HAE - NYSE

Good day, and thank you for standing by. Welcome to the Haemonetics Corporation First Quarter 2026 Earnings Call. [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 today, Olga Guyette, Vice President, Investor Relations and Treasury. Olga, you have the floor.

Good morning, and thank you for joining us for Haemonetics' First Quarter Fiscal Year 2020 conference call and webcast. I'm joined today by Chris Simon, our CEO; and James D'Arecca, our CFO. This morning, we posted our first quarter fiscal year 2026 results and full year fiscal 2026 guidance to our Investor Relations website. The same information was made available via the press release issued this morning. As we provide our business and financial update this morning, I would like to remind everyone that we will use both reported and organic revenue growth numbers that exclude the impact of FX, the divestiture of the whole blood business and the exit of liquid solution products. Organic revenue growth ex CSL also excludes the impact of the previously discussed transition of CSL's U.S. disposables business. We will 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. A full list of excluded items, reconciliations to our GAAP results and comparisons with the prior year periods are provided in our first quarter fiscal year 2026 earnings release available on our website. Our remarks today include forward-looking statements, and our actual results may differ materially from the 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 other SEC filings. We do not undertake any obligation to update these forward-looking statements. And now I'd like to turn it over to Chris.

Thanks, Olga. Good morning, everyone, and thank you for joining. We started our first quarter fiscal 2026, the fourth and final year of our long-range plan by delivering solid results and advancing toward our ambitious growth targets for revenue, earnings, margin and free cash flow. We reported revenue of $321 million, down 4% due to the anticipated $52 million impact from portfolio transitions, but up 13% organically ex CSL. Strong growth in our base business, margin expansion and the most recent share buybacks drove 8% adjusted EPS growth to $1.10. Our business is straightforward with nearly 85% of total revenue driven by 3 core products: NexSys, TEG and VASCADE, all of which are concentrated here in the U.S. This evolving portfolio provides the right balance of focus and resilience, enabling revenue growth and continued margin expansion despite macro and market challenges. In Plasma, we're reinforcing our global leadership through NexSys technology upgrades and share gains. In hospital, strong adoption of TEG 6S continues to fuel growth in blood management technologies, while we take decisive actions to strengthen execution in Interventional Technologies through key leadership additions, organizational realignment and targeted commercial initiatives. Moving to our businesses. Our hospital business, the largest in our portfolio with 2 core growth drivers delivered $140 million in revenue in the first quarter, up 4% reported and organic. Strength in Blood Management Technologies more than offset temporary softness in Interventional Technologies, reflecting the resilience of our diversified portfolio and multiple drivers of performance. Blood Management Technologies grew 14%, led by another standout quarter in hemostasis management, which delivered 22% growth overall and 27% growth in the U.S. Performance was fueled by strong TEG disposable utilization, continued rapid adoption of the global hemostasis HN cartridge, accelerated new account openings and customer conversions from the lab-based TEG 5000 to our advanced point- of-care TEG 6s system. The BMT franchise also benefited from continued growth in transfusion management, partially offset by distributor order timing in Cell Saver. Interventional Technologies declined 7% in the quarter, primarily due to tough comparisons from prior year OEM destocking in sensor-guided technologies and PFA-related pressures in esophageal cooling, which were anticipated in our fiscal '26 guidance. Vascular Closure grew 3%, led by 6% growth in MVP and MVP XL. This was partially offset by continued softness in our legacy VASCADE, concentrated in lower growth coronary and peripheral procedures, representing about 15% of Vascular Closure revenue. Despite increased competition, we remain confident in the clinical and economic advantages of our vascular closure portfolio. We view recent softness as executional, not structural, and we have taken decisive steps to strengthen our performance. With new franchise leadership, including several key hires, a more clinically focused sales force and targeted commercial initiatives underway, we expect to regain momentum in the second half of FY '26 so that Vascular Closure can contribute to revenue growth and margin expansion. We are reaffirming our full year hospital guidance of 8% to 11% reported and organic growth, reflecting strong momentum in Blood Management Technologies, which enables us to drive meaningful revenue growth and margin expansion as we work to strengthen our Interventional Technologies franchise. Moving to Plasma, where NexSys, our third and largest growth driver, delivered $130 million in revenue in the quarter, down 4% on a reported basis and up 29% organic ex CSL, driven by favorable impact from our prior Persona and Express Plus upgrades in the U.S. and a onetime revenue benefit from the renegotiation of a long-term software agreement, which accounted for roughly half of the organic growth in the quarter. This agreement reinforces our 80% market share in plasma DMS software and underscores the strength of NexLynk, which, when integrated with our broader Nex platform, delivers unmatched value to customers. Consistent with our expectations, growth in the U.S. plasma collection volume was in the low single digits. We are reaffirming our full year fiscal 2026 plasma guidance, including a reported revenue decline of 7% to 10%, but organic growth ex CSL of 11% to 14%. Growth is expected to be supported by price benefits from prior technology upgrades, continued share gains and the possibility of a modest recovery in U.S. plasma collections in the back half of this fiscal year as customer yield and productivity gains annualize. Blood Center revenue declined 22% on a reported base to $52 million, reflecting the divestiture of the whole blood business. Organic revenue grew 4%, driven by continued strength and favorable order timing in the core apheresis portfolio. We are reaffirming our full year guidance of 23% to 26% decline on a reported basis as we fully anniversary the Whole Blood divestiture and a 4% to 6% organic decline as we continue to streamline the apheresis portfolio and reallocate resources to higher growth areas. Our revenue outlook for the corporation is firmly on track, driven by strong performance in our growing and increasingly profitable base businesses. Even as we navigate $153 million in planned portfolio transitions, our 3 core products position us to deliver robust organic growth ex CSL, expand margins and strengthen our leadership in the markets we serve. We are reaffirming full year revenue guidance of 3% to 6% reported revenue decline, but 6% to 9% organic growth ex CSL. Over to you, James.

Thank you, Chris, and good morning, everyone. As you heard from Chris this morning, we're off to a strong start to fiscal '26, delivering solid financial results and meaningful margin expansion in the first quarter. Our financial performance reflects disciplined execution across the organization and benefits from our strategic portfolio transformation, including the divestiture of the low-margin whole blood business, our leading innovation in plasma and sustained growth momentum in TEG. Productivity initiatives across the enterprise are helping us better align our resources, and those efforts are beginning to show up in our results. In the first quarter of fiscal '26, the adjusted gross margin reached 60.8%, up 550 basis points year-over-year, driven by the benefits of our Persona technology and price initiatives across the portfolio, favorable product mix and a onetime 210 basis point benefit from license fees associated with the renegotiated plasma software agreement Chris referenced earlier. Adjusted operating expenses in the first quarter were $118 million, an increase of $3 million or 2% compared with the first quarter of the prior year. The modest increase in adjusted operating expenses reflects targeted R&D investments to support innovation and long- term growth while effectively managing G&A and other overhead costs. Despite a $52 million revenue headwind in the first quarter, adjusted operating income increased 9% to $78 million or 24.1% of revenue, up 300 basis points year-over-year. We expect these gains to build throughout the year, supported by continued share gains in plasma, strong momentum in TEG, improving contributions from Interventional Technologies in the second half of this fiscal and additional savings as we scale our operations to support our transformed portfolio. We are reaffirming our fiscal '26 adjusted operating margin guidance of 26% to 27% with stronger margins anticipated in the second half as product mix, stronger commercial execution and continued cost discipline increased operating leverage. The adjusted income tax rate was 24.9% in the quarter, up from 19.9% last year, reflecting lower benefits from performance share vestings. For the full year fiscal '26, we expect the adjusted tax rate to be approximately 24.5%. Adjusted net income was $53 million, up 2% year-over-year and adjusted diluted EPS was $1.10, up 8% from Q1 of fiscal '25. The higher tax rate was a headwind in the quarter, largely offset by the recent $150 million share buyback. We are reaffirming our full year adjusted EPS guidance of $4.70 to $5, which reflects the benefit of disciplined capital deployment. This includes the offset of a higher expected income tax rate and interest expense with a lower diluted share count as a result of the most recent share buyback as well as the assumed use of cash on hand to retire the remaining $300 million of 2026 convertible securities at maturity. Turning to cash flow and the balance sheet. We generated $17 million in operating cash flow in the first quarter, driven by improved working capital management, particularly in inventory. Capital expenditures were $3.8 million, and we placed $11.5 million worth of devices at customer sites, reflected as an increase in CapEx and a reduction in inventory, but with no impact on cash outflow for the period. Free cash flow was $2.5 million, a significant improvement from the $17 million cash outflow in the same quarter last year, predominantly as a result of favorable working capital. As a reminder, first quarter free cash flow tends to be lower due to typical seasonality and the payout of prior year accruals, including performance-based compensation. We expect stronger cash generation over the remainder of fiscal '26 and are reaffirming our full year free cash flow guidance of $160 million to $200 million with a free cash flow conversion rate above 70% of adjusted net income, reflecting our renewed emphasis on cash discipline and capital stewardship. Let me also add a few comments on the balance sheet, which remains a key enabler of our operational resilience and strategic optionality. We ended the quarter with $293 million in cash, down $14 million from fiscal year-end, reflecting additional strategic investments. Net leverage, as defined in our credit agreement, was 2.53x EBITDA at quarter end with no material changes to our debt structure. We maintain strong liquidity and financial flexibility, supported by up to $1 billion in additional available capacity by the end of this fiscal year, including full access to our $750 million revolving credit facility. This positions us well to meet our obligations, fund operations and pursue other value-creating opportunities, including share buybacks when the opportunity arises. In closing, I'd like to reinforce some of the key messages from our call. Fiscal '26 is off to a strong start, and we remain on track to meet our full year guidance and long-range plan targets, including low double-digit compounded annual growth rate in revenue and mid-20s adjusted EPS CAGR, excluding CSL, adjusted operating margin expansion in the high 20s in fiscal '26 and cumulative free cash flow of $600 million to $700 million. Revenue growth and margin expansion are largely driven by 3 key products: plasma, hemostasis management and vascular closure, with 2 outperforming, highlighting the resilience of our diversified portfolio. We are confident in our ability to meet financial objectives. Our plasma business continues to outperform and is expected to be larger and more profitable than originally assumed in our long-range plan by the end of this fiscal. IG demand remains strong, and we continue to grow our share both in the U.S. and Europe and establish our portfolio as the leading solution for driving efficiency and reducing cost per liter for our customers. Strong momentum in TEG is giving us confidence in our ability to deliver on all financial commitments while we work to position our Interventional Technologies franchise for long-term sustained success supported by new franchise leadership, a bifurcated commercial structure and a renewed commercial strategy. With renewed focus on free cash flow, strong balance sheet flexibility and ongoing margin expansion, we have the tools to invest in organic growth, meet debt maturities and build a foundation for sustained long-term value creation for our customers and shareholders. Thank you. Operator, please open the line for questions.

[Operator Instructions]. Our first question comes from Rohin Patel with JPM.

JPMorgan Chase & Co, Research Division It's Rohin. I want to start with plasma. You had a really strong performance in the quarter. Is there any detail that you can provide on the drivers of this? You'd initially communicated limited collections recovery until the second half. So is it fair to assume this is primarily share gains. You also called out a onetime revenue benefit from software, I believe. What was the contribution from that in the quarter? And how should we think about the new growth trend settling out over the course of the year, given the guidance staying put?

Rohin, it's Chris. Thanks for the question. Yes, we're really enthusiastic about what the plasma team is delivering, driven by our innovation, both for pricing and share gains. Our plasma franchise is stronger than it has ever been. It is larger. It is faster growing. It's increasingly more profitable and more diversified. And what you see in our first quarter results is the benefits of that. We had some ongoing price benefit from technology -- innovative technology that was rolled out last year. all of which is contracted for and the beginnings of this more rapid share conversion, which will gain momentum over the course of this year, again, already contracted for. So we feel good short and long term. As you point out, the software agreement was an important contributor. Roughly half of the growth, that 29% growth quarter-over-quarter was driven by the software agreement. But the remainder, 14% or 15% is at or slightly above the high end of our guidance range. We anticipated the software agreement this year. We were uncertain in terms of the exact timing. And the real benefit of that software agreement, obviously, it's contributing to the quarter and it's very profitable. But what that does for us is essentially solidify our position with roughly 80 share of the U.S. VMS market. And so that's really powerful for us. We've talked about this before, but the software is our secret sauce, the stand-alone software. It makes the bidirectional connectivity possible. It helps roughly 1,000 centers that we support in the U.S. gives us deep insight and a level of connectivity that we are the only 510(k) approved DMS software available for commercial sale in the U.S., and we just advanced that leadership. So we're quite proud of it.

JPMorgan Chase & Co, Research Division And I also wanted to ask on the hospital business. and specifically, interventional technologies. You talked to roughly 3% vascular closure growth in the quarter. And I may have missed this, but what was the MVP, MVP XL growth rate, and is there anything that you can speak to just with regards to the recovery in the legacy VASCADE product or anything else you're seeing on the demand front worth calling out and how you see that playing out over the course of the year?

Thanks, Rohin. Vascular closure, VASCADE specifically, one of our 3 core growth drivers. It's the one that is performing less well, and we certainly struggled with that in the quarter. To your question specifically, for MVP and MVP XL, we saw roughly 6% growth. There's a number of factors there. Some of it is our international business in Japan, in particular, which was like 700 basis points of our growth last year, has come back down. That's anticipated was part of our guidance. It's the changeover to PFA and some work we're doing to regain our positioning there. But more broadly, you're right, it is some executional challenges. It's things that really across all 3 products, but particularly base VASCADE, it's roughly 15% of the total closure opportunity for us. But in those PCI procedures, we have more to do to regain our competitiveness.

Our next question comes from Anthony Petrone with Mizuho Americas.

Mizuho Securities USA LLC, Research Division Congrats on clean quarter here, particularly in plasma and at the margin. Maybe one on plasma, one on hospital. On plasma, you spoke quite a bit past few quarters. about the share gain tailwinds here. So maybe just given that the installation cycles take a little bit of time. There's multiple contracts that have reset what do you think the timing is to have those share gains fully deployed at the center level? And can you quantify actually what that can mean just in terms of kind of a growth tailwind to the business? And then I'll have a follow-up on hospital.

Yes. Thanks, Anthony. So the price increases propelled us through most of last year and through most of this quarter as well. The share gains come in on top of that. They are fully on track, actually ahead of schedule, which is great. We're finding tremendous demand for those customers who want to get more of their network on the best available technology. So that will continue to gain momentum. In fact, that's going to be the primary driver of what we estimate will be that 11% to 14% organic growth for the year, and we definitely want to push into that. Some of that will carry over into FY '27. It's an ongoing cycle, as you pointed out. But we also -- I mean, this is -- when I step back, right, our competitive differentiation, as I said, we significantly strengthened the business. We've now -- last year was a major milestone. We transitioned all of our U.S. customers to NexSys with Persona and Express Plus. This year will be about expanding on the agreements we've reached with 2 of the large collectors to get more of their network converted over, and that's an exciting opportunity as well as what we're doing in Japan with the Red Cross. It's -- I pointed out the health of the business. And one of the things I think that gets lost, we're working very closely with these customers to keep an ongoing innovation pipeline. We'll have more to say about that as the year progresses. But the interesting thing for us, while we value all of our customers, today, no one customer represents more than 9% or 10% of our total volume for the corporation. In fact, the top 3 plasma customers now are less than 25%. So it's a significantly more diverse business and one that we think has real potential and real growth. And we're going to continue to do what we need to do from an R&D perspective to build on that. And we're aggressively defending our yes and Persona patents to make sure we expand that exclusivity.

Mizuho Securities USA LLC, Research Division No, very helpful. And then switching gears over to hospital and digging in a little bit more to electrophysiology, post-field ablation volumes by the companies that have reported, it's still in a high-growth part of their product cycle. MVP had a good attach rate there, obviously, decelerates Q-over-Q. Just wondering from a competitive dynamic, how significant was that on the U.S. side? Were there centers that were lost? And if so, what is the path to sort of getting VASCADE MVP back into those centers and attached to PFA volumes?

Yes. Thanks, Anthony. There's a lot there. Let me try to break it up in 3 ways, if I could. The first is the market, and we remain bullish on the market for vascular closure. We see it worldwide as $2.5 billion, $2.7 billion TAM. That's roughly $1 billion plus or minus in EP and the remainder in coronary and peripheral. For EP, we've done a breakdown of that, that those tables on our investor site. We think that market is growing in the high single digits, 8.5% this year, and that's a good play for us with MVP and with XL, which make up 85% of our volume there. We called it out, I mentioned this in the prepared remarks, we're experiencing temporary softness. It's not structural. As I said, it's not the market for the reasons I just outlined. We don't believe it's the product either. VASCADE has a clear and differentiated value proposition. The clinical performance, the workflow efficiencies are -- they lead the category. We offer a pain-free, narcotic-free, leak-free alternative that reduces ambulation on average from 6 hours down to 2 hours and ensures that essentially everybody goes home the same day. That's a really powerful overall proposition. We've got the clinical and the other support to back it up. We need to execute against that. And we need to continue to do our work to expand the label and strengthen the product development. All of that's underway. So it's executional. And we need to own that. We do. A couple of things that lie behind that. This is just worth kind of grounding on. We always knew the game was going to shift from new account openings when we got above 500 of the T600. Remaining accounts are smaller. They're more difficult. They're largely affiliated with IDNs, et cetera. So the game is predominantly about driving utilization. It's a different mindset. It's a different capability set. Along the way, we woke the competition. And we definitely, as you highlight, are facing into some of that. One of our competitors was the prior industry standard. The other is a low- cost alternative that's competing solely on price. So we've got to respond to that. We are. And as I said, we've taken the actions. There's some international play with Japan as well. But there's a series of actions. I'm happy to walk through those if it's relevant. But we view it as temporary. We view it as executional, and we intend to solve it, and we intend to solve it this year.

Our next question comes from David Rescott with Baird.

Robert W. Baird & Co. Incorporated, Research Division Great. I wanted to follow up on the interventional tech and BMT bucket in VASCADE. I think originally, you had talked about this kind of similar split of contribution for hospital and interventional tech versus Blood Management. And it looks like just to start the year off, you've got obviously outperformance in the Blood Management business, a little bit of underperformance in Interventional Tech as it relates to the 11% to -- or 8% to 11% hospital guide. So when I think about the different moving pieces, specifically in Interventional Technologies versus the outperformance in BMT, I guess, what's giving you the confidence that ultimately, you should have a bit of reversion in the Interventional Tech bucket as it relates to the full year guide? And I guess, is it still fair to assume that there should be a relative level of kind of even growth contribution from both of those broader buckets?

David, thanks for the question, and welcome to the call. Hospital grew 12% organic last year. We're expecting, based on the current guidance for us to grow double digits again this year. It's now our largest segment, approaching 50% of corporate revenues, and it's a major driver not only of growth in revenue and earnings growth, but margin expansion, particularly from higher gross margins. And ultimately, as we improve performance, improved operating leverage. We -- when we looked at this at the outset of the year, we assumed roughly comparable contributions from BMT and from IVT. Clearly, the success we're having with PEG and IVT is driving us at this point. We think that will certainly be the story through the second quarter given the nature of what we're working through with IVT, but we do expect IVT to recover. And so is it going to be 50-50? No, that's unlikely. Are we going to deliver? Yes. And we get there because of the strength that we have with the TAG business. Hopefully, we'll get to talk a bit about that this morning. But what that team is delivering is more than covering as we put the energy and the investments and the focus on getting vascular closure back where it's capable of going.

Robert W. Baird & Co. Incorporated, Research Division Okay. Then on gross margins, you touched on it a little bit. in the response there. Gross margins were pretty healthy, pretty significantly above kind of our, I think Street expectations as well. I know you called out the some product mix, better price across the portfolio. And I'm wondering if you could unpack that a little bit. I know in the IVT the hospital segment, you've got a bit of a benefit there from a contribution perspective, same thing on plasma, which again was ahead of our expectations. I know within plasma, you have a little bit better of an argument to make for pricing in the non-CSL accounts. So can you help us think about maybe what all went right in the quarter to deliver the gross margin guide that result that you had? And then as you think about that in the back half of the year, where some of those moving pieces are kind of shaking out as it relates to the full year guide.

Yes. Thank you, David. Let me start, and then I'll ask James to weigh in and fill in the details. We're off to a good start with 2 of our 3 primary growth drivers really delivering, and we feel quite good and we're more than confident to reaffirm our 26% to 27% operating income margin, which from where we sit, reflects roughly a 300 basis points improvement. That's a similar trend to what we had last year. We started the year at 21%, which looked a lot like the year before and then build accordingly. And that's a story that will play out again for us this year based on our forecast. Volume, major driver of gross margin expansion. You saw that 60-plus that was the target for the LRP. We expect to hold that throughout the year at this point. delighted to get it this early. Shifting portfolio mix is the single largest contributor to gross margin expansion. It includes not only some outstanding performance in the hospital segment, but also reducing contribution from both CSL and from the whole blood divestiture, which were gross margin dilutive to us. And so having them pass through is you're seeing the benefit quarter-over-quarter. I think the outperformance we're having in plasma is outstanding. And because of the way it's coming, it's relatively neutral in terms of the impact on our gross margins at the corporate level. But as you can imagine, highly accretive to our operating margin expansion, especially with all the U.S. business now with NexSys with Persona. We do have productivity initiatives underway. We can talk more about them. The largest amongst them is the regional and market alignment program that we've called out. team is working hard to hold G&A flat in dollar terms while we continue to invest in the areas we need to, sales and marketing, R&D, et cetera. So as the year progresses, we'll get all those things and then you'll see increasing operating leverage, which is the dynamic you would expect in a high-performing Med-Surg business. So we can walk through any and all of that, but that's the story.

Yes. And I'll just add to Chris' explanation there. Just on the IV BMT dynamic, we have similar gross margins among those 2 businesses. So if BMT is doing a little better than that really has no effect. If anything, it might be slightly positive to our gross margin.

Our next question comes from Mike Matson with Needham & Company.

Yes, thanks. So just a couple more on Interventional Technologies. So are you -- I want to clarify, are you seeing increased competition in the mid-bore category, MVP, MVP XL? Or is it really just concentrated in the 15% that smaller bore products.

Mike, we're seeing it across the board. We see it certainly in electrophysiology, more pronounced in interventional cardiology, our value prop in electrophysiology is just stronger. It's the things I highlighted earlier where we just have meaningful clinical differentiation and benefit there that carries. I think what we're doing in response, as I said, we own the issue, and we believe it's entirely addressable in the current period. So we've hired new sales and marketing leaders from academy companies, companies with real deep expertise in electrophysiology and interventional cardiology, so we can strengthen our play there. As we called out last quarter, we've reorganized into 2 dedicated teams, one for vascular closure. And really, vascular closure is everything here for IVT. But we also have the structural heart team to enable deeper clinical engagement and better resource alignment. We're definitely investing in our toolkit, more sales enablement, getting deeper at an account level so we can compete proactively rather than responsibly. We've overhauled performance management, quotas, comp plans, training for reps and for supervisors alike. We are building a strategic accounts management team, which is one of the bigger gaps that we've identified. And collectively, we're putting together account-specific competitive responses. The answer is different in PCI than it is for AFib, for example, but we need to action both. And so we'll have more to say as the year progresses, but that's the playbook, and we're on it.

Okay. Got it. And then -- just wanted to ask about your appetite for further M&A. I know it's mostly been in hospital interventional technologies. But given the challenges there, are you going to try to fix that business before you go out and do any more M&A there?

Short answer, Mike, is yes. I'll let James weigh in on if he wants. But we did $225 million in share buybacks last year, and our Board authorized a new $500 million program for the next 3 years. We bought back shares because we believe deeply in our plan, and we think our stock is significantly historically undervalued. So I think from our vantage point, as we deliver on FY '26 guidance and annualize the impact of that $153 million we called out earlier, both our customer and our shareholder value creation is going to become a lot more clear. That's good. It gives us the ability to invest and to drive the performance improvements that we're making. In the near to intermediate term, M&A is off the table. The only thing we're going to consider, I'm happy to give the background on it, is to action our option with Vivasure so we can get the PerQseal Elite product, which we think is a potential game changer and closure for procedures like TAVR and EVAR. But other than that, we're heads down. We've got our ears thin back, and we're driving execution.

Our next question comes from Joanne Wuensch with Citi.

This is Anthony on for Joanne. Just going back to plasma, and please correct me if I'm wrong, but did your outlook for U.S. collections change this year in the back half. I think the language last quarter was you were expecting a modest rebound in volumes. And then the language this quarter was a possibility of recoveries. Just want to see if anything changed in your near-term outlook.

Yes. Anthony, thanks for the question. You heard that exactly right. Let me comment on the existing guidance, but also the long-term outlook because I think there's a lot of speculation out there around both. So the plan this year, price gains tied to the innovation that's already been rolled out, the share gains that are well underway, that's what propels us. That's what we control, and that's how we'll make plan. We do see the pullback in collections, somewhat enabled by our productivity gains for the customers is being short term and temporary in nature. There's a cycle -- we've lived through this multiple times over multiple decades. So I think our long-term models understand this quite well. We expect there could be low single-digit growth above historical seasonality in the back half of the year as some of this NexSys technology-enabled gains annualize, but that remains to be seen. And we don't control that, and I know there's very different views out there in the market. When we step back from this, plasma collections have always been cyclical. As I said, we've probably exacerbated the cycle because of the productivity bump we've given the industry. But there's a lot of speculation about long-term retrenchment, et cetera. From our vantage point, we support a $30 billion biopharmaceutical market. We don't see the demand for immunoglobulins going away anytime soon. And in fact, we look at our leading customers, right? If they're all public -- Takeda and Grifols, and CSL they're reporting double-digit or high single-digit growth, and they're reaffirming that guidance in their IG franchises. So we look at that. We look at the long-term potential. We know we think at this point where their inventories are, and that bodes very well. It's an outstanding environment for collections right now. So I think the forces are lining up in ways that we would hope and anticipate. There's recombinant therapy out there. That's a good thing for patients. But IG remains irreplaceable for the vast majority, certainly primary and secondary immune deficiency. And then I think even on the autoimmune side, what we're seeing new patient starts versus concomitant therapy kind of tells the story. So we like plasma near, intermediate and longer term.

Okay. And then in hemostasis management as you continue to roll out the new happens cartridge, how long do you think this benefit from that last? Or I guess in other words, like how far into this rollout in the U.S.?

Yes. Early innings for sure. And what's pretty clear to us now in hindsight is the introduction of our heparinase neutralization cartridge last year has proven to be a watershed moment in this space. If you go back, we help drive the creation of Viscoelastic testing as a marketplace. We are the market leader with something around 70% share and the broadest body of clinical evidence and track record of usability supported by a really outstanding team that's just firing on all cylinders. The category itself, the underlying treatment areas, probably mid-single-digit growth on an ongoing basis. But to your question about the sustainability, we're in half of what we believe are the T700 accounts, the largest procedure-based hospitals. We're in less than half when I think about Europe and Japan, where we don't yet have the heparinase neutralization cartridge. More on that as the year progresses. We think about the TEG 5000 conversions that are underway driven by the adding of this additional assay, we've converted roughly half of our current TEG 5000 users to TEG 6s. So there'll be capital. There'll be the initial buy-ins and then, of course, there's the utilization. So we like what we see here, and I think we have renewed enthusiasm about the long-term value that this franchise can bring as one of our top 3 value drivers and currently our fastest-growing and largest hospital product.

Our next question comes from Larry Solow with CJS Securities.

Chris, I just want to just follow up on the question on TEG. So you mentioned the 70% share. The heparinase cartridge is clearly driving a lot faster growth. Are you -- and as you go through your existing share base, are you actually taking share to -- is this a share driver? I mean do you take share back? Do you see that actually changing with this cartridge? Is there anything else on the -- does your competitor have a similar thing or maybe in their pipeline? Or any color on that?

Yes. Let me step back from this, sorry. It's less about competitive share capture. We certainly are dialed in on that. But we view this as roughly an $800 million addressable market, and as I said, growing in the mid-single digits. We're indicated and see the biggest growth in cardiac and in trauma and transplant where heparinase neutralization has proven to be the game changer. So for us, the biggest opportunity is actually the adoption of Viscoelastic testing, right, moving folks off of current standard of care to understand what TEG does for them clinically and from a health economic perspective. We have strong data to suggest how much it informs better interventions and in some cases, the lack of interventions. And so we see that in terms of clinical outcomes. But the other part of this is almost without exception, when a hospital or a hospital group adopts TEG, we watch their blood usage contract because they're just -- they're not making unnecessary interventions. And when they intervene, they intervene with exactly the right combination of blood products. So that's really powerful. That's our biggest opportunity is driving that utilization. We think the U.S. is probably close to 50% of that today, 50% utilization. It's probably closer to 30% outside the U.S. So more to come.

Got you. Okay. And switching gears just to plasma. Just on the global on the macro. So it sounds like you're still building in outside of your market share gains, generally flat market collections. Maybe I'm just reading it wrong, but on the Grifols on their last call that they spoke to double-digit volume gains. Now obviously, there's -- and they also spoke to a lot of productivity efficiencies, which is clearly being driven, it sounds like by Persona, particularly that they actually called out. But I'm just curious, when they talk about double-digit volume gains, that's not collections specifically, but is that difference -- and they're just one collector, obviously, but they're, I think, second largest, right? So is that difference mostly just productivity? Or are they just one customer or one view of the market? Any color on that?

Yes. Again, we read the same releases. We have lots of conversations. I won't comment on kind of the inside baseball, if you will. But from our vantage point, when we look at their -- all of our customers' readouts, we know there's base volume demand, there's clearly price, et cetera. There's always a lag because of what they collect -- what they're talking about with those double-digit growth is plasma that was collected last year or previously. And so we have to be mindful of that. The performance in the quarter is flat on a historical seasonal basis, we didn't see any meaningful uptick in collection volumes. Our outperformance is NexSys and NexSys adoption, et cetera. So we think, based on our reading of this, that in the back half of the year, we have the opportunity to get above historical seasonal averages, but we don't control that. And we want to be conservative about that because it's been difficult to forecast with precision in a given period, in a given quarter. long term, we're enthusiastic. We don't imagine this goes much beyond this year without a sizable uptick, and we'll have more to say about that later as things become more clear. But right now, given our guide, given the performance we just delivered, we're confident for the year that controlling what we control, we're going to have a really good year in Plasma.

I appreciate that color. And if I can just squeeze 1 more for James. Just obviously, operating margin, you're building in an acceleration as the year progresses. Any more color just on cadence should it be kind of a linear step up through the next 2, 3 quarters? Or should we really be focused more in the back half? Anything in particular there?

Yes, it's really more towards the back half. I would say the Q2 to Q3 jump in operating margin is probably most significant and then a little bit more from there. Q1 to Q2, we should see a nice bump up as well to get to our guidance point. So overall, on I would say it's probably 45% front half of the year and 55% back half of the year in terms of cadence down there to the bottom line.

Our next question comes from Marie Thibault with BTIG.

I wanted to ask here about another product in Interventional Technologies. I haven't heard mentioned yet. The open -- can you tell us a little bit about any progress your sales force is making with that? I know there was some handholding and dock learning involved with that product.

Yes. Thanks, Marie. Appreciate the question. Yes. We're working hard. I mentioned that we bifurcated our efforts. We have a dedicated field team, both sales reps and clinicals with a separate chain of command that are really leaning in to expand our presence in structural heart. And we continue to see green shoots, particularly on SavvyWire. It gets masked by the OEM situation that we called out in our prepared remarks. But the underlying demand for the product is quite good, and we need to lean in and continue to cultivate and develop and build the market. What that product offers is meaningfully differentiated in terms of kind of a 3-in-1 option where we do hemodynamic monitoring on a real-time basis with essentially no drift. So it's a step change improvement in Guidewire technology. We are learning how to commercialize it. We are long-term optimistic on the presence in that space and what we can deliver. It will take time. And so I don't want to kind of confuse anybody on it. Our success in Interventional Technologies is predicated upon winning in vascular closure. It is by far the largest. It's the biggest opportunity. And as I called out in my prepared remarks, it's 1 of 3 things that drive us along with TEG and NexSys.

Okay. That's helpful, Chris. And then maybe I could get a little more detail. You told us about the growth in VASCADE MVP and XL. I think that was on a global basis, and you mentioned some weakness in international. Could you break out for us what the growth was like here in the U.S.? I know we're a few quarters into the launch there of XL. And any details on the magnitude of the decline this quarter in legacy VASCADE?

Yes. Thanks, Marie. Disproportionately, by far, the growth was here in the U.S. And as you point out on the XL product, the attach rate for XL on PFA is outstanding, right? It's one of the things that continues to be a core strength of opportunity. Interestingly, I've made mention of the fact that as the game shifted from new account openings, which our team was excellent at -- is excellent at to driving utilization. It got masked a bit about this time last year when we introduced MVP XL to the market because the uptake has been so strong that for a period of time. And it's -- again, it's a similar skill set. You're launching a new product as opposed to launching a new category for us. But we're launching XL vis-a-vis PFA, and it's -- that propels the team, and that's a good base of strength that we can build on to correct what we need to correct elsewhere.

Our next question comes from Andrew Cooper with Raymond James.

Maybe one more on the EP business. If we think about the 6% growth relative to what you did last year, last quarter, fiscal 1Q was kind of the last one where you didn't have full market release of XL, so probably the easiest comp of the year. Maybe just help us think about some of those moving parts on the execution side that you called out. And then I think, Chris, you mentioned there's a series of actions that you could walk through if relevant. I think it might be relevant and would love to hear the details on some of the things beyond what you've already discussed.

Sure, Andrew. Thanks. Yes. Look, it's 3 products defined the corporation within interventional, it's VASCADE. Within VASCADE, it's the U.S. EP market, right? Let's just be very specific about it. We need to win there. We look at the underlying market, there's puts and takes. There's lots published about this, much of it wrong. But the underlying growth in EP as we measure it for access sites is high single digits, roughly 8.5%, 8.6% to be precise, this year. That's what we're running to. So that 6% there's obviously comps involved, as you point out, but that's below market. And that tells you that we need to up our game competitively as we've woken competition and now need to respond quite decisively to it. I walked through a set of things, and none of these are silver bullets. There's important levers that we pull. And I'm sure when we sit back in a year from now and celebrate the success we're going to have, probably 1 or 2 of these is going to matter a lot more than the others, but it's difficult to predict from where we are. We've hired new sales and marketing leaders. When you see the pedigree of these individuals, they come from companies and they personally have experience and expertise in electrophysiology and interventional cardiology. In some cases it's closure, in some cases, it's the underlying procedures of AFib and TAVR, but they bring real expertise to our team. The bifurcation, which happened through sales comp in the fourth quarter, but really organizationally in this first quarter is going to be powerful. In the early stages, it's disruptive, and we're working our way through that. So I wouldn't extrapolate a lot from the first quarter in terms of what that will ultimately mean for us. It does allow us to up our game clinically in terms of our clinical support, in terms of our ongoing trial work and how we communicate that message to our customers. We've done some basics. And I said this on a prior call, getting a product from $25 million or $50 million to $200 million is one thing. Taking it from $200 million plus is a different game, and it requires sales enablement tools that help you focus at an account level where necessary. It involves building a strategic account capability. We didn't have that historically. We're leaning into that. That will meaningfully strengthen our relationships with the IDNs, which are a big part, not only of that last 75 or 80 accounts to be opened, but driving utilization across all of them. So it's an increasingly managed market, and we need to approach it as such. I think as we lean into that, there's obviously developments on the horizon. We think some of the interesting changes that are underway with regards to -- from CMS going into ASCs. We think that could be a real tailwind for us because of the value proposition that VASCADE represents. But we need to face into it, and we need to manage it at a corporate strategic accounts level. We are putting in place the capabilities to do that. It won't happen overnight. I want to be crystal clear about that. We do believe it's all executional. We do believe we can do this year, but it's going to be a build from where we sit.

Okay. That's super helpful. Maybe just one on margins as well. I know you talked a little bit, James, about some of the trends throughout the year. I just want to make sure with this software piece that you did see in 1Q, how much of that drops to the bottom line? And how much of that was maybe in the annual plan and just movement from quarter-to-quarter versus potentially a little bit bigger change or something we need to think about from a jumping off point from 1Q into 2Q and the rest of the year?

Yes. Sure, Andrew. So it was 210 basis points on gross margin, and it all drops. There's no real other expenses associated with it. So -- it was contemplated in our plan for the year. It was just -- I think as Chris referenced earlier, it was really just a matter of timing, and it just happened to be in the first quarter. And Chris pointed out all the benefits in terms of how it solidifies our position. But the other thing, it's also an annuity, right? And it will continue to drive our software revenue in the years to come. So in the full -- it was always contemplated. It was in our full year guidance. It helped the quarter by about 210 basis points. That will fall off, obviously, next quarter. So our gross margin won't benefit from that. But we will continue to have even more benefits from the mix and price that Chris alluded to earlier when he was discussing gross margin. So we expect our gross margins to pretty much hold right around this level for the remainder of the year.

Okay. Helpful. And then I'm going to sneak one more in just on plasma quickly. Can you give a little bit more flavor. I think the comment was share gains were kind of on track or a little ahead. When you think about what was already assumed in the guide, what inning are we in, whether it's as of end of 1Q or kind of at present in terms of those incremental centers that you were hoping to have your footprint in that you weren't in prior.

Yes. Andrew, the ongoing competitive center conversion will be an FY '26 and probably first half FY '27 story. Of course, we'll move just as fast and are prepared to move as fast as our customers are ready to go. They're certainly taking advantage of this short-term pullback in total collection volume to get the conversions done. That's great. And if they want to speed up, we'll be there with them. We've laid out based on what we've discussed and what we're experiencing, and that's heavily influenced in that 11% to 14% guide for the year. So in terms of innings, we're midway through. We haven't hit the seventh inning stretch at this point. We have more ahead of us than behind us for sure. But it's on track and it's moving. And if I could, and I'm going to take half a step back and talk about guidance at the corporate level because our strategy is working. And we view in aggregate, the first quarter results is very solid, but we're going to remain conservative. And as a matter of practice, we don't -- we kind of want to refrain from changing guidance after only 1 quarter. It's just not right. And so -- and if you look at the guidance, right, it delivers fully against what most thought were highly ambitious, maybe even beyond that long-range plan goals. I won't reiterate them all here. But within the year, that has us growing plasma 11% to 14% and has us growing hospital 8% to 11% with mid-20s growth on EPS. And the way my math behind that, if you will, is backing out CSL, backing out whole blood, somewhere between $0.70 and $0.90 of EPS last year that won't repeat this year. So deliver at the midpoint of our guidance, we're already talking about something that is mid-20s growth, and we have the same mid-20s growth projection for cash flow, which is what we delivered last year as well. So we're going to guide for what we can control. There's obviously a whole lot going on out there geopolitically, macroeconomically, cyclically that we don't control. So we're focused on what we can control and delivering against that, and that's what's reflected in our guidance.

Our next question comes from David Turkaly with Citizens. David. David Louis Turkaly Citizens JMP Securities, LLC, Research Division Well, I really need to dial in earlier. I think you guys said -- Jim, I think you said you did $150 million in buyback in the quarter. I just wanted to confirm that and if you have the price that, that was at.

No, no, we didn't buy it back this quarter. That was last quarter. David Louis Turkaly Citizens JMP Securities, LLC, Research Division So did you do this quarter?

Yes, we did not buy back. We repurchased any shares. We had a new authorization as well that Chris spoke about, but we haven't acted against it. David Louis Turkaly Citizens JMP Securities, LLC, Research Division Okay. And the $52 million impact that you called, I think that was a quarterly headwind from all the -- was it from the transitions. Is that something that is easily broken into buckets or no?

Yes, it's what we're referring to, so I quoted $153 million for the year that there's 2 factors. One is the transition from CSL. So there was no U.S. PCS2 disposable revenue in the quarter. So that's out. That was $35 million, $37 million, I think, was this time last year. The remainder is whole blood, which we divested, right? And so the combination of those 2 are the $52 million that we see. It will be comparable numbers for the next quarter and then drop off pretty significantly in the third and fourth quarter, which is, I think, going to be pretty interesting to see because it's -- our expectation is that's when the fog begins to clear and the underlying health and performance of this business starts to stand alone without the need to say ex this or post that or anything else. It's just straight up. high single-digit revenue growth, mid-20s earnings growth on our way.

It's 35% in '17 is the breakout between CSL and Pueblo this quarter. David Louis Turkaly Citizens JMP Securities, LLC, Research Division Thanks a lot for that. And last one I'll just leave you with is when can we expect the next LRP, Chris?

When ready. We want to deliver this one because -- and you and I talked about this after our last one. I got -- the first slide is going to be an accounting on our say-do ratio, right? We put high single-digit revenue growth by our accounting when we deliver this year, it will be 10%, right? We talked about mid-20s adjusted EPS growth ex CSL. It's going to be 28%, right? We talked about 26%, 27% adjusted margin, which is 800 to 900 basis points improvement versus where we were back then. I'm not going to -- we have guidance out there. That's our guidance, right? We'll lean into that and deliver. And then last is the cash flow, $600 million to $700 million. And I'll add one, which we didn't say back then, but as James has communicated as part of our overall guidance, a cash to net income conversion ratio that should be defined as top quartile for us, certainly north of 70%. And when we start -- when that slide is printed and fact, then we'll talk about where we go from there, okay? Think spring or summer.

Our final question comes from Michael Petusky from Barrington Research.

I guess I really need to dial in faster. So Chris, I didn't catch this if you talked about this, but the sort of the geographic performance of TEG, can you just speak to how TEG did EMEA region, China, anywhere else you might want to talk about?

Yes. TEG is really concentrated. The outperformance in particular, is concentrated for us in the U.S. We were high 20s growth for TEG in the U.S. We were low to mid-20s kind of in aggregate. But it's -- for now, it's a 70-30 play where 70% of that is coming through in the U.S. It's actually interesting if you step back from our portfolio, right, 75%, probably closer to 80% now of our revenue comes from TEG, VASCADE and NexSys here in the U.S., right? People talk about how complicated we may become or we're not complicated. With 3 products in the U.S. market. That defines us. We do want to grow meaningfully outside the U.S. We think the value proposition for Viscoelastic testing in Europe and in Japan is largely untapped. We like the changes we've made there with our team. We are waiting regulatory release for the heparinase neutralization cartridge in EMEA. We expect that release to have the same catalytic effect that it has had in the last 6 quarters for the U.S. So stay tuned with more to say there. But for now, Mike, it's U.S.

You can just push a little bit. Anything on China. I think you had talked about market challenges in China, which doesn't seem super surprising in the current environment, but I'm just curious if there's any comment there.

Yes. We've taken our lumps in China over the prior 1 or 2 years. That's largely normalized. Now China is less than 4% of our corporate revenue. across the entire portfolio. TEG, in particular, is the older product, TEG 5000 success is not released there, but the TEG 5000 has local competition. We took a beating on some of the local efforts that the government had put in place. That's all stabilized. We actually grew TEG in the quarter pretty nicely, but off of a really modest base. But there's more we can do there, for sure, we'll have it. We seem to be kind of navigating the tariff structure in a way that our products we can supply out of Asia, et cetera. So we've kind of largely sidestepped that, and we're there to support the market, but it's a really modest contributor, less than 5% overall.

Okay. Great. And just the last one, going back, I guess, to the U.S. ET market. you've gone out of your way to say, "Hey, look, some of these changes are going to take time, but we've made changes. We're making changes, brought in sales and marketing leadership and are essentially calling this within your control. You guys got to execute. It's not structural. But I'm just curious, as you sort of look at the first quarter performance and then measure that up against what you sort of consider market growth, 8.6% access sites growth, I guess I'm asking you looking at a crystal ball here, but I guess what I'm wondering is, over the next quarter or 2, is it likely that the, let's say, mid-single digits sort of sticks or possibly even takes a minor step back before you guys sort of get the momentum that you hope to get towards the high single digits. So I'm just curious of sort of the cadence of how you see changes you've made and how they flow through say, over the next 4, 6, 8 quarters?

Yes. I think it's going to be a gradual build, and I don't want to sugarcoat that, right? It's -- we can't accept below market growth, right? That's just not okay, particularly in a category that's roughly 50% penetrated from a utilization perspective. And that's just here in the U.S. It looks even more opportunistic in Europe and Japan. So -- but I want to make sure that the leadership that's in place with all the aligned incentives makes the right investments. We're not -- there's no shortcuts here. We're not doing this. We'll deliver FY '26. We'll deliver the 4-year LRP. This is about the next LRP. This is about the long-term growth. We believe we're building something that has real scale potential in Interventional Technologies and blood management technologies alike and we're going to make the investments and give the team the necessary time. sooner is better, of course. But we need to gain back what we've lost. We need to build upon that and widen and deepen the moat that we believe is capable for VASCADE. So more to come. Success begets success. Sometimes you win by not losing. That team's got a playbook. And I'm cautiously optimistic, but it will be a build. It won't happen overnight, and I think you'll see that in our quarterly results in FY '26.

Chris, can I just sneak one more quick one and I just thought of. Just in terms of the sales and marketing leadership you brought in, I mean, how many -- are we talking just a couple of 2, 3 folks? Or is it a number? And do you care to call out any of the pedigree companies some of these folks may have come from?

No, I'm not going to go into details of it, but I will tell you this, right? And now I'm going back to my prior life as a consultant, been through more than a few turnarounds and launches, et cetera. We're talking change management at a very fundamental level. Yes, we've changed at the top, but we're also changing throughout the ranks. And I mean individual reps and clinicals that have the right experience in pedigree, first-level sales supervisors, every sales force I've ever been around succeeds or fails on the caliber and the commitment of that first level supervisor. We're making the investments there and then up through the rest of the chain, we're building out the key account capabilities I referenced. Obviously, there's some marketing work behind the scenes up and downstream. So there's a lot as we prepare this business to go to a fundamentally different level, right? Like we're investing heavily because we think the demand in IVT, in BMT across the Med-Surg opportunities is much more addressable, much more controllable by us. We love plasma. But plasma has inherent cyclicality and some systemic risk associated with it. We've called that out. What we like about what we're building in hospital is we have more of an ability to control and particularly as we scale and we scale these investments, you're going to start to see the operating leverage come through. That's what takes this to another level, and that's the investments we're making.