HAE - NYSE

Good day, and thank you for standing by. Welcome to the Second Quarter 2026 Haemonetics Corporation Earnings Conference Call. [Operator Instruction]. 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 Treasurer. Please go ahead.

Good morning, and thank you all for joining us for Haemonetics Second Quarter Fiscal Year 2026 Conference Call and Webcast. I'm joined today by Chris Simon, our CEO; and James D'Arecca, our CFO. This morning, we released our second quarter and year-to-date fiscal 2026 results and updated full year fiscal '26 guidance. The materials, including our earnings release, Form 10-Q and supplemental earnings presentation are available on our Investor Relations website and through this morning's press release. Before we begin, I'd like to remind everyone that we will use both organic and reported revenue growth rates. In case of organic growth rates, those exclude the impact of FX, the divestiture of the whole blood product line and the exit of certain liquid solution products. Organic growth ex CSL also excludes the impact of the previously disclosed transition of CSL's U.S. disposable business. 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. A full list of excluded items, reconciliations to our GAAP results and comparisons with the prior year periods are provided in our earnings release. 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 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 all for joining us. Second quarter revenue was $327 million and $649 million year-to-date, each reflecting a 5% reported revenue decline driven by $48 million and $101 million in last year's portfolio transitions, respectively. Excluding these transitions, organic growth ex CSL was 9% in the quarter and 11% year-to-date. Adjusted EPS increased 13% in the quarter and 11% year-to-date to $1.27 and $2.36, respectively. Our results reflect disciplined execution, delivering strong core product growth, record margin expansion and solid earnings that convert to cash, while advancing our portfolio and company transformation to sustain this momentum well beyond our long-range plan. The focus on NexSys, TEG and VASCADE continues to advance our leadership and fuel growth. We are gaining plasma share through best-in-class collection solutions. We are reinforcing TEG leadership in viscoelastic testing, and we are executing targeted vascular closure initiatives to strengthen performance and return Interventional Technologies to growth. Turning now to our individual business performance. Hospital revenue was $146 million in the second quarter and $285 million year-to-date, up 5% on a reported basis and 4% organic in both periods. Strong Blood Management Technologies performance offset softness in Interventional Technologies, underscoring the resilience and diversified of our diversified portfolio and multiple drivers of performance. Blood Management Technologies delivered strong growth, up 12% in the quarter and 13% year-to-date, driven by sustained strength in hemostasis management. Growth was fueled by higher TEG disposable utilization and the ongoing rapid adoption of the global heparinase neutralization cartridge. In October, we reinforced our global leadership in viscoelastic testing by launching the HN cartridge in EMEA and Japan. The broader portfolio also contributed to growth with transfusion management achieving double-digit growth, supported by heightened demand for transfusion safety and efficiency. Interventional Technologies declined 5% in the quarter and 6% year-to-date, reflecting softness in the esophageal cooling against accelerating PFA adoption. While modest in size at approximately $3 million in revenue in the second quarter, esophageal cooling remains a disproportionate driver of near-term underperformance. Vascular Closure grew 2% in the quarter and 3% year-to-date, led by MVP and MVP XL and electrophysiology growing 4% and 5%, respectively. These gains were partially offset by continued softness in legacy VASCADE concentrated in lower growth coronary and peripheral procedures. We remain confident in the strong clinical and economic differentiation of our vascular closure portfolio, and we are taking decisive actions to strengthen execution to accelerate growth. We are also making solid progress with SavvyWire in the U.S., delivering consistent double-digit growth as we build its foundation and broaden our relevance in structural heart. We are updating our hospital revenue growth guidance to 4% to 7%, both reported and organic, reflecting sustained double-digit growth in Blood Management Technologies and little to no contribution from Interventional Technologies. This outlook reflects our focus on taking the steps necessary to drive long-term value creation with Interventional Technologies expected to play a larger role in accelerated growth and margin expansion beyond FY '26. Moving to Plasma. Revenue was $125 million in the quarter and $255 million year-to-date, down 10% and 7% on a reported basis, respectively, reflecting the CSL transition. Excluding CSL, organic revenue grew 19% in the quarter and 23% year-to-date. Second quarter results were driven by share gains, robust growth in U.S. collections and ongoing benefits from innovation. Our plasma business is stronger than ever, delivering revenue growth and margin expansion, enabled by best-in-class solutions that help improve customer performance to drive our share gains. Based on customer forecast and strong sentiment from PPPA, we have renewed confidence in the sustained robust growth of the plasma therapeutics market, particularly immunoglobulins. Our second quarter results reinforce that view with U.S. collections growing in the high single digits and European collections continuing to grow double digits. Given stronger-than-anticipated first half performance, we are raising our full year reported plasma revenue guidance to a decline of 4% to 7% or 14% to 17% organic growth ex CSL. Second quarter collections growth was very encouraging. However, our guidance remains grounded in the factors we can control, primarily share gains. Blood Center reported revenue decline of 18% in the quarter and 21% year-to-date, reflecting the impact of the whole blood divestiture. Organic revenue grew 4% in the quarter and 5% year-to-date, driven by resilience in our core apheresis business. We are raising our full year Blood Center guidance to reflect this performance, now expecting reported revenue to decline 17% to 19% as we fully anniversary the Whole Blood divestiture and organic growth to be approximately flat. Overall, revenue momentum remains strong, underpinned by growth and expanding profitability across our businesses. Despite $153 million in last year's portfolio transitions, 2 of our 3 growth franchises continue to deliver outsized organic growth while we strengthen our commercial execution for renewed sustained success in IVT. Reflecting better-than-expected first half performance across more than 80% of our portfolio, we are raising full year revenue guidance from a reported decline of 3% to 6% to a decline of 1% to 4% and organic growth ex CSL from an increase of 6% to 9% to an increase of 7% to 10%. Over to you, James.

Thank you, Chris, and good morning, everyone. We delivered another strong quarter of profitable growth. Our results highlight the benefits of our strategic portfolio transformation, ongoing productivity initiatives and disciplined approach to cost management, contributing to continued improvement in margins and earnings growth. Adjusted gross margin reached 60.5% in the second quarter and 60.6% year-to-date, up 380 and 460 basis points, respectively. The expansion was driven by the continued adoption of our Persona technology, price initiatives across the portfolio and favorable product mix, all of which are expected to continue to support margins in the second half. Software license fees in the first quarter contributed roughly 100 basis points of gross margin benefit year-to-date. Adjusted operating expenses in the second quarter were $111 million, a decrease of $1.5 million or 1% -- the decline reflects lower freight costs, coupled with disciplined expense management and continued focus on efficiency across G&A while prioritizing targeted investments to support innovation and long-term growth. Adjusted operating expenses year-to-date were $229 million, slightly up from $227 million last year, predominantly due to the timing of certain R&D investments. The strength of our core portfolio and our ability to drive margin expansion is evident in our results. Year-to-date, we've absorbed $101 million of revenue impact from last year's portfolio transitions, all while growing our adjusted operating income. This performance reflects the strength and higher profitability of our base business and disciplined cost management, holding G&A flat and delivering additional productivity savings that help offset continued strategic investments in growth initiatives that strengthen our long-term trajectory. Adjusted operating income increased 5% in the second quarter to $87 million, with adjusted operating margin expanding 250 basis points year-over-year to a new record of 26.7%. Turning to the segment level performance in the second quarter. In hospital, adjusted operating margins expanded by 370 basis points, predominantly on continued strong momentum in Blood Management technologies, and higher operating leverage. In Plasma, adjusted operating margin expanded by 190 basis points, driven by prior technology upgrades, share gains and the full transition of our legacy U.S. PCS2 business, partially offset by additional investments into innovation. Blood Center adjusted operating margin expanded 320 basis points, driven by the whole blood divestiture, a stronger core apheresis mix and continued productivity gains from the ongoing portfolio rationalization. Adjusted operating income for the total company year-to-date was up 7% to $165 million, with adjusted operating margin of 25.4%, an improvement of 270 basis points versus the prior year. We expect continued margin expansion in the second half and reaffirm our total company full year adjusted operating margin guidance of 26% to 27%. The adjusted tax rate was 24.7% for the quarter compared with 25.1% in the prior year. Year-to-date, the adjusted tax rate was 24.8%, and we expect it to remain consistent for the remainder of the fiscal year. Adjusted net income rose 5% to $60 million in the second quarter and 4% year-to-date to $114 million. Adjusted EPS increased 13% to $1.27 in the quarter and 11% year-to-date to $2.36. The combined impact of share repurchases, tax, interest and FX provided a $0.06 benefit to quarterly adjusted EPS and a $0.05 benefit year-to-date. We are raising our full year adjusted EPS guidance to $4.80 to $5 a share. At the midpoint of our revised fiscal year guidance, we assume approximately $35 million in interest and other expenses, generally comprised of net interest expense and foreign exchange hedge contracts and approximately 47.6 million in diluted shares outstanding at year-end. Turning to cash flow and the balance sheet. We continue to enhance working capital management to optimize value creation, generating $111 million in operating cash flow in the second quarter, up 128% year-over-year. Year-to-date operating cash flow was $129 million, a sixfold increase when compared with the same period last year, primarily due to improved inventory management, including the build-out of NexSys devices, which impacted our cash flow in the prior year. Free cash flow was $89 million in the quarter and $91 million year-to-date, with the free cash flow to adjusted net income conversion ratio of 147% and 80% in the quarter and year-to-date, respectively. Our ability to generate cash remains strong, supported by disciplined execution and renewed focus on cash efficiency. We are raising our full year free cash flow guidance to $170 million to $210 million and reaffirming our expectation for the free cash flow to adjusted net income ratio to be in excess of 70% for the full fiscal year, underscoring our commitment to performance, cash discipline and capital stewardship. Turning to the balance sheet. We ended the quarter with $296 million in cash, down $10 million from the beginning of this fiscal year, primarily reflecting $75 million in share repurchases and additional strategic investments, partially offset by higher net income, translating into an even stronger cash flow. Our capital structure remains unchanged with total debt of $1.2 billion, no borrowings under our revolving credit facility and a net leverage ratio of 2.5 as defined by our credit agreement. This positions us well to meet near-term debt obligations, fund operations and pursue value-creating opportunities, including additional share repurchases when appropriate. Before we begin Q&A, I'd like to close with a few thoughts. We continue to execute our plan with strength and discipline, delivering profitable growth, expanding margins across all segments and translating our adjusted earnings to cash. Despite $153 million in last year's portfolio transitions impacting this fiscal year, most of which are now behind us, we remain on track to achieve our updated guidance for the year and meet all our long-range plan targets. Our growth and profitability are anchored in the success of our 3 core products: NexSys, TEG and Vascular Closure, supported by company-wide initiatives that continue to drive productivity and operational excellence. Margin expansion remains a hallmark of Haemonetics. And with plasma and blood management outperforming and progress underway in Interventional Technologies, we are building a strong foundation for continued margin expansion beyond fiscal '26. Across the company, our results reflected disciplined execution and a high-performance culture. And when combined with strong cash generation and a solid balance sheet, this positions us to further enhance long-term value creation. For fiscal '26, our priorities remain focused on meeting debt obligations, returning excess cash to shareholders via buybacks when appropriate and advancing targeted investments in our growth products. Thank you. Operator, please open the line for questions.

[Operator Instructions] Our first question comes from the line of Rohin Patel of JPMorgan.

I just wanted to start off with some of the revenue drivers. You had a nice quarter in plasma and are raising the guidance, and you mentioned high single-digit collections growth in the U.S. So I just want to ask what you're assuming in the second half for collections versus share gains versus pricing? And are you seeing any meaningful kind of recovery in collections intra-quarter? And how should we reconcile that with the strong ex CSL growth maybe with your longer-term sustainable outlook in plasma?

Rohin, it's Chris. Thank you for the question. We had a really stellar quarter with Plasma, a stellar first half. And I think you see that in the organic results. The second quarter was propelled by 3 things in order of priority, share gains as we continue to pick up additional centers on our devices, the benefits of innovation pricing, premium pricing for us, what is a superior product. And now collections volume growth. We had always predicted volume growth in the back half of the year. It started early in the second quarter. And that's a powerful trifecta. To be specific about the volume growth we experienced high single digit in the U.S., double-digit growth in Europe. And we see that as a return from the normal cyclicality that has defined this industry for a very long period of time. So we remain really bullish on the end market demand for Ig-derived therapies, and you see that in our customers' earnings discussions as well. So plasma goes from strength to strength. We're very optimistic about its continued success.

Great. And then also just turning to hospital. Maybe if you can provide an update on some of the commercial work to get IVT back on track. I appreciate the additional color and disclosure you provided in that business. And also just it seems from your disclosures that the hospital business actually drove a lot of the incremental margin benefits in the quarter. So maybe if you could just talk about some of the levers you're pulling to drive operating margin and how you're balancing that with any of this additional commercial spend to get those products back on track.

Sure. Again, thank you. Yes, hospital was the single largest contributor to what continues to be really robust margin expansion. We're trying to provide more detail to be as transparent as possible. As we calculate the segment P&Ls, the hospital operating income expanded 370 basis points in the quarter. And to your point, that's mix, that's volume. And increasingly now, that's operating leverage, which we're really keen to see. Obviously, there's 2 parts to hospital. Blood Management Technologies continues to excel, which is allowing us to put the appropriate focus and resources on driving IVT. And so IVT is defined by vascular closure. You saw the numbers in the quarter. Happy to go through as much detail as you want on that. But we remain confident in both the clinical and the economic differentiation of our vascular closure portfolio. And we're taking the right actions. We're being decisive to regain growth momentum in the latter part of this year and into FY '27.

Our next question comes from the line of Marie Thibault of BTIG.

Congrats on a nice quarter. I wanted to follow up there on Rohin's question about the IVT commercial efforts. You've mentioned some of the progress underway. Can you give us a little more detail on what exactly is happening, some of the green shoots that you're starting to see? Just any more detail on that turnaround?

Yes. Thanks, Marie. Good to hear from you. So I'd summarize it this way. I am highly confident in our team. They're taking the right actions in the right way, and they're fully resourced. And so the things we are highlighting, that commercial leadership group from first-level sales supervisors on up to the business president, many of them are new. They come with the exact right background experience and relationships to excel, particularly in electrophysiology, but also interventional cardiology. You know that at the beginning of the year, we bifurcated our field force. It's an 80-20 split with 80%, of course, going to vascular closure. That gives us over 200 personnel in the field driving the product. We feel that's quite appropriate for the opportunity set. We've put a number of tools in place to drive sales force excellence, and I won't drag you through the details, but we're closing vacancies. We've upgraded our training. We have a new set of tools to track and monitor. The quotas have been aligned. The incentive comp is state-of-the-art. So we feel quite good about sales force excellence. The other part of this is we've meaningfully strengthened our corporate accounts group that will help us with IDNs and increasingly with the ASCs as those become an important driver for the market where we think our value proposition is even more distinct. We have successfully completed the MVP-XL trial, and we're able to make a timely submission to FDA prior to the shutdown. So that should bode well as we get here later in this fiscal year and next in terms of stronger clinical evidence and opportunity to leverage that trial outside the U.S., particularly in Japan. And then we've gotten very targeted in our competitive response. And I know there's concern about is this going to meaningfully diminish your gross margins. It will not. We think we can actually maintain excellent margin and execute well to hold, to regain and to expand share across the board.

Yes. Very helpful, Chris, and thanks for all that detail. It sounds like things are improving for sure. And then I wanted to follow up here and talk about Blood Management Technologies. Again, very, very strong performance. Help us think about the sustainability of that over the next few quarters. How should we think about the cadence of launches that you've recently put out, the length of kind of the rollouts and some of the benefits that you tend to see, again, sort of growing above historicals?

Yes. Thanks for the question. I think Blood Management Technologies continues to be on or undersung hero in the portfolio, grew 12% in the quarter and 13% year-to-date. That's, I don't know how many quarters now in a row of double-digit growth. We feel from the launch of the global heparinase neutralization cartridge that, that franchise has hit a new inflection point. And we think that double-digit growth is absolutely sustainable for about as far as we can see. It's driven by a combination of capital equipment, disposable utilization and, of course, the adoption of that heparinase neutralization cartridge. I called out in the prepared remarks that we were pleased to launch the cartridge, both in Europe and Japan here in October. And we think that helps us, again, go from strength to strength for a business that's -- it's a market that the team helped create -- and we have the leadership share, 70% plus, and we intend to build and expand upon that. Fortunately, for us in the quarter, Blood Management Technologies was also benefited from transfusion management growing double digit, which is -- it's a smaller line of business, but one that is really attractive on many dimensions and continues to contribute positively. So we're excited about the prospects for Blood Management Technologies going forward.

Our next question comes from the line of Mike Matson of Needham & Company.

It's [ Joseph ] on for Mike. Could you just touch on blood center growth a little bit? Just, I guess, why was it so strong? I think 4% organic. Can you just talk about some of the growth drivers there, what you benefited from in the quarter?

Yes. Happy to talk about it, Joseph. Yes, Blood Center, again, that's the real unsung success story here, I guess, and it's meaningfully benefiting from focus. As you know, at the end of last calendar year, we divested the whole blood franchise and some of the supporting products, liquids, et cetera, that were really a drag on our margin and the distraction from a focus area. So with those behind us, we've really been able to focus on what is increasingly plasma apheresis done in blood centers often with our NexSys device. And you see that growth, 15%, 15% of the corporate revenue, but it's a solid source of EBITDA and return on invested capital and free cash flow, as you see from our numbers in the quarter. The operating income in that business on a stand-alone segment basis, we estimate expanded its operating margin by 320 basis points, again, benefiting from the divestiture and an ongoing effort to rationalize that portfolio. We talk about the regional market alignment program. That's the focus there. So that gave us a lot of confidence to raise the guidance. And now on an organic basis, we expect that business to hold serve and finish flat for the year.

Okay. Great. Yes, it's very clear you guys are benefiting from the rationalization. And then I guess 2 more unrelated, but they're quick. I'll just ask them together. How much did the share repurchase add to the EPS in the quarter -- or sorry, the EPS raise for fiscal '26? And then I guess just on VASCADE and Vivasure, are you still committed to the large bore market? And are you still planning on proceeding with that acquisition of Vivasure?

Yes. It's James here. I thought I'd jump in on the first question on the share buyback in the quarter. It was a few cents, and it's included in the $0.06 below the line item that I gave earlier.

Yes. And just jumping over to Vivasure large bore closure. We are very committed to consummating that acquisition. That's -- I would describe that as near final successful submission to the FDA. If anyone has an opportunity to attend the most recent TCT, you would have heard about some really impressive results coming out of the patch trial, just in terms of reduction in vascular complications, medium time to hemostasis near instantaneous, really, really exciting. We think that it will be an FY '27 event just given the timing of FDA release, but that's a $300 million high-growth market for large bore arterial access in TAVR and EVAR -- the product is meaningfully differentiated. It's fully absorbable, sutureless implant-free. Really, as we look at it from the submission to FDA, it was a best-in-class safety and ease of use. And for us, it's highly synergistic. It is a closure product, which is our primary focus in IVT, and it goes against structural heart, which will have call point synergy with our SavvyWire business. So yes, we're excited. There's more work to be done, but we'll have more to say about that, I think, later this year.

Our next question comes from the line of David Rescott of Baird.

Congrats on the progress here. Two questions from us, and I'll ask them both upfront. First, on the plasma side, it seems like a pretty substantial step change in the U.S. collection volumes that are going out. I know you've talked in the past and have remain committed to the fact that there's ebbs and flows in the market and had expected it to get better in the second half of the year. It's clearly coming sooner than expected. So I'm curious on what you're seeing on the ground level as to why, again, a multi-quarter kind of low single flat growth number has now stepped up to this high single-digit level in the U.S. And just interested to hear on your confidence that maybe this isn't just a onetime thing. Should we expect the cyclicality on a quarterly basis, maybe to even step back down and step back up as this multiyear return to high single digit plays through? That's the first question. And then second, on the VASCADE business, I know there were some comments around some of the competitive nature in that market. Last quarter, you're focusing on getting the sales force initiatives realigned here. So just curious to hear if you could parse out maybe the benefits you've seen from the work that you've done versus the overall market acceptance versus some of the things on the competitive side that again give you the confidence that you can continue to progress here through the year.

Yes. Thank you, David. So first on U.S. plasma collections, again, high single-digit volume growth on top of the pricing benefit from the technology advancements and ongoing share gain. We're very bullish that the cyclicality of this market. When we talk to our customers, when we walk the floor at PPTA and see the association's forecast, we think what we observed in the quarter is absolutely sustainable through the second half of the year and beyond. And we're benefiting because our customers are taking share in the end market, enabled by NexSys and the outperformance there. The guidance that we put forth, right, because we grew 23% through the first half. The guidance we put forth is more modest, and we don't control collection volume. While we have every confidence that they continue and grow from here. Our guidance reflects what we can control, which is share gains and the annualization of those prior technology rollouts, which are happening this quarter, third quarter. So from our vantage point, we'll guide to what we control. We have continued share gains at hand, and we feel great about that. And so that's what you see in our forecast. With regards to VASCADE and the competition, it is a competitive market. We clearly woke up both of the direct competitors we face there. But when we look at the trial data coming off of Excel, when we look at the actual head-to-head in accounts, we are very confident that we can regain share. We have green shoot examples of that as we speak. And we think that we go from strength to strength there. You'll know and you'll see our progress in the upcoming results. It will be first and foremost with VASCADE in electrophysiology. SavvyWire is an important contributor, much smaller, but SavvyWire will be -- is the second priority for that team, and we expect continued double-digit growth ex OEM. And then when I spoke a minute ago about PercuSeal Elite coming in from Vivasure, that will be a third priority when we get into FY '27. So the guidance there is more modest. We felt like the right path was just to be prudent. And so we've narrowed and lowered that range. We don't expect a meaningful contribution this year, but the green shoots we are observing tell us that, again, right team, right actions being done in the right way to reestablish growth in that category going forward.

Our next question comes from the line of Travis Steed of BofA Securities.

This is [ Anja ] on for Travis. I wanted to ask on VASCADE. I understand the competitive discounting environment and lapping the Japan launch. Do you think the sales force changes really get you back to market -- above-market growth? And when should we expect the Japan label expansion? How significant would that be?

Yes. We absolutely have confidence that the changes we've made will return us to above-market growth rates and beyond. And so it's a really good product, clinically economically differentiated in the right hands. There's a lot of upside potential, particularly with MVP and MVP XL in electrophysiology. With regards to Japan, yes, historically, Japan this fiscal year was an important growth contributor for us -- the launch of PFA changes the dynamics. But PFA looks meaningfully different in Japan, as you would hear from some of the folks behind that, right? It's a much more modest uptake in part because I think the Japanese market prioritizes safety first. So we see a slower adoption curve and then the mix within that adoption is much more evenly split between the lead players, which is important for us because they've accepted MVP-XL into the market, and we have reimbursement on the base label. And that's important because we're now indicated for so many more of those procedures, in fact, all but one modality at this point. That gives us confidence that the second part of this year and beyond, Japan becomes an important contributor. They've also agreed to accept the U.S. data as part of our submission for regulatory approval and release for the larger access site indications. So there's more to be done. I don't want to call the timing on that because we don't control it. But as we get both the approval for the expanded label and that reimbursement, which has been very favorable for MVP and MVP XL and their base indications, we have a lot of confidence, particularly in the distributor we're using there. There'll be some movement quarter-to-quarter order timing, et cetera, but Japan will be a source of growth for us going forward.

Our next question comes from the line of Joanne Wuensch of Citi.

This is [ Anthony ] on for Joanne. Could you maybe characterize a bit more? I know it's early, but just how the launch of the HN cartridge is going in EMEA and Japan and if it's tracking similarly to how the U.S. launch was in the first few months?

Yes. So it will look different in those markets because the markets -- the viscoelastic testing is really different. We -- the product gives us broad-based application. And if what we see in the U.S. holds true, we're just seeing a far higher number. The dollar revenue per device is meaningfully increased with the heparinase neutralization cartridges here in the States. We expect that part of the launch will be very similar. But it is a different starting point. We don't have nearly as many TEG 5000, the predicate product in the market in either of those places. So less opportunity for that conversion. They are smaller markets. But again, we have the ability to lead and our teams are excited. They are -- those markets reflect more of a hybrid approach. Some of them are direct, for instance, the U.K., Germany and parts of Japan. Others are through distributors. So there'll be a lag time as those distributors come up to speed on the new product, new cartridge and get established in the market. But long term, it's an important source of sustainable double-digit growth for that business and that franchise.

Our next question comes from the line of Andrew Cooper of Raymond James.

Maybe starting, I think, Chris, you said a couple of times VASCADE was economically differentiated. Can you just give a little bit more color on sort of what you mean by that versus the competition? And then talk a little bit about how pricing and your approach to the market there has evolved competitively. Have you made changes to price? And do you feel like from here, we're in the right spot where it's going to be a little bit steadier. I know you said margins would hold in there, but just would love any thoughts on the top line and the price component.

Sure. Thank you, Andrew. Yes, the product, when you look at the metrics in terms of time to ambulation, time to discharge, it is at or above anything else in the marketplace. The real benefit, and I think you're seeing this with a heightened focus even in the post-PFA environment, is the improvement in workflow productivity. As a center adopts MVP and MVP XL, their ability to really move quickly with these patients, get them closed, get them ambulated and in almost all cases, send them home the same night, really powerful. The other factor, and you hear this in the verbatim from the clinicians repeatedly is it's a pain-free solution. Suturing works and suturing has a reasonable profile, but it hurts a lot and often comes with the use of narcotics, which have their own complications. We eliminate all of that. And so the speed in the workflow, the absence of pain medication and just a much better patient verbatim helps a lot. As I said earlier, as this market increasingly moves to the ASCs, that difference will be all the more powerful. And so we're enthusiastic about it. And with regards to pricing, as we've dug into this, we look very carefully now with the account level detail that we have at where we're gaining, where we're losing. It's almost never about the actual price of the product. We may have needed to be more flexible with regards to initiation trials or other work done jointly with VAC to get those remaining accounts converted. But in the head-to-heads that we're observing, very modest degree of flexibility on price tends to be driving the desired outcomes. And you see that, again, I just go back to we're -- the hospital operating income margin was the primary driver of our overall margin growth at 370 basis points of OI. So from our vantage point, -- and to be clear, both BMT with TEG and IVT with VASCADE were equal contributors to that gross margin expansion. So what you'll see going forward is as we layer on the volume is increasing operating leverage. So we don't have any worries. The investments have already been made in OpEx and the price concessions are modest at best. And so from our vantage point, our margin expansion and the growth that we're anticipating top and bottom line are absolutely achievable.

That's great. And then I wanted to ask one more on Blood Management as well, just given the traction there, not to jump too far ahead of ourselves, but it's clear that the HN cartridge has done a lot for driving that growth. When you look into the future from an innovation perspective, are there other menu items to add that could be similar in magnitude? And if so, can you give any color on what they might be or maybe when we could think about more of that menu expansion to continue driving penetration with TEG?

Yes, Andrew, we absolutely see additional opportunity for the growth of visoelastic testing. We target, for example, in the U.S., a T700. Nearly half of them have not adopted visoelastic testing. We have 70 share of the market. Obviously, we intend to retain and grow that. But our biggest opportunity is taking visoelastic testing to the other sector of the market that doesn't have it. Hp neutralization helps do that because it gives you a broader spectrum of testing. But we also have additional indications that we are pursuing and additional applications of the product that -- we'll talk about more probably in the spring when we do our next Investor Day. We'll pull back to Vail a bit and talk more about the really exciting portfolio pipeline that we've got going behind TEG.

Our next question comes from the line of Michael Petusky of Barrington Research.

So Chris, and I will admit, I missed it. There's a ton of companies reporting this morning and I missed part of your prepared remarks. So I'm just curious on Vascular Closure, if you're looking at over the last 12, 13, 14 weeks since we last talked on a conference call and you put in all these initiatives to try to sort of turn the business, and I'm sure you're looking at this, if not day by day, certainly week by week. I mean, are you -- I certainly heard the green shoots commentary, but are you seeing progress week by week, even through the end of the quarter into where we are now? Like are you seeing enough evidence to say, yes, we've bottomed, we've turned this. It's not an overnight back to where we were, but we've turned this or at least now we're trading punches as opposed to just taking punches. Like where what are you seeing? And where are you sort of in -- if you're calling us a sort of a comeback story, hopefully, where are you in that?

Yes. Thanks, Mike. I appreciate the question. And I appreciate the interest on this. We are absolutely anticipating a comeback story, right? And I think this one is going to be exciting and interesting to watch as it develops. We are confident that the actions that we have taken year-to-date have stabilized this performance. And so we don't expect any further deterioration in performance. we see green shoots with new account openings. We see green shoots with greater utilization. We see green shoots with competitive win backs or just healthy head-to-head that we've come out on top on. So we do expect meaningful growth going forward. However, we're going to be prudent in our guidance. And at this point, the guidance for IBT writ large, and it's important. We didn't talk about this probably enough, but that franchise is unfortunately dragged down by esophageal cooling, and I'm happy to come back and give some more specifics there because I'm not including cooling as part of my commentary. I'm talking specifically about closure. In closure, we put very little in for the second half, but that's us being prudent because it's a tough market, and I'd rather be on the conservative side of that. We've heard that loud and clear from the market to call it when you see it, but not before. Our results from here will speak for themselves, okay?

Okay. All right. Great. And just a quick one for James. James, as you -- obviously, you guys have been aggressive here recently with share repurchase. As you just sort of think, I guess, longer term, not looking for specific guidance for next year or longer term, but just generally speaking, I mean, would you expect the share count to sort of remain sub $50 million over the next few years? Like are you guys going to continue to be pretty active in share repurchase as you think about capital allocation beyond fiscal '26?

Yes. Thanks, Mike. So there's roughly 47 million-ish shares outstanding now. So I think a lot would have to happen to get above that $50 million mark. So the thought process here is that certainly, we would aim to keep dilution in check for sure. And then I mean, let's face it, one of the benefits of having a strong balance sheet is that we do have some optionality on capital deployment. So yes, that includes buying back shares, also debt pay down and so forth. But yes, for the foreseeable future, lower than $50 million, pretty good bet.

Yes, Mike, it's Chris. If I could just pile on there. From a capital allocation perspective, exactly as James just highlighted, we're going to focus on paying down our debt, being opportunistic with the share buybacks. We'll make targeted organic investments as we have to advance new technology into the market. But again, we feel we've fully resourced from an OpEx perspective. You see that. You see that in our leverage. And obviously, you see that in our robust cash flow and a really healthy free cash flow to net income conversion ratio. But we're focused on what we have. We're focused on making the most of the portfolio. As I've said repeatedly, we'll do Vivasure when the final set of milestones are hit, and we're ready to go there. Beyond that, M&A is off the table until we have IBT exactly where we need it to go.