Haemonetics Corporation

Ladies and gentlemen, thank you for standing by, and welcome to the Hemonetics third quarter fiscal year 2020 earnings conference call. At this time, all participant lines 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 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 Gayette, Investor Relations. Thank you. Please go ahead, ma'am.

Good morning. Thank you for joining us for Humanetics' third quarter fiscal year 20 conference call and webcast. I'm joined today by Chris Simon, our CEO, and Bill Burke, our CFO. Today, we will discuss our third quarter and year-to-date fiscal 20 results. All revenue growth rates are on an organic basis and exclude impacts from currency, product and supply 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 8PA we filed today and in periodic filings that we make with the SEC. This morning, we posted our third quarter and year-to-date fiscal 20 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 on excluded items, including comparisons with the same period as fiscal 19, are provided with the Form NK and posted to 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.

Thanks, Olga. Good morning, everyone, and thank you for joining. Humanetics delivered strong third quarter and year-to-date fiscal 20 performance as our value drivers are powering revenue and earnings growth. Our multi-year turnaround plans are on track, and we are building momentum to create long-term value. We grew revenue 8.2% in the third quarter and 8.3% year-to-date with all three of our business units contributing meaningfully. Third quarter adjusted earnings per share was 94 cents, up 49 percent from the prior year quarter and up 47 percent year-to-date due to revenue growth and margin expansion. Adjusted operating income margin expanded by 570 basis points year-to-date as we continue to achieve productivity benefits, strengthen our product portfolio, and remain disciplined with our spending. Moving to our business units, beginning with plasma. Revenue grew 12.9% in the third quarter and 14.5% in the first nine months. In North America, we grew 13.3% in the third quarter and 15% in the first nine months. The underlying demand for plasma-based medicines remains strong, and we are seeing a second-half rebound in collection growth to the high single digits. The majority of our customers showed good volume gains in the quarter, especially in the U.S., while volumes in Europe have also increased over the course of the year. We also benefit from pricing, software upgrades, and competitive conversions. Nexus continues to deliver across all four dimensions of its value proposition, yield enhancement, collection efficiency, donor safety, and overall satisfaction. We completed an additional 1.5 million yes collections since our last call, bringing the total to approximately 8.3 million procedures, yielding over 190,000 extra liters of plasma. Notably, Nexus customers grew collections at twice the rate of our other customers in the third quarter, and they achieved meaningful improvements in device turn rates and donor satisfactions. We remain confident in Plasma, its underlying market growth, and our ability to help customers safely and efficiently collect more Plasma. We are investing in incremental and transformational innovation across all components of the Nexus platform. Our donor management software is a key enabler of Nexus. NexLink DMS has established itself as the industry standard, and our software market share is rapidly approaching our device market share. Earlier this year, we made a strategic decision to divest our Union South Carolina liquids facility and rationalize our product portfolio to exit the rapidly commoditizing, margin-dilutive liquids business. We expect a negative revenue impact of approximately $2 million in fourth quarter as a result of this decision. Overall, we are encouraged by the uptick in customer collection volumes and our DMS share gains. we are reaffirming plasma full-year revenue guidance for fiscal 20 of 13 to 15% and anticipate growth will be at the lower end of the range. Next up is hospital. Revenue grew 11.4% in the quarter and 9.9% year-to-date. TAG continued to drive our performance, growing 20% in the quarter on improved utilization, market share gains, and new product launches such as the TAG6S platelet mapping cartridge and the U.S. trauma indication. We also benefited from pricing and investments in Salesforce. The U.S., our largest TAG market globally, delivered exceptionally strong results in the third quarter. Year-to-date, TAG grew about 17% with all major markets contributing. We are excited about our recent acquisition of the underlying TAG6S technology and previously licensed from Coramid. This allows us to pursue our new growth channels outside the hospital, such as outpatient clinics, and also helps improve profitability. Transfusion management grew mid-teens in the quarter and year to date, with both BloodTrack and SafeTrace TX contributing. We continue to support the launch of the next generation of SafeTrace TX, and remain optimistic about the growth of our software solutions in the hospital information systems market. Self-saver disposables showed some improvement in the quarter, but self-salvage continues to be a laggard due to vagaries in the capital equipment sales cycle that distort quarterly comparisons. We are continuing to drive improvements in product performance and sales execution in this area. Overall, we are building momentum in our hospital business. we are reaffirming full-year revenue guidance for fiscal 20 of 11% to 13% and expect growth at the lower end of the range. Turning to Blood Center, revenue was up 0.6% in the quarter and declined by 0.5% year-to-date. Apheresis revenue was up 2.8% in the quarter and 2.2% year-to-date. The main growth drivers were order timing in a situation in Japan where our customer faced shortages due to technological difficulties with a competitor's product. Our team was proactive to ensure our customer had product to meet demand. Improved market share from this situation and continued success in the global rollout of our universal platelet protocol were partially offset by higher double dose collection rates, particularly in Japan. Whole blood was down 0.2% in the quarter and down 3.4% year-to-date. Favorable order timing in Japan and EMEA in the quarter were offset by the ongoing decline in whole blood utilization rates in North America. In addition, blood center software was down double digits in the quarter and year-to-date due to previously discontinued customer contracts. we expect higher blood center declines due to unfavorable order timing in the fourth quarter and a competitive loss of apheresis business to lower cost sources of supply. This business was historically higher margin, but the market is compressing and we chose not to compete on price alone. We expect a revenue impact of approximately $2 million in the fourth quarter and $17 million in fiscal 21. Overall, We are taking action to further stabilize blood center performance. Therefore, we are reaffirming full-year revenue guidance for fiscal 20 and expect to be at the better end of the 4% to 6% decline due to strong year-to-date results. Collectively, our business units delivered robust performance, and we remain committed to executing against our customer-centric growth strategies. The launches of Nexus, TagSuccess, SafeTrace TX, and the universal platelet protocol are propelling us. Therefore, we expect total company revenue growth for fiscal 20 to be at the midpoint of our guidance range of 6 to 8 percent. Now I'll turn the call over to Bill.