think they've all been very clear. They want Express Plus because it speeds up the device in tandem with our software, the DMS software. It makes the door-to-door time unrivaled. Then they add in the plasma yield enhancement in a way that's not even in any way imposing on the donor's time.
Speaker Change: That's kind of the sequence and then as we do that we're picking up additional share We talked at some time ago with the large customer transition out
Speaker Change: We don't need to go one-for-one, given the decidedly different price points and margin profile of the businesses. In fact, it's closer to, you know...
Speaker Change: two to three type of thing, kind of like a two thirds ratio. We're not there yet today, and that's what's included in our guidance. We do expect that we'll gain momentum moving into FY26, all of which is factored into our overall plan.
Thank you. Thank you.
Perfect. I appreciate the time.
Thanks.
Speaker Change: Thank you. Our next question comes from the line of Mike Mattson from Needham. Your line is now open.
Speaker Change: Yeah, thanks for taking my question. So just one more on MBPXL. So on the labeling to get the larger French sizing, do you need clinical data there and then just the timing, can you give us any sense of the timing on when you expect to have that labeling from the FDA?
Speaker Change: Yes, Mike Thanks for the question. So there is no change to the workflow the workflow for XL is the same as it is for MVP as it is for base basket, There's really no change to the engineering design, what we are doing beginning actually with our limited market release, where we saw.
Yeah, Mike, thanks for the question.
Speaker Change: So, there's no change to the workflow. The workflow for Excel is the same as it is for MVP, as it is for Base Basket.
Speaker Change: Without going too far out on the branch, I think FDA has been highly supportive of the need to expand the label and give
Speaker Change: clinicians and patients access to what is truly the best available closure technology. So more to say as we go forward, but we are making it a top priority, Mike.
Speaker Change: Okay, got it. And then, you know, there was a pretty large headwind from currency to margins and EPS in the first half of the fiscal year.
Speaker Change: And I know no one can really predict currency movements, but with rates where they currently stand at least, what is your expectation for the second half? Is that going to continue to be a headwind? Does it neutralize? Does it become a tailwind?
Speaker Change: Yeah, I think if you know at current prevailing rates you know it should continue to be somewhat of a of a headwind, but Yeah, I think I've seen rates moving around all over You know given the elections and some of the volatility and global global markets So I don't want to make too much of a call there
Speaker Change: Okay, thanks. And then finally, I thought I heard you guys say that CSL was going to contribute $100 million this year. Did I hear that right?
was from the original expectation.
Okay, got it. Thank you.
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Speaker Change: Thank you and our next question comes from the line of Kristen Stewart from CL King. Your line is now open.
Kristen Stewart: Hi, thanks for taking the question and congrats on a good quarter. I was wondering if you could just provide some over level thinking on M&A and the environment that's out there and the need to do acquisitions going forward and what kind of areas you'd be looking at.