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Good day and thank you for standing by. Welcome to the Second Quarter 2025 Haemonetics Corporation Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker, Olga Guyette. Please go ahead.

Good morning, everyone. Thank you for joining us for Haemonetics second quarter fiscal year 2025 conference call and webcast. I’m joined today by Chris Simon, our CEO; and James D’Arecca, our CFO. This morning, we posted our second quarter fiscal year 2025 results to our Investor Relations website along with our fiscal 2025 guidance. Before we begin, just a quick reminder that all revenue growth rates discussed today are organic unless specified otherwise, and exclude the impact of currency fluctuation and acquisitions. Our organic revenue growth guidance for fiscal year 2025 incorporates 15 weeks of revenue from OpSens due to the acquisition closing date being in December 2023. We’ll also refer to other non-GAAP financial measures to help investors understand Haemonetics ongoing business performance. Please note that these measures 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 second quarter fiscal year 2025 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 usual 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.

Thank you. [Operator Instructions] Our first question comes from the line of Anthony Petrone from Mizuho Financial Group. Your line is now open.

Thanks and good morning. Congratulations on a good print here. Maybe, Chris, I'll start off with VASCADE and then I'll have a follow-up on Plasma. Maybe to just kick off on VASCADE, Chris, you mentioned in the second half of the year in your prepared remarks, high 20s growth rate trajectory. Can you maybe walk through how many of the target 600 electrophysiology sites in the United States have adopted XL at this point? What's the rollout plan in the second half for more deeply penetrating those sites? And is there anything you can share on the pricing dynamics of XL versus the predecessor MVP device? And again, I'll have that follow-up on Plasma.

Thank you, Anthony. The introduction of MVP XL has put us back on our front foot in vascular closure. Clearly, PFA, fantastic technology, disruptive influence in the market and you see that, unfortunately, in our first quarter results where it was a setback for us. We did the limited market release. We truncated that because the results were so overwhelmingly positive and we had a lot of confidence with the product's performance. So mid-August, exactly halfway through the quarter for us, we began the launch. We are now, at this point in time, fully through 200 of our top 600 accounts. Again, feedback has been very similar to what we experienced in the limited market release in terms of ease of use and the functionality for closure, both for AFib and PFA included and for left atrial appendage closure, which is a market we didn't really have penetration in previously. So we're moving ahead nicely. In fact, if we just look at it from the results through today, if that 13-week period, which is about how long we've been on the market had been in the quarter, we would have already been talking about mid-20%s growth. We think it will be high 20%s in the second half of the year because of the continued penetration. In terms of pricing, we tend to price all of our innovation based on the value proposition. There's a clear and definitive value proposition for MVP XL in the market. It's a 58% larger collagen plug and our pricing reflects that. As we scale the business, the gross margin from that will be accretive to our overall closure business. It's not there today just given where it is in the launch. But certainly, over the second half of this year, we'll realize that benefit as well.

Very helpful. And then the follow-up on Plasma, Chris, maybe just to parse through if we exclude CSL, maybe just the pricing and volume dynamics of that base business, excluding CSL. And really, what I'm getting at, there was weather and IV shortages. So how is volume versus price in the base plasma business ex-CSL trending? Again, congrats.

Yes. Thank you. Our non-CSL business, we saw a mild pullback in total volumes, not unexpected. The growth rate over the prior two years, clearly not sustainable. The market for collections is excellent and there's a lot of foot traffic into the centers. And our largest customers are using this as an opportunity to manage inventory and to manage cost per liter. And that's where our value proposition for the integrated platform on NexSys 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 NexSys device by the end of this fiscal year, if not sooner. As we upgrade, customers are seeing the benefit faster throughputs, better plasma yields and that's driving share gains as well. So excluding the CSL business, we actually grew that business, but not on collections. We grew it on the pricing on the revenue, which, again, just reflects the superiority of the platform and the demand for the product. So we remain very bullish. The share gains are happening as we speak. They'll continue into our FY 2026, 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 4 to 6 quarters.

Thank you.

Thank you. Our next question comes from the line of Marie Thibault from BTIG. Your line is now open.

Good morning. Thanks for taking the questions and congrats on a good fiscal second quarter. I wanted to start here to talk a little bit more about the adjusted operating margin, a really nice jump in that metric, certainly more than we had expected, yet you held the guide for the year. Can you help us think about some of the 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 larger jumps, we'd be getting past the top end of your guidance. So help us think a little bit about cadence and what's actually happening behind the scenes.

Okay. That's really helpful and good to hear. Maybe my follow-up quickly here on some of the acquired products in hospital. I heard $16 million in revenue from that segment this quarter. I think it was $18 million last quarter and I noticed a little bit of a nudge down on the guidance. Can you tell us what's happening a bit with the Attune and OpSens products and the rollout there? Thank you.

Yes. Thanks, Marie. So we remain bullish on both of those acquisitions. It is slower out of the gate than we obviously would otherwise want, very different stories in electrophysiology versus in structural heart. So for EnsoETM for Attune, the challenge is PFA. And we're fully aware of PFA. Our modeling actually has PFA taking slightly more share of the market they're needing either. Some of the leading players have -- are now forecasting approaching 60%. We had it closer to 65% in our model and that still delivers nicely for the business. The challenge in the first half has been rightfully, the PFA companies are targeting our most attractive EnsoETM customers as those procedures get done on PFA versus RF, there's no role for Enzo at this time. So we've moved backwards on those. We have opened 32 new accounts and we tend to be now kind of navigating the landscape, finding the RFA users at volume. And I think that's going to continue to be an exercise for us. If I put it in context and then why we remain bullish, we have roughly 9% of the closure market on Enzo ETM today. If we are able over the next 3 years to drive that closer to the mid-teens, call it, 15%, we will achieve mid-teens return on invested capital over that three-year period. So this is by far the most accretive acquisition we've done and we think our aspirations are appropriate. They're not overly ambitious. It will take time and that's what our field force is navigating. Candidly, having XL in the bag puts them front and center in the conversation, both with PFA and RF users. So we like the direction of travel and what we're able to build there. If I switch over to OpSens and the Sensor Guidewire business, that's a classic example of going slow to go faster and further over time. Structural heart is meaningfully different than closure. So we have presence and we're building on that presence. But the learning curve and our ability to execute against that curve, I think there's a bunch of things coming out of TCT, for instance, last week that will be net positives for us and for the use of sensor-guided technology. We need to capitalize on that and we remain optimistic that over time, we will be able to. But that's part of the build-out, James just talked about investments in the second half of the year as we strengthen our clinical sales team, that's all part of the equation and what we had envisioned for the center guidewire business, so more to come. We remain optimistic. It's just being thoughtful and purposeful about the launch.

Very clear, thank you so much.

Thank you. Our next question comes from the line of Larry Solow of CJS Securities. Your line is now open.

Great thanks, and good morning, everybody. I guess, first question, which is just on the TEG market there. Chris, I know you mentioned really strong growth in the U.S., 35% and then obviously continued challenges in China. Perhaps you could just kind of give us a little more color on directionally where you see both those, the U.S. and the international markets going on TEG?

Yes, good morning, Larry. The TEG is real, like real positive development for us. We joke internally, it's the oldest launch product in med tech. Having the heparinases neutralization cartridge has really expanded the value proposition for the TEG 6S. It's accelerating the remaining conversions of TEG 5000 to 6S because it now puts the products at absolute parity, but in a site of care application, so really powerful, driving that. You see that in our results, both in the U.S., mid-30%s and in Europe in the 20%s now. So that's something we're excited about. We think we can build upon that and carry that forward. China is a different story, right? China is challenged. You've heard about it from many of our peer companies. I'm not going to go into further detail there. But to put it in context, China is roughly 5% of our corporate revenue, split pretty much evenly between Blood Center and Hospital. Within Blood Center, it's split pretty evenly between TEG, which is mostly -- it's all TEG 5000 and our cell salvage business. And the challenges we're facing right now are really pricing-related to the TEG 5000. We'll work our way through it, but there's no easy answers there and we don't expect that to meaningfully change over the second half of the year.

Got it. And switching gears just back to, just on VASCADE. You mentioned it sounds like somewhat a lot of the acceleration in growth perhaps in the back half of the year, driven by the performance of MVP-XL. How about just VASCADE and VASCADE MVP? Are those still considerable, obviously, still should be a lot of room for growth there. Are those still hanging in and doing how you thought they would after a little bit of a slowness in Q2, Q1, excuse me.

Yes, Larry, it's performing as planned. I do think PFA has been so disruptive. It sucked all the oxygen out of the room. And we did see pushback on MVP in that regard in electrophysiology. What we've targeted with the launch of XL is to go and regain the share we lost in the first quarter. And I can tell you sitting here at this point in the third quarter, we've largely regained everything we lost and then some. And that's coming where clinicians being very thoughtful. They're using XL where appropriate and then they're using MVP accordingly. And like any other kind of sales effort, there's some spring in the step and that's helping across the entire closure product line. So yes, I think we're seeing a lift across all three and we anticipate building that momentum as we move into the second half.

Got it great. Thanks, thanks very much, I appreciate it.

Thank you. Our next question comes from the line of Craig Bijou of Bank of America Securities. Your line is now open.

Good morning guys, thanks for taking the question and congrats on a strong quarter. I wanted to start with some of your comments on the VASCADE label expansion. And with the XL launch or now full launch, just kind of wanted to get your sense for pushback for maybe not having that label expansion or when you think about what that label expansion can, how it can drive XL, like, do you think it's needed or is it something that you guys just want to have going forward and maybe gives you access to some other procedures?

Welcome, Craig and thanks for the question. From our vantage point, MVP is getting, XL is getting a lot of consideration appropriately. And that's, one thing I can highlight a bit more is that the breakdown is 60-plus percent PFA, the remaining 35% or 40% is left atrial appendage closure. And that's completely new for us because we really didn't have a product that was applicable for that previously. That's exactly what we saw in the limited market release, where we have a lot of physician testimonial. They'll use it where they see appropriate. We obviously can't detail it or position it in that way out of the gate. And so, we're being very mindful about that and building the usage. We are making the label expansion a corporate priority because it's the right thing to do. And it will further reinforce and the label will reflect the appropriate use of the product over time. In the near-term, I think we've got a good market opportunity ahead of us and we expect to see continued uptake and judgment on behalf of the clinicians. Obviously, we don't promote it off-label. So we'd be really thoughtful about that.

Got it. That's helpful. And maybe just taking a step back and big picture on the longer-term opportunity for VASCADE, obviously, you guys are expecting high 20%s growth in the second half, a return to that. You guys had high 20%s growth in 2024. So when we think about the growth profile of that business, I guess, more longer term, 2026, 2027 over the next couple of years, can you maintain that high 20%s growth profile? And what are some of the assumptions, penetration that we should be thinking about in terms of the opportunity for VASCADE?

Yes. It's something we're grappling with. We know what the TAMs are and they remain really robust and significantly underpenetrated. So we do think continued accelerated growth is achievable. There is the math here. At the end of the day, if you continue to grow at 30% per annum, you become the market and we don't want to be unrealistic about that. What we look at is two offsetting effects that are really powerful that we describe as the net positive, Craig. There's less holes to be closed, right? That is a function of how the market adopts to PFA. We're going to have some dual modality coming to the market. That will certainly reduce the number of holes. We model it going from just over 3, approximately 3.2 down to the mid- to high 2s, 2.7, 2.8 per procedure. That is completely offset by our initial growth experience when we were a year and 2 years ago, where we were printing 30% growth, we were looking at a market that was growing in the low-double-digits. Now we're the mid-teens or better, right? I think there's current forecast have procedure volume in aggregate growing at 16%. That more than offsets the lack of closures per procedure. Now having XL, having MVP, having VASCADE working down market, are development plans call for smaller closure ability and pushing more into venous. It will help us with the interventional front, PCI. We think there's a lot of opportunity. Part of it, as I described, broadening the shoulders of this application. Part of it's the expansion internationally as we follow PFA and the other ablation modalities into other geographies. Japan, for an example, is a really hot market for us right now. So we think there's good room to run. We hold off on guiding exactly what's going to happen next year until the spring. But at this point, we feel really good we're back on our front foot and able to participate fully in a very interesting ablation market.

All right, great Chris. Thanks for all the color.

Our next question comes from the line of Joanne Wuensch from Citi. Your line is now open.

This is Anthony on for Joanne. I want to just switch gears to Blood Center. That margin has been a bit volatile over the last few quarters. It stepped up pretty nicely this quarter. Should we think about, is this quarter a good way to think about stable margin for the business going forward? Should we expect it to expand more as you continue to rationalize that whole blood business, just any thoughts on profitability in Blood Center going forward? Thanks.

Yes. Thanks, Anthony. Look, that business doesn't have the growth potential of our Plasma or our source plasma or our Hospital businesses. So we are in a mode of margin expansion play for the profit contribution, which has improved nicely, as you say. I would separate it out really into three component parts. There's the whole blood filters business. We've announced more than a year ago now the rationalization of that business. It's a nonstrategic asset for us going forward and we just are looking to optimize it exactly as you described. Within the remaining business, Apheresis splits in two parts. There is a plasma collections Apheresis business, which we are actively migrating to the NexSys platform. Many, many of our Blood Center customers are partnering with our source plasma customers to drive self-sufficiency. You see that in our operations throughout the Middle East, for example, but it's also happening in Canada and elsewhere in Europe. That's a powerful driver of the Plasma Apheresis Blood Center, but it's looking more and more and growing more and more like the source plasma business. On the other part of the business, the other remaining Apheresis, it's platelets and it's red cells. Folks use our technology very specifically. And we've had the courage to lean into that and price those technologies accordingly. And so this is all part of the broader rationalization. It's not an active contributor to the top line. But it is meaningfully contributing through price and mix to our bottom line, which is all part of the LRP that we outlined previously.

Helpful. And then on the hemostasis management business, I don't know if you touched on this, just any color you can give on how much of that growth this quarter was from volume? I heard utilization was up 20% versus how much of it was pricing of that new assay that you're rolling out.

Yes. So the heparinase neutralization cartridge has been a real catalyst for that business and we're driving it in the U.S. We will bring it to our global markets in due course. So that is really the single driver behind the 35% growth rate in the quarter. It is a mix of both capital as we swap out TEG 5000 for the TEG 6 success device moving from a lab-based application to something that is site of care, much more user-friendly. And it's also utilization because adding that cartridge makes the full suite of opportunities available. So we feel both of those things are combining and it is at a higher margin, just given that again, the value prop of the cartridge, we had the confidence to price accordingly and I think we're seeing the market response.

Thank you. Our next question comes from the line of Andrew Cooper from Raymond James. Your line is now open.

Hi everybody. Thanks for the questions. Maybe just first, I do want to touch on, you mentioned some more clinical investments. Can you give a bit of sense of kind of exactly what those look like? And should we think about that as being somewhat reactionary to what you've learned as you look at selling OpSens as an example and it being a little bit more complex of a sale than maybe appreciated initially? And just would love kind of thoughts around how that progresses and when we can start to see maybe a little bit of acceleration there.

Hey, Andrew. Thanks for the question. I would describe it as reactive. When we bought OpSens, did that acquisition, we ring-fenced their commercial efforts and their R&D efforts. And we've spent real time over the prior six months learning and helping choose what we're going to accelerate to bring to market sooner as we expand the profile and the value prop of those sensor guidewires. So that's all part of our plan was factored into our deal models, for example and our guidance for this year accordingly. But we do think there's real opportunity to broaden the use case for the sensor guidewires by example. EnsoETM is a little more straightforward and there's less to do there. I talked earlier on the call about what we're doing for the VASCADE family of products and how we're broadening the shoulder of those applications and making sure we are all things closure with distinctive offerings in each application. I would shift over on the Plasma business as well as we've talked previously. We have the leading share. We intend to build upon that leading share. We are building upon that leading share and we're having lots of dialogue with our -- all of our customers about whether it's the hardware or the disposable or the software, particularly DMS, where we're really the only game in town. How do we advance that to be more valuable to them to be more integrated with their operations? And that does require real investments. And probably in not-too-distant future, we'll sit down and have either an Investor Day or an R&D Day where we showcase some of these innovations because we think we have the opportunity to create the next S-curve in that space as well.

Okay. Great. That's helpful. Maybe just one more quick one. Can you give us an update on where you are in that international launch for VASCADE and maybe interventional overall? Obviously, still the early days, but maybe any sense for what that contributed in 1Q and 2Q and how we think about the curve there as you continue to build up the operational presence?

Yes. It is one of along with the label expansion and strengthening our U.S. interventional technologies field force, both sales and clinicals. International expansion is an important lever for us. We feel like we're meaningfully ahead of schedule there. There is a different market set that we enter into depending on where we are geographically. I'd highlight Japan as an absolute hotspot for us. We were able to secure really favorable reimbursement at the time of market release and you see that plying forward in the market. So that's a meaningful contributor. We're well ahead of schedule there. Europe has been more build as we go. There's a different base modality. They use much more suturing than compression. We have clear value, but there's some challenges with regards to the benefit of same-day discharge and how that's reimbursed. And we continue to work through that country by country in Europe. We're confident that we will meet our plans longer term, but it's slower going. It doesn't have quite the same rapid uptake that we saw previously in the U.S. or currently in Japan. But it's one of the three drivers, the international expansion, Andrew, and we're going to continue to lean in there. It is also part of the investment in our commercial and clinical efforts that James talked about earlier.

Perfect and I'm going to sneak one more in, if I can, just shifting to Plasma. You talked about the share gains sort of ongoing. Can you give us sense for, 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 ex-CSL with this sort of share gain over the next, call it, handful of quarters?

Yes. We'll move as fast as humanly possible based on our customers' 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. That's kind of the sequence. And then as we do that we're picking up additional share. We talked some time ago with the large customer transition out. 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 two to three type of thing, a 2/3 ratio. We're not there yet today and that's what's included in our guidance. We do expect we'll gain momentum moving into FY 2026, all of which is factored into our overall plan.

Perfect. I appreciate the time.

Thanks.

Thank you. Our next question comes from the line of Mike Matson from Needham. Your line is now open.

Yes, thanks for taking my questions. So just one more on MVP XL. 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?

Yes, Mike, thanks for the question. So there's no change to the workflow. The workflow for XL is the same as it is for MVP as it is for base VASCADE. There's really no change to the engineering design. What we are doing, beginning actually with our limited market release where we saw substantial PFA use is working with active clinicians in some of the largest leading centers and helping put the clinical evidence together of how Xcel works in that setting. We're in dialogue with FDA about the appropriate timing and structure and kind of what that submission needs to look like. That's still work-in-progress and we clearly don't control that. But I think without going too far out on the branch, I think FDA has been highly supportive of the need to expand the label and give 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.

Okay. Got it. And then there was a pretty large headwind from currency to margins and EPS in the first half of the fiscal year. 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 be, continue to be a headwind? Does it neutralize? Does it become a tailwind?

Yes. I think if at current prevailing rates, it should continue to be somewhat of a headwind. But I think I've seen rates moving around all over given the elections and some of the volatility in the global markets. So I don't want to make too much of a call there.

Okay. 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?

Yes, Mike, you did and that was included in our affirmed guidance. What we're seeing from CSL, the approximately $85 million that we talked about back at the beginning of the fiscal was their minimum purchase commitment. Through the first half of the year, they've needed more. And like all of our customers, we're going to do what we can do to respond. Roughly 70% of that approximately $100 million has already been realized in the first half. Their transition will continue. In fact, our model has it accelerating over the second half of the year. We still expect them to fully transition not later than December of 2025 per the existing agreements. But yes, it's going to be marginally higher total volume than it was from the original expectation.

Okay got it, thank you.

Thank you. And our next question comes from the line of Kristen Stewart from CL King. Your line is now open.

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?

Welcome, Kristen, and thank you for the question. Growth, both organic and inorganic remains our top priority to drive the margins, to drive our profitability and to make this all significantly more sustainable going forward. Right now the here and now and certainly in our second half of this fiscal year, our first, second and third priority is delivering on those recent acquisitions for some of our prepared remarks. We really want to deliver fully against what we're doing with EnsoETM. We want to deliver fully against the Guidewire business and the R&D expenditures that we've had, whether it's XL or HEP neutralization, they're our immediate priorities. That said, we will continue to look to be opportunistic with regards to M&A. I think tuck-ins. In fact, we've been very public about our relationship and the option play that we've put for baby shower, for example. They had an outstanding readout on their patch trial at TCT. That's moving forward and we're helping shape that submission to FDA. So that's something we will talk about in fiscal 2026, for example. But, and then you saw we did the buyback in the quarter. We'll be opportunistic about returning value to shareholders where we can and that would include debt pay down as appropriate. But M&A is part of the equation. For now it's tuck-ins. Maybe a year from now or longer, we'll talk about the next leg on the stool. But our top priority is validating our performance in Interventional Technologies and really driving home this thesis that we can be the enabling tech in a very rapid and attractive category.

Thanks for taking the question.