Haemonetics Corporation

Ladies and gentlemen, thank you for standing by and welcome to the Hemonetics second quarter 2020 conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star then 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Olga Gayet, Investor Relations. Please go ahead.

Good morning. Thank you for joining us for Humanitix second quarter fiscal 20 conference call and broadcast. I'm joined today by Craig Simon, our CEO, and Bill Burke, our CFO. Today we will discuss our second quarter and first half fiscal 20 results. All revenue growth rates are on an organic basis and exclude impacts from currency, product and the slide decisions, and divestitures. Our remarks today will include forward-looking statements, and our actual results may differ materially from anticipated results. Information concerning factors that could cause results to differ is available in the Form 8-K we filed today and in periodic filings that we make with the FCC. This morning, we posted our second quarter and first half fiscal swing results to our Investor Relations website. We included updated fiscal 20 guidance and posted analytical tables with the information that we'll refer to on this call. I would like to remind everyone that consistent with our past practices, we have excluded certain charges and income items from the adjusted financial results and guidance. Details of excluded items, including comparisons with the same periods of fiscal 19, are provided within the Form 8K and have been posted to our investor relations website. Additionally, our press release and website include a complete P&L, balance sheet, summary statement of cash flows, as well as reconciliations of our reported and adjusted results. And now, I'd like to turn it over to Chris.

Thank you, Olga, and good morning, everyone. Humanetics delivered strong second quarter results and a positive first half fiscal 20 performance as we continue to accelerate revenue growth and improve profitability. Our teams grew revenue by 8.6% in the second quarter and 8.3% year-to-date. Our innovation agenda is propelling us with the launches of Nexus, the PEG-6S trauma indication and platelet mapping cartridge, and SafeTrace TX. Today, we are reaffirming total company organic revenue guidance of 6% to 8%. Improvement in operating leverage led to second quarter adjusted earnings per share of 87 cents, up 55% from the prior year quarter and up 45% in the first half. Complexity reduction, operational excellence, pricing, and the transformation of our product portfolio are driving higher margins. Adjusted operating income margin expanded by an additional 530 basis points year-to-date due to improvements in our business and discipline spending. Bill will provide more detail, but overall, we are proud of the work our teams are doing to strengthen our trajectory, and we are increasing our adjusted EPS and adjusted operating margin guidance based on our positive first half performance. Let's talk about our business unit results and trajectory, starting with plasma. Revenue grew 14.6% in the second quarter, and 15.4% in the first half. North America accounts for about 93% of our plasma business and drives the majority of the growth. In North America, we grew 14.7% in the second quarter and 16% in the first half with contributions from volume, mix, and pricing. North America collection volume grew in the mid-single digits, and we were aided by Nexus PCS device premiums, pricing initiatives within our liquids solutions business, and discrete items in software. Based on conversations with our customers and input from the recent PPTA industry forum, we forecast collection volume to increase to approximately 10% in the second half. Nexus is performing exceptionally well. Nearly 7 million yes collections averaging 23 additional milliliters per collection have resulted in an estimated 160,000 more liters of plasma collected. The benefits are clear. Yield enhancement, collection efficiency, and donor safety and satisfaction. We are busy innovating the platform, PCS devices, DMS software, disposables, and service to further strengthen our value proposition to safely and efficiently collect more plasma to meet the strong market demand for IGG. As noted, software was a positive contributor for us again this quarter. We have leading DMS market share and continue to convert and upgrade customers to Nextlink. We are excited about software's role in helping customers realize the full potential of Nexus and software's strategic value for the Plasma business. We also benefited in the first half from price and volume increases in our liquids business. As expected, this business is under pressure from high-volume, low-cost liquids providers with aggressive pricing strategies. On an as-needed basis, we will continue to offer liquids to our customers as part of a full plasma apheresis offering, but we expect our volumes to decline in this rapidly commoditizing market. We are bullish about the prospects for plasma, and we remain confident in our fiscal 2020 plasma growth guidance of 13 to 15 percent. Moving to our hospital VU, revenue was up 10.1 percent in the second quarter and 9.2 percent in the first half. TAG continues to be the primary growth driver in our hospital business, growing 16 percent in both the quarter and in the first half. The early stages of our TAG6S U.S. trauma launch have been encouraging with positive customer feedback and increased adoption. We continue to build clinical evidence and scientific exchange around our technologies. We recently shared the results of the TEG trauma comparison study that led to our FDA clearance with senior experts at the American Association for the Surgery of Trauma meeting. The manuscript has been accepted for publication in the Journal of Trauma. TEG was recently featured in a JAMA surgical innovation review which notes that the technology could become part of routine practice to treat trauma-induced coagulopathy. In the second quarter, we also launched a TAG6S four-channel platelet mapping cartridge, enabling us to offer hospitals one device for both overall hemostasis and platelet function analysis at the site of care. The self-salvage market continues to experience downward pressure from declining transfusion rates and competitive pricing. Against this backdrop, CellSaver had low single-digit revenue growth in the second quarter, which, while modest, was an improvement over first quarter results. With increased focus, we expect performance to strengthen. Transfusion management grew robustly in the first half, despite an uneven demand cycle for hospital management information systems. We are encouraged by the market opportunity and customer enthusiasm for our new product line. We are strengthening our sales execution capability and expect double-digit growth powered by the recent full market launch of the next generation of SafeTrace TX, a product we expect to become the standard in hospital blood lab management information systems. We continue to see hospital as a growth engine for humanetics. Our new global hospital president, Stuart Strong, is committed to tapping this market potential. We anticipate improved second-half performance, and we expect to deliver hospital full-year revenue growth in the 11% to 13% range. In blood center, we saw a slight revenue increase of 0.2% in the quarter and a 1% decline in the first half. Aporesis grew 4.7% in the quarter and 1.9% in the first half. Performance was particularly strong as we benefited from favorable order timing and the long-anticipated stabilizing of double dose collection rates in Japan. However, the benefit of order timing will likely reverse in the back half of the year. Our blood center apheresis business continues to experience pricing pressure, and as such, we anticipate revenue declines beginning in the second half of fiscal 2020 as certain customers convert to alternate sources of supply. We are assessing the situation and taking action to compete effectively while maintaining our margin objectives. Whole blood was down 5.7 percent in the quarter and 4.9 percent in the first half as transfusion rates continued to decline compounded by pricing pressure. We anticipate these factors to continue in the second half with additional impact from previously exited unprofitable business. In addition, Blood Center software remains a challenging segment largely tied to whole blood collections. We expect a full year revenue decline for Blood Center of minus four to six percent. In summary, we are pleased with our strong fiscal 20 year-to-date results and the momentum our employees have generated. The company is fully on track and powering through its multi-year turnaround. We remain committed to driving profitable growth and to create enduring long-term value. We expect to deliver our fiscal 21 aspiration of doubling fiscal 16 adjusted operating income and quadrupling fiscal 16 free cash flow before restructuring and turnaround. Thank you. I'll now turn it over to Bill.