Haemonetics Corporation

Ladies and gentlemen, thank you for standing by. And welcome to the Humanetics Corporation Q3 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker 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 to your speaker today, Olga Gayet, Director, Investor Relations. Please go ahead, ma'am.

Thank you. Good morning, everyone. Thank you for joining us for Humanetics' third quarter fiscal 21 conference call and webcast. I'm joined today by Chris Simon, our CEO, Stuart Strong, President of the Hospital Business Unit, and Bill Burke, our CFO. This morning, we posted our third quarter and year-to-date fiscal 21 results to our Investor Relations website, including the analytical tables with the information that we'll refer to on this call, and an investor presentation on the pending Cardiva transaction. Additionally, we provided a complete P&L, balance sheet, summary statement of cash flows, as well as reconciliations of our GAAP to non-GAAP adjusted results. Before we get started, unless otherwise noted, all revenue growth rates discussed today are on an organic basis and exclude the impact of currency fluctuation, strategic exits of product lines, acquisitions, and divestitures. As in the past, we will refer to non-GAAP financial measures throughout this call to help investors understand Humanetics' ongoing business performance. Please note that these measures exclude certain charges and income items. Please refer to this morning's earnings release for details on excluded items, including comparisons with the same periods of fiscal 2020 and reconciliations to our GAAP results. A remark today include forward-looking statements, and our actual results may differ materially from the anticipated results. Humanetics cautions that these forward-looking statements are subject to risks and uncertainties, including the potential impacts from the COVID-19 pandemic on our results, risks related to proposed acquisitions Cardiva Medical, and other factors referenced in the Safe Harbor Statement in our earnings release and in our filing to the SEC. We do not undertake any obligation to update the forward-looking statements. And now, I'd like to turn it over to Chris.

Thank you, Olga, and good morning, everyone. Our improved third quarter results are evidence of the strength of our strategy and our progress transitioning to transformational growth. We have a lot to discuss today. Let me start by highlighting five key themes. Revenue improved sequentially in all three business units as our markets are recovering from the pandemic. Productivity from the Operational Excellence Program and cost management helped improve our profitability. We are making meaningful progress with Nexus adoption. Our innovation agenda continues to propel organic growth, and the Cardiva acquisition will help us diversify, grow, and create shareholder value. Moving to our results, organic revenue was down 6% in the quarter in 2012. percent year to date as the impacts of the pandemic continued to affect our business. Third quarter adjusted earnings per diluted share was 81 cents, down 14 percent in the prior year quarter and down 28 percent year to date. While our results were below our pre-pandemic fiscal 23rd quarter, we did see a 14 percent sequential improvement in revenue driven by all three business units. and our adjusted earnings per diluted share was up 31% from second quarter. Plasma RASMA revenue declined 13% in the third quarter and 26% year to date as the pandemic continued to have a pronounced effect on the U.S. source plasma donor pool. Revenue declines were partially offset by a $6 million one-time safety stock order of plasma disposables. Sequentially, North America collection volume improved 29 percent, excluding the effect of the safety stock order. To put this in perspective, we typically have a 3 to 5 percent seasonal increase in the third quarter. Our customers have taken extensive donor safety measures and launched a myriad of promotional campaigns to encourage donations. Heightened safety protocols and compelling financial incentives, along with waning government stimulus, contributed to 10 consecutive weeks of volume recovery. Nexus platform adoption is progressing, and we are confident that it will supplant PCS2 as the standard for source plasma collection worldwide. We are on track to upgrade all US customers to our NexLink DMS software by the end of the calendar year. All major customers have agreed to adopt Nexus PCS devices somewhere in their network. This bodes well for eventual broad-based implementation because history shows that firsthand user experience leads to adoption. Rollout will not be immediate as there is important planning and support work to be done, and near-term, Humanetics and our customers' primary focus is on driving a robust recovery in collections. Our innovation agenda continues to propel organic growth. Persona's individualized donor-specific approach is expected to yield an incremental 9 to 12 percent of plasma per collection. Nexus early adopters are validating the new nomogram's impact on immunoglobulin levels and implementing logistics changes needed to support the new procedure, including accommodating a collection bottle that is a third larger. The real-world data being collected will strengthen the Nexus offering and inform ongoing innovation in our proprietary collection technology, including safely advancing additional personalization and further yield enhancements. Meanwhile, we continue to do everything we can to support our customers, and we remain cautiously optimistic about the timing and pace of recovery. The third quarter highlights the critical role that donor economics play in plasma collections. Collection volumes weakened over the last few weeks, which we believe was driven by a donor response to the new government stimulus. Nonetheless, our customers are ramping up to support end market growth. And although forecasting remains difficult in this environment, once the pandemic subsides, we expect to see 8 to 10 percent collections growth over the long term and the potential to grow in excess of that as customers replenish their inventories. Blood center revenue declined 1.4 percent in the third quarter and 2.6 percent year to date. The business continues to outperform as our continuity and responsiveness enable us to supply blood bankers around the world seeking expanded safety stocks. We also continue to support customers globally in collecting convalescent plasma. We had strong capital sales both in the third quarter and year to date as our aphoresis devices continue to play an important role in helping to provide essential blood products to our customers. We believe the increased installed base should provide longer term benefits to our disposable sales. Apheresis revenue was up 6% in the third quarter and 1.8% year to date. Continued plasma growth and favorable order timing among distributors in both periods was partially offset by the impact of a previously disclosed customer loss of about $4 million in the quarter and $12 million year to date. We did not see distributor stocking order reversals in the third quarter. Whole blood revenue declined 19% in the quarter and 11% year to date, driven by lower than usual procedure volumes due to COVID-19, previously discontinued customer contracts, and overall declines in blood utilization rates. Additionally, whole blood revenue in the third quarter was impacted by unfavorable order timing among distributors. Our recent efforts to optimize this portfolio has allowed our team to focus on aphoresis devices and disposables, which is driving performance. Before I turn the call to Stu to talk about hospital business unit results and the Cardeva integration, I want to reiterate our rationale for the deal. Cardiva is a leader in vascular closure, an underdeveloped segment with significant potential. BASC-AID is a leading product with strong tailwinds, and the Cardiva team is talented and highly motivated to deliver. With focus and support, we can accelerate growth, especially in electrophysiology, where BASC-AID MVP is uniquely positioned for use with cardiac ablation procedures. This is a revenue deal, but with added scale, there will also be increased operating leverage. We avoid the GNA costs Cardeva would have incurred to operate as a public company. We can use our infrastructure to support U.S. expansion, and our international commercial organization can help to launch FastGate outside the U.S. Together, we can improve our global reach and relevance. Investments in sales and clinical reps, as well as clinical, medical, and health economics capabilities will benefit both portfolios in IC and EP. Our TAG long-range plan is anchored in interventional cardiology with further opportunity in electrophysiology. Humanetics Hospital BU can learn from Cardiva, and over time, there may be commercial and or clinical call point synergies. We value diversification and growth. Cardiva diversifies our product offerings and catapults us into IC, EP, and vascular closure, attractive near adjacencies that can fuel accelerated growth. Our focus has shifted to integration, and execution is now our top priority. Over to you, Stu.