Haemonetics Corporation

Good day, and thank you for standing by. Welcome to the Humanetics Corporation's third quarter fiscal 2022 earnings call. At this time, all participants are in 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. I would now like to hand the conference over to your speaker today, Olga Gayet, Director, Investment Relations.

Please go ahead. Thank you, and good morning, everyone. Thank you for joining us for Humanetics' third quarter fiscal 22 conference call and webcast. I'm joined today by Chris Simon, our CEO, and Bill Burke, our CFO. This morning, we posted our third quarter fiscal 22 results to our Investor Relations website, along with our updated fiscal 22 guidance and the analytical tables with the information we'll refer to on this call. Additionally, we provided a complete P&L, balance sheet, summary statement of cash flows, as well as reconciliations of our GAAP to non-GAAP financial results and guidance. 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 assets of product lines, acquisitions and divestitures, and the impact of the 53rd week in fiscal 21. As in the past, we'll refer to non-GAAP financial measures to help 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 21 and a reconciliation to our GAAP results. Our remarks 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 pandemic on our results and other factors referenced in the Safe Harbor Statement in our earnings release and in our filings with the SEC. 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 for joining. Third quarter revenue was $260 million, an increase of 8 percent in reported dollars and an organic revenue decline of 1 percent. Year-to-date revenue was $728 million, an increase of 13 percent in reported dollars and an organic revenue growth of 3 percent versus prior year. Third quarter adjusted earnings per diluted share was 84 cents, an increase of 4 percent and year-to-date adjusted diluted EPS was $1.93, an increase of 2% when compared with the prior year. Our third quarter performance exemplifies our agility and resilience as we navigated the pandemic headwinds, keeping our people safe while providing our customers the solutions and support they depend on. U.S. blood and plasma collections in some hospital product lines were disrupted by the impact of the Omicron variant. but we believe those effects are transitory. Meanwhile, our hospital business continues to excel, with hemostasis management and vascular closure achieving record high quarterly sales. We made significant progress with our Nexus and Persona conversions, which support increased plasma volumes. We met critical R&D milestones and expanded our global commercial capabilities. and we delivered additional savings from our operational excellence program that are partially offsetting inflationary pressures and supply chain disruptions and freeing up resources to fund growth. As we will discuss, these accomplishments have contributed to our increasingly strong adjusted gross and operating margins. Moving on to our business unit results. Plasma revenue decreased 2 percent in the third quarter, primarily driven by disruption from Omicron, and a $6 million stocking order in the prior year. Excluding the stocking order, U.S. plasma collections volume improved 2 percent on top of the strong growth we experienced in the same quarter last year and grew 9 percent sequentially compared with a historical seasonal improvement of 3 to 5 percent. Year to date, plasma revenue improved 3 percent compared with the prior year and was largely driven by 11 percent growth in U.S. collections. partially offset by the one-time stocking order and prior price adjustments, which have now fully annualized. Additionally, we have amended our agreement with CSL Plasma to allow them to use our PCS2 devices and purchase disposables through December of 2023. This extension provides CSL the ability to utilize our devices and disposables in their collection centers on a non-exclusive basis, and we are working with them to quantify their volume requirements over the life of the agreement. We are meeting our Nexus rollout milestones. We have completed the majority of customer upgrades to NexLink DMS, and we are transitioning the remainder of our major customers to Nexus PCS. We have already successfully converted several hundred plasma centers to our Nexus platform without interruption to their daily collections. and we have the Nexus PCS devices available here in the U.S. to ensure timely conversion of the remainder of our major customers by mid-fiscal 23. We are also pressing forward to upgrade customers to our persona technology and expect more plasma centers to be using our personalized nomogram by the end of this fiscal. The pandemic continues to highlight the critical role our Nexus system plays in donor recruitment and retention and collection center productivity. Our technology and our teams are making outsized contributions to help customers accelerate recovery. A fully integrated Nexus platform consisting of the Nexus PCS device, NexLink DMS software, and our Donor360 app is enabling our customers to benefit from faster procedure time, contributing to a 16-minute reduction in average donor door-to-door time. improved compliance, including up to 98% elimination of documentation errors, as well as increased donor satisfaction. Our in-market results demonstrate donor affinity from a 93% donor preference for Nexus PCS over the prior generation device. And with our persona technology, Nexus customers can also benefit from an additional 9% to 12% average plasma yield per donation. The breadth of our technology and its impact touches every step of Plasma Center operations. Remote donor check-in, registration and screening, the plasma collection process, issuing donor payments and processing, testing, and shipping samples. Close partnerships with our customers and years of experience have given us deep expertise and understanding of what drives value in the industry we serve. And we will continue to use this knowledge to develop new products and software applications. We are looking forward to providing additional details about our innovation during our Virtual Investor Day later this year. On a macro level, we continue to believe that the pandemic's negative effects on collection volumes are transitory, and we remain optimistic about U.S. source plasma. Predicting the exact pace of the recovery remains difficult due to COVID's multifactorial impacts, including the new Omicron variant. Accordingly, we are updating our fiscal 22 plasma revenue growth guidance to 8% to 10% compared with our previous guidance of 10% to 20% to reflect the protracted pace of collections recovery through the end of our third quarter. The end market demand for plasma-derived therapies is robust, and our customers continue to ramp up to support this demand by investing in R&D, expanding their manufacturing capacity, and opening new plasma collection centers. As the industry recovers from the pandemic, we believe U.S. source plasma collections will return to a historical growth rate of 8 to 10 percent, with the potential to grow in excess of that as customers replenish depleted inventories. Moving to hospital, revenue increased 11 percent in the third quarter, driven by continued procedure recovery, despite challenges posed by hospital staffing shortages and supply chain disruptions in Asia-Pacific. The encouraging procedure recovery trend from September continued through most of the third quarter, waning in mid-December with a rapid rise in COVID cases, coupled with increased pressure from staffing shortages in U.S. hospitals. Nonetheless, year to date, hospital revenue increased by 15%, primarily due to use of disposables from continued improvements in hospital procedure volumes across most geographies. Strong capital sales in North America and new business opportunities in Europe. We are excited about our growth and expansion in hemostasis management, our largest hospital product line. Hemostasis management revenue grew 18% in the third quarter and 23% year-to-date, primarily due to adoption of our TAG6S devices and increased utilization of cartridges in North America, where we experienced three consecutive quarters of strong capital sales. We also benefited from sales growth in Europe, where the Clot Pro visceral elastic diagnostic device drove disproportionate growth in our third quarter and year-to-date results. We are excited to increase our footprint in underserved markets through capital sales and to drive utilization and adoption of our testing protocols and existing counts globally. Self-salvage revenue declined 2% in the quarter as Omicron dampened procedure volumes in the U.S., and disrupted supply chains in Asia Pacific. Year-to-date, revenue grew 5% driven by higher hospital procedure volumes and strong capital sales as we upgrade customers to our latest cell saver technology. Transfusion management revenue grew 8% in the third quarter and year-to-date driven by both blood track and safe trace TX. Omicron impeded our ability to implement new hospital conversions, but we anticipate this will correct going forward. We remain enthusiastic about the performance and potential of our hospital business and update fiscal 22 revenue guidance to 16% to 18% growth, including mid-20s hemostasis management growth. We are approaching the first anniversary of our acquisition of Cardiva Medical. Early results have surpassed our expectations, and with the integration essentially complete, we are progressing ahead of schedule on all critical milestones. We had another record sales quarter in vascular closure, delivering $24 million of revenue in the third quarter and $67 million year-to-date. Both Vascaid products delivered meaningful results through accelerated penetration into new accounts and increased utilization within existing accounts. The performance of our Vascaid MVP product in electrophysiology was particularly strong, aided by the recently granted FDA indication for same-day discharge following atrial fibrillation ablation procedures. We are increasingly confident about this business and increase our fiscal 22 guidance range to $90 to $95 million, nearly double the revenue generated in the 12 months prior to the acquisition. Blood center revenue declined 7 percent in the quarter and 4 percent year to date as Omicron disrupted U.S. blood collections. Apheresis revenue declined 7 percent in the quarter, driven by staffing shortages in U.S. blood centers and unfavorable order timing among distributors when compared with the prior year, affecting both capital and disposable sales. Year to date, apheresis revenue declined 1 percent as first half growth from a strong recovery of platelet collections in Asia Pacific and the winning of several new tenders in EMEA was offset by third quarter revenue declines. Whole blood revenue declined 9% in the quarter and 11% year to date, driven by lower transfusions due to reduced hospital procedures, collection center staffing shortages, and previously discontinued customer contracts in North America. Overall, we are confident about the performance in our blood center business and reaffirm our revenue guidance of a 3 to 5 percent decline in fiscal 22. Before I turn the call over to Bill to review our financial results, I want to reiterate that despite the COVID-related challenges of the quarter and over the past two years, our teams remain committed and focused as we continue to build a foundation for transformational growth.