Haemonetics Corporation ($HAE)

So we welcome Chris Simon, CEO. Thanks for joining us today.

Travis. Thanks for having us. Great conference. We're delighted to be a part of it.

Awesome. Maybe I'll start at a higher level. Just to kind of finish your last LRP, you set a new guide us where do you kind of see yourself kind of at this stage in the life cycle of Haemonetics?

Yes. It's been a journey over the past 4 years. I think at the time, 4 years ago, when we issued that LRP, we had just survived COVID. And we knew that CSL was transitioning. And I think we wanted to go out with a bold and audacious plan that gave investors confidence that there was life afterwards. And -- so we put forth a set of metrics. And I think at the time the reaction we got from buy side and sell side like was like -- why could you lean that hard into it. Nobody does that period, let alone in an environment like this and transitioning what turned out to be $150 million of revenue. . But sitting here today, I'm really proud of this team. Our goals were very clear. we achieved double-digit revenue growth ex CSL we were high teens on our EPS and earnings growth. We added 660 basis points of margin to our operating income margin from the high teens into the mid-20s. And we generate nearly $700 million of free cash flow along the way. So I think very clearly, what we've built is a much more solid foundation of durable growth that we can build on from here. So we're actually really excited about what comes next.

Great. Sounds good. And how do you think about the longer-term portfolio of the company, we saw the acquisition of Vivasure, do you continue to add to the hospital? And one question I get a lot is, does it make sense to have the 2 businesses together and some of the synergies there?

Sure. We like plasma. We are the only dedicated plasma play. We're the undisputed industry leader. We continue to invest aggressively behind that to deliver unrivaled growth and profitability. -- but there are limitations to what that business can deliver. So when we set that LRP, we made a conscious effort to diversify sustainably, and now hospital is our largest business. I do get that and I get the -- well, you guys have become very complex. I don't think we're complex at all. We're about 3 products. NEXUS, TEG and VASCADE -- those 3 products are all made in North America. They're all sold primarily here in the U.S., which is 85% of our revenue. We're about as straightforward to get if you want to know how Haemonetics is doing check in on those 3 products, and you'll see the durable growth.

Makes sense. Maybe just on plasma, in particular, just think about the market dynamics in the plasma market. You've got to so that people think of, it's a cyclical business, right? I mean depend on where are we in that cyclical part of that market? And you've had a few good quarters in plasma, and so just kind of how durable is that when you think about the overall market?

Yes. Over that LRP period, it's been anything but linear. We had this massive recovery, 40-plus percent growth, first year, 20%, the second. And then it stabilizes at some point. Last year, we went out with guidance that said the collection volume would grow at 0% to 2% and end up growing double digits for the year. So it's difficult to predict I do think people confuse that, though, with the end market demand for IG-based therapy, which remains unabated, right? And we get into this whole debate about anti-FcRn and I'm happy to go deeper on it, but we see no obstacles to the ongoing growth in demand for which is the absolute core of what drives collection volumes.

Okay. When there was some news recently on one of the CSL, which obviously is not your customer, but they were talking about inventory destocking. And so the question I've gotten is, is that a customer-specific thing? Or is it a market thing that we should actually pay attention to?

Yes. It's -- so we pay attention to what all of our customers CSL is a customer, an important customer, and we value the relationship greatly. We have 100% of their volume in Europe, and we announced at this time last year that we entered into a new long-term read that as 7 years plus agreement to support all their U.S. centers with our integrated software. So they're an important customer. We listen to those announcements. I think what gets missed here is that there's a lot of competitive head-to-head across the industry. One customer is taking share and others giving share. Some are more committed to the U.S. market, some are more committed to the international markets. and you see that up and down accordingly. Our guidance of 0% to 2% is just us being prudent because we don't control it. But in aggregate, I'd be surprised and disappointed if the trends that we experienced this year don't continue at some level into FY '27.

In Q4, plasma was 13% ex CSL. Can you talk about kind of the points there between pricing, share gains and market collection growth? And trying to think how much can potential upside there could be in '27?

Yes. Super proud of what the team accomplished in our FY '26 to just wrapped up at the end of March. The -- the drivers were threefold. We call it the perfect trifecta here. We took share hand over fist. We took share in the marketplace in terms of collection volume growth, both here in the U.S. but also disproportionately internationally where the growth was even higher. We had the benefit of innovation-based pricing from the final leg of our Persona rollout. That's a 10% yield enhancement we gave to the industry. And then on top of that, you saw the collection volume growth, which was double digit throughout the year in Europe and then the second half of the year became double digit here in the U.S. as well. So that's a trifecta. You can't reasonably expect that all 3 of those things are going to deliver at that level year in and year out. But the things that we control within it will lean into and we expect continued success then.

You alluded to rolling out Persona Plus it could be a headwind to the collection volumes centers collect 5% more with each visit. Is that baked into the 2% collection volume expectation?

Yes. The round numbers, right? When we rolled Persona, it was roughly a 10% improvement off of what we had already done with the industry's yield enhancement. Persona Plus is half that again, these are just rounding, right, and each experience will be different. We saw 2 very different waves. The initial wave of persona the collectors took the 10% added it to their existing plants, which were roughly 10% and grew 20% in the year, and we're delighted to be able to do so with our help. . Later in the wave -- second wave was really more of a modulated where the companies needed to tamp down their cost per liter. -- they pulled back on new center openings, took the 10% we gave them and met their plan that way. it remains to be seen what Persona Plus looks like. Our guidance is derisked with regards to the 0 to 2. And I think what gets lost in all of this is the extensive margin expansion and again, bragging on that team. But when I joined the company, our gross margins were in the low 40s. And plasma was right there and I thick 43%. Today, that plasma business is operating in the mid-50s or better, and Persona Plus will be a further expansion on top of that. So we'd like to see volume and margin, but we win either way.

You talked about annualization of some share gains as the biggest driver, kind of the mid-single-digit growth in plasma in '27. Can you help us conceptualize some of the share gains a bit more? It sounds like some of the customers are crops are winning more business, is that flowing into you?

Yes. Clearly, when our customers do better, we do better. I want to talk about individual share because it's obviously tightly contested across the major players. What I think is interesting, if I go back again to the LRP, historically, we had 70 share of the industry, and people refer to us as plasminetics, not Haemonetics. But with the CSL announcement, folks thought we were going to drop into the low 40s or something. That never happened. It was a much extended transition -- and during that transition, we've meaningfully gained share from the other major players such that we never drop below 50% of the market. And our aspiration is to get back to that 70% plus based on the superiority of our technology and the service and offerings that we put out there.

Fair. You entered in some plasma novation in '27 in addition to Persona Plus what's the long-term vision for innovation there? Could there be other further upside to pricing in this business as you bring in innovation?

Yes, and there will be. The levers we pull are very obvious. We're better at it than others, but yield is first amongst them because it's an immediate drop through, no pun intended to the CPL bottom line. Speed is a close second in that regard. So stay tuned there. But then we're the only ones with an integrated offering. So obviously, the software that powers the device is very sophisticated. -- but there's also stand-alone software, what we refer to as NextLynk DMS, the donor management system that runs the centers. And with our 80-plus share of the U.S. collection center opportunity, we have really good insights to what's happening hour-to-hour, day-to-day. We've packaged those insights via data analytics and some AI enablement back as a tool to help our customers run their operations more effectively. There's going to be a steady stream. Think about this as the 1.1, 1.2, 1.3 version. -- that we will continue to roll into the market so that anybody who's operating our integrated system is going to see that steady stream of innovation on top of the big blockbusters like Persona Plus.

Anything else that we should talk about in plasma move [indiscernible] closure?

Yes. I just think plasma's best days are ahead of it. I know there's a lot of consternation, as I said, about competitive alternatives. Fully half, probably closer to 55% of the IG demand is primary and secondary immune deficiency with the incidence and prevalence of cancer therapy, that growth continues unabated. On the autoimmune side, it's a dynamic market for sure. But we look at new patient starts new patients start on IG across the entire suite of autoimmune therapies, because it's 1/3 of the cost, and it works really well. The others are growing. They're growing as adjunctive therapy or where they're non-IG responsive. So I don't think it's an either/or choice. I think there's plenty of opportunity. It's a great thing for patients. And candidly, it's a good thing for us.

Moving on to vascular closure. Anything you could kind of talk about where do you kind of see the state of affairs and base closure now just to open it up?

Yes. Vascular closure declined 9% in fiscal '26. That's disappointing in the extreme. And we did go backwards in fourth quarter. However, if you look at our third quarter to fourth quarter performance, it is the first time in fiscal '20, where we grew. In fact, we grew 8% on the vascular closure business and we also grew in the Savvy wire business. So I think there's a number of factors coming together for us Travis to give us confidence that IDT will it be a meaningful contributor to our growth in FY '27. We've guided for mid-single digit across hospital. We didn't break it out between the 2 franchises, but IBT can and will contribute to growth, and I'm very confident -- when we look back, folks will look at that January, February, March time period and say that's when Haemonetics turned the corner and got back on the front foot and delivered growth with that franchise. .

What's giving you confidence in this January, February, March kind of being the turn in the corner, I guess, Q4 did step up sequentially. I don't know was that just typical seasonality? Or are things actually getting better sequentially in Q4?

The seasonality is tough to call. Actually, what we read and see because there's a lag factor here, it will be obvious pretty soon here. But I think actually, procedure volumes were down, not up for a host of factors. We were able to grow because of a number of factors. For the first time our commercial group is fully resourced from corporate accounts down through all the frontline clinicals, et cetera. So that team, and that is a more skilled, more capable, more driven team than we've ever had in place. That's the first one. They've got a better product, getting the MVP XL label expansion with the clinical data that came with the trial work that we did meaningfully positions us as a therapeutic choice within that category. And then Candidly, I think use the sell-side lingual, -- it's a soft comp. 80% of that 9% decline in fiscal '26 was attributable to 2 factors. One was the releveling of the Guidewire business, OEM, right? So we have an existing contract that we bought into when we acquired Open we make product for Abiomed. Abiomed was acquired by J&J, they did 2 things. They rebalanced the supply from 70% down to 50, and they cut back on their inventory levels dramatically. That hurt us a lot in fiscal '26. That's now annualized. It will not hurt us in -- the second piece is Enzo ETM, Enzo's esophageal cooling. It's on the wrong side of the PFA advancement. And at this point, it's less than $2 million in revenue for us in the fourth quarter. it really didn't hurt us going forward. So we'll step off the curve, and then we'll grow from there.

Okay. That's helpful. And on the corporate accounts team and kind of the sales force, talked about equipping the teams with better tools and it does take time for sales forces, transitions to actually get back on track -- we've had a couple of quarters here where that's happening is where are we at from kind of the sales force perspective at this point?

Yes. We're very confident in the win ratio, win loss ratio of that corporate accounts team. We just didn't have a presence there. Actually, the acquisition of Vivasure and large bore closure even help further strengthens that value prop. But from where we are, I think the IDN and the ASC strategy will increasingly be a source of growth for us going forward. Our product and the data we now have in support of it, it's just a really clean profile. It's fully bioabsorbable, nothing is left behind, highly predictable workflow, rapid time to ambulation, hemostasis, et cetera. So for an ASC, where you have owner-operator, physicians, they'll look at that value proposition. They are looking at that value proposition and saying this is a winning tool in our armitarium -- and I think we have the wherewithal and the capability to contract with them in ways that make it win-win.

Then when you think about the competitive actions, I guess, some actual some of your competitors in that market, that seemed to be caught you guys by surprise at 1 point. Is that -- how is that trending? Are you getting some of that share back and some of the trialing that was going on competitive products? .

Yes. Our win-loss ratio, as I said, is really favorable. Those guys aren't going anywhere, right? It's -- they're 2 very aggressive competitors in their own right. They approach the market quite differently. I think what we'll rely on is better team, better product and disproportionately well driven to deliver what we need to do here. .

Does your better product or clinical data, does that tends to resonate with customers?

Yes. I think any time we've had presence and had the discussions, whether it's at the corporate accounts, IDN level or it's talking to the individual EPs and other operators, the products predictability, the bio absorbability, the broader use case now, particularly on some of these large access site technologies for EP and for left atrial appendage gives us a real play. The other thing that's happening in the backdrop there, the onset of PA, we're A lot of folks kind of misinterpreted that, that somehow that displace us. It did not. It changed the modality though. And we went from having 3 or 4 access sites per procedure. -- down to 2 or 3, depending on whether it was concomitant therapy, right? So left atrial and Afib together or just different approaches to mapping. What's interesting about that is now with the PFA mark at like 70% to 80% of the market, that stabilizes. -- it's a net effect. So it's not a $2.8 billion TAM anymore. It's a $2 billion TAM or something they're in. but the growth rate increasingly will mirror that of procedure volumes. We estimate the access site growth rate in FY '26 was about 3.5%. We think that roughly doubles in FY '27. And for no other reason than the onslaught has now begun to plateau, and we sit from here. Once it's fully plateaued, we will grow at the rate of growth. And if that remains mid-teens, that's a really good base for us.

Okay. That's helpful. The next question was going to be on con. I don't know if there's anything else you wanted to say on that. Just to kind of think about that headwind kind of comping out and going away given how fast those procedures are growing?

Yes, there are, I think, some very good companies are leaning in, making sure that, that concomitant therapy gains steam -- the good news is we have a product that's uniquely well positioned to close those larger access sites, and we have the label and the clinical data to support it. So net debt, it will tap down slightly the addressable market. but the growth rate and our applicability within that should be -- has never been stronger. .

Okay. That's helpful. And then with the expanded indication of MVP XL recently, -- how important is that in the U.S.? And then kind of the latest on getting that in Japan. .

Yes. I think there is a reluctant, call it, 20% or 30% of the market that without the label would be hesitant to use the product broad-based. For sure, you can't contract for something that's not on label. So I think, again, the ASCs and the IDNs, it's a real plus. But equally so, I think it's the data that was in the trial work that we submitted for that release. And I think as that data is now part of the clinical literature, it really bolsters our value prop.

And then on the ASC opportunity for VASCADE EPE procedures over time move -- how important is that market for you and opportunity to get those?

I think we're a really good fit for that. It will take time. The ASCs that won't happen overnight. But I think there are half a dozen states across the country, mostly across the South and Southeast. -- that will lead this charge. And we like that concentration. That's one of the areas we've really muscle built our organization to have a much better presence clinically and commercially. And so yes. We think we're in the direction of travel there and will benefit by that momentum. .

On [ PerQseal,] the Vivasure acquisition, why was that kind of the right deal?

Yes, there really is no therapeutically equivalent product out there for large bore closure. So the PerQseal Elite submission that went to FDA is angling towards a 26 French OD -- there's products that they can use for that today, but they're really suboptimal. And so when we look at that product, it's clinical data. We look at the patch study that was the original support for it. We just got really enthusiastic when we went and talk to our advisory board, those are just -- they want a tool that works. As you see TAVR and EVAR procedures now growing double digits. -- they need a closure methodology that is fit for task for these more complicated, more advanced procedures. PerQseal Elite is that product. .

When you think about kind of the call points with existing [indiscernible] closure businesses, how do you think about the synergy between the different call points and businesses?

Yes. So PerQseal Elite is designed to be a tuck-in product -- the investments we've already made in our U.S. sales force for vascular closure infrastructural heart will support this existing product. It's a closure product, and we intend to market it as closure. Yes, it's in the IC, it's structural heart play, where we have the presence with Savvy wire but we're going to be very thoughtful about not distracting our existing Savvy wire team. So it's really going to be predominantly driven by the vascular closure force, which is the bulk of our efforts. We have 180 feet on the street today doing that here in the U.S. to.

How does it compare with like Mentone kind of gives you the confidence you can take share in that market?

It's suture less. It's fully bioabsorbable. There's no permanent implant left behind. It's achieved in its trial work and immediate median hemostasis. And the outcomes more broadly, I think that we're going to give us confidence we're going to be able to access that $300 million addressable market safely and with meaningful workflow efficiencies, a much more predictable recovery and hopefully accelerate discharge pathway along the way. So I think we like the profile a lot.

That's helpful. and Blood Management grew 21% this quarter, a 13-point acceleration in Q4 when you called out transfusion management, but how sustainable is the growth in that business?

Yes. First and foremost, thank you. Like the first time I've been asked in a public forum about Blood Management technologies, which at one level is kind of ridiculous. This is a $300 million hospital business, operating at 70% plus gross margins. I went back with the team and looked at the LRP. They delivered mid-teens growth in each of the last 5 years, powered by TEG. It is the definition in our portfolio of durable growth. And we think it's highly sustainable. When we look at the TEG market, that viscoelastic testing opportunity, whether it's here in the U.S., Japan or in Europe. -- we're less than 60% penetrated in the total market. Now in fairness, we have 7 to share of the market. So we do the heavy lifting there. But we see unbridled opportunity to continue that double-digit growth. That's not what we guided to because we want to be measured about this, but there's no reason that TEG should slow or diminish. And that team when we asked them to was able to lean in and in a very thoughtful way to drive recurring revenue. To your point, in the quarter, the way we achieved 21% growth that we have the transfusion management business, which is our blood banking software for the major hospitals -- that business also grew, contributed equally in the quarter, actually grew nearly 50%. And that, again, the team leaned in. We view that opportunity as EPIC converts the landscape. We view that as a land grab. -- a land grab, we intend to win. These are all long-duration recurring contracts. So the lean-in in fourth quarter bodes very well for momentum in FY '27. And Yes, that's a really nice one, too. We don't talk much about transfusion management, but as it approaches $100 million in revenue maybe that will change. We'll see.

Just to move the needle a little bit more.

A little bit more -- and it's a really good way. It's one of our most profitable products.

[indiscernible] vascular margins. It's accretive to margins?

Yes, highly accretive. It's -- as you said, there's a lot of upfront go-live installation, et cetera, but there's an ongoing usage and maintenance revenue stream that makes the theme a nice annuity.

Okay. I think 1/3 of the reason medtech stocks are not working year-to-date as worries on inflation, and there's the war and chips and just oil prices -- just would love to kind of understand like your exposure there. I don't think you have a lot of exposure to the inflation in macro stuff, but just kind of curious doing that matters a lot for investors.

Yes, whether it's patients or donors, the underlying procedures continue unabated. Actually, it's a very good environment to collect and you see the growth in our core hospital franchise. So we have 0 QAMs about that. We are not immune to tariffs, to inflation or to the geopolitical disruption Resin one of our largest raw materials. It's a petroleum-based product. So we've got to be really mindful of that. Our guidance for the year on that mid-single-digit revenue growth on a reported basis, we said comparable with regards to what we're going to achieve on the earnings side, and that includes 50 to 100 basis points of ongoing margin expansion. -- we feel confident that we have line of sight to that. But there's a lot of moving parts. And if anything, we've tried to remain prudent to deal with whatever shocks and ebbs and flows occur, we have to deal with continue this durable growth while we chase that second objective, which is margin expansion.

I was going to ask on the 50 to 100 basis points of margin expansion. Just think about the visibility there that kind of gives you the confidence that you can sustain that going forward?

Yes. Well, on the product side, we see a return to growth unabated. So there's volume for sure. There's price. We talked about the new product launches, whether it's heparinase neutralization going into Europe, whether it's Persona plus here in the U.S. on the plasma side, whether it's VASCADE, MVP XL and PerQseal Elite when it comes, will all contribute to a more favorable mix. So that's a big part of it. But I think what you'll see from us in fiscal '27 and forward is core productivity and greater operating leverage. As we scale this business, we strongly believe we've already made the investments we need to make to be able to deliver the revenue growth that we view as quite prudent and conservative. So with that in hand, you'll see operating leverage now as that manifest, we'll call it. And we think that gives us room to run.

In hospital margins, I think you talked about 30% plus at some point. I assume a lot of that has to do with the top line. But -- just curious if that's still a target to get there. .

Yes, if you go back to the start of our LRP, I think our hospital margins were mid-single digit, 6%. It's the number I have in my head for that. Today, it's operating in the low 20s -- that is very much a function of scale, to your point. And I think as we scale the business, the existing portfolio has the ability to drive towards that 70% gross margin -- and again, as we create operating leverage, both with TEG and with VASCADE you'll see a meaningful uptick in the operating income margin that comes with it.

Okay. I think that mostly covered my questions. I think you wanted a couple of minutes to kind of close out, but let you...

Yes. Look, I appreciate it. I started by doubling down on what we've achieved the last 4 years. We have not issued a new LRP. And I think we're going to hold off on doing that. what I hear from you and from your colleagues and from our investor base is, we're very much a show me situation at this point. We have to demonstrate durable growth. I think that's at the absolute core of everything we do. The margin expansion will continue what that left with. And I think what's really becoming much more of the dialogue around Haemonetics is the free cash flow and the return on invested capital. We expect those numbers to continue to move decidedly northward, right? We like the portfolio we've got. We're not out looking for new products. We're going to double down. Our first priority is organic. With the cash flow we're generating and the strengthening of our balance sheet, it gives us some optionality to delever or buy back shares as appropriate. But we feel we've got all the elements in place here, drive us to be able to drive durable growth going forward. And I think that -- the sector has got its challenges. We understand that, but we think we can stand apart in terms of total shareholder returns in this environment.

Great. Well, thanks a lot for coming and [indiscernible] meetings today.

Thanks. Thanks for having us.